you could also have much bigger capital surcharges for sifis than was agreed over the weekend. that would be another way to go. i'm just curious as to why you've chosen the glass-steagall route as opposed to some of the other readers for discouraging too big to fail. >> well, we did think about size mars. part of what we thought about though is size isn't the only -- isn't really the fact terror. it's one of the factors, but not the primary factor. it is the nature of the race, whether you're bear stearns, which probably wouldn't have been caught underneath the size limit. it is the nature of the risk that you're bringing on that gives us pause. and second of all, giving sifis, if we can do at giving them what i'll call a marginal capital requirements above, i think that would be fine, but i don't have any faith in it at all because it will be co-opted within three years of the recovery. on all kinds. for example, the resistance to 7% equity or tier one equity and then kind of an add-on to that is ferocious. once the economy turns around and institutions are now out to be found

you referred to so-called sifi surcharge or sifi buffer. one thing that might help do that. there are others that i alluded to, and that are extremely important in promoting transparency, better place discovery and markets that have been opiate. better data so that we can all analyze that. when i say we all, not just numbers were genuity, but the resource communicate market participants themselves. all those i think are important ingredient. in having market discipline act as our ally. >> i would tend to agree. i think an important issue is worth that activity migrates to. surcharge on to large institutions, you know, lending activity migrates to the next tranche of firms and stays in regulate banking sector that's one area that moves out to areas that may have, it's not clear what the backstop is, i mean, -- [inaudible] >> yes. >> and where do you think it's likely to move? >> the capital surcharges. solving activity -- so i think it's early to tell with the capital surcharges. the function is an entirely made explicit get. the analysis hasn't been thought of for the macro,

if it was truly too big to fail they might refer to be designated sifis. the other thing that is crucial and still a work in progress in order to get rid of too big to fail we have to have failed. we need a way for the biggest firms to fail. you heard some discussion this morning about the fed and the fdic's work on the orderly liquidation of 40 -- authority. it will be a sign of success when we see large firms getting themselves smaller to try to get out of the oversight. out of the oversight. we see the cost of funding

it is just not designed for how we operate. >> the sifi question has two parts. the second has two we have a regulatory regime dealing with that. as to both wanted to come in the non-money market funds is clearly they should not be sifi. any question as to if someone asked her presents risk, but i strongly disagree as to money market funds. it is not prudential regulation come i don't want to dispute the answer for funds is the first question is clearly that it is systemically important in some respects. i think the second question now is when we really need to deal with, whether the current regime in regulators thread went to do it. mr. stevens point about not prudential regulator because that deeply into its structure can't do the job for money market funds. we need to rethink whether it's a good idea to have a free market regulator also been a prudential regulator cared but we cannot lose sight of the fact that money market funds are prudential regulation in the regulator needs to act like one. >> this a definitional squabbles more than anything else. but from

this starts the door to designate launch banking organization and certain non-bank companies as sifis. and then suggest that you heighten oversight and higher capital requirements in relation to the risk they pose to the financial system. these companies also be required to make a liquidation plans or living wills to shut it could be resolved in a crisis without a bailout and without messing up the financial system. these provisions are designed to restore the discipline of the marketplace to the megabanks, to end of the ability to take a risk at the expense of the public, and to eliminate the competitive advantages they enjoy over smaller institutions. some of the rhetoric and the financial reform debate has been either shortsighted or simply inaccurate. as part of the reforms we advocated in order liquidation of 40 for sifis like the authority which used for years to resolve fdic insured institutions. this ola is expressly designed to facilitate the third of one of these companies without a bailout which is expressly prohibited by the new law. but what is the sound but i keep hearin

of the sifis. and 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 the different treatment of these off-balance-sheet exposures. and so essentially what the capital rules in conjunction with accounting rules are making off-balance-sheet vehicles such as abcp converts a lot more capital intensive from financial institutions perspective. so in particular, the degree to which off-balance-sheet vehicles can be used to achieve lower capital requirements has essentially been enclosed by the combination of the dodd-frank rules and the accounting rules. and i guess i will end with that. >> and i just ask, have you touch him one other thing, which is repos. i think there's been a lot of talk about it in the market. what do we see happening in terms of throwing the safety net or some regulatory networks around repo

part of the discussion around the title that i have for these remarks was "do sifi's have a future?" that is i think what it is importantly about. as we talk about them, i always try to ask myself some fundamental questions. how in the world could we have an investment bank that is of relatively minor importance on a global basis merit a bailout? how can another investment bank with its failure caused its devastation, a collapse of the financial and economic system around the world? how can a large insurance company that has failed to be bailed out and then left in private hands to go forward? finally, how can a country the size of greece hold hostage most sense?world's financial i do not think there are any good answers to those questions. they are very hard to answer. i think they are inconsistent. having these kinds of events makes it inconsistent with the concept of capitalism. they have been powerful and increasingly the destabilizing to our economy as we have seen in the recent crisis. they have required special support. they have the availability of different rules. i think th