| 00:00:00 | THESE AGENCIES ON THE REFORMS UNDER WAY TO ADDRESS TA RISK. |
| 00:00:04 | THAT'S FULLY PLOIPT. |
| 00:00:05 | WE WELCOME THAT EFFORT. |
| 00:00:06 | WE'LL BE FULLY RESPONSIVE TO IT. |
| 00:00:08 | >> THANK YOU VERY MUCH, MR. |
| 00:00:10 | CHAIRMAN, I YIELD BACK. |
| 00:00:12 | >> THANK YOU. |
| 00:00:13 | DR. |
| 00:00:14 | PAUL. |
| 00:00:15 | >> IL THANK YOU, MR. |
| 00:00:16 | CHAIRMAN, AND GOOD MORNING, MR. |
| 00:00:19 | SECRETARY. |
| 00:00:20 | I HAVE A QUESTION ABOUT THE WORKING -- PRESIDENTS WORKING GROUP ON FINANCIAL MARKETS. |
| 00:00:27 | THERE'S AN ARTICLE THAT SAID THAT THE FED BRIEFED THE PRESIDENT'S WORKING GROUP ON FINANCIAL MARKETS IN JUNE OF 2008. |
| 00:00:34 | AND DURING THAT TIME, I ASSUME YOU WERE PRESIDENT OF THE NEW YORK FED IN JUNE OF '0 ? |
| 00:00:38 | >> IT WAS ACTUALLY IN MAY THAT WE BRIEFED THEM. |
| 00:00:42 | AND I WAS THE ONE WHO DID IT. |
| 00:00:43 | >> WELL, THE ARTICLE SAID JUNE BUT OKAY, MAY. |
| 00:00:46 | IT SAID THE FED BRIEFED THE WORKING GROUP. |
| 00:00:49 | DOES THAT MEAN YOU DID IT OR SOMEBODY ELSE FROM THE FED IN. |
| 00:00:53 | >> IT WAS ON THE AGENDA OF THE MEETING. |
| 00:00:56 | AND I WENT TO PROVIDE -- I WASN'T A MEMBER OF THE GROUP BUT I OCCASIONALLY WENT. |
| 00:01:01 | I WENT TO PROVIDE AN UPDATE ON THIS ISSUE AND THEN MY STAFF SUBSEQUENTLY BRIEFED OFFICIALS OF THE TREASURY AND SEPARATELY OFFICIALS OF THE SEC AND THE CFTC. |
| 00:01:11 | >> OKAY. |
| 00:01:12 | YOU'RE THE CHAIRMAN THAT HAVE GROUP RIGHT NOW, CECT? |
| 00:01:14 | >> YES, I'M THE CHAIRMAN OF THE COUNCIL. |
| 00:01:16 | >> OKAY. IN RELEASE TO THAT MEETING YOU HAD AND THE MEETINGS YOU'VE HAD SINCE, DO YOU KEEP DETAILED MINUTES OF ALL THOSE MEETINGS? |
| 00:01:23 | >> WE DO KEEP MINUTES OF THE COUNCIL MEETINGS TODAY AND PUT THOSE IN THE PUBLIC RECORD. |
| 00:01:30 | >> AND THEY'RE. >> WITH WHATEVER THE APPROPRIATE LAG IS TO MAKE SURE WE HAVE REVIEW BY THE AGENCY. |
| 00:01:34 | >> HOW OFTEN DO THOSE MEETINGS LEAD TO POLICY CHANGES WHERE YOU MAKE A DECISION AND THE FED GOES OUT AND DOES SOMETHING OR TREASURY DOES SOMETHING OR GETTING INVOLVED IN THE MARKETS? |
| 00:01:44 | HOW OFTEN DOES THAT HAPPEN. |
| 00:01:46 | >> WELL, THE COUNCIL IS STILL IN ITS EARLY STAGE OF IMPLEMENTING THE AUTHORITY CONGRESS GAVE IT. |
| 00:01:51 | IT GAVE IT TO TWO DIFFERENT SETS OF AUTHORITIES. |
| 00:01:54 | ONE IS SPECIFIC RESPONSIBILITY FOR THINGS LIKE DESIGNATING FINANCIAL MARKET UTILITIES THAT HAVE SYSTEMIC IMPLICATIONS. |
| 00:02:00 | THAT'S A SPECIFIC RESPONSIBILITY THE FSOC HAS BUT IT GAVE IT A SET OF BROADER ACCORD FATING RESPONSIBILITIES IN SERVICE OF SOMETHING MANY OF YOU HAVE SPOKEN TO, TO TRY TO MAKE SURE YOU'RE NOT LEAVING LARGE GASP IN THE SYSTEM AND THE AGENCIES ARE WORKING TOGETHER, NOT AGAINST EACH OTHER. |
| 00:02:16 | THAT'S A MORE GENERAL RESPONSIBILITY, NOT A SPECIFIC ONE INTO NOT SPECIFIC. |
| 00:02:21 | ON LIBOR, I DON'T WANT TO GET INTO THE DETAILS OF FRAUD AND WHO COMMITTED CRIMES AND WHO SHOULD BE PUNISHED WHAT NOT. |
| 00:02:28 | I WANT TO TALK ABOUT THE PRINCIPLE. |
| 00:02:30 | AND THE PRINCIPLE HERE IS THAT PEOPLE ARE COMPLAINING BECAUSE THEY BELIEVE LIBOR WAS FIXED. |
| 00:02:36 | THE INTEREST RATES WERE FIXED. |
| 00:02:39 | AND THAT IT BENEFITED SOMEBODY FINANCIALLY. |
| 00:02:43 | AND I DON'T THINK THERE'S A BIG ARGUMENT ON THAT. |
| 00:02:45 | THAT'S WHAT ALL THE TALK ABOUT AND THAT'S WHY BARCLAY'S WAS ACTUALLY PENALIZED FOR IT, BUT ISN'T THIS A WHOLE LOT LIKE EXACTLY WHAT THE FEDERAL RESERVE DOES? |
| 00:02:56 | AREN'T THEY FIXING INTEREST RATES ALL THE I'M FOR THE BENEFIT OF SPECIAL INDIVIDUALS? |
| 00:03:02 | I MEAN, IF THE MARKET GOES DOWN, INTEREST RATES ARE LOWERED AND THERE'S GOOD EVIDENCE TO SHOW THE MARKET USUALLY COMES BACK UP. |
| 00:03:09 | IF BANKS GET INTO TROUBLE, INTEREST RATES ARE LOWERED. |
| 00:03:12 | RIGHT NOW, INTEREST RATES ARE LIKE ZERO AND BANKS GET A LOT OF FREE MONEY AND THEY TURN AROUND AND THEY PUT IT BACK IN THE FED AND THEY EARN INTEREST. |
| 00:03:20 | AND THEY BUY TREASURY BILLS AND THEY'RE DOING QUITE WELL. |
| 00:03:23 | SO IT SEEMS LIKE THERE'S A TREMENDOUS AMOUNT OF MANIPULATION OF INTEREST RATES FOR THE BENEFIT OF SOME INDIVIDUALS, BUT THIS MANIPULATION OF INTEREST RATES HARMS PEOPLE WHO SAVE MONEY IF THEY'RE RETIRED AND THEY CAN'T EARN ANYTHING, IT SEEMS LIKE IN THE SENSE OF MORALITY AND ECONOMIC POLICY, OUR MONETARY SYSTEM IS EVERY BIT AS GUILTY AS WHAT WE'RE ACCUSING LIBOR OF DOING. |
| 00:03:51 | NOW, THEY MAY HAVE -- WE MAY BE AND THE FED MAY BE PROTECTED BY RULES AND LAWS, BUT ISN'T THERE A SIMILARITY? |
| 00:03:59 | ISN'T THERE HAVE SOMETHING THAT WE SHOULD QUESTION ABOUT THE MANIPULATION OF INTEREST RATES FOR THE SPECIAL BENEFITS OF SOME INDIVIDUALS AS THE FED DOES THIS? |
| 00:04:08 | >> NO, I WOULD NOT MAKE ANY COMPARISON. |
| 00:04:11 | I DON'T THINK THEY'RE REMOTELY SIMILAR. |
| 00:04:13 | I MEAN, THE FED WITH AUTHORITY CONGRESS GAVE IT TO MAINTAIN. |
| 00:04:18 | >> I'M NOT TALKING ABOUT THE AUTHORITY. |
| 00:04:19 | I'M TALKING ABOUT WHAT THEY DID. |
| 00:04:21 | I RECOGNIZE THAT. >> BUT WHAT THE FED IS DOING IS WITH RESPONSIBILITY CONGRESS GAVE IT TO KEEP PRICES LOW AND STABLE OVER TIME AND UNDIPLOMAT LOW -- UNEMPLOYMENT LOW OVER MANY TIE AND USING A SET OF TOOLS IN THE PUBLIC INTEREST TO ACHIEVE THOSE OBJECTIVES. |
| 00:04:38 | I WOULD SAY THAT'S A FUNDAMENTALLY DIFFERENT THING FROM BEHAVIOR OF INDIVIDUAL BANKS TO OF MISREPORT THEY MIGHT PAY TO BORROW MONEY. |
| 00:04:47 | >>IVELY HAVE ONE OTHER QUICK QUESTION. |
| 00:04:50 | WOULD YOU SUPPORT CHANGE IN POLICY WHERE THE FED COULD BUY TREASURY DEBT DIRECTLY SO IT DIDN'T GO THROUGH THE BOND BROKERS WHERE THEY MAKE HUGE COMMISSIONS ON THIS? |
| 00:05:00 | WOULDN'T THIS BE MUCH BETTER FOR THE AMERICAN TAXPAYER? |
| 00:05:02 | >> FOR THE FED TO DIRECTLY FINANCE. |
| 00:05:04 | >> YEAH, WHY CAN'T THEY BUY TREASURY BILLS FROM THE TREASURY? |
| 00:05:08 | INSTEAD, WE HAVE 20 OR SO BOND DEALERS AND I THINK THEY MAKE SOME COMMISSIONS ON THIS, AND THEN THE FED GOES OUT AND BUYS THESE BONDS AND BOND DEALERS MAKE MONEY OFF THIS. |
| 00:05:20 | >> WELL, LET ME BE CAREFUL IF ANSWERING THAT QUESTION. |
| 00:05:22 | LET ME TELL YOU I PERSONAL LIAM A STRONG DEFENDER OF TWO VERY IMPORTANT PRINCIPLES. |
| 00:05:27 | ONE IS TO TRY TO MAKE SURE THE FED IS INDEPENDENT OF POLITICS BUT ALSO TO MAKE SURE THERE'S NOTHING IN THIS RELATIONSHIP BETWEEN THE FED AND THE TREASURY THAT WOULD RAISE CONCERNS THAT THE FEDERAL RESERVE IS DIRECTLY FINANCING THE FISCAL DEFICITS OF THE UNITED STATES. |
| 00:05:43 | THAT WOULD BE SOMETHING VERY DAMAGING TO THE FED'S INDEPENDENCE TO CREDIBILITY OF MONETARY POLICY AND TO THE FISCAL CREDIT |
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