properly regulate the shadow banking system, which currently oppose one-quarter of the united states financial sector. if you look at the pieces that triggered the crisis, the shadow banking sector is still loosely regulated. i think it is a genuine danger. i look forward to entering your questions. thanks for having me today. >> just to make this salient, imagine a processing firm wants an to have a firm in a crowded residential area. some regulations would prohibit that. what if the government had a tax policy that encouraged the processing plant to locate in a crowded area? above that, it provided health benefits and insurance protection to help claims against the iranian processing plant, only if a look at it in a crowded registered -- residential area. we have a policy when it comes to our banking sector. it subsidizes debt in makes equity expensive. the other subsidy is the one that is critical here. it is the too big to fail subsidy. there are guarantees given to the government safety net that subsidize firms and makes equity expensive. this creates huge distortions. if it affected only a few

demanding but we need a level playing field regulate the shadow banking one quarter of the united states financial sector is a very big deal because if you of the look of institutions that fail and triggered the shadow banking sector was still is loosely regulated i think is that said i look forward to answering your questions and mr. chairman thank you very much for pfleiderer. >> thank you chairman brown for allowing me to be here today and what i think is a very important issue to be discussed here. i want to start with a very simple proposition that i and that is the notion that the government should not in produce just to make this particularly wanted to locate one of its plants in a crowded residential area. obviously we would have zoning regulations and other regulations that would prohibit that. the way government had a uranium processing in protections only if it locates in the crowded residential area policy clearly. quality for the processing plant that we do have when it comes to our reason for that is make the equity expenses. it does that in two main ways. first of all there's is available

, properly regulate the shadow banking system which currently owns one quarter of the united states financial sector. this is a very big deal because if you look at the institutions that failed and triggered the crisis, it wasn't the commercial banking sector. the shadow banking sector which is loosely regulated is genuinely a danger. with that i look forward to answering your questions, mr. chairman. thank you very much for having me today. >> professor paul pfleiderer. >> thank you very much for having me today in what i think is a very important issue that is being discussed here. i want to start with a very simple proposition that i think is completely uncontroversial and that is the notion that the government should not in any way encourage firms to take actions that have large social cost and produce little or no social benefit. and just to make this clear, imagine uranium processing firm that wanted to locate one of its plants in a crowded residential area. obviously we would have zoning regulations and other regulations that would prohibit that. but what if the government had a tax policy th

leading the charge is the financial sector and the united states markets have lost, the s&p, now, 15ercent or 16 percent or 17 percent? >>guest: in 12 days. obviously when you see that it is basically a rapid flight away from all risk. not a matter of carefully pricing each security for what the fortunes will look like and that is what you see at times when it seems like you cannot analyze the situation properly. and there are too many things that you have to analyze whether it is the european central bank and whether it can get a bailout through, whether it is obviously the fortunes of the government, of the situation in washington, and the impact of the softer economic conditions, that that will be on big companies which have been extremely profitable. so it is like people pushing away from the table say this is not what i signed up for. >>shepard: you said during the commercial break if we are headed to a second recession, which is possible, but we do not predict that here, it does not appear to be the numbers are there. >>guest: we have been talking about the downgrade, talking a

financial crisis and recession. one would argue in some part caused by the irresponsibility of the private sector and the response not just in the united states but across europe has been that the right has been strengthened and the left has been discredited? >> i think the reason is that the public mistrusts government because the government has bailed out major financial institutions that brought us to the brink of collapse, that basically government is providing welfare for many en trched interest. government is not there any longer to support the weakest among us or the most vulnerable. you see this intersection of lobbyists, big corporations and washington is what people are turning against. >> they think of the left as the party of government? >> exactly. while even though in truth the government has bailed out many more powerful institutions. ev even now -- even paul ryan came out in one brief moment in ending bailouts for the oil and gas industries. >> going back to what arianna was saying earlier, if he was saying he was going to play the grownup and be the man in the middle, it's not working. >> i'm not sure that that's true. i thin