now, we won't get the jobs done that we need. but it'll take us taking the first step because you had a chance to govern, and you said no to everything that came down. you didn't say, let's sit down and negotiate it out. you said, no, and you filibustered it. i think that was one of the most outrageous things that the country's seen to stop progress that way, and hopefully, we won't see that in the future. did the employee free choice act have a dampening effect in this election? this probably early on it did because -- probably early on it did because there was an enthusiasm gap early on with our members, but the more information we gave them and the more progress we showed them that was made, reining in wall street, progress on health care, the different things that was done, i think that it had less effect. and will we continue to fight for it? absolutely. and the reason we'll continue to fight for it is it's a very, very essential part of the

recovery. look, our country is 72% driven by consumer spending. if people don't have money in their pockets, they can't spend. to compensate for that over the last years, they borrowed. we know there's an end to that. consumers can't borrow anymore. and if you belief that corporate america -- believe that corporate america out of the goodness of their heart is going to start sharing more money with a vast number of workers in this country, i have property -- oceanfront property in southwestern pennsylvania that i'll sell you. what we need is the ability to sit down with our employers so that we can work together, so that we can be profitable together, we can share in that profit and then build an economy from the bottom up. >> okay. can't you agree with me that they have to have an environment and a trust in government where they'll invest their capital? you know, back during the depression this there was this d of time when capital wasn't being invested. we've got to allow that money to

get out there because small business, not wall street, small business creates most of the jobs in this country. >> yeah. and small business is starving right now. they need those banks to start lending. that's one of our programs, one of the five planks of job creation for us, getting money -- used or paid-back t.a.r.p. money -- to get banks to start lending to small and mid-sized businesses -- >> the money's there. people aren't applying right now because of the uncertainty. >> let me go back to something you just brought up, mr. trumka, the t.a.r.p. vote has clearly had a big impact on this election. largely on mr. duncan's side of the aisle. senator bob bennett lost his convention as he was running for re-election. senator lisa murkowski lost her primary although she may have won anyway. congressman bob english, all

because they voted for t.a.r.p.. a number of democrats who voted for t.a.r.p. lost last night, although it's not clear that's the reason they lost. what impact, mr. duncan, do you see those who were against t.a.r.p. as having on the republican concern what impact will they have on the republican party going forward? >> >> it was a giant motivator on the republican side because it was ill con conceived and then ill carried out. there were good results in it, but it was part of the government overreaching and more deficit spending, and that energized a lot of people in this country. >> you know, look, you had 21 out of 54 blue dogs lost last night. if this was all about ideology, those blue dogs should have won, and they didn't. you know, it's too complex and too simplistic to look at a race and say, this vote. i mean, it's far more complex than that. i think there was an anger because this economy, people are hurting. more and more americans are

hurting. 15 million people unemployed, 11 million more underemployed, 6.5 million that have been unemployed for six months, they're angry, and they want action. and i can tell you, michael, if you don't start the action and we don't start the action, it'll be the fourth cycle the next time around you'll get tossed out. >> what do you think about that, mr. duncan? we've seen, now, three cycles in a row as mr. trumka mentioned earlier. that hasn't happened since 1946 -- 1946, '48 and '50. are we getting into an unusually volatile period of american politics? >> it is. some would refer back to the beginning of the last century with the changes in government. the people have given us a chance this time. we had change in 2008, and we're having a change in the direction, change in the ship this time. we get that. i had a chance last night to talk to leader boehner, talk about some of the programs that

he's putting forward. this is a great opportunity for the republican party, and the conservative principles of this country. get back to the basics. don't spend more than you have. look at what the governors have done. and i think haley bash bear did a great job articulating that. we can cut pack on the size of government, we can create an environment that helps small businesses produce jobs in this country. those are the things that you're going to hear us talking about. health care reform you'll hear us talking about because such a dramatic impact that it had on us. you'll hear us talking about cap and trade. cap and trade would have destroyed the competitive advantage in many parts of this country. these are opportunities for us to put the conservative principles forward. >> mr. trumka, are we seeing a newly-volatile electorate? >> absolutely. people want action. they're fed up and they're frustrated, and they want action. if you want to listen to 'em, here's what they said last night: 85% of them said allowing health insurance denial for

pre-existing conditions, we're against that. they were against, 75% were against reducing or eliminating the minimum wage. 72% for against eliminating the department of education. 63% were against raising the social security retirement age, and 63% were against cutting taxes for those who make more than $250,000. so that's what they said last night in the 100 congressional districts that swung that election. so i do hope you listen and work on that. >> i think there are other questions on there, do you want a smaller government, do you want a more efficient government? i think people do. and that's what they're saying to us right now. we've got to create a new environment in this country. >> let me ask one question, this is what they'd like to hear. everybody keeps talking about a smaller government. what would you eliminate from this government? and don't say waste genericically. what would you eliminate? >> >> well, let's leave the policy stuff to the policy guys.

i want to ask sort of a question that we'll all be asking ourselves over the next few days, and everybody will be sort of predating their own actual knowledge. when did you know, mr. duncan, that the house was going to be, was going to fall into republican hand? >> i think we started seeing that in the early spring. we started seeing indications at that point. the quality of candidates. i remember speaker boehner came to lexington, kentucky, in april and talked to me about, and talked to the group about 100 house seats that he thought would be in play, and people were laughing at that point. but we knew because there had been a great effort to recruit quality candidates this time. we saw the mood of the country moving in a different direction, so we started to believe at that point that there would be a change in the congress. >> mr. trumka, did you have any premonitions that this was coming? >> yeah. when we saw the citizen united case decided and more money flowing into this election than there was oil in the gulf,

that's when we started to figure there'd be a problem. [laughter] >> that's just absolutely not true. i mean, you guys continue to outspend us, you did this cycle. >> oh, come on that's just preposterous. >> we only have a few minutes left. >> put the stats in the national journal. >> you obviously read what's the matter with kansas. you create a reality, and we have to put -- >> we only have time for one more question. i want to make this a good one for both of you. mr. duncan, the tea party has influenced the republicans and ginned up this new populist mood. where do you see republicans going from here, and how are they going to avoid what mr. trumka forecasts is yet another cycle in which the bums get kicked out? is. >> well, the liberty and freedom movement in this countries has helped the republican party. it energized us. you saw it in volunteers w the turnout yesterday. you'll see these people coming with fresh idea, you'll see them holding us accountable.

i think it bodes well for the future of the country because we want more people involved in our government. we need to have more money and people involved in politics. so i think they will be assimilated within the party. the party will be much better off for the fact that we had this movement. >> mr. trumka, where does the democratic party go from here? you've just lost more seats than any party since 1948. how do you regroup, how do you get back into the fight? this. >> first of all, the operative word that michael said is he believes there should be more money in politics. i don't know if you caught that. >> to catch up. >> i personally believe there's too much money in politics, there ought to be more policy debate where we actually talk about policies rather than trying to destroy people and destroy their character. where do they go? they've got to go back to the simple notion of jobs, jobs, jobs and more jobs. fight for jobs. fight for the reauthorization of the transportation act. fight for the clean water act. fight for clean energy act which will do twofers, they'll help

solve a problem in this country, and they'll help create jobs. there ought to be a major investment in infrastructure. that's a ten-year period so that we can crowd in private money into the process and fix the problem. we have a $2.2 trillion infrastructure deficit. we need to fix that. the only way to do it is to go after it and make a long-term commitment. they should make that commitment and force votes on job bills. stay true to their principles, work with the other side if it doesn't cost you your principles and if it does, then you have to pull up, and you have to fight for what you believe in. >> all right. mr. trumka and mr. duncan, thank you so much for joining us this mo >> we're back live with this event from the grand hyatt in washington, d.c., "national journal" taking a look at the midterm election. charlie cook there on about to start a panel talking about the

election and the predictions that mr. cook me. a quick reminder, president obama will be speaking to reporters in just about 45 minutes or so. he will be talking about the midterm election results. live coverage of the presence news conference on c-span. >> if you ever want to know whether our economy is picking up or not, which i think almost everyone in this room wants to know, you should take a look at how their businesses are doing. with their 200,000 employees in this country. greg, just and addition and thank you for underwriting. [applause] >> i thank him very much. >> let me introduce our two speakers in the following sense. or at the beginning it. there has been a revolution as it were, election last night. we at "national journal" had

something of a revolution ourselves. we brought in ron fournier, one of our speakers was been a longtime bureau chief of "the associated press" here in washington, 20 years or so. and we have totally reinvented "national journal" as an organization. and have moved into a very digitally focused newsroom. we had 40 or 42 people over the last three months am such news organizations as "the wall street journal" and "newsweek," and "usa today," and a good many other organizations. at a time when this is a commercial message you all are hearing, but after all, the food is free. [laughter] at a time when there is so much consolidation in this business, we're going to an extraordinary period of expansion and growth. and i urge all of you to take a look, i want to call new

website. it's been there for quite a while, "national journal.com," where you'll find throughout the day breaking news items and breaking inside and breaking analysis which has been redesigned. i happen to be an apple ipad free. and in about three or four weeks "national journal" will be distribute on iphone and sometimes in the next six weeks or so you will be able to come to our website on ipad. so old "national journal" is getting very hip. but introduce you to these two folks that everybody knows charlie cook. he has been with the company for about 11 or 12 years, publishers the cook report. some of you know the following, but if you don't know, i'm going to remind you or kill you. in 2006, charlie was the first

political prognosticator or analyst or handicapper to say that the house was going to go democratic. he was the first of his colleagues to do that. in august of not this past year, but the previous year, which i guess is 2009, charlie cook predicted that the house would go republican work and at the time this is really kind of a surprising and stunning prediction. charlie was out there first before any of his colleagues and he called it right. vis-à-vis the senate. is always a little more conservative in terms of how many seats republicans are going to take and he was right on the mark with that. he told a great story just a second ago. he was at nbc, msnbc, nbc. he and his colleagues working with the nbc folks called the

house turning republican, that is to say in b.c. did before any of the other networks, and too much apparent glee at nbc they call it about 10 minutes before fox figured it out. in b.c. had some fun with that. charlie just said that is the best. ron fournier, i sort have introducing. he joined our company from "the associated press." he has revolutionized our newsroom. he has brought an amazing talent. is extremely well-known journalist in this town. he is very much a breaking news and sort of digital mindset. he is the most competitive person i've ever met, which in this business is exactly what you need. and so with that, we welcome my two colleagues and let's have fun and enjoy. [applause] >> yes, i am competitive so i will go first. >> and my boss. >> don't forget that. i would just give, since i'm an

old wire got, i will give a few headlines. let charlie take it from there, put it in a broader context. the headlines here as most of you know, to give you the latest, a huge night last night. republicans picked up 6 60 house seats. the biggest turnout -- turnover in as many as seven decades. hands, the blue dog democrats will be out of work in january. republicans picked up six seats in the senate, not attending you to regain control, but certainly enough to narrow the democratic majority. as many as six governorships were net gains for republicans. especially in the industrial midwest. and 19 or so legislative chambers went, or republicans picked up legislative chambers in places like, the wonder what

jumped out at me was ohio. the last two, that means for the next 10 years of the congressional district where republicans have control of so many state legislative chambers and statehouses. that's a big, big deal beyond even the last night. since my name is wrong and they were for the "national journal" i do have crossed paths. a couple other numbers. if you look at the breakout of the cross tabs, the ones that jump out on the double-digit shifts from 2010 to this year. where barack obama's party lost 10 or more points among men, among white, among college graduates, among independence, among catholics, among rural voters. that's basically the coalition that he was able to put together in 2008, and the democrats were able to fashion and 2006 to regain control. so just to give charlie jumping off point, a few people have

heard me talk about this in the past that i think this is part of a cultural shift, not just a political shift. that what's happening here is there's an electorate out there, americans out there who are undergoing an incredible amount of change in their lives, starting with the economy. we're going from one area to another in the way we go about making our listings. massive about new technologies competition our life. the new technology changing the way we connect with one another. those kind of changes have happened in the country in this kind of integrated with anytime in the last 100 also years, the beginning of the 20 century, the end of the 19th. and at that time, when the list that kind of, the kind of an ease we have in society now, people disconnected from their jobs, unemployment our unemployment, feeling disconnected from one another, being bumped by new tech knowledge, politics was affected by these changes, by the changes in people.

people drive politics. putting people first. and what happened in the last air like this isn't had enormous volatility in the political seat. the house and the senate changing from one cycle to the next very abruptly at the latter part of the 19th century, and a string of one term president. so i have a sense what we saw last night was not an anomaly, that the gap between shifts, the turnovers, has narrowed in just this last 10 or 20 years. i don't think it's going to be something that is going to go away right away. but i'm kind of trees which you think. >> all, thank you, ron. i agree completely about that though we've had three ways in elections in a row, and i'm sure al gore is convinced is related to climate change. but it is unusual because we don't get one of these waves every six, eight, 10, 12 years.

to have three in three consecutive elections, that's really something. first, i should just say, i guess we're done maybe a half dozen of these since i came on board at "national journal" in 1998. >> we'v1998. we have never had a crowd like this. i think it's a real tribute to a lot of excitement, the energy around what's going on at "national journal." several years ago were on came off the floor and i could have been more excited that he's like one of the most exciting guys. when they brought ron fournier over to bring our big box, our editor, editor in chief? is that the test because he's like a real journalist. i just pretend to be one tv. and ron has been covering politics for ever and is just an amazing, amazing, amazing journalist. >> thanks. just to be clear, he's the smart one, i'm the fast one. >> but you put in probably more rotund.

and just, you know, passing people that come on board that i've been gone since i got here pretty much. but i'm really looking forward to matt, an old friend, and matt cooper. just an amazingly talented journalists. so we're really excited about all that's going on. i should correct john sullivan through. i should all that's going on. i should. >> you can't outdo me, john. just face it. and a couple of things. one john said last an increasingly, but we started, it didn't really notice until the there was almost this by vacation developing, a splitting, and that the house

was becoming clearly a nationalized, and i think basically a parliamentary election. i mean, i think it became jus tt the conservative this thing sent this was a big election. i guess the starbucks vernacular, the hous in the sene governors, i think the candidates, the definition of the candidates on each side, in the house were just pulling the donkey's tail or pullin and youd

some in had some enormously influential peoplwhich was kin t were let's just say there was a lot of a very different set of dynamics

>> only 29 months has had come have had an unemployment rate of 9.5% or higher. 29 out of 741. 14 months we are back in 1982, 83 during that recession. and 15 out of the last 16 months have been 9.5% or higher. that's just extraordinary. so that would happen under any sort of circumstances. and then the next is sort of priorities is that i think in a better economy, if on the planet come if the economy were strong, if unemployment were low, i think the american people would have welcome a dialogue about health care reform. i think they would have welcomed a dialogue on climate change. and it's not to say that they would've gone along with just anything. but they would have welcomed that conversation. but i think last year as the economy was spiraling downward, and unemployment was shooting

up, they wanted to use bill clinton's term laserbeam like focus on the economy it and instead, what they saw was basically an obsession with health care. and i think that can increase their frustration. and then you get to the substantive, the substance of some of the policy things. and let's face it, for senior citizens, they get medicare. they loved it. they felt really threatened at extending, you know, a national health care system if actively out to everyone. they strongly, strongly suspected that it was going to cut, it was going to do that it was going to result in medicare cuts. and i think they reacted very negatively. and i think people's attitudes toward government has sort of shifted some as ron suggested, since the economic crisis of september of 2008. you know, different issues tends to in different places. you know, i think you have a hard time convincing rick

boucher today that cap-and-trade had nothing to do with his loss. and, in fact, to me when i pinpoint when did we start seeing that an aries in the coal mine, so to speak, in terms of democratic problems, it was right around the fourth of july of 2009 immediate after the house cap-and-trade vote. that's when i first started getting sort of vibrations from democrats i knew that were coming back from their district. and it just had their heads handed to them in a way that they've never seen before. and just sort of a feeling of, you know, when people were worried about jobs, the business community just not like they were under siege to. and i don't think the administration, the democratic congress necessary intent to any the business community. but boy, you would have a hard time convincing the business folks of that.

and it reminded me of a friend of mine who was an economic advisor to president clinton, said that any meeting or after a meeting at one point, he turned to someone and said, you know, i don't understand people who love jobs and hate the people who create them. and i don't think that the president or the democratic congressionacongressional leadee democratic congress hate people who create jobs. but i tell you what, those people who create the jobs, they sure feel hated, whether they are or not. and they feel under siege and there were not willing to hire people. and into last point because i know we want to open it up. the democratic congressional leadership became the face of the democratic congress and a lot of these districts that that wasn't necessarily helpful. and i think that sort of contributed to the nationalization of it. i mean, if you're jim taylor in south mississippi, you would

rather be the face of the democratic party in that district and not speaker pelosi. and, you know, nobody, there's not a democrat in this country that can blame tom foley in 1994 for having lost their seat. there's not a republican that could in 2006 blame denny hastert, the speaker then, for having lost their seat. but i tell you what, there were a heck of a lot of ads out there that had the speaker's name and picture in them. and the thing that i think she's an enormously able inside player, and she would have gotten that job, she didn't. but i think she took it much more public profile that was helpful. . .

less than a college education, south border, heartland, midwest and, in fact, my house colleague and david wasserman pointed out that something like 60 percent of the land area of the country when republicans yesterday last night. this thing is it was like a lot of places where democrats held seats. look in north dakota, south dakota, places like that. that just sort of went over the side no matter, it almost didn't

matter who the rep was. boy, over they went. we are going to be sifting through this for weeks to come to kind of figure out all the meetings in the crevices and understanding it better, but i agree with ron entirely. this pattern of the surging in and away is going back and forth are almost self perpetuating. >> if the house in particular was a national collection, the people in the election, was it an anti democrat message, was an anti-incumbent message or anti-washington message? >> well, since there are only, what, two republican incumbents in new orleans -- two republican

incumbents in the whole country lost general elections to democrats, so i have a hard time saying this was an anti-incumbent because otherwise you would have seen some republican incumbents. i mean, the only republican incumbents who lost were so far in enemy territory in terms of the kind of districts they represented and to me to republican incumbents have lost their primaries this year, those of an ideological purpose for every one of them lost to somebody that was significantly more conservative than they are so i don't think this was an anti-incumbent even though there are certainly people that hate washington. i think it was pretty anti-democratic. >> shall we take some questions from the crowd? >> you are the boss. >> any questions out there? >> i think they have some microphones rolling around,

there is one of whether. >> today will be interesting when you talk about the embassy issue with barack obama, interesting to see what he does today at 1:00 o'clock. can he state what the message was from the public and can he articulate what he will do it and do in the way where people feel like he finally gets it? >> having interviewed the president in the last two weeks and here just in the privacy of this room and forgetting c-span is year --. [laughter] what was it in your piece that you could share with us? >> is struck with the difference between me and clinton. i covered president clinton as a governor in arkansas for years and the white house. in 94 he took it personally, he was really internalizing it. this was about me and how i screwed up and i did screw up and i didn't see this coming. since you could see even before the alexian clinton internalizing the. i was surprised barack obama a lot of people called him aloof

and out of touch and the supporters will say it's something to admire. he really seemed in flammable. he could tell the wave was coming and was clearly thinking about how he was going to have to as you said govern with more humility. look for more consensus which is what he promised to do two years ago and didn't or could not get done. talked about, clearly you a shrunken agenda talking about going into issues he thought he could reach common ground with republicans, education, infrastructure and a piece of managing so that's what popped out with me he was the polar opposite of bill clinton at this time in 94. it will be interesting to see the difference how clinton came out in 94 were as i recall he had a news conference the day after the midterms, hop on a plane and went overseas, but was showing contrition talking about the era of big government being

zero per. in april of 1995 arguing that he was relevant and that oklahoma city happen and he rallied the country and began his march toward reelection. the republicans by the way it really over reached after that cycle and one thing interesting to see is it republicans over read this mandate as well. is that close to answer your question crack. >> it touches on the, the chicken read and national journal.com. >> the visual first. in my question over here. >> thank you. turley especially, the two of our words, retirement and redistricting, what do you think yesterday's results mean in terms of potential congressional retirement especially on the democratic side in 2012 and also with the pickup of so many chambers by the gop, what you think the long-term outlook is

for any democratic comeback in the house? >> well, i always say that if it's never good for a party to have a really bad election but if you're going to have a bad election you really don't want to be in a year that ends in zero with redistricting coming right after. and with a number of chambers that have switched to governors, this is just terrific timing for democrats. it's going to cost them. they will pay a price for this for a decade to,. i think your point on retirements has been very well taken although given how many members that have served for long periods of time and that or retired yesterday, you know, the ranks of potential retirements will be a lot less than they would have been but for democrats i think a lot of them kind of stuck it out, maybe one more time with a lot of pressure on them not to retire this time. some of them are going to go ahead and pull the plug.

but that the same time there will be democrats that will have a good year either two or four years from now because of the very same reason, or some of the same reasons republican did now, you don't have a mass of a massive and wavelike this without getting some pretty exotic people in some pretty strange places elected. and there are people -- you know, you are like this were 2006 and 2008 together i would argue for democrats or 2010 for republicans, you get some really smart really talented deserving people to win and then you get some people and that just happen to have their names on the ballot on the right day. the right here. suddenly find themselves on wednesday morning members of congress. i have this conversation with

some friends that our republican consultants to say, wow, this is going to be some interesting people to try to defend the in 2012 and 14. [laughter] >> you have names? >> no, but it was interesting people and so just as democrats -- anybody in this room is pretty wired in group, very wired in group, you can name some people that god didn't necessarily intend to be elected to congress back in 06 and 08. [laughter] we've seen this rodeo before. >> so -- >> whether it happens in 2012 or 14, i don't know. as a scent that is a self perpetuating, you have waves and 06 and 08 encounter with the other way. you did a bunch of exotic people

elected this way and in -- all i can say is my youngest is 17 years old, i could be doing this a while longer, and these waves back-and-forth a really good for business. [laughter] i'm not so sure it's good for the country, but it is good for business. >> in the middle of their parent. >> there's been a lot of talk throughout this conference about the house obviously with republicans taking control and am wondering either of you would advise to give to both senator reid and senator mcconnell as to what they should be doing on the senate side in? >> he is more of a legit journalist. >> first of the first thing i thought of a couple weeks ago was there's going to be a day

were mitch mcconnell is going to say i have missed jim bunning [laughter] [applause] he had days from time to time but he really wasn't as bad a guy as we thought. [laughter] know, and i think that i am kind of watching for is how many of the sort of a non tea party republicans and this is senate and house will feel the need to move in that direction out of fear of having a -- what happened to senator robert bennett and his primary there or we summer burkowski and the republican primary or mike haskell and the senate primary. warren hatch. senator hatch had to decide it am i going to retire or am i going to have to become jim demint new best friend in?

that's an exaggeration, but it is not entirely wrong. a lot of these folks, the republican primaries have gotten to be a pretty rare find a place. in bennett's case when was it, 83 percent lifetime american conservative rating, wasn't nearly enough to give his name on the ballot. the thing is people say, gosh, want a president obama be able to do what president clinton did in terms of trying deleting and taking advantage. in clinton's case where he used newt gingrich as a foil in the house republicans particularly to play off of it. certainly there was that, but at the same time president obama -- first of all, he's not president clinton, i don't think he has ideological dexterity. [laughter] that president clinton had an.

but the other thing is president clinton had an unemployment at 5.6, 5.8% with democrats losing the house in 1994. right now is 9.6% and he didn't have a a war in afghanistan some place. and so i am not sure to say, well, and this then it horrible economy and a problematic war, other than that president obama is in the same situation that president clinton was in. other than that, that is really really different. the other thing is newt gingrich has a million ideas and then lease a third of them are good. [laughter] >> the others are exotic? >> exotic or thought-provoking, how about back? [laughter] i like newt, but the thing is

john boehner is not going to be new to, and john boehner is a very pragmatic guy and he is not going to -- i just don't think the same mistakes, he may make new ones but not the same once. >> is a that the irony, they hate gridlock and isn't much more likely there. in a gridlock entrenched. >> assuming that steny hoyer for the sake of argument is the minority leader and it john boehner is the speaker, you know, in theory john boehner and and the steny warrior could go in a room and work out a pragmatic deal to deal with lots of these problems facing the country. >> but their bases are on the outside. >> could either one of them make the deal stick once they left room and went back to their conference.

they both would have to dubai in and it wants those -- boy, that is hard to do. >> charlie, congratulations, you're the first and right and thus not a bad combination so well done. >> i have a caterpillar truck in my office. [laughter] and a john deere i should add a. >> one of them is the best. the state's i am most familiar with our illinois and pennsylvania. the attacks on republicans were relentless on trade. on one hand it did work but, on the other hand, the attacks have the blessing of the white house and the powers that be with the democrat party. what is the prognosis entrée

given that dynamic in where we are today for the next two years? is this an area where you can work together? >> let me deal with that on two levels but i want to invite ron in because he's a more substance than i'm. if you have any substance at all. but i do think that unrelated to train necessarily illinois and pennsylvania were interesting because while both the senate races ended up going republican, democrats put up a hell of a lot tougher fight than i thought there were able to do and kept both of them really, really, really close when i thought they would have pulled away earlier on. it probably says something about sort of the intrinsic nature and terms of economic issues of those states that democrats were able to take and go all the way to the wire even though they finally came up short. first of all, i think sort of the free trade wayne of the

democratic party probably got darn near wiped out yesterday and so when you are going to see i think leftover is a much, much more protectionist democratic conference and is going to look more like the pre bill clinton era democratic conference. but at the same time over on the republican side i don't think this is your grandfather is republicans that just got elected to this group. i think there are a bunch -- is sort of and i'm not saying this in a derogatory way about an organization, but we have gone from i think a fortune 500 republican party to in an effort by the republican party and more small business and more orientation. and where internationalism and international commerce and three

trained in is less of a core value. i suspect that you're going to have the least free trade democratic conference we have seen in a good while and absolutely the least three traded republican conference we have seen in a long, long time. >> i think those conferences are close to the poles of a public. people are scared and run the scared they turn inward and got out words. i was raised in detroit around and buy a lot of not college-educated union workers who were used to making a lot of money, good money. turning widgets in a factory in these other people that ran away from the democratic party. last night. i just can't see there being much of a stomach for that kind of activity. i don't think in the tea party

movement, the kind of ill cousin a desire for this. any independence left in the democratic party last night did have a hard time stomach and back. this is what their jobs back, 10 percent of people are unemployed, 16 percent are under employed, just give me my job back before trying to cut deals. >> and the jobs being created are different jobs largely going to during kinds of people than the people lost these high skill jobs that he is talking about. >> looking for the new economy before looking at new deals is what we heard yesterday. >> i see a hand way over there. there is some of the year with a microphone, so they can get one. >> a question i rarely ever charlie. what is your initial assessment of how the election outcome is going to impact the presidential

nominating process in 2012 for both parties? >> the race starts today. >> i will start it but you have got to finish it. i don't know the immediate future impact of it to be honest. i don't know what's going to be really different. i tend to think that's an this is an original with me somebody else and i should trigger ought to came up with this concept to give them credit, but the nomination fight on the republican side is sort of like n.c.a.a. basketball practice. clearly there will be a tea party bracket and that bracket will go all the way to certainly the final four if not the championship game there will be in the various things, maybe evangelical bracket which may or may not be feeding into that same bracket and there'll be

very assertive brackets of types of people that will be competing with each other for places in the feel of. the only thing my theories about the republican side is i knew not know who is going to be the republican nominee, but my hunch is to people that want for a very different reasons than one won't be sarah palin and i don't think mitt romney either. for sara palin personally i don't think she will run. i think she's making more money than she ever dreamed of before, she's a celebrity, can get on tv wherever she wants. as my kids would say she has a sweet deal going and why would she want to mess with that? just get back into this grinder. with the other thing is if she runs i don't he should win in nomination because i think that one thread, one common thread between conservatives and republicans in 2012 is going to

be broken renominate that has the best chance of a beating president obama i think for conservatives that will be the driving thing. they may love what she has to say and they may think she is a hoot to listen to, but is a pretty hard case to make the issue would have the best shot. for mitt romney i think his opponents are going to do everything short of taking him to court and changing his name legally to mitt father of obama care romney. i'm not a health care expert, i don't know if in any way, shape or form his plan that he pushed through in massachusetts was a model or inspiration or even it to ideas came out of it -- i have no earthly idea, but i know that in politics if you are explaining you are losing. as they would say, he has a lot of explaining to do. >> i will and is bringing up one

bracket i will watch most a dozen have a d or an our next to it. somebody who is not aligned to the tea party who has several million or a billion dollars to spend who has a record of accomplishment who can do what ross perot did at the time that was and as tumultuous. what would you said, exotic web. >> csp maximum like michael bloomberg who is a serious politician and a serious man who has a record and a ton of money and very ambitious. i would not discount him and i have a summit earlier say how can the small and jewish man from new york, mayor become president. two years ago would have projected a black man would have become president. these are times like aunt in decades. all the old rules are off the table. and something really surprising, really mind long is going to

have been in this next presidential race and one of those things could be some rely bloomberg making a huge play and live in the race and maybe becoming president. >> i don't know how many of you had a chance to talk to him, i spent an hour with him over a cup of coffee and i came out thinking this is one of the spot is people i've met in my life and also some day that just in suited competence from every corner in his body. can he win? i don't know. but he is a very formidable person and if i were in the white house looking at records from wells fargo that there are projecting for calendar year 2012 gdp growth of only 3% which is the point where you start creating net new jobs. 9 percent unemployment for calendar year 2012.

if we are going in, and unemployment is anywhere near 9 percent in the presidential election year, god help you if you are incoming president running for reelection and then you have a war out there as well i tell you what, if i were in the white house i would be on my knees every night praying that sarah palin would be the republican nominee. [laughter] >> charlie, my question builds off that last one -- >> with your arm. >> my question deals of the last one on the economy since that was clearly the central issue in the race and as you said it's not likely to improve dramatically the business cycle snapping back. it doesn't given the you have split control now with republicans in the house and more leverage in the senate who gets the credit economy is improving and who does the blame if it doesn't? and the outlook for the 2012 senate elections given twice as many democrats and a lot of

first term tolerable democrats, even a barack obama reelection landslide it could keep republicans from taking the senate in 2012? >> i will take the first on. the president and owns the economy, if it doesn't turn around in is very likely it doesn't charlie is right, it's awfully hard winning reelection with 10 percent unemployment, people will get even more angry and less efficient and more typical. and if the economy turns around the president will get credit whether or not he deserves it because he's a guy in the white house and stands in front of the podium and takes credit when things don't turn around. i really think and this is a unit of fonted, go back and traced the president's approval numbers, any presidents with the unemployment rate and a dovetail to a large extent. barack obama's future is linked

to the economy. >> i was trying to find jennifer duffy our seventh editor has actually put together some preliminary seven ratings and i am not finding the piece of paper read the second. but for 2012, the thing is it will be 10 in coming either nine or attendant republican seats are up and i think 23 democratic seats are up. that is a heroic level of exposure for one party. the lopsided whenever you have a way the election if you are the beneficiary of a way the election is in the senate six years later they all come back up as just use the word again some of them were fairly exotic people. elected in non-traditional places for democrats. wow, but one thing to plant something that ron said, i had a

really smart republican and very tight with republican congressional leadership of the time make the argument that back in '95 in 1996 president clinton, newt gingrich would come onto the white house and president clinton was sweet talk him into something. some deal. just without trauma -- just with the charm that bill clinton had. and president clinton had it and then you would go back to the hill and go in and tell his republican colleagues about the deal he had cut with the president. and then want to kill it. what the hell would you do that for blacks he would get him oftentimes to go along with that eventually even though they hated it. the thing about it is what they done was once these things passed the president's numbers would go up and guess what, the republican congress' numbers one

up. it so the republicans started realizing, you know, i hate doing a deal with this guy but in our numbers are going up and if it is making us look competent and likely to get stuff done and they had that 94 way with, they kept that congress in 96 -- it helps get the over the hump and increase their survivability. they kept that thing going until 2006. whether these new exotic members coming to town see politics in the traditional way, that's a good question, i don't know. >> we have time for one more question. we know you are all busy. >> hi, angela, hi charlie. i wonder is there a voting part of people that enjoy the

political whiplashed? is there someone that supported senator kennedy, president obama's, senator brown and to all patrick or is voter turnout going to be a big factor even more so next time with surprises? .. >> in the gallup numbers for the third quarter, 40% of adult call them selves independence.

and that plot led by an 18-point margin in favor of democrats in '06, and by a point in '08 and 8.4 said obama, senator mccain. i don't know what they did yesterday. i know for the year they were averaging with gallup a 10-point spread. in a cbs "new york times" poll it was a 20-point spread. probably something in between. 55-39 spent a lot of the same people. it is the same people who are spending back and forth. >> the thing is when they were voting for democrats in '06 and oh it eight, i think those people, they were expressing displeasure with whatever was going on. i don't think was an ideological vote, and just as i think their votes this year are not ideological foes. these people, they want results. i mean, independent voters, the liberals have passion. and conservatives have passion. and we can guess what shows at

night liberals watch, and we can guess what shows conservatives watch. but the people in the middle, they're not watching that stuff. you know, they're like me. they're watching law and order, cis, or criminal minds, "dancing with the stars." you know, they are not watching with the food fight shows. and so they're just not ideological beans. they are not beings by their very nature. and they're very fickle. they're not sure what they want, but they really are sure what they don't like. >> about two years ago about 80% of them felt the country was on the right track. and about 70% just want something done. >> thank you. thank you very much. [applause] >> before you always let me come again, thank our underwriters at

altria, qorvis communications and united technologies that does produce carrier air conditioners. often at these events i say that i am so lucky as i want to thank our observers here. i am so lucky because i get to spend every day of the week working with the likes of ron and charlie cook and their various colleagues. but with a new "national journal" you can yourself share time with them and their colleagues every day of the week at national tell.com. so i actually encourage you to experience that. i want to thank these do. but most of all let me just thank all of you for spinning so much time with us. it's most by thing that. we appreciate you spending the time and enjoy the rest of the day. have fun. [applause] [inaudible

conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

>> you can see complete midterm election results online at c-span.org. you'll find all of last night's concession speeches. as well as today's reaction. and the "national journal" discussions and allies in the election results. all that at c-span.org.

>> next a look at development challenges in iraq. we'll hear from the deputy special representative of the u.n. secretary-general as well as the state department iraq affairs director. hosted by united nations development program, this is about an hour and 45 minutes.

>> well, i think will get started. and everyone here all right in the back? is the microphone working effectively? great, thank you. we seen that sort sort of an unfilled deal here, which may be a metaphor for our political situation on this election day. let's hope not. my name is fred tipson. i'm the director of the washington office of you in the pit, and i would like to welcome you to our roundtable today on iraq's developer challenges. most of you know undp well, but for those who don't, we are the leading developer and agency of the united nations, have offices in over 130 countries and do work in more than 160 countries. but among those assignments are development challenges in many of the most difficult parts of the world. we want to highlight in particular the work of the undp

and the u.n. system, in this case the mission of united nations as well. in iraq. let me however make a plug for future roundtables, and one in particular that is coming up, not unrelated to the challenges we're facing in iraq, and that is our launch event for the 2010th human development report of the undp. this year looking at 20 years of since the innovation of the human development report, which is many of you know was one of the first indices and reports based on the indices that went beyond income and gross domestic product measurements for measuring human welfare. and that in particular measures longevity and literacy that in balanced a wider view of what human development encompassed. what's interesting about this report, and i hope you can join

us on november 17, at add for that launch event. what's interesting is that they're a number of new indices that have been proposed and added in that report. one measuring equality, one in measuring gender empowerment, and one which is called the multidimensional poverty index get out in conjunction with oxford university. which looks at an even normal capacitive way of thinking about both poverty and progress against measurements of poverty. so please come out for that. the roundtable today i should tell you is being video by c-span, and we are glad to welcome c-span audience. that means that you are all on your best behavior, of course. let you all always are in this audience, and we look forward to a vigorous interaction with you after we have made some initial presentations to get the conversation started among the

panelists. i can't help observing however having been working in the congress in 1980, when we had one of our last tsunamis and the united states government. those years you may remember, or not, it was not expected really that it would be h. a in the u.s. senate. and as the night wore on, those of us who worked for the republicans, myself included, found ourselves increasingly confronted with the prospect that we would be in the majority. so i sympathize with any colleagues who may be, find themselves in that position tomorrow morning, because it is indeed a rather significant change in u.s. politics, when even one of the houses chefs. i know that experience because as we will no doubt note in the discussion, the iraqi people had

an election some seven months ago, and have yet to form a government based on that election. and i've received some criticism for that delay. i simply would point out that in every democracy there are challenges, even once the government has been formed, in operating that government and reaching consensus in moving attenders or work. and though i hope it's not the case in this country next year, we may find ourselves challenged by the need to collaborate across often very contentious political boundaries in making a government function. fortunately, in iraq things continue to move forward in a positive direction. and it's really that that we want to focus on today, both the challenges that rock faces, but also, hopefully, take note of the fact that there are some

very dedicated people, not just in the international community but especially in iraq who are working despite the lack of a formed government to move the agenda of human development forward, and it's for that perfect that we are gathered today to reflect and understand how that process is unfolding. to do that, we have a star-studded cast. in particular, our own deputy special representative thomas secretary-general, christine mcnab in iraq. and christine not only is the drs decommission also humanitarian coordinator, she's also the senior undp official in the country. so several hats which as you can imagine complicated her challenges in operating there. but it's one of our star performers from previous assignments and other difficult locations. i'm not going to go through all the biographies, because that's

why we put them on the back of your indication. -- invitation. we are also pleased to have john desrocher from the state department she's come back recently from iraq, august. and is now and leading the department from washington. and also has quite a distinguished career in foreign service, including any location that is very dear to the heart of our administered, helen clark, former prime minister to new zealand. john was in auckland as the council general for several years. so we are very pleased to have him bring the new zealand perspective to these issues. and les campbell is an old friend for the national democratic institute, and as many of you know, the head of the u.s. committee for undp, but every time we tell them we have a need for a speaker, anywhere

related to the middle east, he neatly suggests les. and les has shared this podium before. so we're very pleased to have him back again. i also might note super talk about electoral politics that he is a practicing politician in his native canada. he may wish, or not, to say more about that experience as we go. but i think these challenges of government performance in democracies, where the old democracy or in new democracies, there are some common themes that run through them and perhaps we can all take account of the. so that's our lineup. >> we've asked each panelist to spend 10 or 12 minutes kind of laying out their view of iraq's develop a challenges. i want to inhabit a interaction for the panel, stimulate by me as the moderator, but then hopefully turn to you, the audience, to surface the kinds of issues which the presentations provoke for you, or which you came with.

so without further ado i would like to turn to christine. >> thank you very much. can you hemi at the back? on the sides? good. i have been working in the back for one year. i intend to be there for at least another year. so in a way this is my midterm review. i come to iraq with a strong development background, because of also the humanitarian coordinator. saw just like to take you a little bit about what i've seen and what i thought about things since arriving in iraq. in our writing in iraq was quite spectacular from the developer workers point of view, because when i stepped off the plane in the baghdad international airport military side, i felt like i'd stepped into a film set. we have seen on television. i stepped into it. i then got lifted by the u.s. forces helicopter over to the

international zone, started my career as the deputy head of the united nations mission. now, for joy for me there were two deputy heads. the other one does with politics. i get the easy bit, give him and affairs. nothing is easy in iraq, as i'm sure john will also tell you. is highly complex, because we're dealing with a country where the majority of the population have no nothing except war, sanctions, and conflict. because half the population is under 18. they literally have not known peace. they literally have not known to democratic development or respect for human rights, for their human rights. so we have a huge agenda ahead of us, to work with the government of iraq and the people of iraq, on developments, on human rights, on humanitarian

relief, on rebuilding a war-ravaged country, and a country where the infrastructure was severely damaged. first, it was damaged by the era of the sanctions that because that meant essential work, maintenance, could not be done on the electricity, water supply, irrigation system. and this was further slashed by war, then we had the international struggles which this place huge numbers of people after 2003. and we as an international community, have an obligation to iraq because they are a member state of the united nations, and we're all citizens of the state of the united nations. so that's my starting point. people in iraq have a right to a decent future, and they're not very different to anybody else but the vast majority want the same as i want for my family, and you probably want for your spirit peace, security, a good school down the road, a health clinic can go to, and a job, and

hopefully a career ahead of him. at the moment, remarkably few iraqis have that. but it's not all bad news. it's not one master it is a lot of different challenges, and some parts of the country live more peacefully than others. a lot of children go to school. but i will come back to my schooling is still an issue. so the big picture is, so much work still to be done despite the money that has been poured into the country. the budget is not where it should be. it is still a government with a deficit budget despite sitting on this sea of oil that we all hear about, it's not being pumped fast enough, effectively enough for export to cover the budget at the moment. and yet, we need now to lay the foundations for what is to come, which is a stable democratic iraq, which is a noble country playing a noble role in a very important region of the world.

it was that, if you go back several decades. and we want to go back there. so let me just get very quickly to some of the challenges as i see them, as some of my team and seize them. you all know about the millennium development goals. for what every family has a right to expect. we are making process, it has to increase over the last decade decade that access to sanitation and water has increased. there is widespread cell phone ownership. that comes under in the g8 if you're one of why that is an mdg eight. that is part of the catholic the end of all that modernization. but now nutrition still exist that there are still children who are stunted in the growth because of lack of access to food. but there is good news. poverty is very shallow. most families in poverty are just on or below the poverty

line. so we don't get that get agonizing poverty were children slowly starve. is not there. it is much, much better than that. but even if children are born and grow up fairly healthy, they have many challenges ahead of them. one is illness caused by damaged water supply and sanitation infrastructure. and another is that basic of going to school. the numbers in primary school are dropping that he used to be 95%, now down to 85%. but the thing that really worries me is this one. although the majority of children go to primary school, by the time you get up to senior high school level, which feeds universities and training colleges, it's only 20%. this is an absolute long-term catastrophe for the development of iraq. because that 20% will have to carry all the expectations of a trained workforce doing all this

technical jobs that need to be done in the future. and their schooling is partly the lack of schooling is partly a result of damage of war, many teachers have fled because they were definitely targeted in the post-2003 fighting. and for those who stayed, there were very real threats against securities and many parents just quite simply didn't send their charges go. it's okay going to the village school or the school down the road that it is not a case in your children 20 miles to get there secondary education. so that is one of the huge issues. and that the issue is that women who used to be a part of the economy and the government of the country have been severely marginalized following the wars. because jobs are in such scarce supply, i've talked about 13% open unemployment, and probably much higher, women have been

forced back into the homes, and while for many, this is perhaps an inconvenience and not quite what they expected to do with their lives, it's a tragedy for the women who are widows. and thereby become dependent on the good grace of rather distant relatives to make a living. it is very, very difficult for winning headed households. -- women headed households. if we continue about the challenges, there is another serious challenge, and the u.s. government has been very instrumental in trying to help solve this, and that is of the displaced people. there is to one and half million people who had to flee their homes, who are still living in the country, and some of those awful squatter settlement in baghdad or rural areas which have been devastated, and there are serious problems getting them back to their homes or selling them whether or.

because in urban areas, there's the whole tenure issue which has to be solved. and rural areas there is a whole jobs issue. you cannot survive in the rural area unless the education systems are working because agriculture is dependent on that. jobs are dependent on agriculture. so huge challenges. one and a half million still to be settled. there have been some recent flows of refugees which you might have picked up, they are much smaller than before. so they are very specific groups that have been targeting of the minorities, and you've probably seen in the press over the weekend, this awful incident of the catholic church in baghdad where all the people of service were taken hostage, and in the rescue attempt, over 50 of them died. so there is still targeted. but there's also a can of rights that. we have seen targeting against christians around election time

when their muslim neighbors actress said, please don't leave us, we will protect you. or when a student convoy was attacked, christian students. their muslim colleagues came out and demonstrated to keep them at the university. so there are things that are of the good side of this. and the final development challenge i want to mention, because it's not the obvious one, but a very important one. it's that of rebuilding the state of iraq. rebuilding the civil service, rebuilding the public service, the schools, the education system as a whole, the universities, the hospitals, water and sanitation supply. but the core of rebuilding the state is for people who work for the state, the civil service reform. getting them to think like civil service might mean you are at the service of the people, and that you are civilians who are helping others affiliates.

it's been a highly illiterate society. so civil service reform is a key, and then the other reform is that of, not even a reform. it is building the private sector. because iraq, amazingly, has never had a private sector. it said state-owned enterprise. it said farmers, and it said traders. but the private sector as we would know and recognize which generates jobs has not really existed in iraq before, but we are working out very closely as it happens with usaid, to build up the capacity of the government to enable the emergence of the private sector, to regulate private sector, to give them stable operating conditions. because the key issue in the future will be jobs. or you will generate income, but it will not generate jobs. the oilfield down south now generating about 30,000 jobs. we need 3 million jobs.

so it's really an essential part of our work. the u.n. has agreed now with the government of iraq on a five-point agenda which covers the areas i have mentioned already. first one highly neglected area, and that is climate change and environmental management. because the country is getting drier and hotter. that is the trend at the moment. water supply is declining disastrously. the very famous marshlands are down to 10% of their original area, and they're one of the most important marshlands globally. and we will work on that through the global environmental facility, through the united nations environmental program with the world bank. we often partner with the world bank, and with our donor community. so i have one final message in my 10 minutes, and that is, as much as we have done together

since 2003, in very, very difficult security conditions there is even more to be done. but it's in our selfish interests as well as in our humanity interest to keep on working in iraq. we all who are there to in some mystic we are aware of the risk that we take measures to mitigate the risk that it's a high-cost enterprise. but it's like something that someone was said about education, which is very simple. if you think education is expensive, try ignorance. it's the same with iraq. if you think a successful iraq is expensive, think about the alternative of a failed state in the middle of the middle east. thank you. >> thank you, christine. >> john, we will turn to you. >> thank you. thanks very much. i want to thank you for the

invitation. it's great to be here with christine and les. and it's great to talk to ever. i think glad to talk to everyone all the less in my tennis that i might have because christine covered challenges i think pretty well. i will maybe just glide through a bit through the remarks i had prepared and, so as not to repeat a lot of which have already heard, it's our duty the u.s. government's, the u.s. government angle on some of these things. christine lagarde the challenges very well and very clearly, and, you know, i was checking my own notes, so picking them off as she was going to them very thoroughly. our own approach views governments relationship with iraq is governed by the strategic framework agreement which is something we cited 2009, which covers the gamut of our relationship with iraq across economic and political and diplomatic, all sorts of fields of discussion.

we work on things like public services and economic reform and reducing violence and shaping the rule of all and respect for human rights under the rubric of disagreement. we have spent billions of dollars since 2003 on iraq reconstruction. in all sorts of areas in security, economic reconstruction, local governments. christie made a point about jobs. it is a great deal about jobs. iraq is a country that is rich in oil, but, you know, you don't need to look at a globe for very long. you can find countries that are rich in oil are rich and other natural resources that also suffer real poverty. and we want to help the iraqis build, a diversified economy, a complete economy, one that oil is a foundation for but is not the only part of. as christine said, you know,

years or so many jobs in the oil sector will create. and there are a lot of young iraqis out there who will be looking for jobs, trying to develop the commercial sector in iraq, helping with things like regulatory reforms and developing good business environment, working on the banking sector, telecommunication sector. would have a very couple of successful trade missions. we had one last year here in washington and commerce undersecretary sanchez just returned from a trip to baghdad where we are trying to bring business people together we are our companies, iraqi companies can find partners and work together. that's been going very well. we work a lot with our international partners, and i should talk about that. we were, christine talked a lot about refugees and displaced people. we spent a lot of time and a lot of our assistance with our u.n. partners on working on refugees and idps. and i think we've had some success there. it's a very difficult, if a difficult challenge.

but we are having some success in getting people back to the areas where they came from and supporting them until they can do that. that's really crucial. we, of course, the u.s. motor has done a great deal from the beginning, do a lot of support for reconstruction goals, both things they do on their own and things they do to support us. they work a lot with the u.n. as well. . .

obviously we are very supportive of that. but, there are a great many challenges and as i said i was sort of just jotting down some notes as christine was speaking, and it is really, truly it is important to recall how economically isolated iraq has been for so long, and obviously not just since 2003, not just since even the sanction period even before. that sort of isolation has taken a toll. it is certainly taken a toll on the infrastructure of the country and when you have to think of infrastructure and the most broad terms, not just the electricity sector or the transportation sector although certainly those have suffered at education and health, all the things you need to build a society really suffered a great deal in past decades, and those things, those cannot be rebuilt overnight. we are putting a lot of effort into that.

the education system as i said has suffered. refugees and displaced people have fled and that damages education as christine pointed out. the agricultural sector. iraq's agricultural sector can be a great employer. it really should be an important employer, but it operates on a very outdated status centralized approach, which is really in addition to the infrastructure problems with irrigation and everything else, it makes it a real challenge. i talked a bit about them financial environment. we spent a lot of time in baghdad working with the iraqi some the financial environment. the banking system, the banking system is really just starting to develop. it has started to develop an economy you know, while your banking system is still developing. legal and regulatory, as i mentioned we talk to people who want to do business in iraq and obviously security is a concern.

the security situation has improved but security still an issue of course but there other issues. if i sign a contract someone is there a legal system that i can take advantage of to enforce that contract if i have to? can i buy land? if i can buy land can i get clean title to my land? can i borrow money against the value of this? things that may seem very basic to us but really are the underpinning of any diversified economy, and that is what we spend a lot of our time working on. and, you know i really, i really took to heart what christine set about rebuilding the states and the role of the state. so many people fled. the educational system was so damaged. there really is a gap and expertise in so many areas across ministries. you have a lot of people who want to work with you well, don't have a lot of experience, don't have international

exposure to different methods of doing things, different approaches that you can take. and that makes it very tough, but these are all things we are working on and working on with their human partners i think very well together. i think the potential in iraq is great. i really do. and you know, not just because of the oil, although that certainly is a large part of it because of the, because of the extraordinary role in the arab world that iraq has played in the past, and i think, i do second the idea that it is still something we need to work on and we need to work on well. there is an extraordinary opportunity here to help the iraqi's develop this extraordinary potential in something i really enjoyed in the year i was in baghdad and i'm still doing it now from washington. it is really been quite meaningful to me and it has been great to work with partners like the u.n. and i think i will leave it at that.

>> thank you john. we look forward to explaining more vetting questions and answers. less, we will turn to you. >> thank you. i guess i'm lucky because i think i get the field of political development to myself, at least so far so i'm happy with thousands that is my specialty. and the eye has an organization that has been in iraq since 2003. i was part of the first trip, to a bus that went in. things settle down after the invasion in early june 2003 in 1 of the connections with the u.n. at the time, and this is going to be crazy-- sound crazy but it is a true story and it shows you i think how many of us were part of iraq but myself and deputy director bar team and an arab-american woman decided to go to iraq. we had no idea how we would get there where we would go but we were able to hitch a ride with a u.n. plane. didn't have you any-- any u.n.

i.d. that no problem, hops on the plane but we didn't think what would happen when we arrived. we did arrive in the military hangar and the only cars that were cars that the u.n. had so we hopped in those cars and they have brought us to the u.n. office, the one that was eventually blown up, but people just assumed regular employees and they fed us and tried to funnel us into an orientation. we sat there and we were afraid to say we didn't work for the u.n. because then we thought we would be not appreciated and impostor so as soon as there was a coffee break we sat there in the orientation. is in his there was a coffee break we snuck out and went out in front of the building and again it sounded excellent-- absolutely wacky but we flagged down a cab and said take us to a hotel which we did. that in those very early days there was a lot of optimism and as crazy as that sounds we met over the course of a week, dozens of iraqi's who at that moment were mostly hopeful about what would happen. that was when foreigners could walk the streets and soldiers were suntanning on the top of tanks and it seemed like anything could happen.

now i won't go into the history of what happened after that because i think we all know, and it is amazing sometimes given this very tragic story in so many ways that iraq has fallen off the public agenda to some extent and it is heartening to see such a good crowd out today because it is still very important what happens. even if the optimism in the early days was highly overblown and the mistakes were huge, it doesn't mean that we don't i think collectively have a responsibility to try to make it turn out well. and so i want to do a typical thing and explain what i will put a few things in the political of good news category of a few things in the bad news category. on the good news, in iraq and again i'm referring to is specifically political development, political party elections advocacy organizations, civil society

organizations that are trying to have an impact on policy at the national and local level. women's participation, youth participation, freedom of speech, media, all the things that go into building a functioning democratic system. as bad as the news has been in iraq and as bad as the security and so on has been, and i am by the way ndi's regional director so i deal with countries including iraq all the way to iran, iraq in the middle. under most measures iraq actually compares favorably to the u.s. and middle east if not ahead in the areas i was talking about so in other words in iraq or hundreds of political parties. i don't know if that is good. is probably not good but the fact is there is a competitive political system and almost anyone that is interested can join the party and try to work through political life that way. as you know there have been successful local elections, provincial elections, national elections and being a party

member working within the party is a viable option in iraq. also in iraq, you have, there are many problems. i will probably keep saying there are many problems. maybe i will say it once and not keep qualifying because i wanted to sound as if i am naïve. there are many problems however there is surprising degree of freedom of expression in iraq. there are problems in-- but in many cases in most cases people are free to pursue-- you have interviews and they talk about a variety of things and unlike many of their neighbors, it is possible to hold different opinions, express those opinions whether it is done through the media or through writing articles. there are a wide degree of freedom of expression. there was a quota system in place in the election that led to the election of about 25% of the parliamentary seats for women. lots of criticism on how it

happened. it is imperfect and so on, and i suppose we could even wonder if iraqi's were entirely serious about this but the fact is that it happened and we know from experience another middle eastern countries including morocco and more recently in jordan, in kuwait once, once women are in political life it leads to many more good things. in the case of morocco it led to a complete change of the family and barack up, which was much better for women and families and the election of 35 women to the moroccan parliament eventually was the precursor to the election of thousands of women at the local council level so good things can happen. the iraqi parliament is going to sound funny if i say that it is functional because it hasn't been functioning for the last six or seven months, but let me put it this way. it is no more dysfunctional than any other parliament in the arab world. in fact when it is meeting it actually has power.

i'm not going to say too many good things about the iraq parliament because of the current impasse but the iraq element actually makes decisions. the iraq parliament actually passes laws of consequence. they iraq harlem and stops loss of consequence. the iraq parliament has a big role in negotiating treaties with international, not so much negotiating treaties but it has a role in ratifying treaties with the international community so the statements i have just made don't apply to any other arab parliament. they don't apply to any other arab parliaments of the iraq parliament matters. so that is the good news. moving closer to the current time, another piece of good news is that there was a move prior to the election towards what i will call issue-based politics. i know that christine was in bosnia and i was in bosnia in the mid-90s, and one thing that happened in bosnia that is also unfinished business there, but when the immediate threat to

people's lives lifted, in what i will describe is the existential threat. when people didn't have to worry about whether or not they and their families would live another day, didn't take long before their attention moved away from what we can call sectarian issues of bosnia toward issues that cared about pensions, jobs held, everyday concerns. we started to see that last spring in iraq. up until not long ago for good reasons, iraqi's perhaps behaved as if they were closer to their tribes sectarian groups and so on because there were these existential threats but in the last election, there is good evidence through polling and focus groups and so on that people started to exercise votes based on the parties and leaders that they thought would bring the best future economically in terms of services and i will talk about that more in a moment. another piece of good news is that the election was fair. i wrote an op-ed which appeared in foreign-policy in march,

where i mention the support of the u.n. and the support of the u.n. to the independent high electoral commission i think is the correct name, the support of the undp for domestic election monitoring. not only where the technicalities of the election run well in iraq with u.n. assistance and others, there was domestic-- in other words iraqi volunteers monitoring and they found something to a parallel vote tabulation, parallel to the ahec that the results that were announced were roughly true. there may have been some numbers here and there but the results were roughly true. ndi did free election polls which tracked fairly closely with the results as well so the results of the election seemed to jibe with the pre-election polls and then ndi conducted a postelection poll where we found out that iraqi's very clearly believed in this case i-- i had

allow a's coalition to be the winner. if you remember a lovely's coalition won a couple of seats more, it was a small margin of victory but it was clear throughout the evidence that was the case and in the pre-election poll what we found interesting was that roughly double doubled the number of people who actually voted for a lovely's coalition perceived him to be the winner three or four weeks after the election. in other words, people's perception of him as the winner was increasing as time went on for his people's perception of maliki and his coalition is the winner was diminishing as time went on. even among maliki supporters, imagine that because that is actually a common phenomena in politics. you may have heard of this common phenomena where when you do postelection polls, many more people than actually voted for the winner will claim to have voted for the winner later and we will see that starting wednesday. if there is a big sweep-- everyone will say that they were on that train and the same thing

happened in iraq where it actually turned out that more people that actually voted for alawi claim they voted for alawi. i think it is important because they said to themselves the election's over with, now let's move on. we have a winner and let's use that for a basis for forming our government. all good news. i will go quickly through the bad nose-- news. first of all no government as we know and maybe i don't know if john will have any comments on this or not but i think that the idea that the iraq government should need an all-inclusive government is good in some ways. i think we would all agree that in the conflict, a post-conflict environment government that excludes anybody is probably a mistake. the more inclusion the better but on the other hand there was an election people voted and they took it seriously. there was an outcome. the outcome of the election should be the predominant factor. it may not be the only factor in forming government but it should have a large impact on forming a

government and fortunately that has not worked thus far. it is a shame that the incumbent did not step down as someone working on middle east democracy, i was looking forward to what probably, don't know if this is completely true or not but i think it is true. it may have been the first instance if it happened that maliki the current prime minister steps aside peacefully to allow a successor. it may have been the first genuine peaceful transfer of power other than succession, father to son in the arab world. it would have been a huge moment. maybe it will still happen but it would have been very exciting if that happened. i'm not sure that all-inclusive government is exactly the way to go in the reason i say that is that it sounds an awful lot like, and part of it is built into the constitution but it sounds a lot like the system in bosnia and in lebanon where if you allow this kind of organ inc. for these positions that supposedly belonged to a set, then you are stuck with that forever and when do you back away from that? i think we know from experience

in bosnia and lebanon among other places that formula is not a good long-term formula and get the iraqi people spoke for the election. i want to finish by just reading five headlines basically from a series of 16 focus groups that and the arch is completed or is actually the greenberg quinlan rosner completed in iraq in september. september 22 through the 27th of just a couple of weeks ago. and we are asking iraqi's with a feel of the problems and what they would like to see. the first main finding political leaders and parties are undefined in their driving frustrations of people, iraqi see their party leaders, parties and civil servants as self-centered elites looking to maximize their own personal gain rather than working to help average iraqis. and the failure to enunciate issue agenda from their point of view gives them a sense of parties are not focused on the public's needs. issue-based politics is novel,

creating opportunities and challenges for political parties. we asked this question about issue-based politics because we realize that is not normal in iraq and much of the airborne old. it is about personalities and power, not about i can do a better job in health care or i will help the agricultural sector. people who talk that way, dislike i am this person and vote for me. so we explore different ways that they might get a skeptical public to buy into issue-based agendas. they are open to it that parties would have to communicate very carefully. they are a mixed use of the saddam era. this is the saddam era. this is the sad part of it. x&ster spelled iraq is at a tipping point because of the saddam hussein era although not a majority view. some say life is better under saddam particularly regarding security and to a lesser extent economic conditions. these you suggest for many iraqis there is not yet proved democracy can be relied on to deliver better material results than a dictatorship so all these

years after the war, all these billions of dollars and people are still unsure whether or not the system they have now can deliver better results than saddam and that is sad obviously. on slightly better now there is a strong sense of iraqi identity. i should mention we have been conducting focus groups since 2003 and we have always found the same thing. counter to what the conventional wisdom in washington is, 98% of non-kurdish participants choose to identify themselves first as iraqi, not in terms of shia-sunni arab tribal clan or regional identities. even in kurdistan 34% recognize themselves as iraqi, although 65% say kurds. so there are a lot of pride and hope about iraq. they want to see their country prosper and be free of interference. the sense of iraqi identity has been strong since 2003. their many qualifications i can get into but this can be built upon and it includes kurdistan which surprises people. most people i know would say 99%

of the kurds don't think of themselves of iraqi's. not true. iraqi minority groups also raised nationalism so focus groups conducted among christians echo those with non-minority of iraqis want to be treated like iraqi's, not minorities, don't want minority rights but one iraqi rights. they just want better representation within the national government. i will conclude by saying that, and a lot of history and a lot of it negative over the last seven years, but the invasion of iraq, not a great idea, led to mass suffering but once it happened, the idea that to turn iraq into a normal country that is integrated with the rest of the world where people have a reasonable expectation of a better life, i think that is our responsibility and can happen in a traditional development area, the political development area. it so happens the u.n. works on both of those areas along with

other organizations and we have great raw material to work with. and i am heartened and i think christine said the same thing and that i think john mentioned, in fact he said very clearly that you have got a lot of satisfaction out of working with iraqi's. those of us who have been in iraq and worked with iraqi snow there is tremendous raw material they are so if we can somehow marshal the resources and push forward i think we have great people to work with. thanks. >> thank you. let me take the prerogative as moderator to ask each of the panelists questions in specific areas and invite them as to respond to address any issues colleagues have raised in their presentations. christine, i wanted to ask you the security question because obviously we have referred a couple of times now to the august 2003 bombing at the hotel, which killed a number of colleagues including my good friend who just happen to be

visiting and interviewing sergio at the time the bomb went off. the u.n. withdrew. it's reintroduced itself but now with the u.s. transition, what are the needs for security? how do you operate in iraq at this point and what needs to happen to make your position more secure? >> a lot needs to happen to make opposition more secure. i just had a note given to me from reuters today. many in coffee shops full of civilians, at least 26 dead, expected to rise sharply and that is coming on top of the massacre in the christian church earlier this week. so, security is a huge issue for anybody and any organization or any other country working in iraq. in 2003 i think some people got the impression we disappeared

for a long time. we didn't. i think we were out of the country for a maximum of one year. is that about right, j.? jake is worked a lot longer than i have for the u.n.. we were a way about a year. we work in two different ways. we have large group of national staff working for us and they work right across the god country. their security is their anonymity because even so long after they hotel bombing, we have u.n. staff working in different programs and age and sees who don't actually tell anybody they work for the u.n.. we have staff that leave their homes at different times of the day. we have other staff who work in the international service to come in and out with the flow of civil servants into the international service. unfortunately for them u.s. and the u.n. sound quite similar in both arabic and english, and the u.s. of course hasn't been a

target. more so in the last several years been the u.n. has been and they don't want to be confused, so they drop-- lined up with civil servants. so the international staff, but we are very obvious because we don't speak arabic or if we do it is not fluent, but fluent in the wrong dialect so we are very easy to pick out of not being of iraq but being international community. and we have had amazingly good support from the american forces. it is heartwarming to out with the american soldiers, because even on the most difficult missions, they will turn around and tell us even when they are just being shot at, and one of my missions when the american colonel was meeting with the force was shot and hit that but saved by his flat jacket. they say to s. you now, after all the fighting, and he had been there in 2003, 2005 and was back on his third tour, and said

after all the fighting to go out with you and with your american development and humanitarian colleagues is what it is all about for us, the soldiers. we have done the fighting and now we want to see the rebuild. now as you know, we at the u.n. has been reliant on american security ever since 2003 so we are making some very difficult adjustments in our own posture. it is still not safe for us to just go wander around, except in the north. north. it is much safer in kurdistan because they had a protective no-fly zone which allowed their development to take off a lot earlier than the rest of iraq. it is a safe city and big government forces of peshmerga up in northern iraq are a very effective defense force. they do protect us very well, so there we can make this transition to being with the u.s. troops to being on our own

with the government peshmerga forces. that is relatively easy. what is not easy is to move around and center and south, because there are still bombs going off and rockets flying around. there is still targeting of minorities. anybody who is seen as other, the international community. so what we have to do is to think through our own security posture. we really have a two-pronged approach to this. one is, we are beginning to produce a lot more printed and also other media materials, explaining with the u.n. actually does. we are on your side basically. we are working for your development in solving some of the problems that you are coping with so that is one part. we have a lot more open-- been with the u.n. does. the other is trying to find solutions such as our own transport means, helicopters, armored buses, armored vehicles.

everybody in iraq moves around and armored vehicles. we don't want to be collateral damage to a roadside bomb. despite this, run special representative had his convoy targeted about 10 days ago. and it was a very near miss. the police car behind was it rather than his car. very sadly the police officer died and others were badly injured, so the target is there. so we have to actually asked the government of iraq but also the government of the united states to continue to support it and other donor countries also to continue to support us. not because we want to go around in huge armored fleets of vehicles but because we do want to go around to get the job done and once you move into state-building capacity development, we have to be out there. you can't do it from a distance. you actually have to be there talking to people. it is a long-term project and we have to start now. we can't wait for it to get quieter, so the security issue

is really very very pertinent thing to ask about, and the bottom line is, the bottom line, doing business in iraq is very expensive because we do have to make sure we have security, some of which of course is provided by the iraq government. that we need at the moment, we still need add-on security to give our employees confidence that we are doing everything possible for them to do their jobs and return home safely. >> thank you. john, let me ask you, not so much on security per se but this transition that is really underway between the military led operations to the united states to to a more of a civilian led operations. what are the particular challenges in doing that and engaging with the iraqi government and repositioning the u.s. government within iraq?

how do you think about government engagement, even in a situation where we don't have a formed coalition government? >> well i guess i would start answering that by saying that we think about government engagement and we think about transitional constantly. and the transition, i mean the august 31 deadline in the drawdown to 50,000 troops, i got there the previous august. and we were already in, just thinking about the percentage of my day that would be spent in my days that would be spent in baghdad working with their military colleagues on this transition because it is a big project and it is a big challenge to determine how we will pick up items that, issues that the military has done and how we will address them except of course we operate differently from the military. operating in this environment, i mean christine has laid it out

very well. it is very expensive. it is not the normal environment that we, that i'm used to working in but if we want to get our job done there we have to be prepared to do that and it is very expensive. we are building, we are determined to be able to get out. you can't do, you can't do your job properly from behind the walls and we are determined to get out and i got out quite a lot. my colleagues got a quite a lot and we continue to do so. our colleagues who work at the provisional reconstruction teams around the country get out all the time. the basis of what we do can't be done remotely. i mean if you quickly do it from here, but you can't do it with a phone, a facts or an emil. but i mean that as a challenge that our leadership at the u.s. government leadership has taken on and has made the determination that the job is so important, yes it is different than the way we have operated before but is so important that we will endeavor to find the

resources that it takes so that our people can do this safely, and it is tough and we are learning a lot. a lot of it is new, but i can speak from a years experience, i feel like you know we are doing it well. i felt like you do the job i needed to do. sometimes there are some days where you expect to go out and you couldn't go out. that happens sometimes but you know it was a pretty impressive operation from my perspective. >> thank you. before return to the audience let me ask you since you volunteered for the role of political development focus, let me ask you the regional question. iraq obviously has neighbors who are interested vitally interested in the outcome not only of their international relations with iraq, but the way the political parties develop inside the country. how big a factor is the outside influence and the coalescence of these political parties within iraq and indeed with the

eventual formation of the government itself? >> it is a great question and i was in iraq in june, meeting with the various political leaders, met with most of the leading political leaders and they were in full flight been going, and still doing the same thing to turkey, syria, saudi arabia, jordan and elsewhere. and in thinking about this and with a political science background i am interested in policy and i kept thinking to myself why is this? the obvious reasons are these regional powerbrokers and certainly iraq can't afford to ignore iran or saudi arabia, but it seemed odd, you know as they were making the shuttle trips to these capitals to tehran and so on, and one thing i started to realize is that there is a tremendous loss and a political system in iraq, and that is the fact that there is no head of state. there is a president, talabani

is the current president, but he has symbolic power, but it is not symbolic in in the sense of say a european head of state has symbolic power where this is a very prestigious office. it is not a particularly prestigious office because chalabi lavinia seen as they partner representative of a party. he is not perceived as somehow above it all so i thought to myself it is interesting as these leaders go-round to try to get sort of a clue as to how they can form a government and what would be support of the surrounding countries are almost serving as the traditional head of state. there is nothing in iraq that has the legitimacy of say the british mike or even the u.s. presidency with its own history and all of its prestige so prestige is drawn from being the candidate of iran or the candidate of saudi arabia or the candidate of turkey and so one way of looking at what is happening right now and the role of the surrounding countries is that they are playing this kind

of role of almost a collective head of state for iraq and you can imagine i think how damaging that is over the long run and in the focus groups, which the reporters-- the iraqi people are very very upset that their politicians are trying to drive their legitimacy from their relationship with iran and saudi arabia rather than a relationship with the voters into this i think is a major flaw in the system of the country. >> thank you very much. let's turn now to questions from the audience. i may take several at a time but let's s.t.a.r.t. i at a time to begin with. please identify yourself and ask your question as concisely as you can, although if you have something further to say don't hesitate to say that. yes, please. >> yes, kim clarke. why can't they seem to get a government and what is it going

to take for them to be able to overcome the divisions between them, to actually form a government? >> i'm not sure i can answer that exactly. i think what you are seeing is a very complex negotiation to carve up the pie. i think these sort of easy answer is that rather than seeing the election and seeing political power as deriving from the people, you know an election happened and they should respect that outcome, i think how the iraqi politicians see this is that they were able to demonstrate the relative strength vase on the election and now there is a pie to cut up and the pied means positions, whether it is the high positions, prime minister and the president but also other positions. who is going to control what? how are things like oil wells and the split of oil going to be decided and they are negotiating

not really about the outcome of the election. they are negotiating how that pie is going to be split up so it is very very complex and i think it is just a long long complex negotiation and then you add the outside countries and they have their favorites because there are parties that are closer to iran and there are parties that are closer to the saudi soar to the turks. so i think it just ends up being, don't want to say the terminology in a negotiation but a negotiation with probably 100 points to be decided and it is just taking forever. but at some stage, it is also about stubbornness. i think if any one of the major contestants, and particularly in my opinion, i think the incumbent has said listen, the normal democratic practice is that the party that wins the plurality of seats as the first chance to form government. i'm going to step aside and resign. that would have gone a long way toward solving the problem but i

should say to defend iraq is a little bit there is no history of democracy so this idea, we saw happen in britain not long after the iraqi election where for one moment i think you know the british prime minister thought maybe i can find a way to stay on it he realized though that is not how it goes. i lost, have to step down but iraq doesn't have that long history to draw on. >> yes, please. >> pat ellis, policy group. could our speakers talk a little bit more about the impact of the neighbors, not just relations with political parties but what role they are really playing and which other countries are trying to get more involved in iraq right now, not even neighboring countries, for commercial or other reasons? thank you.

>> are you collecting questions? okay, let me have a first attempt and i will handed over to the other panelists. we have seen a lot of interest in iraq because this is a very oil-rich country in the iraq government has made very clear that it doesn't know who its friends are. and it is a budha for different picture depending on where you are. in the north kurdistan has highly developed relationships with turkey. it is its biggest trade partner and there are many turkish firms working in the north of iraq. also china. china is also very interested in coming in, and there is a huge reconstruction program going on in the kurdistan region, and the government of all of iraq, also has a huge reconstruction program ahead of it. for example they probably need several million new housing units. they are going to do the first batch of 750,000. this would attract interest from global companies. it is not going to be done

locally because the skill sets and material aren't there. the oil industry of course is a chapter all on its own, and i know i'm not to call them concessions because they are called something else but however the oil deals that have been going on are bringing in the oil companies from different parts of the world, and they in turn will bring in other firms, subcontractors for example to provide safe and secure housing for the thousands of workers they will need. and those workers will probably come from outside because a number of oil engineers in the country is just enough for about one oil company. they have even had informal chats on how are we going to share these 1500 engineers between us? are we going to take it in turns to use them? obviously they are not going to bring in people from outside, so the trade route of interest is very important. on the neighboring countries and

outstanding issues, of course kuwait is a very important stumbling block to the development of iraq because of the reparations program. i think iraq so far has paid back $30 billion and another 40 billion to pay and they do need to renegotiate with kuwait on how that is going to be manage. their border of demarcation lines problems that need to be salt. it the u.n. political mission is very active in working on that front. if we look to the east, of course we have iran with many long and very bloody conflicts behind them, huge minefields on both sides of the border just as an example of the problems, and then water. there are huge problems with water sharing. there are no transboundary agreements and iraq is downstream of almost everybody.

iran, syria, turkey. they have to do transboundary negotiations sometime in the future. at the moment they don't have the knowledge base to do it because they need to know more about what they have in the country and so there are complex relations and because of the oil wealth, it will generate interest from outside the region it is not just a regional question. >> would any of you like to address that? >> well, actually if i can take a minute i would even go back to the previous discussion of little bit about government formation and obviously for a lot of reasons i'm not going to go into detail on a lot of that, but there is something i do think is important to note. that we do want to see an inclusive and an accountable iraqi government and we do want iraqi's political leaders to move forward quickly on government formation but i do think it is important to note that what is going on here is a political process and there are political discussions going on,

pretty intense political discussions going on. i mean, that may sound like i'm stating the obvious but i'm not stating the obvious. you need to think about what is not happening here. we are not having a military stepping in. we are not having a coup. we are having a political process in a place where the political process is new as less pointed out and we have an election result that kind of broadly spread among some pretty large blocks, coalition blocks. there is a lot to work out there and i just want to remind people that this could be happening in another way. while we would like things to move more quickly the fact that it is a political process is i think something we need to keep in mind. i mean in the interest of the neighbors i think christine covered it pretty well. you are talking about a country of 30 million people that have substantial resources that if it develops wisely will be you know an economic powerhouse in the years ahead.

there is a consumer market there that will someday, the countries who want to serve. their resources there the countries will want to be able to share in. there are, you know, it would be unusual if they were not so interested. that would surprise me more than the interest of the neighbors, so i don't take that as all that unusual and dealing with the neighbors will be part of what a new sovereign iraqi government does in the years ahead. >> another question in the back. >> hi, jennie rothenberg from the modernizing foreign assistance network. thank you for all the panelists. this is really informative. i was surprised that usaid only came up once in the discussion and that sparked a question for me and coordination on the ground, knowing that there are various agencies, so many ngo's and for many in this room working in iraq, i was curious if some of you could comment on

the coordination on the ground and how that is working? >> let me turn to the chief coordinator. coordinator and chief i guess, christine mcnab who works for the u.n. system. >> there are many people on the ground. humanitarian, development agencies, ngo's, whatever, and the government needs to keep a grip on who is doing what in the development of iraq in one of the traditional u.n. roles or even the undp roles is to support the government is a coordination, and there is a very active iraq partner for him, which is both the multilateral and bilateral agencies, cochaired by me as the u.n. resident coordinator together with the representatives of the world bank, but already agreed with government that as the new government comes and they will be the third cochair of this forum.

if there is a logical progression in any country. usually the donor start chatting with each other over lunch and then they have a formal forum and then government is invited to join government takes over. the government gets technical assistant to manage the a court nation. not just as individuals that they need to manage but it is also the budgets. the budgets of the aid, donors need to be integrated and reflected openly and transparently in the national budget. it doesn't usually happen until you make a concerted effort. there is another mechanism, and that is we have a humanitarian coordination mechanism, which brings together both governmental and non-governmental humanitarians. we reestablish that for him this year. we are going to have our third meeting together in november, soon as i get back, and again it is with the government, this

forum access because also the government is responsible for its idp's and so the humanitarian work is also coordinated. so that is a typical u.n. world bank role in the donor community, but as fast as possible we build up the capacity, usually as minister of planning our minister of finance or both to take over this function just so that the transparency will increase within the country because in many countries the development is quite a big chunk of the capital budget and without a big effort it doesn't get reflected in the national budget. john you have been part of this. >> yeah, you mean certainly careful coordination is something that we take very seriously in this area and i think that is pointed out why we have in baghdad created a position that hasn't really existed in the structure of an embassy. in this case for assistance

transition, and that is somebodt has always been filled by somebody who has held ambassadorial prank to give you an idea of how seriously we take it. that person was my boss when i was in baghdad. and, because we have to draw together effectively first internally within the u.s. government our own efforts, whether it is what the military is doing and i mentioned the commerce department's commercial on development program and then we have a.i.d. and we have these partners we work with wood in the u.s. government of then of course according with our non-u.s. government partners. we take it very seriously. we spend a lot of time on it. there is a lot of organizations there and you don't want, you don't want to be stepping on each other and you want to be sure that you are addressing, you are working with the host government to help determine priorities and address priorities that they have so that they have course have a buy-in to the programs that you are doing.

and we spent a lot of time on that. >> just to give you a specific example from my perspective of the coordination, just on the election. you nominee was providing different types of support to the election commission, but it was the usaid funded program with our organization called ifas that was giving a lot of staff support and logistical support and so on to the election commission. ndi and their funding by the way, most of that but not all of it comes from from the state department democracy human rights and labor. we were supporting domestic election monitoring which is sort of the accountability side of the whole equation, so you know these programs are very integrated and iraq. i think two may be a greater degree than we see in a lot of countries so there is a lot of integration of the different aid agencies. >> christine what you say a word about the multi-donor-- because we find in washington that there

is very little widespread recognition of the importance of these trust fund vehicles as a way of getting donors. >> well, within undp there is a trust fund office, and multi-donor trust fund office and the iraq multi-donor trust fund was the first one in the biggest ever. in the end a total of over $1.3 billion, coming in from donor partners to the government of iraq. and the agreement is that they will put the money into the same budgets, and that money is then through a series of committees in iraq allocated to specific sectors and projects, and i chair the steering committee together with government. there are a series of technical committees which look at the programs and projects that i is requesting financing. the reason this is important, it is the u.n. mechanism, and there

are 20 u.n. agencies regularly working in baghdad, out of baghdad across the whole of iraq. and what we don't want is competition between agencies for donor and government support. we wanted to be integrated and we also want the government to have a voice in what are grams and projects are in fact done by the u.n., using donor money. there were several very important financiers of this mechanism. one was the european commission which put in half a billion dollars. other important ones include japan and spain and a number of others, and a small sum of money came from the u.s. because the u.s. money has been mainly used not for the development agenda but for the humanitarian agenda and specifically for the idp refugee returns. so the multi-donor trust fund has now come to a close. we have actually allocated all that money.

we going to a new cycle of programming now under a very traditional u.n. development assistance framework and we are now discussing with government setting up a new trust fund. it will be much smaller, because the reconstruction costs a large amount of money to do, what reconstruction we were able to do, so the government says now if we take over the nuts and bolts of the reconstruction what we now want to do is see a much more difficult state building, capacity building institutional development, which is long and patient work with many people involved. this is the face-to-face development of the country. so we hope we will have another trust fund up and running, which we will then invite first of all we do in agreement with government and then we do memorandum of understanding with u.n. agencies and then we invite the donors to put money in. and bake in your market. they can say look, we would love to give you hopefully $100 million but probably not,

probably to many in our 25 million we would really like it to be used for children. then we put in the essential social services or whatever or they could even say we will give you some money but we would really like you to use it for the idp. that is fine because that can also going through the essential social services because idp's have the same needs as everybody else, just more acute so they find mechanism is another way of ensuring this coordination but the donors are represented on the steering committee and on the program is committee as is the government. so that also brings us all together around the table. it really is important that we work together. >> thank you. yes, right here. would you wait for a microphone there? >> this is a question mostly for john. there are all sorts of-- i think a critical piece that is missing

here is what role target contractors will play in meeting these challenges in iraq and we are hearing that the state department is key for some of the services. everything from support to health services and infrastructure and security. so i'm just wondering what role private contractors will play especially in working with the state department? >> well, i'm not in a position to talk about rfp's and contractors and so on, but i mean we do and will continue i believe, you know, we talked before about the extraordinary expense that working in iraq generates. and you need to, you need to be transported. you need what we call life support which is basic housing, food, you know clean water, let the things that you need to use to support herself and those places where locally it can't b.

we will continue to do that and we see contractors having a role in that that i'm not really in a position, i mean, when and if we do in rfp will look to the rp. is not the kind of thing we talk about in advance so i think that is the limit of what i should say about that. >> would you met-- wait for a mike? mike? it is right over there. thank you. >> the one thing that really struck me was hearing that only 20% of the young people, who would he and an educational system that continues are truly progressing to the point where they can be part of the

infrastructure that is going to be very critical to achieving all of the goals that everyone has in every country, whether it is ours or the surrounding company to make it-- country to make a viable and stable. my question is, what about the other 80% most of whom are cell phone users by the way, but if you had 80% of young people post primary age, throughout the country, not going to school, not employed, it would seem to me we have a very precarious population situation, and i want to know how all of this really across the board is being addressed? it. >> well, i can start. the first thing that we have to do is raise awareness of it.

because people look at the primary schools and say well that is okay. it is not great but it is okay. i'm saying you can't wait for the primary school generation to move up to the system. you have to fix secondary now so first of all we have to a locked a strong messaging to government. that is going to get some results but it is not going to fix the problem for the 80% who are out of school so we have to look at the alternative solutions. and of course one of the alternative solutions is to give children or young people, because by this time we are talking about middle to upper teens, is to get them into vocational training, into apprenticeships and to what is the word? i keep running into interns when i run around in washington. i think we should start an intern system here. now i haven't been able so far to get enough attention to this comment i really am working hard on that because in bosnia where i came from where my last posting was we started off a

fantastic program. i didn't stay to see the end of that, but this was to really tackle the issue of the out of school youth and to get them into work, and to get them trained within the context of work, so work plus education. it has been done in many other countries. there are many models for it. and, one thing, one way we are going to attack this is every time the private sector comes, oil or non-oil we are going to be knocking on their door saying hello, corporate social responsibility. your firm has signed up for the global compact. this is what we need and this is what we want you to do and we want you to focus on two or three things. the overall development of the communities around your oil installation, oil factory or whatever. in the mind affected parts of the country i want big bucks for the de-mining, the mine action

and thirdly i want them to focus on giving work opportunity to youth and we are actually negotiating with one of the unnamed companies at the moment which is getting very enthusiastic about setting up vocational training institutes in the south of the country. so this is what we are doing. it is not solving the problem for everybody. we are sincerely worried about the impact, particular particularly the impact on girls because what is going to happen to the girls as they are going to get married young and they are not going to have the knowledge and skills to make them independent in their adult lives. they are going to go into a dependency on the family which will continue, and which will make it very difficult for them to help their own children and turned to get the education they need, even when the education comes on on line. so there are two or three areas where i will truly focus on. one is education, and the other one is water. we haven't talked very much

about water. the whole of development is based on water availability, but education yes. unicef is very active in the country. it has more of a focus on primary and pre-primary but let's work alone to go up the ladder a little bit, and unicef is one of the few agencies i know that does very active-- to all of these cell phone owners out there. the social messaging. we need to do a lot more. how to use media to get the message across, because in the good old days, if you go far enough in time there was a state-owned radio which everybody listen to because that was the only entertainment. than we had stayed on television and that was great for social messaging, now we have come, everybody has the satellite dish, picking up 100 channels.

they have probably never watch the iraqi news so there is a real issue of how to do that so any bright ideas we will gladly listen to them and see how to do it. thank you. .. ????;?/?///????;?ç

>> i don't think there's an easy short term solution to the problem. i think what you have to do is set up -- i'm just one example as christine appointmented out, there's a great potential, but it is limited how many people can work in the oil sector. what you have to do is develop a diversified economy that offers employment that develops overtime, and, you know, you're right about the large cohort of young people out there who will be tough to reach, and you can't do it with everyone tomorrow or across the board, but the quicker you get in place an

economy that they see perhaps not nearly as fast as anyone would like, but it's creating jobs and opportunities for people is offering them something so that they can see a future in. that's what you have to do. i mean, it's a tough road, and it's not something that happens fast. i don't know -- i just -- i don't have a simple, let's do this and take care of this dwriewp of young -- group of young people because there's not one target for that unfortunately. it's a long term challenge. >> it's not widely understood this particular problem is bad as it is. it's not just terrorist recruits. it's crime that is very problematic for iraq. i just, i wanted to ask less the ndi question for the middle east.

if i'm a nondemocracy in the middle east looking at what's going on in iraq, why should i be purr sueded -- persuaded that a democratic system is worth the effort or consider going that route in my own political development. what do you take away from the iraq experience to date? >> well, first of all i think it's important to be reminded that the idea of iraq as a democracy was something that, you know, sort of developed after the fact, and i spent a lot of time having to defend this notion that democracy is something that's imposed on people, and i say, well, where does that come from? well, the united states tried to impose democracy on iraq, and that was an after the fact justification. i don't think that was ever the real reason for invading iraq. i think it was in the aftermath

of the invasion i think for organizations like ndi. it seemed like we should along with others do what we could to help iraq become a well-governed country and i argue even being democratically governed is the best way. there's something called the arab barometer, and there's similar barometers around the world, but the air barometer is a series of polls done every year, and this polling shows the vast majority, more than 80% in most country, believes democracy is the best way. the idea of democracy is not a hard sell in the arab world. it's an easy sell, but people look at iraq, and they think if chaos comes with democracy, they

don't want it. i have to say for the arab world, they don't want negative things associated with democracy. i'm going to jordan tomorrow, there's an election next monday, and the senior -- jordannians have said they see the bad parts, but iraqis can choose their leaders. i don't think iraq is a potential model yet for the arab world, but most are subtle enough to understand the good comes with the bad. i think democracy in the arab world is a long term endeavor and the idea of pursuing democracy is not based on us imposing something, and i think

everyone in the development world agrees ultimately good government has to go hand in hand with development, and for me anyway, democratic government and good government go to together, but nothing will happen in the next two years. >> i'll try to restrain myself from asking nee questions. who else would like to ask a question? i must have scared them. >> hi, shawn kane from the u.s. institute of peace. i was in baghdad in 2008. it's something which iraq kyes wanted with the u.s.. it showed they wanted to see economic development and they

want to be integrated into the region and u.n. sanctions, and i know it's a difficult question to answer now because there's not a government for you to talk to, but this agreement is aspirational. can you give us an inside on what structures have been put up? >> we actualize it lrd. -- lrd. already. >> the actualizing of it, if that's a word, has not stopped during the government formation process. not to get difficult, but in the diplomatic realm, we break this down into subjects. i'll talk a little bit about the economic realm because that's what i did most recently. we have an energy group, transportation group, electricity group, and we sit down with the iraqis and proper

ministries and talk about the problems that exist and if there are ways to solve them together. that continues to go on and ebbs and flows a little bit. some things go up and others down. the emphasis changes. it's something that we still use every day. we did not stop using it on the day of the election. we continue to have these conversations. there is -- it's important to point out that the government's currently in place does continue to function and continues to function in important ways when fred talked about this in the beginning, i jotted down memory joggers to make a point of this. during these government formation discussions, they have taken and continue to make major decisions. i'll mention a couple of them. they announced a major part of taking advantage of the oil resources that iraq has that

once you get them out of the ground, you have to get them to the field in the gulf to get them on tankers. there's a long acronym for this project, but the iraqis have during an enormous tender for this project, a huge amount of money that the government was able to function and move the process forward. they are not falling behind. they just did the third round for natural gas, another important resource they're working on and the government works on a draft budget for next year on so on. the point is the government continues to function in our relationships and stray strategical framework continues to go on. it's a really valuable tool, and we have not stopped using it, and we'll keep emphasizing it more and more in the future. >> thank you. yes,yes, please, is there a mic

nearby? i'll put a plug in for the interns. we have the best in washington, and we wouldn't function without the people who help us. thanks. >> hi, i've been a contractor for u.s. aid in iraq. i was interested in the discussion of the role in surrounding countries as a collector head of state. i wish you could elaborate on that. i haven't seen anything written on depth in that in the think tangs or in the newspapers. can you elaborate and talk about maybe who are the stronger neighbors and their connections to particular parties and leaders in iraq. >> i can elaborate on it a little bit. i mean, the, you know, i think the absence of a true head of state, you know, i don't think it's something people forgot or

didn't do, i just think the way the system was set up, it didn't provide in the end -- what happened is the political positions right from the get-go became a part of the negotiation of power sharing. you remember that the symbolic president during the iraq governing counsel time was a sunni, but when they sorted it out, he ended up being a cur. my opinion when the person occupying what should have been a head of state position is seen as a political partisan and is part of the every day politics, that position is never seen as where you go to get the legitimacy to form the government. it works simply i think. for the leaders of the parties that are predominantly shiite and there's cultural and historical reasons, they tepid

to travel -- tend to travel to teheran. should they form government, they would have the blessing of tehran. i'm simp simplifying a lot, but the coalition includes a lot of, you know, strong sunni leaders with support from the sunni community. he spends time in the gulf, particularly saudi arabia and turkey to show that if in fact he formed government or he had the upper hand, he has the support of the powerful ib -- neighbor of saudi arabia. it gets complicated because there's those perceived as being more straight fronts for iran and some have accident ties to iran and it's not the case that

saudi arabia promotes one party or another. it gets more complicated. syria plays a big role as well, but the syria government is partly made up of a christian sect, but what's obvious those that the political parties try to establish these allegiances and some have existed for decades, but they are trying to use these allegiances in my opinion to demonstrate to the people in iraq but more important to the people in the negotiations i go to teheran, they back me and therefore you should back down, and that person's goes and says no, no, the king receives me, you should back down, and one of the, i think, it was a news item the day before is that the king of saudi arabia issued an invitation and the political spin was maliki was not

invited. it was a bit of a snub. i don't know if that's true or not, but it's a game-to-game legitimacy. i agree with john. i'm not down on the system in the sense it's played out in some framework with an eye on the election, not as well as i would prefer, and it is being played out peacefully, and you know, it's a complicated thing. i think it's being played out -- it's a shame they have not formed the government and i think the focus group shows that iraqi people are frustrated beyond belief and are sick and tired of it because it looks like a bunch of self-serving elites feathering their own nests which is partially if not completely true, but on the other hand politics is always a necessariy -- messy affair anywhere. the home grown and neighboring

countries add that legitimacy into the mix. >> well, we're just a few minutes from 2 which is our close. i wanted to give our colleagues to make final points, if not, i have one. >> oh, no, i think this has been a very rich set of questions that we've had to answer, and i hope you think we used our time well as well to put our issues on the table for you to think about. thank you. >> well, no, i would like to say, no, it's been great being here and listening to your questions. you know, our emphasis and christine's emphasis is as well there's still work to do in iraq. the u.s. military draw down and the sort of landmarks we've reached, and that does not mean that, you know, we're leaving it behind. we're not at all leaving it

behind. there's a lot of work to do there and working hard with our partners, and we appreciate the interest you have in it, and we really want to keep working together to build a really stable sovereign independent iraq because the job isn't finished. >> just thank fred and the washington office for organizing this, and i think it's nice to, you know, bring iraq back to some focus today. as i mentioned at the beginning, for understandable reasons, it's sort of flipped, i'm glad it's not the number one thing anymore, but we don't want it to slip too far because the challenges are huge and congratulations for keeping this on the washington agenda. thanks. >> thank you. i wanted to return to the theme which i can't help on election day, but imagine the affect of day on u.s. politics and the

conversation we have in the washington off which is responding to interest largely in the congress in this case of people who don't really understand that there is an economic side to the u.n., there is a development side to the u.n., and how much not just in the undp, but how much the u.n. does in very close partnership as you've heard with u.s. and the state department and ngo's like ndi. the whole challenge, of course, is one that iraqis bear for developing their own country, but the effectiveness of engagement with the international community and particularly the u.n. system is one of the key considerations, so if our efforts to convey the information and impressions to the officials in washington, nothing helps more than to bring the most experienced undp people to town to talk to audiences like this and meet officials as

we're doing over the course of two days to reengage with john and les, and i just want to thank all three of you for helping us capture that messaging. thank you, and thank you, john. [applause] [inaudible conversations] [inaudible conversations]

>> now a conference focusing on the u.s. and world chi. this one world event was provided by global insight, an industry analysis company, that uses economic modeling and forecasting. >> i can promise you that this is really going to be the high light of today. this is the real show.

we've jokingly called within ihs global to call it the david and david show. we have them from the "new york times" and "wall street journal," and at a time when we have a polarization to put it mildly in terms of the political dialogue and shouting match, these two gentlemen are voices of reason. i read them all the time and always enjoy what they have to say and get a lot out of it and it's interesting because they write in editorial pages that's part of the shouting match to be blunt, but delighted to them both here and we're long standing relationship with both gentlemen. as i said, i'll always enjoy what they write, and i'm sure you will enjoy what they're going to say and the basic question in front of them is,

okay, after the election, then what? what's going to happen? what can we expect out of washington after the midterm election? with that sort of broad question, let's start with david russell first. >> wow, if you think i'm going to give you a definitive answer to that question so close to the election you're really -- well, it's good to be here. i was telling the people that i'm glad that my wife talked me into buying a prius with a gps because i'd still be trying to find exit 1 be -- 1b or whatever it is. i'd still be out there looking for this. [laughter] david and i are both lucky to have ringside seats in this kir

cues, and if we were only journalists, we could enjoy it, but unfortunately we're citizens and fathers as well, and it's on that side of things where you can get nervous. we have an election with an enormous amount of heat and little light where one might have had an argument of big government versus small government, but we're not. on one side is saying we won't raise taxes, and we will cut spending, but we can't tell you what spending it is, the way you get a mandate, and the other side never saw an increase they didn't like as long as it was people who made a lot of money, and if you pushed them, they cut the defense budget, but otherwise spending money is great. it would be convenient if we were in a period of great

prosperity like we were at the end of the clinton administration if gridlock meant we had a sound fiscal policy, but we're not, and the founders left us a system that's good at not doing things in a time we need them to do something. i think the one reason that the federal reserve is moving so aggressively on quantity at a easing is there's long term deficit reduction in the next couple months, and their mandate is maximum sustainable employment with max stability and deliver it with their policy that's going to be tough. i think the second thick you can look at -- thing you can look at is what is it that the people want out there? in every poll we've done at the journal and other polls are the same, you end up with situations like this. when it comes to the current tax for households with incomes over

$250,000 a year, would you like to see the tax cut end or not? 49% would like to see it end, 45% say they don't want it to end. you know then they ask it slightly differently and give them two ridiculous statements to choose from. one is looking at the tax cuts for people over $250,000 a year, one end the plan because it's unfair to borrow 750 million a year or two keep it in place because in this difficult economy we should not increase taxes on any americans especially small businesses because it will slow down the economy. 47% picked each one of those answers. [laughter] we have this bizarre situation when the democrats win as they did two years ago, they, i think, people were voting for change and democrats particularly in the house mistook it for a mandate and

they governed far to the left for the people, and i think the republicans will make the same mistake. they will think a vote for change is a vote for whatever their economic policy is and they will make the same mistake. when you have a close house like this and it changes seats that no wonder people talk about uncertainty and the world doesn't know what we're doing. i think the tea party thing adds a wild card to this that is kind of extraordinary. basically, although it's hard to find a coherent view of the tea party, a lot are running on a simple platform. i'm as angry as you are. that may be a good way to get elected, but it doesn't give you a guide what you do when you get to office on november 7 or whenever they get back to town so you ce see the republican --

you can see the republican leadership being terrified. we might win, but we don't have people believing in the things republicans believed in. the house could control because it's like the leadership calls the shots and you follow them or you don't get in office or something, but in the senate where anyone crazy person can hold up the works, they're likely to have a couple crazy people who will hold up the works, so if you imagine a post election scenario with president obama says, i get it. i'm going to be like bill clinton. i'll tax the middle and look for confidence building things we can do together. i'm going to do the korea free trade deal, and in the old days what would happen is the republicans say we'll get you the majority of our members if you get us a third of yours, and that's enough to get it through. i'm not convinced that the republicans will be able to deliver or promise to deliver a whole lot of votes for a free trade practice, and they certainly can't promise that

some senator say rand paul suspect going to filibuster the thing in the senate. it's important for the president to move to the center and hope the other side meets him halfway that doesn't give him incentive to move to the center. both sides here need to show that they can govern. this is all going to be jocking for position in 2012 and obama needs to get something down. there's nothing that can be done to vote against democrats, but he need employment to be at 8.4% in two years so he accomplished something, and the republican leadershipments to say we got -- leadership wants to say we got something done. we're not just the party of no. there's a sort of happy se scenario and an unpleasant one. these impulses overwhelm the

partisanship so far that in the cold light they decided to get something down because if we don't get anything done, i'm not sure my side suffers more than the other side. that's the happy scenario. it's a fore gone conclusion that they extepid the tax cuts for everybody for a couple years. i think the question is what else gets built into that? is there something like the investment tax breaks that obama proposed, finding something that republicans supported before? do they do something on the deficit reduction to say they've done something? that's the happy scenario. you know, they will do something in the lame duck and more next year and get a scare from the market and hope chinese lend out forever. that's the happy scenario. basically about get getting position in 2012 and neither

side has control of their own troops. nobody can control the senate, and you end up with gridlock that just persists for a couple of years further underminding a very serious loss of confidence in our institutions by the american people, and i think it's kind of hard to tell right now which way it's going to go. there are people of good will and both sides who really don't want this to be two years of gridlock and chaos and ever deeper debt and con vipsing the -- convincing the rest of the world that we're on track to be the largest subprime borrower. there are people who want to do that, but they seem to be trying to at least not kill each other before they get to the point of making decisions, and they're kind of surprised about what it's like to be in a room with people from the other party and talk about these things which hasn't happened, and you know, there's a weird romance between

david stern and you can see maybe some sober minds prevailing. i'm not completely disspot, but there's so much outside their control and anger out there in the public and distrust of institutions and so much fighting for partisan positions that it's just as likely for the thing to decrease and we'll have gridlock. >> thank you. read online or print, or do you feel strongly about print if >> you're better off in both cases reading the news sides and reading the -- ignoring the editorials. [laughter] thank you for having us, it's a pleasure to talk to david in public or private.

we'll have everybody else's comments and questions and things like that. i'll outline what i think should be the three goals of economic policy now, and then i'll talk a little bit about whether we're likely to get policy that addresses these goals. so, i think the first one is to deal with the moment we're in. bloiment is 9.6% and larry katz has a nice way of capturing just how bad the job market is. we would essentially need job growth as rapid as we had from 1997 through 2000, that four year period to get the unemployment rate down to close to where it was before this recession began. we wouldn't even get it all the way down to where it began, and of course we're not going to have four years of job growth like 1997 to 2000 next month. we're a long way away from that

which is to say we're many years away to having a healthy job market in any way. the job market is the economy's weakness. we have capital that's not being used. workers are not being used. we have a real problem, and on the one hand toward the end of these tough times, it's very easy to get too down; right? my favorite example of that is that in scene of this 1996 which we think of as the great internet boom, but 1996 didn't feel like the boom. pat won the primary, news week ran an article called corporate killers about ceo's laying people off and had mug like shots. the "new york times" ran a story called the downsizing of america. when times are bad, it's easy to

look at the reasons why things are staying bad than to see the good news of things around the corner, in that case, the interpret. so i think it's important to be open to the possibility that things are going to improve on their own absent policy intervention. having said that, this is a fairly scarry moment. i think the terms of a japan style malaise are legitimate considering how we got ourselves out of other cycles is through a big buildup of debt. we can't repeat that. we have to get out of that, and that is why some of the work mentioned says that the aftermath of the financial crisis is so bad. two, we have a deficit problem both medium term and long term.

bill captured that so i'm not going to linger on that, and then three is this long-term growth problem. if you look at average annual economic growth from 2001 until 2007, so i'm cutting it off before the great recession begins, i'm trying to make last decade look as good as possible, it was slower than any decade since world war ii. obviously if you then include the rest of the decade, it's really a lot slower. if you control for population and things like that, it beats the 18970s -- 1970s, but that's a low bar. we are coming out of a time in which growth has not been great. we are in a period which the moment itself is not just slow growth, but a really weak economy, and we have to figure out how to get ourselves out of this at the same time we face real long term issues with the

commitments we've made to ourselves with retirees and social security. i think it shouldn't be that difficult to come to an agreement about what the ideal policy to deal with this should look like. i think you spend some money in the short term to deal with this moment we're in and people can debate should that be tax cuts or government spending or both, but some combination of them to put people back to work, and then in the long term you try to cut the deaf -- deficit in ways that don't hurt our ability to grow. find resources to invest at the same time you're cutting which in some ways means we have to make larger cuts in the things bill was outlining. we just don't want to get rid of the deficit and assume everything will be fine. i think we need to increase investments in things we have

been ignoring, education above all and also technology, also science, also some of the green energy stuff, and so to me, that's the sort of three-headed challenge that we face, and it is possible to sketch is fairly optimistic scenario for how the two parties can get there. that's not the scenario i'll sketch because like david i've been watching the debate going on, and i have a hard time seeing how we get there in the next two years. i think we are much more likely to have this fighting for 2012 issuing a new crisis of more responsible policy response to see if interest rates remain as low as they are, and there's a few reasons for that. one of them is that i don't

disagree with david about too much, but this is a panel, so we're supposed to disagree about some things. i don't think the main problem with how obama and the democrats have governed went too far to the left. i think the main problem is they were not effective enough about resuscitating the economy, and i think that has led to large amounts of frustration. i think again and again maybe not so much the house leadership, but when push comes to shove, the house leadership fell in line, senate was willing to compromise. if you go issue after issue, you tend to see this, the same list that real liberals hate; right? they forgot about the public option on health care reform. they offered to negotiate on medical malpractice in exchange for republican votes that didn't happen or vote on the idea of card check which expanding union stuff. they dent break up the biggest banks. they still, despite the fact

they had a filibuster proof majority, never voted to get rid of the bush tax cuts on wealthy households. i think the republicans came -- the republican leadership in congress came up with a political strategy that's been quite effective which is if we don't compromise, and mcconnell was open about this, it makes them hard to get credit for what they are doing. republicans are in a tough position controlling neither the white house or congress, they get credit for nothing in the last two years. their interest is not in compromise, and they didn't. it's worked quite well, and not only that, if you look at the tea party polls that the "wall street journal" had recently, you can really see that it's going to be very difficult even for republicans who want to compromise to do so because they

are at such risk of facing primary challenges. some will have come here winning elections saying i'll do no more spending. it will be very difficult for them to do. that is why i assume the republicans will take over the house, and i assume maybe they don't have a 50/50 chance of the senate, but they have a decent chance at the senate. i assume that's what's going to happen and we'll have largely two years of fighting and pruning on the deficit. the president will make the republicans look bad on the deficit and the republicans are not actually for, and i think the republicans will try to make obama look bad on the deficit by coming up with the least popular aspects of spending and least in health care reform and essentially sending those up for targeting votes and forcing him to defend things that americans are not so much in favor of. i think in terms of winning the

public debate, the states are a model for what we'll see for a republican congress. i think governors like christine christie have found things people are upset about. i think in 2012 you can imagine a scenario with more progress. there's people of good will in both parties interested in doing things. i think you can imagine a president like mitch daniels compromising with the democrats on these issues. i think you can imagine a second term of president obama compromising with republicans on these issues. bill had a nice line at the end of his presentation saying the public isn't ready to have this discussion about deaf fit reduction which means they're not willing to support politicians in favor of deficit reduction which is why we don't

have those candidates. we have the republicans as david said promising to make the deficit go away without cutting specific promise which is impossible. in some ways, my greatest concern is that our public discussion in our politics have gotten to a place where it's very difficult to imagine the sort of moment where as a country we're willing to make some of the sacrifices that are needed, and it makes me nervous we have a financial crisis brought on by the deft sit to get us to the point where we are ready to do that or we need an uncommonly gifted politician who can persuade people to do that. >> thank you, david. questions for both of you. for awhile you talked about the uncommonly gifted politician.

there was a thought in 2008 that obama might fit that bill. he won by a fairly sizable margin, much bigger than some in terms of a nonincumbent president. he did it largely by trying to come up the center by talking about bipartisanship and that stuff, but i guess the dis appointment from a lot of people is that's not what he did when he came into office. maybe it's unfair, and i think you pointed out areas where they did compromise, but if you look at the campaign rhetoric and antibusiness he's been and drawing the line in the sand with the tax cuts, why is he doing this? why is he doing this rather than appeal to the center again as he did successfully in 2008? i'm curious as to what your take on this is. >> well, i think that's a good

observationsment a couple things. clearly the expectations for what he could do in changing washington was out of whack. somebody said if obama didn't walk on the surface of the reflecting pool after taking the oath, people would say he's disappointing us. there's something to that. secondly, david makes a good point that 9.6 unemployment in the slow recovery, that's kind of, that overwhelming everybody. those are two things. i

>> i think that the fact is that two things, one, we have the most popular president we had in decades. it was clearly a call for a stimulus. they made a decision to get the stimulus through. they had to let congress do what they want the and the stimulus was branded with nancy pelosi's face, one the leases popular, and that was hard to recover from, and secondly, look, i wouldn't ever be game to say the president made a mistake by doing health care thing. how could you argue it's wrong for the president to be ambitious on health care which we know it needs fixing regardless of the his solution. there are people who said it was downhill from there and he spent capital on political health care and that and the economy, he has nothing left. it's not a question of tapping to the right or left, he's just

spent, and it's difficult to be spent. >> i think the kind of imagining another reality is interesting. on the one hand, people try to get universal health care done forever, trueman, nixon, clinton, and they count get it done. this group did it, and sometimes we may no longer be the only rich country in the world with millions of people without health insurance. on the other hand, it is true that it at a time of incredible economic trama, it really overwhelmed everything last year, and it is interesting to think back what if they per sued what is often referred to the rahm strategy. he wanted to basically cover all kids and do a bumpleg of not a cap and trade, but funding in

green investments and wanted to put points on the score board. he wanted lots of little victories. i don't think that would would have mattered in terms of popularity except with one big exception. if it meant earlier this year they could have done more in the economy, and the unemployment rate today was 8.6 falling from a high of 9.6. that would feel like a different moment. it would feel to the average voter like progress, and of course, we vastly overstate the president's effect on the economy. george bush came into an office with a recession folding in minutes. of course, we overestimate that, but voters do overestimate it, and i think there's a scenario to have been in a better

position. 20 years ago we could have said that was bad for them and led to a 10 year republican majority, but we got health care out of it, and for the country that's not a bad tradeoff. i don't know what is true, but it's fund -- fun to think about. >> some much you spoke to this, but what if any lessons are there from reagan in 82 and clinton in 94 that might work in this environment? i understand the standoff scenario, but what might obama draw from that? it was both of those, a slap in the face basically, but they managed to work both of them, through it, reagan and clinton. >> i think obama has to try to topple together parties. clinton did that on well form

reform, and the korea deal could be something even if they got little coorpg, it will be different when republicans control something because if the economy is then turning around and they get things done and republicans make the argument, look what happened when the democrats were in control of everything. they messed it up. now that you give us some control, things are getting better. to me, that's probably a substance-wise, he has to look for any area where it's possible to cobble together coalitions, but i think are more republican nan democrat. i don't know -- >> when sort of -- >> yeah, i don't know -- >> beside korea, but -- >> well, you can imagine some sort of tax cuts that would go. they're going to have to do business on appropriation bills

because the congress said one thing they learned from newt gingrich is shutting down the government is not a win. once you decide to pass appropriations bills, you're in negotiation with the president. they are forced together on that. you know, in my dreams they come together on social security, but i wouldn't put my personal ira on that happening. i want to go back to the point i made earlier that so another scenario is that maybe obama is not a good politician as reagan and clinton is jim was quoted as pointing out that he thought that clinton really enjoyed politics in a way that obama doesn't. clinton enjoyed the confrontation and all that, and obama doesn't, and so when you're dealing with people who have no reason to be loyal to you like john bahner and you have to make them like you,

obama will be tested. it's a lot easier when the congress is run by people who bout your stock, and now that the people who are running congress or at least one house are people who bought the other stock will see if he can court them, and maybe he'll rise to the occasion, i don't know. that's a big test. >> maybe, you could imagine and i'm looking for optimism here, but if you look at the tea party candidates, the favored candidates, some of them have been a lot more specific about the deficit stuff than the leadership in either party here. you know, rand paul, go on his website, and read, watch the speech he gives about the budget and talking about cutting military spending. it's striking from someone on the right. there's talk of raising the age for social security, and when that kind of stuff, maybe you

could imagine, again, though, so, i don't know how you quite get to 60 senators, but that at least is the beginning of something that is sort of interesting. >> i think another possibility is that we end up with some character third party person emerging, the ross perot who forces the democrats and republicans saying you're doing nothing and yelling at the other guy is not the solution. could glenn beck? [laughter] >> i'm not particularly waiting for that or hoping for it, but -- >> if i were a republican now thinking of running for president and anywhere on the moderate end of things, i'd look at time at running independent. you look at the delaware senate race, mike castle, someone who is incredibly well respected and thought he would get the victory, he lost the primary.

it's not difficult to imagine a replay of that in the 2012 republican primaries which would be a gift to obama. as i mentioned mitch daniels before who is a loyal party person, but if i were sort of a moderate republican, i would be tempted to give it a shot even if history says it doesn't work. >> yeah. >> we ran through the questions, but i'm happy to take questions from the floor. i can't imagine -- i mean, i got lots but i want to give you a chan to ask these two gentlemen questions. if you have a question raise your hand, and we'll be happy -- yes, up front here. i'll repeat the question too because not everybody can hear. >> [inaudible]

[inaudible] i'll repeat that. the issue is on the current unemployment rates, the appetite of deficit reduction is not there until we're at 6%. what's realistic here i guess? >> so, if we wait for the public to clam mori for cutting their taxes, we will definitely have a problem; right. director of the congressional budget office says it's summarized this way. the people are not willing to send to washington in taxes enough to cover what they demand in benefits. the only way we get there is a, leadership. you know, look the george bush the first, you know, he agreed to raise taxes to get a deficit deal through the congress,

planing for him losing or not getting reelected. they put things in that deficit reduction thing that worked surprisingly well. caps on the spending that prevented something lying the medication drug bill. there's the leadership thing, or there's a crisis that may not be talked about to have anything to do with the deficit. it may be a crisis of wages or productivity or something like that, but pressured to do something the congress comes together with the president and says, we have to do something, like after the 89 ministock market crash they did a reduction, and that gets them off to things. yeapt -- you can't wait for the people for leadership or crisis. >> i love listening to what things people did in the early #

90s on the deficit. first is the first bush who doesn't get enough credit for it and then republican votes in neither house or just the house? i can't remember. what's impressing is the george bush suffered a challenge and lost reelection and the democrats were routed. if i'm a democrat looking at that -- >> either that, a good bubble boomed. >> right. we had a surplus. >> one here, and then you in just a min. a mic is coming to you. >> in terms of opening -- [inaudible] are they going to be lost in the

partisan debate? >> i think they can provide some options, and if the political system decide that they want to do something about the deficit, it will be very useful to have yet another set of options blessed by these imminent people. i think it requires some sense on politicians that this is something they have to do, but you can't wake up one day saying i want to reduce the deficit. you have to pull ideas off the shelf, and it's helpful to have ideas that people like the deficit commission. you know, that's -- you agree? >> yeah, i do. i think they are right. there's two ways to reduce the deficit and the fact that the deficit needs 14 votes and six people already said they won't raise taxes, so that means it can't deal with the long term

deficit because without raising taxes, you have to do something like what paul ryan sketched out which i once asked another senior republican in the house what he thought of the ryan plan and he said paul is a very thoughtful guy. it's a radical plan that involves getting rid of medicare as we know it, and it's an hon honest plan, but that's what he needs to do to balance the budget without tax increases. that's the first real hurdle, and the second is we already know what they are going to say. we don't -- because -- but, the options, there is no secret plan to get rid of the deficit that everyone agrees with. it's the options that bill outlined, and the poll tigs of -- politics of that and the people who are for that don't have to run for office. >> fair enough. yeah, right there. john. >> one of the knocks on the

administration is he relied on the close team insight in the white house and has not used his cabinet members to advocate his policies much, and now he has a chance to retool the cabinet, so what suggestions do you have to most effectively do that to increase his ability to reach out to republicans? >> i think that's a fair critique. i think he drew too much for the senior bill clinton brain trust. he had obvious reason to do it and needed the people who had dealt with crisis before, and quite frankly, individually they are excellent policymakers, but the way you get to group decisions is by having a diversity. ..

>> has not been sufficiently hetero jean ya. >> okay. thank you. this is will come from a foreigner. i know foreign policy doesn't count must in the domestic election. yes, it is concern for us abroad. and i -- you know, you cannot help, you know, at this point obama is probably more popular aboard than he is in the u.s. so is this administration. i was wondering if from what you just depicted after the great recession we're not going to get

a kind of a great withdrawal of the u.s. and maybe what we can abroad expect from this kind of scenario not from congress on the midterm election would be just more protectism. >> i think it's a good point. so someone had a column this morning, i can't remember who it was saying how striking it was how little talk there was about iraq and afghanistan in the campaign. which is interesting, you could have imagined a different scenario. >> tom brokaw; right? >> yeah, tom brokaw. that's what happens with the economy tanks. one thing that's alarming when we look at the polls, the widespread bipartisan, multiclass, antipathy to trade and outsourcing and people blaming that for the problem. i don't think the president is a

reflectist, the politics of that are very difficult. i think that's a concern. on the other hand, if we've learned anything over the last four or five years, it's how vulnerable we are to the rest of the world. and it was 50 years ago in the rest of the world economy. so on one hand, you could say there's all of this protectionism. and protectist fever, and not the leadership to stand up to it, and all of that stuff. on the other hand, you could say, well, the kind of people that understand that we can't ignore china. and that we've borrowed a lot of money from china, and the chinese and indians are getting kind of competitive. you can imagine having a we-can't-afford-to-ignore-the- re st-of-the-world-and-eat-our-lunh

scenario. china released japan which released germany, who is going to kill us. if we build walls, we can keep out their goods. that's going to be tough to manage. one thing i can say about the protectionism, you have to adjust it. i was worried when we had a low unemployment rate. it's not surprising now that there is. for instance, i don't know, i don't see an easy end to the stand off between china and the u.s. over the exchange rate. it's not hard to imagine that it gets worse before it gets better. there's some frightening moments. the economic equivalent of chinese taking the fishing captain or cutting off exports to japan. these people are playing and really close to throws things at each other. it maybe that it takes a confrontation like a strike in the industrial company before

they can come to the table. there will be a lot of innocent bystanders. like every other emerging market in the world. >> okay. this is at least two more here. then i've got one last one, i think. if we could bring the mike down, the two of them here. hang on. would you wait for the mike please. because that way everybody could hear the question. thank you. and then there's another one. okay? >> actually, my question is what -- if there is an interest in congress based on republicans leading the house, what does the president have in terms of alternatives, like veto powers, executive orders? do you think it will be probable that he will govern from that point? also, what will congress mean for the world in terms of the international agenda?

>> he can continue to appoint people to regulatory agencies, and try to have the bureaucracies carry out his agenda has past presidents have done. one obvious example of that is with the failure of cap-and-trade, the epa can try to crack down more on greenhouse gas emissions, as you noted, he can veto. in terms of stopping things he doesn't like. but if the focus is the state of the economy, they can't do much. that's where we come back much more to the federal reserve. and i think it's a good sign the fed is now talking about doing more. i think they've been behind the curve on that. they spent too much time worrying about inflation. indeed it's a terrible team, it's not a problem right now or much of a risk relative to the other risks. so i think then you get into a situation which the fed becomes much more important.

and the fed really isn't willing to act in the final weeks before the recession -- before the election. absent a terrible crisis. so i assume we'll see them doing more. >> i think that's right. i think -- i would imagine for the rest of the world it means three things. one is the one that david said. more reliance on monetary policy than fiscal policy. which can have side effects as we've seen and what happens to the currencies of other countries. i don't think brazil is indifferent. we're going to get the monetary. two, it makes it hard to get unpopular things through the congress that the world might think is a good idea, say, replenishment of a quota at the world bank, stuff like that, free trade. and third, i can't imagine how anybody outside the united states can make any sense of what our policy is, given that nobody inside the united states can. and so i would imagine it's going to be a period of great

confusion. and, you know, everyone once in a while durings conversations, you hear some the americans officials say, you know, the parliamentary system has a lot to say. i heard that in the crisis, when the european stuff could do a lot of stuff in a hurry after the prime minister and minister agreed to it. i think the rest of the world is in for a rocky ride. >> right there there. david. >> i find it interesting the topic dropped out in the political arena. the anti-said movement, which maybe is just too complicated for people. that's why they don't accept it. it's definitely a taboo category in terms of political, the senior citizens. the fed strategy right now is anti-favors; right? you got senior citizens on fixed income, they are making nothing

on it. and it's interesting nobody is ringing the alarm bells on the policy. >> well, i thought you were going one way. then you went another way. the anti-fed thing is not gone. it peaked and went down. and it'll come back. because most americans think the fed saved wall street and didn't save main street. when you look at unemployment and a number of people under water mortgages and a number of people making money on wall street, you can see how people come to that conclusion. i can't answer the question on why there's not more of a rebellion among favors. among the american household, there's still a lot of borrowers. we know they are not net borrowers. they have been enjoying the people who can refinance and that compensates. but it's a good point. it rarely shows up in the --

even at times in the past when the fed had low interest rates. once in a while, you hear some things. i don't have a good answer as to why there isn't now. i would agree, it's a terrible time to want to be saving low risks. >> i'll risk a little generational war and argue that senior citizens have, as a group -- i'm not surprised they aren't angry. they don't have much to be angry about. this an age group that got to benefit from the huge run up. it's something that younger generations will not get to benefit from. they are not going to get to buy stocks at terrible depressed prices. which is what the generation did. i don't know if that explains the lack of outrage. to me, if you were going to look at different groups, senior citizens were the ones that i would worry the at least about. bill gale, right, mentioned all

of the planes to deal with the deficit. we would never do anything to harm 55 and older. there is a justification. they can't alter the plans the way a 30-year-old or 5-year-old can. dealing with the deficit is not going to fall on senior citizens. >> i think one other thing that occurs to me is it may be it's drowned out by the worries bit other thing that is are enormous. if you are worried about losing your job or your kid graduating from job without a job, if health care and 401(k) is tied to your company, low interest rates may not be in the top list. we gave them so many other things to worry about. >> there's the neat thing in which kentucky is going to continue to have the anti-fed senator. they brought in rand paul. >> all right. last question. it's off of the card. i'm going to read it. you'll understand why i'm going to read it when we get to the end. >> i'm not sure i like the sound of that. >> no, no, it's not like that.

everybody will understand. this is from the perspective of top-shelf economic journalist, does academic economics have much to offer in these times, a opposed to a global analysis like insight? you can see why i read it. it's not my words. >> some employees. well, my answer is yes. look, the academic economic communities was in part responsible for some of the misunderstanding we had of the crisis. but it is also responsible for some of the great insights that we've had as to why it happened. gary gordon at yale is as good as anybody in explaining the run at the shadow system. and having a fed that has an academic background, that has studied how we got into the great depression has proved beneficial. whatever you think of larry

summers, that we are better off in the room or working for de shaw, what was he was do on the side. that's not to denigrate what global insight do. you don't want a whole bunch of academic economists figures who's going to go the next quarter, or basis points, 25 or 50? i think it's bad to say academic economists aren't useful. >> they both have their strengths. i think the two big strengths of academia, among the two biggest, are the interest in taking a lot of time and trying to really come up with the right answer that will withstand rigger and will withstand time. sometimes they get it totally wrong. many times that approach really helps. i think another real strength is trying to come up with whole new ideas and theories that explain things. one the nice things about academic economics, it's tried

to get more real world. they have taken the theoretical and applied it to the real world. if you relied on academics, not only would it be wrong, would nobody is right all the time. it comes out so slowly. the rigger means you are analyzing things years after they happen. i think the reason david and i are both here, we both have experience with outfits like global insight, and global insight in which you are trying to figure out what's going on with the chinese auto market. four minutes later, you have a spread sheet in your e-mail that explains. >> alan greenspan says how did you miss the rapid wise of the mortgages? he shows the finance in 2006 which shows a big increase in the number of subprime mortgages. we're talking about a guy who he's a global insight kind of guy. he said he didn't believe the

data. he didn't think it was possible to have something increase that rapidly; right? and so i think that one the things that the policymakers have learned is that it's exactly when -- there are times when you really do need to have the data to figure out this story is not unfolding as i expected. and that the whole lesson learned from this episode, the whole business of macroprudential supervision and the oversight council is to spend a little less time to figure out how to trust the markets. and just a little bit more time looking at the data to make sure that allow for the possibility that these guys run the big banks on wall street. they may not actually know what they are doing. since the evidence is that's what was going on. >> the evidence is a lot of academics got it wrong. a lot of the models got it wrong. the data got it right.

right, pe ratios, house print to right ratios. they all look really smart. >> great. thank you both. please join me in thanking david and david. this was great, guys. i need to make a couple of quick announcements if you don't mind. just a couple of quick announcements, please, please fill your evaluation forms. we take them very seriously. dinner, downstairs. we'll start loading the boat around 6 as i understand it. downstairs, through the atrium, outdoors, follow the red brick -- not the yellow brick -- it's a 10 minute walk. commercial peer, not the gaylord peer. we're looking for the odyssey cruise. it's going to leave at 6:30 sharp. look forward to seeing you all at dinner. thank you again, both. this was fantastic. [inaudible conversations] [inaudible conversations]

>> this weekend on booktv "in depth" jonah goldberg discussed the election results, the conservative movement, and the next wave of leaders on the right. join our three-hour conversation with your calls, e-mails, and tweets, sunday at noon eastern on c-span2's booktv. >> saturdays landmark supreme court cases on c-span radio. >> the school always calls it a voluntary bible reading statute. there's nothing voluntary about the bible reading. >> this week in part two of the edward schempp, reading from the bible in school, he felt students should not have to. on 90.1fm, and online at

c-spanradio.org. >> georgetown business school held a conference on the implementation of the financial regulation law. scholars and regulators discuss the different elements, including how to regulate companies that may pose risk to entire financial systems and how to effectively enforce the new regulations. this portion is about 35 minutes. >> my name is george daly, i'm dean of the georgetown university mcdonogh school of business. we are, of course, in our new home. aisle -- i'm pleased to welcome you to the special conference on financial reform. we are delighted to be co-sponsors with an organization that was closely involved with our activities, pricewaterhousecoopers. we are terrific to our speakers and panelist who have joined us.

thank them all for being here. we look forward to in depth discussions that will be generated both by their dialogue, and by interaction between them and the audience. as you may now, we moved into the beautiful new building just a year ago. we've been fortunate to host a number of distinguished leaders such as yourselves. we would like to continue to play role of convener or honest broker of ideas and insights related to the world of business. at the conclusion of todays program, we will adjourn to the fourth floor of this building to the fisher for dock -- cocktails. those who have registered, there's a dinner on the first floor on the tent on top of the pad -- patio. it's now my pleasure to

introduce the co-host mark casella. he leads the firms alternative investments practice. with more than 30 years of experience, mark serves as the engagement partner and business advisor to alternative investment funds clients, including investment partnerships, hedge, offshore funds, private equity funds, and their related investment advisers. he has experience with a multitude of financial services, organizations, and in recent years, his focus has been in dealing with banking, capital markets, and alternative investment clients. mark also as extensive experience serving brokage firms, college, and university endowments, which especially interest us. investment banks and commercial banks. he's led numerous advisory engagements on the evaluation and operational issues with the complex financial instruments

and the review of internal controls. we are particularly proud that mark received his bachelor of science degree from georgetown and is a member of the advisers and he's a member of the managed funds association. please join me in welcoming mark casella. [applause] [applause] >> thanks a lot, dean daly. good afternoon to everybody. as a proud alum of georgetown, i can tell you this is a moment that we've long waited to be able to do for pwc to be able to welcome the group like this into the hererri building. we think the opportunity to be in this city at this moment will provide the backdrop. not since the 1930s has there been so many regulatory change

in the u.s., or proposed regulatory change. to help sort all of this out, we've organized a group of speakers and panelist to answer the question that we've posed in the conference materials, "what's next"? our first panel, the new systemic risk regulatory regime will be mod rayed by reena aggarwal, professor of administration at georgetown mcdonogh school of business. next is timothy bitsberger, a principal with booz allan hamilton. phil swagel, who's a visiting professor, and christopher towe, deputy director of monetary and capital markets, and team leader in the financial sector assessment program of the imf. after a short break, we'll come back from the second panel "punishment and deterrence."

obviously sounds like a real winner. this panel will be moderated by tom biolsi, and he leads the practice. bonnie jonas, rob khuzami, dave markowitz, special deputy for the new york city attorney general andrew cuomo, and james shorris, executive bp in the enforcement division of finra. finally the closing keynote will be donald kohn. after mr. kohn concludes, we'll lighten things up with the cocktails and dinner. and nora o'donnell is the chief

correspondent for nbc and msnbc. let's get started. i'm first honored to welcome our first keynote keeker, -- speake, neal wolin. neal earned a masters of science from oxford, and returned to yale where he earned his law degree. he's worked at one the nations leading law firms, served as special assistant to the director of cia, and was deputy general council at the treasury department under secretary rueben. he spent eight years in the private sector at general counsel as the hartford, and later as chief operating officer for the property and casualty operations of hartford financial services group. in march 2009, he was selected to be deputy treasury secretary. testifying before the committee

earlier this year, he said the ingredients for successful financial regulatory overhaul should include strong consolidated supervision for all large banks, increase capital and liquidity requirements, strengthen core infrastructure of financial markets, robust authority to unwind a failing major financial firm in an orderly manner, and a strong accountable consumer protection agency. so without further ado, let's see what he has to say today. let me welcome deputy secretary neal wolin to the stage. after his comments and after each of the panels, we'll hopefully have some time for a couple of questions. and we'd like clients and students to please feel free to ask the question that the mike has provided. secretary wolin? [applause] [applause] >> good afternoon, everybody.

thank you, mark, for that generous introduction. i'm delighted to be here at the conference. i'd like to thank dean daly for organizing the conference and giving me an opportunity to speak to you about financial reform. the financial crisis was caused not by one gap or breakdown in our system, but by many. firms took on risks they did not fully understand. regulators did not make full use of the authority they had to protect consumers and limit excessive risks. loopholes alarged them to operate without oversight, transparency, or restraint. policies failed to fix the situation. the president came into office not just to repair the damage, but to fix the system that allows the failures to have such devastate consequences. earlier this year, the president

signed into law the most sweeping reform since the great depression. the dodd-frank act addresses the concerns. the act addresses the major gaps and weaknesses in regulation. it puts in place buffers and safeguards to reduce the chance that another generation will have to go through this, it protects taxpayer, it brings fairness and transparency to consumers services, and it lays the foundation for a financial system that's proinvestment and progrowth. but the work is far from down. enacting this law was just the beginning. we have now begun the difficult and complex process of implementation. and today i'd like to discuss some of our accomplishments and our next steps. before i describe how we are implementing the act, i wanted to tell the broad principals that our guiding our efforts. first, we are moving as quickly

and as carefully as we can. whenever possible we are providing clarity to the public and the markets. but the task we face cannot be achieved over night. we have to write new rules and some of the most complex areas of finance, consolidate authorities spread across multiple agencies, set up positions for consumer protection and systemic risk, and negotiate with countries around the world. in getting this done, we are making sure to get it right. second, we are conducting this process out in the open. bringing full transparency to implementation activities. as we write new rules, we will consult with a broad range of groups and individuals. and as we seek their input, the american people will be able to see who is at the table. draft rules will be published. everyone will be able to comment. and these comments will be publicly available. treasury will disclose the

topics of meetings on dodd-frank implementation and the names of the attendees. third, whatever possible, we will streamline and satisfy government regulation. over the years, we have accumulated layers bonn -- upon layers of rules. which can be overwhelming. that's why our efforts to strengthen the system, we will avoid cup placation, and seek to eliminate rules that did not work. fourth, we will create a more coordinated regulatory process. it proved to be a failure. gaps allowed risk to go unattended and inconsistencies an overall race to the bottom. better coordination will help prevent a recurrence. fifth, we will create a level playing field. a level playing field must exist not just between banks and nonbanks here in the united states, but also between major

financial institutions globally. we are setting high standards at home while working tirelessly to purr -- persuade the international community to follow our lead. sixth, we will protect the freedom for innovation that's absolutely necessary for growth. our system allowed too much room for abuse and excessive risk. we have to achieve a careful balance and safeguard the freedom for competition and innovation that are essential for growth. seventh, we are keeping congress fully informed of our progress on a regular basis. guided by these principals, we have made significant progress in the month since enactment. i'd like to update you on the few of the institutions at heart, the financial oversight council, the office of research, and the consumer financial protection bureau. before the dodd-frank act, there

was no single entity monitoring the risk. gaps and inconsistencies led to regulatory arbitrage, and some of the largest most interconnected firms were able to escape meaningful supervision. the act creates the financial stability oversight council, requiring it to identify risk to stability, respond to emerging threats in the system, and promote market discipline. the act provides the council will a leading role in several important regulatory decisions. including which nonbank financial institutions and financial market utilities will be designated as systemically important and what heightened standards should be applied to those firms. the council's success in carrying out these critical functions will depend on the ability to act. while each agency is responsible for a specific part of the sector, or for certain aspects of it's functioning, the act

holds the council and members accountable for maintaining stability across the financial system. accordingly, the council must adopt and approach that preserves the independence for the regulators to fulfill their individual responsibilities while maximizing the coordination required for the council to achieve it's broader mission of financial stability. as chair of the council treasury move quickly to convene the council earlier, ahead of the date required by the act. at it's first meeting, council members engaged on important substantive issues. they requested public input on the criteria the council should use to designate the bank companies for federal reserve supervision. they requested comment on the vocal rules limitations on proprietary trading at certain financial institutions. members also released the road map for implementing the dodd-frank act that reflects the priorities of various regulatory

agencies. and they adopted by laws and a transparency policy. on november 23, the council is scheduled to have it's second meeting. i suspect the council will continue to work and discuss the criteria for nonbank financial institutions and financial market utilities. i also expect the council will have make further work on budget, staffing, and organizational structure. how to constrain systemic risk, the council and it's members must be able to monitor systemic risk effectively. doing that requires improvements in financial reporting and capacity in the regulatory community. that is why a alongside establishing the council, the dodd-frank also established the office of financial research. in the decade leading up to the crisis, financial reporting failed to adopt to an ever evolving financial system.

both supervisors and market participating lacked data on the build up of risk. particularly in rapidly growing areas such as the banking system. and when the crisis hit, policymakers and investors had inadequate information about the interconnectness of firms and associated risks. the ofr was created to address their critical need of regulators, policymakers, and industry for data that are better, more useful, and more reliable. the ofr's capacity to organize and analyze data will also help the council make more informed decisions about the threat to the financial system. in order to accomplish the goal, the ofr is working with regulators and industry, laying the ground work to standardize reporting that will identify and describe financial contracts and institutions. data standardization will provide for more consistent and complete reporting.

making the data available to decision makers easier to obtain, digest, and utilize. over the coming weeks and months, the ofr will begin to define a set of standards for reporting of financial transaction and position data. the ofr will collaborate with the financial city, data experts, and regulators to develop a approach that works for everyone. the ofr must not duplicate the efforts obvious impose unnecessary burdens. that's why we are working to catalog carefully the data they already correct to make sure it relies on their data. they are exploring ways to act for the regulatory community. which could generate efficiencies and interagency cooperation. we have already seen how standardization can help markets run more efficiently. the codes for security and swift bank identification codes are

good examples of the benefits of standardization. introduced into the 1960s, cod reduced paper, processes time, and human error associated with stock market trades. they also help facilitate the trade execution the reduction in paper work and increased efficiency and precision of settlement. similarly, swift's bank identification codes facilitate efficient transmission of funds across the global. standardizing the way that entities, instruments, and transactions are identified, not only reduces cost, it also allows for more meaningful identification of risk both at the firm level and system wide. the development of new data standarding is only a foundational element of the ofr's goals. the true measure of standardization and success will be in how it facilitates more robust and sophisticated analysis of the financial system, both for the government and the private sector. for example, more consistent and

complete reporting of derivatives will make it easier to track the risk in the system. it will make it easier for firms to assess their own risk, and giving market participants better information on what firms are doing. beyond establishing standards, the ofr is also required to develop and public key reference data that will describe financial institutions and contracts. regulators and supervisors as well as private firms and investors rely on the data to analyze risk. the ofr is beginning to put them in place. to help fulfill the potential, we established to develop a research and analysis center. the ofr can help identify undue concentrations of risk, and ensure when the next crisis

beginning to emerge, the government will have better information and analytical tools to respond appropriately. as we work to establish the ofr, we are committed to protecting private information and trade secrets. the act provides strict protections for data security and confidentty. we take seriously the obligation to implement the safeguards fully. we will develop policies and procedures for the ofr and the data centers that meet the highest data security standards. while the council and the office of financial research are desired to help us address risk in the broader financial system, the consumers protection bureau was created to address the cap in our structure. the need for a single entity, dedicated to consumer protection. the cscb, an independent agency within the federal reserve

system will have the sole mission to ensure transparency and consumers financial products and services, and protect consumers from abuse and protection. the cscb will consolidate the rulemaking authorities for the financial services. it will consolidate agencies interesting functions for supervising the largest banking institutions for compliance with the consumer financial laws. it will supervise the activities of many nonbank financial firms that sell consumer financial services, an entirely new federal function. the act charges the secretary of the treasury with standing up to cfpb. until his leadership, we set up a implementation team with a clear division of responsibilities right after enactive. elizabeth warren, as special advisor, is leading treasuries efforts to build the cfpb. the cfpb team has working groups

focused on setting up key functions of the bureau and other institutions. other working groups are focused on the infrastructure, from procurement and budgeting to human resources and legal services. the secretary has designated july 21, 2011, the one year anniversary of the statutes enactment as the date on which the cspb will assume 11 agencies. we have made progress for them to incooperate staff from the agencies. we have begun planning for certain rules so the cspb can meet statutory deadlines. we are working with the agencies that will transfer rulemaking authority to coordinate and ensure a smooth transfer. certain rule writing mandates with the federal reserve board

to speak clarity for the market and make sure the deadlines are met. we are also harder work to assume the compliance supervision with banks, risks, assets, exceeding, they are laying plans for staffing, training, and systems. we will make sure to coordinate the schedule with regulators to avoid unnecessary burden. finally, let me say a few words about global coordination with respect to the financial reform. for reform to work, we need to establish a level playing field. as i said before, not just between banks and nonbanks here in the united states, but also among financial institution, our financial institutions and those in europe, japan, china, and emerging markets. who are all competing to financial global growth. during the response to the financial crisis, the g20

emerged as the premier forum of the international cooperation. and it has remained critically important as countries across the globe have begun to design and implement their forums. since the first meeting held in washington in 2008, working with the board and banking committee on supervision and other bodies have catalyzed wide ranging reforms. these reforms are strengthening regulation, improving transparency, and accountability, and reinforcing international cooperation. just the past weekend, g20 financial ministers meeting in korea reaffirmed their commitment to the international reform agenda. the g20 agenda has focused on the strong agreement on bank capital, on resolution framework, on the problem of too big to fail, and transparency in

the over-the-counter derivative markets leaders have committed to bringing the trades to trading platforms where appropriate and ensure that all standardized contract are cleared through parties. leaders have also called for all otc contracts to be reported. so that the supervisors can better monitor systemic risk. and further work continues to ensure the central depositories are well regulated and supervised. additionally, g20 leaders have committed to strengthen the hedge funds in an internationally consistent and nondiscriminatory fashion. the dodd-frank fulfills this in several ways. it imposes reporting requirements on funds, and those funds that are deemed systemically significant. it deems advisers of hedge funds

and other private pools of capital, including private equity funds. and it imposes the same rules for the u.s. investment advisers as foreign fund managers. in europe, member states are reaching an agreement on legislation that strengthens and standardizes the regulations across the eu. although the uncertainty still surrounds the treatment on managers and funds. we believe it is critical that any agreement be nondiscriminatory as agreed by the g20 and maintain a level playing field for funds and fund managers. beyond the go 20, we are working through forums such as the financial stability board and the basel committee. in september, international regulators announced a new agreement on the capital standards. the basel iii agreement will require any bank whether based in london, new york, or tokyo to hold more and higher capital against the risky products and

activities that caused such damage two years ago. it will require banks to meet the requirements on maximum leverage and minimum liquidity. secretary geithner and many others have been working hard with the partners to coordinate global reforms. i look forward to continuing this effort next month when i travel to europe to explain how dodd-frank shows our commitment to the g20 agenda and international standards. this economic crisis was caused by fundamental failures in our financial system. and over the past few years, those failures have cost us dearly. millions have lost jobs, trillions in lost savings, thousands of failed businesses, homes foreclosured, education deferred. no future has to pay such a price. it also rebuilds our financial

system so it can once again be an engine for economic growth. for much of the last century, our financial system was the envy of the world. from london to shanghai, it was analyzed for the creativity and inefficiency of finding ways to channel savings towards credit and capital, not just for the biggest companies but for individual entrepreneurs. those who had a good idea and a solid plan. the dodd-frank act, and it's successful implementation will help ensure that our financial system becomes safer, stronger, and just as in the past century, the world leader. thank you very much. [applause] [applause] >> so happy to take some questions. or not. [laughter]

>> sir? >> yes, hello, i'm name is perot. i have a question. we know that all of the bank crisis and financial crisis in the history has always occurred from accessive -- excessive financing and some say is not risky. none has come as investment as what is perceived as risky. that put higher capital requirement as what is perceived risky, and much lower to what is perceived as not risky, are completely counterfactual. my question is: in what way will the commission will able to keep arms length distance with the

other regulatory authorities because many of us consider that some of the bank regulators have, in fact, themselves being the biggest contributors to systemic risk with the regulations? thank you. >> thank you for the question. the dodd-frank act puts toward a framework that we believe it does tame down what we think risky sets of activity. our knowledge at risk of any moment in time is imperfect. in any event, our understanding and thinking about risk will evolve as markets evolve and so forth. that's a very organic constantly moving process. i think the key here is to put in place the institutions and i identify two of them that i think are really at the core of the answer to your question. the stability oversight council on the one hand and the office of financial research on the other that will give the government a better set of rules and capacity to both understand risks at a certain moment in time, to make sure there are --

whatever gaps or holes in the regulatory framework that are perceived are addressed and to involve risks to examine and understand risk as they evolve. the counsel has the important mandate of looking over the entire system, including over the shoulders of it's various members to make sure that it is examining the financial system as exist today and as it continues to move forward, for exactly the kinds of insights with respect to risk and the future of risk that it did glean. it's obviously an imperfect science. no set of human beings have a perfectly clear crystal ball. but there's now a structure for the first time ever that is -- that has been given the explicit mandate to look at risks across the system with the input and the expertise of the various regulators that comprise the council membership. but also to provide an effective second view, check basically

only the regulators and their own respect as fears. and to aide the council in that work, the office of financial research, i think, again, for the first time ever provides the government with a set of capacities with respect to data and data collection, and data analytics, which we believe will be an enormously important set of tools enabling the council and for that matter, it's respective members to get a handle on what's going on in the system, and a range of lenses as i noted in my remarks as sort of a building block in that is to have data standardized so it can be used in it's most useful sort of ways. i think those two elements are critically important. obviously, we will continue to work cross bodder, the stability oversight council and all of its members with colleagues overseas, and with, you know, the imf in it's important role

to make sure that all of those institutions are looking at what is going on. to do so, you know, obviously with recent experience in consciousness, but as i mention, critically, importantly, i think, new tools and new capabilities at their side. >> hi. >> hi. >> i have a question about the financial stability oversight council. and, of course, they just put out for public comment the questions to inform the criteria that they will use to decide whether a nonbank financial company is systemically important. and beyond reading the statute itself, i'm interested -- i'm with a.c.e., a pnc company, as we look at leverage and size, what's in the statute, what's in

the view about the pnc how will the analysis work in practice? and i guess associated with that, do you forsee the council sending large companies, you know, questionnaires, data calls, sitting down with our management team? some the issues, i think, get beyond just sort of metrics and more understanding of a company's risk management. thank you. >> the statute lays out some general criteria for what would constitute a nonbank systemic risk. as the mentioned and as the question notes, just in the last three weeks or so, asked for public comments on how people should -- how people think the f-stock should lay out the criteria, what criteria ought to be applied and what sorts of way. i think it's premature to say

how they will come out what criteria will be important and in what ways either for nonbank financial institutions or financial market utilities or the process by which precisely they will go about doing designations or considering designations. that is work for the council to do and for the council to make judgments as i say. the council will have it's next meeting in november. there is quite an active, vigorous process of staff members of the various council entities working in the mean time and i think when the council has received public comments in response to the notice that it put in the federal register, and has a greater opportunity to consider how they want to organize those criteria, and the process by which they want to apply them, they will say so out loud. for me to guess at that now, will not be appropriate. >> mr. secretary, shawn kota,

one of the points that you made was on innovative technology, and rapid deployment of regulation through standardization. one the elements in the dodd-frank bill is oversight of derivatives, obviously, of the world's $623 trillion of nominal value, approximately $300 of which is u.s. in the vast number of trades and reporting. in order to have transparency, we didn't include any financing for the cfdc in regard to it's budget in order to do that. what is the strategy from the administration to finance this so the transactions can functionally get done? >> excellent question. and one that we are very much focused on. the administration has sought

additional funding and other agencies that have critical roles to play in implementing the legislation. the politics of funding right now on capital hill are, as you know, quite complicated. we will continue to work hard, not just on behalf but other entities who play a critical role and will play critical role in this. and who will need additional resources. in some cases substantial additional resources in order to get that work done. and so, you know, the congress has passed the continuing resolution which will need to be reevaluated in the lame duck session after the midterm elections after next week and hopefully we can get some additional funding for the agencies, including the cftc. thank you very much. [applause] [applause] >> this weekend on c-span3 american history tv, we'll show some of the art created by

japanese-americans during their time in world war ii intermment camps, and we'll look at the incoming economic and freedom of women in the early american republic. american history tv all weekend every weekend on c-span3. >> this year's student cam video documentary competition is in full swing. five a video on washington, d.c. through my lens. your video should include more than one point of view along with c-span programming. upload for your chance to win the grand prize of $5,000. there's $50,000 in total prizes. the competition is open to middle and high school students, grade six through 12. for all of the ways to upload, go online to studentcam.org. >> georgetown business school held a conference on the

implementation of the new financial regulation law. scholars, and regulators discussed the new law including how to regulate companies that may pose risk and how to enforce the new regulation. in the hour-long portion, risk regulation. >> the work is far from done. we have a piece of legislation that's a very complicated piece of legislation. it has created a lot of uncertainty, a lot of unanswered questions. and we have a terrific panel here that will be able to comment on a number of the issues that dodd-frank, particularly with respect to systemic risk. so let me start by introducing our panelist here. and immediately to my left here is profession -- professor phil swagel. he's a visiting professor at the

mcdonogh school of business. he was assistant secretary for economic policy at treasury, and in that capacity, he played an important role with t.a.r.p. issues. he has also served as the council of economic advisers at the imf at the federal reserve. and phil has degreed from principal university and -- princeton university and harvard university. next is tim bitsberger. he's an executive advisor at booz allen. he also has extensive service at the treasury and also at freddie mac, and tim serves on the board of directors on the cme group. next to tim is steve albrecht.

steve has a law degree from georgetown university in addition to his other degrees. and steve is managing director for regulatory affairs at ge capital. and tim also serves in treasury as counselor to the general counsel, and acting deputy general counselor. he was very much involved in t.a.r.p. and in issues related to fannie mae, and freddie mac. then we have chris towe. chris is a deputy director in imf monetary and capital markets department. chris has been very much responsible for the financial sector work going on at the imf, particularly the fsap work, and has recented created fsap of the united states, the first, and will have a lot to share with us in terms of global coordination. so let's start.

there's a number of issues here that need discussion. as secretary wolin pointed out, how do we define systemically important financial institutions? there are a number of issues to consider here. and he mentioned the fsap, the body that is going to decide which nonbanking institution should come under this umbrella. so i'm going to start off with the broad issue of are we really simplifying the financial structure, the regulatory structure here, or is it becoming even more complicated. they have created a lot of new agencies. there are a lot of new entity that is are created. and for some people, they have seen this as a more complex financial regulatory system and

a deck tear wolin -- secretary wolin pointed out, a lot more coordination is going to be required. what does this mean for the marketplace? will these new regulations, the new agencies, the new organization take care of future problems? and i hate to say this, but there was a survey by the cfa institute, where 3/4 of the respondents felt dodd-frank will not help prevent another financial crisis. asked a lot of questions, raised a lot of issues here. let me start with tim. >> sure. thank you very much. just by way of background, just to add to my resumé, i spent about 15 years on wall street as a trader. traited a lot of derivatives. :

>> consumer protections were needed. plaintiffs a -- there was a lack of communication between the regulatory agencies, but to get to the heart of the matter though i'm cog any disament of the need for better coordination, i remain a little skeptical that it will be successful. i reason i feel that way is you need a certain type of person or

qualification in that regulatory role to understand what exactly is going on, and i don't know how many people here have traded and interest rate swapped and how a cbo is structured and traded cbs to get into the details of the problems that occurred. i would argue that the regulatory regime and what's required is to get a real detailed understanding of what's happened and having read all the books on the financial crisis, the one that stands out is michael lose's book, "the big shore". they found what they thought was a macroissue. there was a housing bubble, tiewch leverage, and they looked to maximize the return on that, and i -- they didn't approach it in a

regulatory way, but for the regulatory to be successful, we need that framework in there. secondly, i think there's some overlap. there could be overlap as a result of dodd-frank. let's say you are jp morgan. i don't know what the fdic rule is going to be what the rules will be, but each has authority in the case of fdic and resolution authority but they approach it with a different interest and mind set. i do worry that there's some come flicts as -- conflicts as regulators will deal with conflicts. >> first, i want to make absolutely understand we welcome

everybody with degrees from -- [laughter] you just have a little more love affection with people with a georgetown degree, and phil has degrees from princeton and harvard. >> thank you. no, i agree with a lot of what tim said. i'm a little bit more hopeful probably. there's some ironny here. before the dodd-frank was enacted, i testified on it very critically. you know, i do think it will help in particular ways, you know, with the gaps in the system, and i particularly have in mind aig here with no federal agency head direct oversight for aig and there was a little bit of the firm, but there's really no federal agency head or ownership to feel responsibility

to go out and figure out what's going on and there's at least two agencies, you know, certainly treasury, the secretary chair and the fed there's systemic risk over the whole system and the free safety of the system. they're not going to find every problem or avoid every crisis, but at least there's ownership and ability to get information. i know we'll get to it later, but i worry once they get the information and there's a problem, what can they do about it? but that's a second issue. >> i think i certainly don't envy the governments and regulatories they find themselves in now. if you think over the last few years and the dodd-frank thing and never again there's no more loss or crisis of that

magnitude, and let's pull the regulators together and say okay no one understood who was in charge before, and now it's you guys. it's similar to being at homeland security and the best you hope for is that nothing happens. it's certainly a difficult task and one of those issues where i think as tim was saying, it takes a lot of understanding of the system just to get your arms around all the moving pieces, and all of the difficulty in managing a system the size of our economy and the global economy, let alone then understanding where is the next bubble coming from and what do we do about it? it's a difficult task we have in front of them. i'm also, you know, somewhat hopeful because there's certainly some gaps in regulatory coverage in the past that i think were very clear in the crisis, and then to the extent now there is, you know, some overlap as opposed to gaps.

neither is perfect, but i think you take the overlap to make sure somebody is assigned to looking at all the different pieces, and certainly some of the derivative side to get a better handle fire department -- on the side of the derivatives and that's a good thing as the aig experience taught us. i guess at the end of the day i'm hopeful, but it's a big task the regulators have in front of them to make better sense of the system. there's also some very good people in the regulatory agencies who i think i know are taking this seriously and working very hard on this right now. >> thanks. i guess i'm probably unique among the panelists in that i'm canadian, so i didn't go to any of the schools here. [laughter] even more so, i never served in treasury. i don't know if that's a good or bad thing.

>> you did go to a fine institution in queensland, canada. >> i guess to come to the initial point as directly as i can, you know, one of the issues that we struggled very much with during the assessment we did in the united states over the last year, imf.org, please check it out, is, you know, i think the crisis illustrated there was not a perfect regulatory framework. we saw a crisis in the united states with a hugely fragmented system with overlapping regulators, and there was a crisis in the u.k. with a single regulatory type body similarity to germany with a single ragelator and the netherlands with a twin peak model. point two is where we came out

on the u.s. was the system is incredibly fragmented, and there's good examples in the period leading up to the crisis where that tended to slow decision making, slow risk identification and slow the response to the crisis. i think where we came out was there really was an opportunity into the crisis and coming out of the crisis of dodd-frank to take a bolder step and swing at trying to consolidate it. now, unfortunatelily, that didn't happen, and i think that is unfortunate. that said, the fsoc has an important opportunity, but it's significant challenges in trying to address the fragmentation. i think let me name three of them. one is coordination. there remains a huge number of agencies. we listed many of them, but of course the state regulators for the banks and insurance side that coordinating all those

bodies is going to be very difficult. secondly, there is the issue of the political factor in the extent to which this body and its chairman, the treasury secretary is going to be very political, and i think what we would ideally like to see in a regulatory agency or supervisory agency is a certain degree of independence. i think that's going to be an important test, and i think the third and related challenge is the will to act. again, leading into the crisis, we saw risk identification. we saw many agencies identifying the subprime as a significant source of risk, but really a delayed response to that, and i think the real challenge of the fsoc is to take quake action. >> so, one of the jobs, one of the first few jobs of the fsoc is to figure out who is going to get this designation, this very important designation, and

supposedly there's tough new supervisions on whichever constitutions are designated as sismatically important, and so how -- the secretary mentioned size, leverage, which are part of dodd-frank, and he said it was too early for him to comment on who should have this designation. i'm interested in the panelist's upon on who should get the designation? is it size, leverage, a combination of size and leverage? the school at nyu, some of my colleagues there have come up with an index. you can go to their website, and they are raping financial -- ranking financial institutions, and their criteria is based on stock market return and leverage trying to keep it very, very simple so it's easy and transparent and easy for the

market to follow, but who should get this designation? who should not? it's causing a lot of confusion, and so let me throw that out to you. >> okay. sure, sure. it's a tough one. the first, you know, my first reaction is it shouldn't just be size because i think of, you know, some of the largest financial institutions are of course fidelity, vangored and other complexes. they are not risky, they're huge, but i don't think of them as risky. on the other hand, the transition mechanism of the crisis it's not like lehman failed and the world blew up in the next second, but it was the preserve fund. if any, we all would have said, you know, that complex was safer than the others i just mentioned, so somehow, i think it's got to be a mix of size, yes, but really activities, and there's got to be both of those

together. you know, how you identify which ones, and i do think there will be an impact. if you as a society if we tag, you know, big asset managers as significant, they will be tagged with significant charges and other things putting them as a disadvantage, and i'm not sure in this environment they'll have an advantage with a too big to fail and i'm not sure that will company said. >> this is a tough one. it's a qualitative assessment. you need to look for leverage, inner connectivity and funding needs that roll over an a more frequent basis than not. this is going to come down to a judgment call with a lot of

second guessing. this is one i don't have a good answer for. i think it's going to be hard to discern, you know, you're in this bucket, you're in that bucket. >> you think the initial judgment will be too bard or too narrow? how will the incentive be? can you -- >> yeah, well, i fear it will be too broad. >> chris, what happens in a global sense? all of these have very large global operations, and so how do you wrap around this in a global sense? which constitutions get the bucket and which don't? >> yeah, again, hugely complex questions for which there are no easy answers. i think just to come back to the initial premise though, another dimension to keep in mind is substitutability. we want to keep in mind financial industries not easy to substitute. they may not be large in

absolute size or inter connected, but if they go down, the gap couldn't be filled. the other dimension onements to keep in mind too is what it is you're going to do with this designation, and there's different ways to slice that. there's the, tent to which you might want to apply a risk charge to them, there's the extent to which you might want to insent them to shift their behaviors in ways that are systemically risky and ways or options in which to increase the extent to which you oversee them, and then finally, there's the extent to which you might want to apply regime, and we may come to that more later. in terms of the global dimensions, i think there are a number. one is on the resolution side, it is incredibly difficult to

consider resolving a large domestic financial conglomerate, but doing that in the case of conglomerates that span borders is really at least at the present insoluble, so there's a considerable amount of effort underway in the financial stability board to try to develop these principles to improving the degree which agencies and regulators can cooperate across borders in the event of a financial event. also, efforts to try to align domestic resolution regimes, legal frameworks, bankruptcy codes, ect., to make sure they are at least not unfriendly to cooperation across borders, and then there's the issue of regulatory arbitrage across borders, and the real risk is that you get some, some national

bodies applying much more stringent regulatory regimes and systemic risk charges for example that may or may not shift activities across borders in ways that are not necessarily to be of advantage to the global systemic ability. >> it's been interesting to see that forms of all of these shifting as to what they do based on what is about to come. for example, you see the goldman sachs, they closed the proprietary unit and trying to figure out what to do with the private investment unit, what's the appropriate side they should go down to. the other day standard charts announced they will increase their capital from 9% to 11% and set minimums to 7% and came out saying they're going to 11%, and

the u.k. regulators are talking about not just meeting the basal timeline, but it needs to be happen much faster and sooner, and you see from all of these starting to respond. my question to steve is what are the consequences of these what's going to be in a practical sense on whoever gets this designation? how is the marketplace getting ready for it? >> well, i think the -- it's another challenge that the regulators face first, and then the industry second based on what they do. there's a very delicate balance i think in terms of capital is a good example between di resisting and making the system safer, and maintaining a system that can grow and courages economic development. when you raise capital, the response is shrink the balance

sheet and less lending, and so that is a balance that probably will be able to swing a bit back and forth as the regulators do their work in the coming decade i would imagine. companies, i think, right now are looking at this and saying we don't know enough yet how this will shake out to do too much because on the systemic side the counsel was just right now seeking comment on how to designate firms let alone setting up the process on how to do whether it's a big or small group and the markets take their time in thinking what does that mean to be a systemic firm or not, and so i think unfortunately part of the answer to that is it's too difficult to tell right now and some firms are making changes to their model because they don't want to be in any longer and that sort of things, but in terms of the bigger picture what it means to

be systemic, i think the hope is that regulators understand particularly at this time when the economy is struggling to regain its footing, you don't want to do too much to inhibit growth and push us back further. it's a balance. >> tom, what about the private sector this >> well, i'm probably the only trader i know that actually thinks there's a lot of good behind the volcker rule. in 2000 there was so much liquidity and the securitization market were so misunderstood that that excess liquidity mispriced credit threats, and i think if they took out some of that liquidity and the goc's for example were less active in subprime and the proprietary allowed the wall street firms to be downsized or smaller, the,

you know, and you take away that leverage. i think by definition credit would have been wider, and i think some of the things we saw would not have taken place, so i think some of the changes can be good. >> so among all these things they are going to be quite challenging as they debate on what's going on in the u.s., and chris adds on the global aspects to it which makes it even more complicated, and yet all is starting to hear where the u.s. and maybe switzerland to some extent is pushing for higher capital standard, and then you have france, germany, japan pushing back and are not so comfortable with higher capital standards. where does all this converge, chris? >> well, i think it's going to converge on the model three standards in 2019. that's -- we have a fairly well-defined

end point. the real issue now is two-fold. one is will it be a race to the top? will markets force particularly the most internationally active financial institutions to move quickly, and we're seeing signs of that. we're also seeing signs that many countries are also pushing for more stringent capital requirements. i think frankly that's probably to the good. i think the system was overleveraged. it remains overleveraged, and this is probably a good as time as any to build up capital. if we wait until after the recovery has taken place, then i think they'll probably be no enthusiasm as the lessons learn start to dim in people's memories. i think this is a opportunity to be taken and grasped as firmly as possible. >> so isn't that only starting to happen where there's pressure

to move implementation further down the road and the further you move it, than different parties come up and different ideas and they start diverging instead of converging? >> that's not my sense. my sense is there's a fairly defined road map particularly for the capital requirements where i think things are more fluid with regard to the rules on liquidity, but i think those are starting to jell. i think the degreings of separation among the various parties involved have narrowed, and i think we're going to get a fairly clear guidance on where that's going fairly soon, so i'm relatively confident on that score. the one issue we flag at the fund where maybe more could have been done or where maybe the compromises might not have been taken is with regard to the definition of capital. there is, i think, a 15% buffer

for intangibles, which i think we all might have preferred to is have seen wiped for good. that wasn't done. there will be further opportunities to do that in the future though, so we can look forward and hope for that. >> so there's differences in the types of capital that are also differences on how the resolution should take place, and some countries are pushing for con ting gent capital and converting debt to equity during periods of emergency periods or periods of crisis and other countries don't like the approach of contingent capital. are we going to end up in different countries just taking a different approach, and then what will that mean for the resolution? >> again, that's a difficult question for me to answer partly because i don't know the answer. [laughter] so let me say that, you know, there's a lot of debate about

the contingent capital. i mean, there's two elements to the proposal. one is con tin gent capital -- contingent capital could be used in a framework, capital converted to equity as a firm starts to weaken, but they remain still very viable. there's concern on capital triggered by a regulator when the firm is effectively bankrupt. i think there's, again, speaking more personally here than corporately, but my sense is the gone concern on capital has more promise. the going concern on con tin gent capital is probably more problematic because once that trigger is triggered, it's going to create a cascade effect, and you'll see a flight from the

institution. >> one thing that's interesting to me is that the convergence of the national attitudes. right, it used to be the u.s. was in favor, you know, broadly speaking of higher capital requirements, and europeans, say, germany, not so much. i attributed that to different attitudes towards role the government and the availability of public capital, right, i mean, in the u.s. we have public capital basically when the four horsemen of the apock lips were just away. some are seven and public capital and consortiums, and now in other countries over the years, it's much more difficult going forward to have that sort of public capital come into the financial sector. certainly easier and simpler than the u.s.. it's unimaginable in the u.s. we'll have another t.a.r.p., but in other countries the

experience of ireland and other countries made it difficult. that counts for countries that are a bit more with us now on higher capital, it doesn't say it's the right amount of more, but this race to the top you nengsed with standard -- mentioned with standard charter, i can see it across other countries. >> are countries concerned with the competitiveness of the country and arbitrage and secretary wolin mentioned u.s. was the envy of the world in terms of financial markets and sectors and if regulations are too high in one country versus the other, should countries be concerned about competitiveness, about regulatory arbitrage as some of the discussions are going on, are they thinking about these issues? >> well, yeah, i think this is a big issue. i mean, countries, you know, it's hard to know what we mean

when we say countries, but countries are concerned about their growth and well-being of their citizens. they are concerned about the growth and well-being of their corporate sectors. they're concerned with the coast of capital within the national borders, and the extent to which their financial systems are able to provide easy across access and bear access to credit. i think they're also concerned about nondiscrimination, and i think the interesting issue is especially for the emerging markets now becoming much more active internationally much more competitive internationally in the sphere, these countries are very eager to make sure they have relatively easy and nondiscriminatory access to investing in the vast economies.

>> moving slightly away from our decisions so far, one of the things that dodd-frank did not address is the gsc's, and tim, you have a lot of experience in that area, and phil, you talked a lot about gsc's, what do you think should be the future? >> i'll go second on this one. >> okay. sure, sure. i have my own proposals out there. you know, to me it comes back to the issue i just mentioned. secondly, the role of the government in society, and gsc reform is a microcosm of the broader discussion of the role of the government, and in next tuesday we'll have that discussion in public in a sense. i suspect going forward, there will be a role of the government in housing and finance and having a backstop for the goc's but it could be a long time before we get to that point, and

so there's a certain ironny that until them the two forms are in conservativeship and fully backed by the united states government, so i think the future is some hybrid, some government backstop private fi