dr. kane and then stiglitz. >> the mistakes may have come back to the credibility. if you take the day makes allowed to run up more debt under government guarantees the government could never collect from taxpayers somebody has to absorb those. europe is going to learn that subsidizing that risk-taking by their banks is going to ruin the economy for a while. so, the notion that because they've been subsidizing in the past to take away from this i think is one of the lessons of this crisis is people are going to look through the banks of the regulation and shoes something they can trust. >> the primary lesson is higher capital requirements? >> the primary lesson as you have to deal with average requirements. we have high average requirements. but we have to be sure that the margin we are not subsidizing foolish risk taking. that has to be done around the world. we can have lots of differences in the system to the countries and cultures, but we want to make sure that the margin we are not encouraging people to find ways to high risk or hide their capital. >> dr. stigl

dr. stiglitz?rst i want to address the second question i want to go back to my a change in the debt equity, change in the financial structure of banks is not really to the extent that there is a to the extent we can put aside the subsidy, the therefore they would would be less lending point. >> do you agree that there would be i will get back to you on the rest of your answer mr. stiglitz issue here is a practical matter mr. chairman is that so costly and particularly at this time they have raised so much to increase number of the banks will consider instead accommodate. >> are they more reluctant to issue dividends? >> as you know know the dividends have actually been restrained federal regulators. >> recently they were distributed and from simon johnson and some others at the banks because of equity issues and attract enough equity that they ought to hold onto their profits for a period of time that sort of a line of thinking? >> it is a matter balance mr. chairman. they can issue reasonable diff

dr. stiglitz. dr. kane. >> thank you. it's an honor and privilege -- >> is your microphone on? >> should i start again? >> go ahead. >> the effects of making taxpayers back up, treasury and federal reserve bailouts are insolvent and ungrateful financial institution. during the housing bubble and our representative of democracy, the interest of foreign and domestic financial institutions was much better served than the interest of society as a whole, as joe stiglitz has been saying. but why were taxpayer interests poorly represented is because of regulatory capture. the financial industries saw huge loopholes in the capital requirements and risk that then and now are supposed to keep financial instability in check. the dodd-frank act left many issues open. it did not try to define systemic risk or to confront the ongoing foreclosure mess in fannie and freddie disasters. and the implementation of the regulation and for disciplining elite institutions has left to regulators. the keating five episode tells us how hard it will be for regulators to write rules that truly crack down o

dr. stiglitz. dr. cain, thank you for joining us. >> thank you, mr. chairman . it is an honor and privilege. >> is your microphone on? >> shall i start again? >> go ahead. >> the distributional effects of making taxpayers back up, treasury and federal reserve bailouts have been solvent and ungrateful financial institutions. during the housing bubble, in our representative democracy, the interests of foreign and domestic financial institutions was much better served than the interests of society as a whole as joe stiglitz has been saying. but why were taxpayer interests poorly represented? huge loopholes into the capital retirements and regulatory definitions of risk. they are now supposed to keep instablingt in check. the dodd frank act left many issues open. it did not try to define systemic risk. implementation of its strategy for dealing with regulation and disciplining the lead institutions is left to regulators. the keeting 5 tell us how hard it will be for regulators to write rules that crack down on influential firms. sadly the same gaps and issues are in