sifis. this is the so-called different question which includes the capital surcharge debate you had this morning. and impacts what action should be taken with respect to such firms. most of us think we know the firms preordained to make the lives. but at this moment no such public list exists. we do know there's a long list of firms who do not want to be in the g. sifi club. there are related questions that need to be asked on this topic. one, who decide whether firms should be on the list? number two, is this a domestic decision or globalization? three, shed countries without a g-sifi have a say in the process? for, what would be the criteria and factors used to make these determinations? five, will this process be transparent, fair and subject to review and appeal? none of these questions have been publicly answered. second major question we would like to pose, and you talk about this all morning, regulators have spent a lot of time focused on the need and size of the special additional ca

we need to spread the word as to what the sifi resolution for the work is all about. and what does it say if we don't see that the next news is the authority fully implemented before the next crisis? the resolution plans required in the sifi under dodd-frank will be critically important to of tanning the information we need to carry out an orderly resolution that places losses on shareholders and debtholders which is where they belong. the fdic and the federal reserve are going to need to stick to their guns and insist that these companies can provide the infrastructure is necessary to ensure it can be resolved without a bailout in some future crisis. the debate will most likely take place when markets are, and the possibility of the crisis is remote. once again, people are going to ask why now? why are we making, putting such on the private-sector financial institutions? and it will be the need to explain the alternative is to risk another financial crisis that could someday through millions of people out for direct our public finances. short term is also alive and w

and in that instance the sifi was born. it's no wonder then we had a great recession. it's no wonder given the incentives that were put in place and the ability to grab for risk and return on equity the lending practices became weaker and we began to trade very significant amounts at the desk and we increased leverage buy almost twice what it was before we have the elimination of glass-stegall. the can dillinger was there and the housing market struck the match and we have this great financial crisis. and that the bailout of the crisis has cost the american taxpayer billions of dollars and that is just the down payment. the 10% unemployment certainly was contributed to by the financial instability and their actions. now the sifi's argue and i've heard them argue very often we are pushing hard on capital standards, that it's great to make them competitively less viable. it will keep loans from growing my answer to that is pretty much nonsense. i don't believe that. one of the things we know them and i will outline some of those issues in the remainder of my speech after

sifi alone funneled over 100 comments during this regulatory process. while we are working through the dodd-frank changes which significantly modify the banking activities in the united states, we are also faced with comparable changes in basel which we are trying to work through. 1. i would like to make that is imported deutsch is to echo a comment made yesterday by mr. kronman church which was also discussed this morning about the question of resolution of large systemically important institutions certainly in the united states. we worked very hard with this committee to make sure that legislation was done in the inappropriate fashion and we are hopeful that both in the united states and outside the united states that resolution schemas recognized as something that's viable. so, my as to number two, the question is we would like congress and regulators to postpone any position on the capitol surcharge until the industry has had time to implement all of the regulatory changes making their way through the system and the effective parties which include t

and in that instance the sifi was born. it's no wonder then we had a great recession. it's no wonder given the incentives that were put in place and the ability to grab for risk and return on equity the lending practices became weaker and we began to trade very significant amounts at the desk and we increased leverage buy almost twice what it was before we have the elimination of glass-stegall. the can dillinger was there and the housing market struck the match and we have this great financial crisis. and that the bailout of the crisis has cost the american taxpayer billions of dollars and that is just the down payment. the 10% unemployment certainly was contributed to by the financial instability and their actions. now the sifi's argue and i've heard them argue very often we are pushing hard on capital standards, that it's great to make them competitively less viable. it will keep loans from growing my answer to that is pretty much nonsense. i don't believe that. one of the things we know them and i will outline some of those issues in the remainder of my speech after

however, we believe that a g-sifi surcharge on the largest u.s. banks would be excessive and could impede economic growth. draconian capital requirements come at a cost for u.s. competitiveness and economic growth. requiring capital at a level above basel iii will force large banks to either reduce their balance sheets, increase prices, or abandon more capital-intensive activities. for example, we estimate a hospital requesting a standby letter of credit could see its costs go up by as much as 30%. or a small mid-market client could see increases of as much as 20% on a revolving line of credit. in conclusion our holistic approach to risk management was one of the key reasons jpmorgan weathered the financial crisis as well as we did. my responsibility as chief risk officer is to look at all of the bank's activities across all markets. we believe the fsoc was intended to serve in effect as the chief risk officer for the financial system. analyzing and coordinating the impact of regulation on safety and soundness, but also, on economic growth and com

the off-balance-sheet of the sifis.so what used to be an off-balance-sheet activity now has to be subject to new capital requirements which were developed in conjunction with the basel committee. and so the basel committee came out with new rules, new capital rules, that include different treatment of these off-balance-sheet exposures. and so essentially what the capital rules in conjunction was accounting rules are making off-balance-sheet vehicles such as abc converts a lot more capital intensive from financial institutions. so in particular the degree to which off-balance-sheet vehicles can be used to achieve low capital requirements has a chance only been called by the combination of the dodd-frank rules and the accounting rules. and i guess i will implement the. >> can i just ask you to touch on one other thing which is repost. i think there's a lot of discussion, a lot of talk in the market. what do we see happening on the regulatory front entrance of from the safety net or actually some regulatory network around

the privilege of sifi membership. when markets are stressed, authorities will almost surely convince themselves that a faltering firm may be the first domino to topple. that is, the new resolution authority provided in the act may give the authorities the ability to act, but it will not increase their willingness to do so in extreme mis. we've got to remember that tbtf entered a lexicon referring to banking regulators' unwillingness to resolve large banks. they had the authority, they department have the will in the 1970s and '80s. as for the federal reserve, authorities should have no regret that some of their lending powers have trimmed back. political officials should have to sign off whenever taxpayer dollars are put to risk such as when lending to nondepository institutions. there is much to regret, however, about the new responsibilities given to the fed. my third point is that monetary policy making is already hard. adding an ambiguous mission regarding financial stability invites threats to the fed's reputatio

we are working through the sifi committee process. it's important to get international agreement on the standards and the basel committee has done and a little cool work on this looking at the cost of the crisis, the amount of losses on financial institution balance sheets and how much additional capital would have been needed to absorb the losses to avoid the massive deleveraging that we've experienced. it's also tried to weigh the costs against increases in lending from higher capital standards. and so the numbers i think had very much tried to strike the right balance. the 7% basel free which i don't think he has a disagreement with has been agreed to but it's part of that agreement there was broad based consensus on the basel committee including with mr. walsh that we would be looking at a higher absorption capacity for the institutions and that is a process now and i have been on record thinking of the three injured basis princeton% of the standard would be right. that is actually a moderate but you can look at the studies that h

si fi is congressman -- governor carrillo's proposal impose additional capture requirements on the sifi, reflected not of harm a sifi very well reflect on the rest of the financial system the right approach? or will it just make u.s. financial institution significant important, financial institutions less efficient and less competitive without making the system safer? as we doubt of the capital and liquidity constraints on the red lake financial sector, do we run the risk that more activity will migrate to the shadow banking system and the jurisdictions offering a lighter regulatory structure? three, to raises regulation. should we expect the participants entering this market will shift their business to non-us firms if other countries refuse to follow our lead on margin and capital requirements? how should we expect u.s. firms to compete if they face higher costs than their foreign competitors? number four, regulation of proprietary trading. not even paul volcker claims that proprietary trading caused the financial crisis in 2008. but dodd-frank's rule prohibits banks and non-bank fina

regulation of sifi. it's congressman said seven -- governor tarullo proposal for a capital requirements on the sifi reflect the amount of sifi will inflict on the rest of the financial system to rate it broach or will it just make u.s. financial institution significantly important financial institutions less efficient and less competitive without taking the system safer? f3 title of the capital and liquidity constraints on the regulated financial sector, do we run the risk that more activity will migrate to the shadow banking system and the jurisdictions offering a later regulatory structure? three, derivatives regulation or should respect the participants a derivative smart associate to non-us friends at other countries refuse to follow our lead a march in capital requirements. how should we expect u.s. firms to compete if they face higher costs than their foreign editors? four, regulation of proprietary trading. not even paul volcker claims proprietary trading caused the financial crisis in 2008, but d

i see a lot of sifi which they could charge for.lf on someone's fleet and now they're getting it to be higher. whether rates for baggage he's changed the number of baggage changes, i cannot say for certain. i see it as a permanent thing. the person who just wants to move him or herself can't they just a fair to move him more herself and not paper bag to be doesn't want to. host: as the consolidation of the airline industry lead to higher costs -- higher prices for consumers? guest: i don't think so. i'd think it is led to the preservation for air services for customers. i think you would have seen more routes, especially with the fuel price this year than you would have otherwise. but agreed to compared to what would have happened. i think this is allowed airlines to stay profitable. if we went back three years, we would be cutting. host: the numbers are back up on your screen and we have reserved the fourth line for airline employees. we will begin with grace from graham, north carolina. good morning. caller: hi, i have a comment.

dodd-frank is asking for enhanced provincial standards, including the off- balance sheet activities of the sifys. what used to be an off-balance sheet activity now has to being subjected to new capital requirements, which were developed and construction with the basel committee. the committee came out with the new rules, new capital rules, that includes different treatment of these off balance sheets exposure it. the capital rules, in conjunction with accounting rules are making off-balance sheet vehicles such as abcp conduits a lot more capital intensive from financial institutions perspective. in particular, the degree to which of the balance sheet vehicles can be used to achieve lower capital requirements has essentially been closed by the dodd-frank role and the accounting rules. i guess i will finish on that. >> and ask you touch on another ?hing -- reposs what we see on the regulatory front on the safety net, or regulatory net worth around repos? >> i went to a dodd-frank act and i don't think there is i direct application of dodd-frank to repo reforms. there is an initiative under the aus

you referred to the salt sifi surcharge cor buffer as one thing to help do that. there's others that i eluded to, and they are extremely important in promoting transparency, better price discovery and markets that have been opaque, better data so that we can all analyze that, and when i say "we all" not just the financial comupt, but the research community and the regulators themself to have market discipline agent as our -- act as our ally. >> i would tend to agree. i think an important issue is where that activity migrates to. a surcharge on the large institutions, if the lending activity that migrates to the next tranche of firms, that's one area of it. if it moves out to areas that may have -- it's not clear what the backstop is, then, i mean, it's -- >> we don't know the margins. >> yeah. >> where do you think it's likely to move? >> for the capital surcharges? so lending activity -- so i think it's a little early to tell with the capital sur charns, the function is not entirely made explicit yet. the analysis has been thought about for the macro and the effe