to the history, you have rd helped us, christine, we see many examples of the changes which have had to be introduced in the central banking universe. we had this huge transformation in eastern europe and former soviet republics. there, of course, the imf staff had to do an extraordinary job, providing technical assistance and coordinating efforts to create central banking in a universe where monetary policy did not have the same meaning. as a matter of fact, it had no meaning at all. that had to be created from scratch, creating the central banks, along with the supporting

banking, payment, accounting, and financial infrastructures. the work was enormous. and here i must take off my hat to the exceptional dedication of the staff working in d.c. then we had the asian crisis. it was a very different kind of episode. we had central banks there. they were severely tested in the affected countries. we had a few false starts in some cases. you may remember them pretty well. also, decisive stabilization measures. more important probably are the lessons which were learned from them, by them and by the imf, in

that occasion. one was that financial vulnerabilities can even be when macroeconomic fundamentals appear sound. this was the surprise of that moment, one of them. another was that the risk from large and volatile capital flows create larger foreign exchange offers. we had some difficulty in convincing our membership that you had to add a zero to the numbers of our loans in several countries. we had some problems with that, but we did it. then we had the change in central banking policy frameworks introduced with enormous effort from the staff,

and they have paid off. we had a demonstration of this in the fact that all of these countries have been extremely quick in weathering the recent global crisis. of course, one could regret that the advanced economies have not realized deeply enough after the asian crisis that their own financial systems might be vulnerable. another surprise in this world. we have paid a certain price for that. a very certain price. after expressing this regret, i must say that on the positive side that in europe, which

launched the extraordinary experience of creating a new currency -- in europe, we have seen the central banks, and more broadly, the governments draw two important lessons from this crisis. one, the importance of adhering to fiscal rules. this adherence is changing the landscape. this is a lesson which has been well received. another one, the importance of banking supervision and crisis resolution, an issue for which our predecessor has made a very

superb job over the last few years. another change was the inflation targeting. a canadian invention at the end finally -- which went around during my last stay here, and this was an enormous condition that continues running its course. all of that to say that -- and i i see that time is running. one of the features of the central banking, which was for so long an archetype of mobility -- it's always

changing. the definition of central banking is changed now. changes are at times small, and at other times, deep and widespread. change is often induced by outside pressures. it can also happen by design. we know all of that. in any case, it is important that the implications of such changes be carefully considered. if i had time, i would take that. when i was appointed central bank governor in paris, i went immediately to see my predecessor to have his instructions. he told me only one -- he said, remember, my friend, in central banking, nothing is urgent. nothing is urgent. take all the time needed to

carefully think about and then, finally, either the crisis will be over -- [laughter] or you'll make the right decision. well, i was not 100% sure that he was right, but nevertheless, i keep that in my mind, and the conclusion i did draw -- two things -- one, invest in capacity, talent, applied research, analysis to try to stay in the cutting edge, and remain open to new ideas. we are now in a new period of

questioning due to the global financial crisis, of course, and i couldn't agree more with what the managing director just said. the crisis has taught us where in the past years, a little bit too simple, monetary policy can -- you can deploy unconventional measures when necessary. financial stability equals new tools, like macroeconomic policies, and the eternal lesson that preventing crises is a

substantial less costly move than managing and containing them. this crisis has left us also with major unanswered questions. in the immense uncharted field that central banks have in common, the international monetary system. here, i couldn't do better than to echo the words of my elder brother in central banking, paul volcker, who in his remarks at the annual meeting one month ago -- of course, in that speech, there were plenty of interesting points. you alluded to the so-called exorbitant privilege.

and the invention -- [indiscernible] of which you have been yourself the kind of emissary around the world since the beginning of the 1970's. history should keep that on record. what i wanted to say is that i would like all hearted late to repeat -- wholeheartedly to repeat your plea for attention to the need of developing rule-based, cooperatively-managed monetary systems. i look forward with high expectations to the measures the central banking community will adopt to face this challenge in the continuing quest for

frameworks and policies that would lead us to greater global stability and prosperity. i have no doubt that the imf, faithful to its purpose to promote economic cooperation and to provide the machinery for consultation and collaboration on international monetary problems, will contribute -- these are your own words -- to provide the necessary analysis and well-conceived approaches that could command support in this long journey towards a better system. may our new lectures contribute to it. thank you, thank you all very much. [applause]

>> thank you very much, michel. listening to you, i wanted to revisit our traditional thinking about central bankers. no, they are not boring men in grey suits. they are capable of changing, and they are even capable of not being men. [laughter] which is why i'm not going to spend any more time -- [applause] introducing to you and leaving with you an extraordinary woman whom i greatly admire. i have about five pages of complements and reminders of all of her achievements and how much she has done, but i will spare you that. you are all convinced as well as i am. the first woman to take the chair of the federal reserve board last february this year, janet, we all look to you and your deeply experience and everything you bring to the table to guide us in this difficult time.

i know you are going to navigate us between price stability, financial stability, and many other issues. the floor is yours. and we are all expecting. [applause] >> thank you, christine. it is an honor to deliver the inaugural michel camdessus central banking lecture. michel camdessus served with distinction as governor of the banque de france and was one of the longest-serving managing directors of the international monetary fund. in these roles, he was well aware of the challenges central banks face in their pursuit of price stability and full employment, and of the interconnections between macroeconomic stability and financial stability. those interconnections were

apparent in the latin american debt crisis, the mexican peso crisis, and the east asian financial crisis, to which the imf responded under camdessus's 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 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, policymakers, myself included,

were 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 literature 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. 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 of quantitative effects or alternative views regarding the causal channels at work. furthermore, 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%, 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

resistance against adverse financial developments and those primarily intended to lean against financial excesses. 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 funds, although 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 measures-such as requiring firms to hold larger amounts of capital, stable funding, or highly liquid assets based on use of short-term wholesale funding, would likely apply only to the largest, most complex organizations. other measures, such as minimum margin requirements for repurchase agreements and other securities financing

transactions, could, 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 sector 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 bubble 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. 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. [captions copyright national

cable satellite corp. 2014] [captioning performed by national captioning institute] >> 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 our man 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 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'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 that help us get away from this zero lower bound environment in which monetary

policy is currently a bit stuck without being negative about the word stuck, 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 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. 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? >> 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 h 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 certainly hope so. 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 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, you know, than we did before the crisis. >> 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 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? d for those who are not so >> i think it is widely understood as the consequences outside of domestic base of decisions made outside of monetary policy. .he spill backs we do pay attention. the mandates that were given by

congress or legislatures tend to focus on domestic goals, we certainly strive to avoid harm in generating spillovers when we use monetary policy and 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 policy would be. i mean, i think if you look at s. monetary policy generally of course there are spillovers. in global financial markets 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.

t when you have seen significant impacts on say emerging market economies from capital flows, i think most studies, ours and those of other researchers would suggest there are a lot of factors that are causing it, in which movements in global interest rates would only be one. so, for example, when we e-2 and after that there were capital inflows into emerging markets, there were other factors, stronger growth in the emerging markets was an important factor and shifts in risk attitudes among investors that are not necessarily driven by monetary policy. the other point i would make is

that the studies that we have done -- i believe this would be consistent with the i.m.f.'s analysis, would suggest that when the united states, as important as we are in the global economy, policies in pursuit of price stability and full employment, given our importance as a purchaser of goods from other countries, generally these are not bigger policies. we aren't namely affecting foreign countries by pushing down with expansionary policy, our exchange rate to their detriment. when our economy expands, we buy more and on balance, the spillovers are not negative but typically positive. but you did refer specifically to the episode a year ago and we did see before there had been any real change in monetary

policy, but a shift in communications about future monetary policy. 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 outflows that put pressure on currencies, caused those countries to tighten monetary policy and obviously, those were disruptive. >> michelle was here where you were yesterday and she was reminding me at that time the currency in chile went up by 30%. it went down a bit, but had a strong effect on those countries. new zealand is another case in point. >> there, what is happening is that traders had built up positions that were premised on

unrealistic expectations about interest rate tabs and about the appropriate level of volatility. and it wasn't just a shift of monetary policy, but a rapid unwinding of trade and leverage positions that had built up that caused that damage. you know, i pledge often and will continue, we will try to conduct our monetary policy to communicate about it and and to conduct it in the manner that is understandable to financial markets to avoid the kinds of surprises that could cause jumps in interest rates that cause uch capital flows, you know to some extent, i think such spillovers are really unavoidable in a situation that

global capital markets. i don't know if you would share this assessment but my own assessment that most emerging markets have much stronger financial systems than they had at the time of the crisis that michelle interveend. >> they felt a lot stronger afterwards. >> and all the things that were put in place, the kinds of tracks that we may see as spillovers as hopefully the global economy recovers and are in a position to tighten monetary policy. i can just say that we will do everything on our side to make sure that it goes smoothly. >> thank you so much for this investors to tell the

and they are interested in your views as to how we can best -- you can best communicate and best anticipate to limit the volatility risk that arises from that. i will ask you a final question, because i know that we are pressed for time, michelle referred to in a poleion, who said that the central banks should be independent, but not too much. with that enlarged sponsibility in a way -- purposely, i changed a little bit. [laughter] > monetary policy, macroprudential tools to be used for financial stability, you do mandate of both employment and growth. ruined? >> well, i think we are independent and appropriate in

the conduct of monetary policy. congress has established the goals that we are to pursue, and i think this is true in most -- not goals independence but there is independence about how to carry out monetary policy. and there is an awful lot of research that suggest 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 and we are 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 that phere of conduct 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 liquidity umber of programs and when central banks becomes involved in lender of last resort activities, for example, the lines between with what should a central bank do and what's the responsibility of government, can become blurreded. and these are times i think the activities of central banks can become quite controversial. and when of the things that we did during the crisis to try to clarify, what's the dividing line. what are we supposed to do. should it be dragged over and if it is, fiscal authority should clearly be taking

responsibility. we have had actually kind of accord with treasury that was signed that kind of indicated that we may use our balance sheet to lend and not take on credit risk and to the extent that we do with the responsibility of the government. but with cooperation, it becomes very natural. the lines do get blurred. and there is a potential threat to central bank independence, but i think it is important. >> from a monetary policy, it is important. >> at least tool independence. >> well, chairman yellen, as a token of our appreciation, i would like to hand over a book that celebrates the 70th anniversary of the i.m.f. because the anniversary was actually yesterday of the beginning of the i.m.f. you have been a fantastic

speaker. and you have been a positive person in this venture and i continue to work for you. >> as i do, too. >> thank you so much. [applause] [captions copyright national cable satellite corp. 2014] [captioning performed by ational captioning institute] >> tonight on c-span, the discussions of the origins of the universe with remarks from

professor brian greene and spoke about how scientists study that issue and the nature of space itself. >> in the beginning, it was hot, really hot, and as the universe expanded, the heat was spread out and it cooled down. and you can calculate how cold it should be today and it's about 2.7 degrees above absolute zero. so that's the temtu space. not when there are sources like stars nearby. that's the temperature. but go one step further and not just talk the average temperature but calculate how the temperature should vary from place and it should vary on the order of a degree. tiny variation and you can do these precise measurements and see the temperature variation in just a pattern that the math

present difficulties. what do you mean when you call something called the fabric of the cosmos? >> it's a hard question. is space really a thing or just a useful concept in order to organize our perceptions of reality. you are over there. you are further away in space. the tablets get further. is it allows me to articulate locations or is space really a thing? and no one knows the answer to that. but different people interpret d it differently, i see space as a thing in einstein's theory. >> fabric of space and time together? >> space and time. >> they would exist even if nothing else existed? >> that's right. and there has been a lot of debate. if you were to remove everything from space, the moon, sun, earth, what would be left?

would you have an empty universe or would you have nothing? f you take an alphabet and remove the letters, when you remove the last letters, is it an empty alphabet? >> it comes into existence with the letters that make it up. >> that was a portion of an event held earlier this year. you can see the entire event at 8:00 eastern here on c-span. on the next "jarks journal," federation for american immigration reform and american immigration council discuss whether immigration to the u.s. hurts or helps the country. charles murray of the american enterprise institute looks at american exceptionalism. "washington journal" is live at

7:00 a.m. eastern on c-span. >> my first reaction was surprise, because i had worked for him. i coached the clippers in the year 2000. he invited me to his daughter's wedding. i had no idea what was going on. but i also, because of my baylor ion, i know what was complaining about. i didn't know which set of facts mr. sterling stood behind. and then when his words came out, it was so obvious and shocking and just disgusting, all of those things wrapped in one. but the surprise of it, to find that type of sentiment in someone who relies on black americans for so much of his success and public profile, it

was amazing. i just couldn't believe that someone could have that much bigotry inside and think it was ok. >> july 4 on c-span, a look at racism in sports. later, exploring the red planet with mars engineers beginning at 3:40. and later at 8:30 p.m., discussions on gun rights and the personal recovery of former congresswoman gabby giffords. >> the senate is back in session monday at 2:00 p.m. eastern. the senate will vote on a judicial nomination for the federal appeals court in philadelphia. and then a procedural vote on a bill to make more federal land available for public hunting and fishing. live coverage on the u.s. senate floor on c-span 2. house of representatives returns for legislative business on tuesday. among the bills under consideration, one dealing with

security at chemical facilities and a spending bill for energy and water programs. you can see the house floor here on c-span. earlier today, defense secretary chuck hagel briefed reporters on the situation in iraq. he was joined by joint chiefs of staff chairman general dempsey and discussed the mission to protect the embassy and u.s. personnel. this is half an hour. >> good morning. happy early 4th of july. i hope you all have big plans tomorrow.

i'm going to make a couple of opening comments and then ask chairman dempsey for some thoughts and we'll go to your questions. i know as chairman dempsey does, you have been receiving updates on the situation in iraq here on a regular basis. and i would like to focus a couple of comments on iraq as i start. our efforts here at d.o.d. have been focused on two specific missions. and i want to lay a bit of a framework down and a base down on what those missions are and then i know you'll have questions.

but in a very clear, deliberate way, first securing our embassy. facilities and our personnel in iraq. second, assessing the situation in iraq and advising the iraqi security forces. both of these missions are important components of the president's overall strategy in iraq. helping iraq's leaders resolve the political crisis that has enabled isil advance and supporting iraqi forces. by reinforcing security, its support facilities in baghdad international airport, we're helping provide our diplomats time and space to work with sunni, kurds political leaders as they try to form a new national unity government. by understanding the conditions on the grounand the capabilities of the iraqi security forces we will be better help advise them as they combat isil forces inside their own country. approximately 200 military

advisers are now on the ground. we have established a joint operation center with iraqis in baghdad. and we have personnel in the ground where our second joint operations center has achieved initial operating capability. assessment teams are evaluating the cohesiveness of iraqi forces. none of these troops are performing combat missions. none will perform combat missions. president obama has been clear that american combat troops are not going to be fighting in iraq again. the situation in iraq, as you all know, is complex and it's fluid, but there is no exclusively military solution to the threats proposed by isil. our approach is deliberate and flexible and designed to bolster our diplomatic efforts and support the iraqi people.

we will remain prepared. as most americans enjoy this holiday weekend, military around the world and especially in the middle east will stay postured for any contingency in that region. as we celebrate independence day tomorrow, i want to particularly express my gratitude to the men and women and their families, who serve our nation at home and abroad, both civilian and in uniform. thank you all for what you do to keep our country safe every day. now ill ask chairman dempsey for his comments and we'll take questions. >> you would probably hear from clint dempsey today but you're stuck with me but i'm sitting with the real secretary of dens. i will begin with iraq.

the secretary described our current mission and role in iraq and the actions we are taking are part of a broader line of effort to contribute to stability in the region. iraq's future depends as much on political inclusiveness as it does on security, which will be an important factor in determining what we do going forward. we are, of course, a force that's engaged across the globe. let me comment briefly on my travels over the past several weeks and some of the insights that i gained. in brussels, i met with my nato counterparts. preparations in afghanistan and the threat of further russian coercion and weigh heavily on our european allies. the joint chiefs met with the united kingdom chiefs in london. we talked through common strategic concerns and now is

not a time for business as usual in europe. i met with my counterparts in saudi arabia and united emirates and they are plagued with instability. i met with partner nations in the pacific region. we had a frank conversation about north korean provocations and china's activities in the east china sea and south china sea. yesterday, i returned from hawaii where they are participating in the rim exercise for the first time. not the first time they were invited but first time to choose to participate. military relationships in the region are important and we remain engaged. i met with my counterparts while in hawaii to discuss the national and regional implications of north korean provocation. this was the first time in the history that the chiefs of defense from these three countries, myself, its republic

of korea and the japanese have met together in this context. across the board, these engagements reaffirm the importance of close partnerships in protecting our national interests and assuring our allies against an increasing number of threats. u.s. leadership is still regarded as the world's best hope for stability and prosperity. i think of the extraordinary men and women who safeguard these freedoms. they are on my minds as their families. thank you. >> i was wondering if you could give us your most up-to-date assessment of the insurgency in iraq, what you are seeing, if it is imagining strength, and mr. chairman, you have mentioned the possibility that the u.s. at some point could use assets in order to go after high-value

targets. i wonder if the mail tear has done that yet. do you see what kind of tipping point would you want to see in order for that to begin and would you have to communicate with iran in order to avoid any onflict or miscalculation? >> as you know, i noted this in my opening comments. we have six assessment teams now on the ground in iraq. and we have two joint operation centers that are operating. these individuals who are making these assessments essentially focusing on your question, what is going on? the strength, cohesion of the i.s.f., an assessment of the strength of isil, where they are deeply embedded, all this is part of the larger sectarian dynamic that as you all know is in play in iraq. also part of what's going on is probably -- is an important process as any, and that is the process of forming a new government. that is in play and very ctive.

as you know the next time they meet is the 8th of july. now that said, both the chairman and i are getting some assessments back early assessments through the general, who as you know is overseeing all of this. we won't have the full complement of all those assessments for a while. but that is in process, ongoing.

and you know that we have -- as i have noted here and general dempsey has and admirable -- admiral kirby where we have additional people, airport, embassy. all of that is essentially getting to your questions and answering your questions on a realistic assessment so we can therefore be better prepared to advise the iraqis on what we think they need to do and the different dynamics that are presented there on the ground and how they can best use their forces as we continue to advise hem. >> if i could briefly, i think you asked me four questions. state of the insurgency, state

of the i.s.f., whether we are going to strike and let me see what i can do. hy are we there? we are there we have two overriding national security interests. a stable iraq within a region that can be and probably should be a partner with us in countering terrorism that stretches from beirut to damascus and to syria. they are a regional threat today that overtime could become a transregional and global threat and that's why we are there. the actions we have taken fall into two bins. one is we're protecting our personnel and our facilities to preserve options and we are assessing to develop options, ok?

earlier -- you asked me about the insurgency. the insurgency after some initial gains and collaboration with other sunni groups in northern iraq made some pretty significant and rapid advances. they're stretched right now, stretched to control what they have gained and stretched across the logistic lines of communication. >> i don't have the assessment teams' exact language but some initial insights is that they re stiffening and capable of defending baghdad and challenged to go on the offense. nd the call that they called

out for volunteers is being answered and it complicates the situation frankly a bit. the reality of the assessment is it is being done in the situation and it is important to note that the assessment is being done as the political situation unfolds. and they will affect each other. the ability of the iraqi security forces to act on behalf of other iraqis will be affected whether they will be conformed to a government of national unity. we continue to gain insights and establish trends. we will be able to measure some intangibles and some intangibles like leadership and it is very dynamic. trikes, that is one of the options that we will continue to develop pending the assessment and pending iraqi's political process. >> my question is very specific, what is your measure of success

in doing that, how dune how much do you break the momentum. how dune mission accomplished this time that you can say, we have achieved those bjectives? and is it enough for the iraqi forces simply to be able to hold baghdad? is the measure of success that or is it the iraqi forces able to go north and regain this massive territory that isis has right now? is the united states military prepared, if they have to, to defend baghdad and defend the airport? >> so, the questions get more and more complex. >> i don't see you in a long time. >> it's impossible to wrestle the podium away from john kirby. i don't think you have heard me say we will break the momentum. >> actually the admiral did.

> that's my problem. the issue has been us for us to determine the ability of the i.s.f. to be able to stabilize the situation and eventually go back on the offensive to regain their side of the territory and what we would be willing to contribute to that cause and that's not a question we are prepared to answer just yet. you mentioned the airport and you mentioned our intentions, remember the phrase i used is that we were protecting that which would allow us to preserve options. the airport, not the entire airport but for that part we need for supply and potentially for evacuation, we are protecting that part of the airport for that purpose. it is about deliberately first preserving options and then developing options and if you are asking, will the iraqis at some point be able to go back on the offensive to recapture the part of iraq that they've lost, i think that is a really broad campaign-quality question.

probably not by themselves. doesn't mean we would have to provide kinetic support. i'm not suggesting this is the direction this is heading, but in my military campaign you want to develop multiple axis and squeeze them from the north and from baghdad and that's a campaign that has to be developed. but the first step in developing that campaign is to determine whether we have a reliable iraqi partner that is committed to growing their country into something that all iraqis will be willing to participate in. if the answer to that is no, then the future is pretty bleak. >> what you just described is an

open-ended commitment or mission to the u.s. military, a stable iraq, inclusive government, the ability to force isil into some find of treat or when is the end game. when will the president be able to say, let's bring our boys ome? >> first of all, this is not 2003, it's not 2006, this is a very different approach than we've taken in the past. i mean, assessing, advising and enabling are different words than attacking, defeating and isrupting. we may get to that point if our national interests drive us there. f they become such a threat to the homeland that the president

of the united states with our advice decides that we have to take direct action. we are not there yet. in terms of the open-endedness of it, you heard me say before that the ideology that stretches from south asia across the arab world and into north and west africa, the ideology which is an anti-western, very conservative, religious and in some cases radically violent ideology, we are stuck with that. a generation or two. it doesn't mean that we have to throw that rock and take it on by themselves. it should not be that. and what we owe the president of the united states over time in consultation with the congress and explanation with the people of the united states is how we can deal with this long-term threat without having to repeat what we did in 2003 and 006. >> you said the advisers would not be involved in commenting. general dempsey, you have raised

the possibility that the advisers could be used as forward air controllers in the event you call in air strikes that most people would be regarding that as being involved in comment. and second, you mentioned that iraqis to go on the offensive would most likely need help, which sounds like a prescription for sending in more u.s. advisers, troops, opening up supply depots. is that on the table? >> there is a tendency to think of this as kind of industrial strength, where we are going to put a mountain of supplies someplace and that's going to require us to protect and then move it forward into the hands of the iraqis to ensure they use it and responsibly and effective. and that is one possibility, but it's not one that personally, i think the situation demands. i think the situation demands first and foremost that the

raqi political system find a way to separate the sunnis who have partnered now with isil because they are zero confidence in iraqi's politicians to govern. if you can separate the groups and it allows us to be in a position to enable iraq not with a huge effort but rather with the special skills, leadership and niche capabilities that we possess daily. we haven't made -- right now as we sit here the advisers are not involved in combat operations but literally assessing. that's their task. if the assessment comes back and reveals it would be beneficial to this effort and to our national security interests to put the advisers in a different role, i will first consult with the secretary. we will consult with the president. we'll provide that option and move ahead.

but that's where we are today. >> you will not be involved? >> i think the chairman made it clear, these are assessment teams and that's their mission. their mission is limited and it is a clear scope of what the mission is. and it is to assess. it is to come back with their assessment of where they believe where we are regarding isil and other dimensions that i aid. advisers or what may come as a result of any assessments as to what they would come back to general dempsey with or general austin and eventually me and th they are going to be, but their mission today is making those assessments. the general is pretty clear. that wasn't your question. we have one mission today and that's assessments. and i don't know what they are

going to say or what they'll recommend. we'll wait to see what general austin and general dempsey then recommend. that's the whole point of assessments. >> i watch television. i know that is going to shock some of you and i won't tell you what channel i watch. that's the wrong phrase. we will match the resources we apply with the authorities and responsibilities that go with them based on the mission we undertake and that is to be determined. >> can you explain what this joint operation center in the north is doing, how many u.s. troops have been sent there and what is the purpose of it? and general dempsey and back to iran, what is your assessment of iran's strength inside iraq right now? what have they sent militarily? are you going to have to deconflict inside iraq and the

decoys they sent over in recent days is that breaking international sanctions? >> well, first, on the two joint peration centers, you need centers or some kind of center to have component of organization and focus omission and what you're going to do. and in baghdad, the first one that we had up, we had iraqis in hat mission with us. we're behind -- further behind in irbil and we will coordinate with iraqis whereas we put our assessment teams out as they are out, on their mission, their focus. and we get better information if we have cooperation and coordination from the iraqis.

so that's essentially, they will have that mission as a centerpiece but will include oordination as well. >> on iran, look, anyone who has served in iraq through the years knows that iran has been active in iraq since 2005. so the thought that they are active in iraq in 2014 is completely unsurprising. it's probably more overt than it has been up till now. they, too, have come over in ome ways to advise this call for young shia men to rise in the defense of their nation. when that proclamation was made, he made it for all iraqis. i hope so. that is a question yet to be answered. but the iranians are there and flying unmanned aerial vehicles and provided some military

equipment. i don't know if it has violated any national security resolutions. that has to be determined. whether we intend to coordinate with them or not, we do not intend to coordinate them. it's not impossible in the future to have reason to do so. in terms of deconflicting, that is sovereign iraqi airspace. our i.s.r. and their i.s.r., that's an iraqi responsibility which they are capable of ulfilling. >> going back to the air strike issues, a couple of weeks ago, senator feinstein asked you about the issue and you paid the point that it's not like looking at an i-phone video and you need clarity on the ground. two weeks later, is the clarity there if the president says i

eed options to strike? >> we have much better intelligence picture than we did two weeks ago. the complexity is the sunni groups that had formally opposed the iraqi government in any case, they have intermingled with the isil groups in particular. and that's going to be a tough challenge to separate them if we were to take a decision to strike. you might say does it really matter. i think it does matter. it matters for the future of iraq which allows me to roll back to the place i continue to start, unless the iraqi government gets the message out that it really does intend to allow participation by groups, everything we are talking about makes no difference. >> the united states has spent $25 billion, 250,000 army and

another 600,000 security force personnel, they are going up to 10,000 isil, the public might be asking you, what did we get for our money? is it just collapsing? >> the collapse of the i.s.f. in the face of this radical extremist group called isil occurred over time. this wasn't isil decided to drive across the board and everybody collapsed. they infiltrated into western raq, into mosul. if i know anything about their tactics, which i do, they bought some people off and threatened the families of others and remind pd everyone that the government of iraq was not operating on their behalf and ndermined the iraqi security

forces and stripped away their will to fight for a government that didn't support them. at that point, it wasn't a fight. they didn't collapse in the face of a fight, but collapsed in the face of a future that didn't hold out any hope for them. it's different than collapsing in the face of a fight. what we are seeing now is the remaining i.s.f. is fighting and this is the important signal. [captions copyright national cable satellite corp. 2014] [captioning performed by national captioning institute] scientists study the issue a the nature of space itself. here's more thousand. >> in the beginning, it was hot, right, really hot. and as the universe expanded, the heat was spread out, it

cooled down. and you can calculate how cold it should be today and it's about 2.7 degrees above absolute zero. that's the temperature of deep space. not when there are sources like stars nearby. but you can go one step further and not just calculate the average temperature but calculate how the temperatures should vary from place to place nd it should vary on a degree, tiny variation and do these very precise measurements and see the temperature variation in just the pattern that the math present difficulties. >> what do you mean when you call something the fabric of the cosmos? >> it's a hard question. is space really a thing or is it just a useful concept? you are over there, you are further away in space, the tables get further.

is space allowing me to articulate the calculations or is space really a thing? and no one really knows the answer to that. different people interpret it differently, i see space as a thing in einstein's theory. >> space and time together? >> space and time are stitched together. >> and they would exist even if nothing else existed? >> that's right. that's right. and there has been a lot of debate about this. if you were to remove everything from space, the moon, sun rgs earth, everything, what would be left? would you have an empty universe or would you have nothing? if you take the alphabet and x,rt to move the letters, z, and b, what is left? is it an empty alphabet? not really.

>> that was portion of an event held earlier this year held by atlantic magazine. see the entire event at 8:00 astern here on c-span. on the next "washington journal, dainl stein of the immigration reform and benjamin johnson discuss whether immigration to the u.s. hurts or helps the country. after that, charles murray of the american enterprise institute looks at american exceptionalism. "washington journal" is live at 7:00 a.m. eastern on c-span. >> my first reaction was surprise, because i had worked for mr. sterling. i coached the clippers in the year 2000. he invited me to his daughter's

wedding. i had no idea exactly what was going on. but i also, because of my elgin baylori know and what he was complaining about and i was confused not knowing which set of facts mr. sterling behind. when his words came out, it was obvious and shocking and just disgusting, all of those things wrapped in one. but the surprise of it to find that type of sentiment in black on relying americans for so much his success and public profile, it was amazing. i couldn't believe that someone could have that much bill on the try inside and think it was ok. >> july 4 on c-span, a look at racism in sports. later, exploring the red planet

with mars engineers beginning at 3:40. and later, discussions on gun rights and the personal recovery of former arizona congresswoman gabby giffords. >> the senate is back in session monday at 2:00 p.m. eastern. later in the day, the senate will vote on a judicial nomination for the federal appeals court in philadelphia. and then a procedural vote on a bill to make more federal land available for public hunting and fishing. live coverage from the u.s. senate floor on our companion network c-span 2. house of representatives returns for legislative business on tuesday. among the bills under consideration, one dealing with security at chemical facilities and a spending bill for energy and water programs. you can see the house floor here on c-span. >> next, today's white house briefing with press secretary josh earnest and he talked about

the latest weather reports concerning hurricane arthur, employment numbers for june and immigration policy. this is a little more than an hour. >> good afternoon, everybody. it's nice to see everybody so chipper. i'm sure it's because a thursday that feels like a friday, right? that's good. before we get started i just wanted to do a brief announcement at the top. both yesterday and today the president was briefed by his home left-hand turn security advisor lisa monaco on the administration's efforts to prepare for the storm, ongoing coordination with state, local and tribal partners. the storm i'm referring to, of course, is hurricane arthur. the president directed his team to ensure that state and local officials in the storm's path have all the support and resources they need to prepare for and respond to any potential impacts. he'll continue to receive updates as necessary through the weekend. also wanted to point out that fema administrator spoke with the north carolina governor and emergency management director michael about preparedness efforts and to ensure that state has no unmet needs.

as part of our administration's approach to preparing for and responding to disasters, fema has deployed a special coordination team to north carolina and prepositioned staff in north carolina and south carolina's emergency operation centers to work closely and ensure we're closely integrated with state and local teams. so that's one way in which some administration officials are preparing for the weekend. jim, i'll let you go ahead and get started today. >> thanks, josh. want to ask you about the jobs report today. the president has argued that republicans have blocked his legislative power. republicans and democrats are blocking theirs. given that both sides essentially acknowledged there's been no progress legislatively, can the president truly take credit for these positive job numbers today? >> well, let me just start by saying the people who deserve

the most credit for the strong recovery of the american economy are the american people. including american entrepreneurs and american workers. it is through their great determination that we have recovered so strongly from the worst economic downturn since the great depression. but they have been aided by some of the policies that this president put in place at the very beginning of his residency. from the recovery act to the politically courageous decision that the president made to rescue the auto industry to a range of other reforms, some of which we put in place with congressional support and some of which have required independent action by the president have laid the foundation that has been helpful to the private sector as they have led the recovery of the american economy. >> that was five, six years ago. >> throughout this recovery in actually much darker times, we talked about the fact that the

kind of crisis that was created didn't occur overnight. it wasn't caused by conditions overnight, and our recovery wasn't going to occur overnight. these are longer term trends we are talking about. and because of the critically important decisions that this president made over the course of his presidency, again, it put in place a foundation that has allowed the private sector to lead our economic recovery. the president's very pleased with the progress we have made. you know, there have been -- there's some history associated with today's statistics. in the first six months of this year, 1.4 million private sector jobs were created. that is more jobs that have been created in the first six months of any year since 1999. we've seen the last five consecutive months more than 200,000 jobs have been created. that's the first time that's happened since the end of 1999. we've created now 9.7 million

private sector jobs over the last 52 months, and the unemployment rate has actually declined more quickly where you consider year-over-year numbers than at any point in the last three decades. we've made tremendous progress, and the numbers bear that out. but what's also important is the president believes that there's more that we can do to ensure that middle-class families all across the country are enjoying the benefits of what seems to be a strengthening recovery. and so that's why this president's so focused on putting in place the kind of policies that will expand the economic opportunity for the middle class so benefits of this recovery won't float just to the top but to those in the middle class as well. because the president believes if we're going to have a sustainable growing economy that we're going to grow this economy from the middle out. that's what the president's focused on, and these strong numbers that we saw in today's report only gives the president a greater sense of urgency to make sure we're capitalizing on this momentum and making sure

that middle-class families across the country are benefiting from this recovery. >> i want to ask something that the president said regarding the financial sector. he said he believes there's still room for reforms. i'm wondering what he had in mind since he also said that he believes that taxpayers are protected under the dodd-frank bill, a position that not everybody in his party agrees ith. he was talking about risk-taking and how to control risk-taking to protect the investors and wonder whether he's discussed some of those potential roposals with anybody. >> well, the wall street reform legislation that passed in the first year and a half or so of this president's administration are another good example of policies that are put in place that have stabilized the financial system, ensured that

taxpayers are no longer on the hook for bailing out big banks hat make risky bets na go bad, and that stability has also contributed significantly to our economic recovery, have allowed the financial markets to recover and the success of those financial markets has an important role in terms of the benefits that are enjoyed by our broader economy. the president alluded to this in the interview that strong and dynamic financial markets are part of what makes the american economy the envy of the world. after all, it's performing financial markets to make sure that capital is available to entrepreneurs who want to start and grow their business. small businesses are an important contributor to job growth in this country. it's the efficient functioning

of our capital markets that nsures that middle-class families across the country will be able to go out and get a mortgage at an affordable rate that will allow them to purchase a home. there's an important role for our financial markets to play in the strength of our broader economy but also in terms of making sure that our economy -- our economy's strength benefits middle-class families across the country. in terms of the president's comments, jim, you've been covering the economic policymaking decisions of this administration for 5 1/2 years now. so you're familiar with the idea that the president and his team, since the president's very first day in office, has been focused on the financial markets and making sure that we both are tabilizing those financial markets through a regulatory regime that prevents banks from making the kind of risky bets that hurt our economy so badly in 2007 and 2008. he's also ensured -- he's also

concerned about making sure that middle-class families have an advocate and a voice in the policymaking process here in washington, d.c. when it comes to these kinds of financial regulations. too often we've seen in the past that special interests, big banks, wall street financial firms had been able to, you know, dictate a regulatory regime that, again, led to a system that incentivized big banks and other large financial institutions to make the kind of bets that ultimately were bad for our economy. in terms of the president's interview yesterday, he wasn't referring to any specific regulation or law that he had in mind but rather the need to continue to vigilantly monitorfs risk that may be emerging and tone sure that the necessary regulatory protections are in again, to ensure the stability

of the financial markets but also make sure that somebody is looking out for middle-class families. steve. >> he just sort of threw these things out there. he's not looking for legislation or any executive action, regulations, nothing? >> i guess what i'm saying, there's no specific thing the president had in mind. he's not referring to some -- to some specific plan, but, again, this is something that the president and senior members of his economic team are talking about every day as they monitor the financial markets and assess the risk that's embedded there. there obviously is an important role to play -- let me say it this way. there is obviously an important role for those agencies to play as they continue to implement wall street reform legislation. there's also an important role to play for these independent regulatory agencies that the fed and otrs