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tv   Politics and Public Policy Today  CSPAN  October 12, 2016 5:00pm-7:01pm EDT

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and it got the fda to get off the dime and propose voluntary targets. so if we're lucky, those voluntary targets will be adopted as final voluntary targets, with two year and ten year goals. the ten year goals would bring sodium down to safe levels. >> mike, i want to ask you, you've been critical of the food and drug administration and u.s. department of agriculture. before we get to how you've educated tens of millions of people, and how difficult or n beneficial sha wthat was what, your brief view of regulatory consumers now? >> it starts with the laws, and the laws are not bad. if you get a law passed, then you have to fund the program. and conservative congresses starve the programs. so the food labelling, the food safety laws reasonably good. they could be enforced with great vigor, going back to the
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1958 food additives, but they don't have the guts to enforce with vigor, regulate salt or sugar. we've asked for warning labels on soda pop, because soda pop causes heart disease and diabetes and obesity. but you know, fda isn't -- is in a bit of a pickle, because if it does anything brave, congress would crack down and through appropriations riders, stop it from taking one action or another. and they just don't have the staff to do many of these things. so the fda inspects, you know, with the meat inspection acts, the u.s.d.a. inspects a chicken soup plant factory every single day of the year, even though it is sterilized, the soup is
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sterilized, it isn't going to harm anybody. a food processing facility that does not have meat or poultry, like a vegetable soup factory, gets visited every five or ten years. the fda just doesn't have the resources. and it is very important to ensure that agencies, not ensure, desperately try to get the agencies sufficient funding to enforce the laws. >> have you expressed your view on efforts by the meat and poultry to have privatized inspections to self-regulate, daily or frequent u.s. department of agriculture meat and poultry inspections. >> most of the daily, it is really continuous inspections of the slaughtering and processing of the animals. and those, where it is -- the inspectors are checking to see,
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look at every carcass. that's almost worthless. what they can find are obvious defects, you know. a serious bruise or tumor, that are more quality than safety, things that the food processors should monitor on their own. tyson doesn't want to have them market chickens with big bruises on them, so they should be responsible for that. those inspectors that are scrutinizing a chicken, they get one or two seconds to look at each chicken. >> that's how fast the assembly line is. >> they're whizzing by. they're looking for bacteria. you're not going find bacteria looking at a chicken carcass. you need stronger systems. and that's how the laws are moving, where the companies will look at the bruises and tumors,
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and government inspectors will monitor for the systems that should be in place to make -- to keep the products uncontaminated. >> do you think the penalties are strong enough for violations. >> they could be, if they're brought about, so the peanut corporation of america, which killed many people, poisoned thousands of people with contaminated peanuts, the chief executives got thrown in jail. but as russell mokabrarer indicated earlier, those penalties are rarely invoked. >> mike, some people in the consumer think you're not tough enough on certain issues. so let me throw something on the table. a lot of consumer groups are up set with gmo crops, genetically modified crops, they say that the argument for it is based in
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secre secret corporate science, monsanto, for example, and no evidence it increases crop volume around the world, and that it migrates and affects other neighboring farms and contaminating other farms, and produces its own backlash with the so-called wikiller weeds mu tati -- mutating. where are you on gmo foods? >> genetic engineering is a powerful technology. it is kind of like electricity. when such a technology comes before the public or society, i think we should try to maximize benefits and minimize problems.
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like with electricity. electricity fries people every year. little babies stick their innocent fingers in the outlet and they're dead. we need to try to cloontrol tha because electricity has benefits, though some are arguab arguable. and same thing with jen nettgen modified crops. we should look at them individually. has the -- have the -- has the government monday -- evaluated it adequately. are farmers using the products appropriately, and sometimes yes, or sometimes no. but i think it is crazy to do away with a whole technology that is providing some benefits, could be providing much greater benefits here and in developing countries, in terms of drought
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resistance, crop yields and so on, and it's naïve to say get rid of the whole technology. when it can provide really major benefits. >> what about food ee radiation, instead of focusing on the food in the plants, you eradiate it before it gets to your dinner table. >> for a company to be producing dirty food, and then trying to kill the germs, just before it leaves the factory, there is no real evidence that radiation is harmful. you know, again, maybe it would prevent some of the thousands of food borne illness deaths, and it is better to have safety systems in place that would prevent the germs from getting into the food in the first place. >> i've got to finish with this
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story. when i was a little boy, my mother put on the kitchen table, fresh celery, radishes, and carrots, and i said i don't want to eat it. she said what. i don't like it. i want through -- i don't like it. i don't want to eat it. she leaned over and said well, who is i, ralph. what do you mean who is i. is i your liver, your kidney, you don't want to eat it, your heart, your lungs, i didn't know what she was getting at. she finally concluded, i know who i is, ralph, when you say i don't want to eat carrots and radishes, which are very good for you. and i said who. and she said i, i is your tongue. why are you turning your tongue against your brain. eat up. and so this is a -- now, in this massive educational effort that mike jacobson and his colleagues have engaged in, that has to be
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one of the big issues. focus on taste, taste, taste. after it gets past your mouth, it can be damaging to all these orga organs. how do you deal with that? and in conclusion, mike, tell people how they can get nutrition action, which i read every time it comes. it is a terrific publication. >> well, the tongue is more powerful than the brain in so many cases. and but i think people, you know, so some people, we're not going to get through to some people, so you try to make the food as safe as possible. if salt is dangerous, limit the salt so it isn't as bad. either the food gets -- tastes less salty or some of the saltiness may be replaced with other ingredients. the people, so many people have learned that healthy food actually tastes terrific. tastes better than the processed
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foods with kind of the cheap tastes of sugar and salt. but it can be hard to persuade somebody who has been brainwashed by eithering this kind of -- >> you mean tongue washed. >> tongue washed. for eating this kind of food, since they were infants practically. >> well, you see, just a few people can do, mike came to washington, he had no money. no contacts. just knowledge, persistence, and wanted to make food and nutrition his life's work. when you told me you were in the for the long haul, i guess you were in for the long haul. >> didn't know what i was get mieg self-in getting myself into. go to and sign up
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for "nutrition action." >> in print and online? >> yeah. >> i like the print version. >> so do i. >> nice colorful newsletter. >> if you buy a color monitor, would you get it in color on the internet. he is talking to someone who uses an underwood typewriter. thank you very much, mike jacobson. [ applause ] the next speaker will be empowering consumers, a subject near and dear to my heart. he is -- he teaches, professor of law at georgetown university
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law center, where he teaches federal court, civil procedure, administrative law and seminars in first amendment litigation. he also co-directs georgetown's institute for public representation. former formerly, the director of the federal trade commission bureau of consumer protection, and he has also spent 25 years with the public citizen litigation group, public interest law firm here in washington, where he has handled multiple cases before the united states supreme court and more than 60 cases before federal courts of appeals and state courts of last resort. he is a senior fellow with the administrative conference of the united states, and an elected member of the american law institute. he is also a scholar with the center for progressive reform. welcome, david vladick.
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so i spent a mere 25 years worki working for ralph. i'll never forget my interview with him. he asked if i read the paper, and he asked what made you really mad. and so let me talk about what makes me really mad about the state of consumer protection in the united states. so ralph talked about the blasophemoy about food protection, very strong notions of freedom of contract are essentially corroding what we think of consumer protection. this is a pincer movement that comes from two angles. one comes from essentially the disintegration of tort law, contract law as we know it.
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these days, consumers ordinarily have no bargaining power with respect to the contracts they sign. these are often, you know, the i accept little box at the end of a form contract that you may or may not read. in many instances, consumers aren't even presented with the contract prior to entering into them. the contract is available if at all after the fact, and those contracts, there are generally provisions that would have been unthinkable 30 years ago. so one common provision gives the seller the unilateral right to modify the contract. so if the seller decides, well, you know, i think can sort of eek more out of this relationship with the consumer, they're free to modify the contract, and send you a little note down the road.
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there are all sorts of bombs that often go to the detriment of consumers. one, and i'll come back to this, one ubiquitous is a mandatory arbitration provision, which requires them to go to a privatized system of justice that is essentially invisible, rather than exercising their rights in court. i'm going to come back to that. there are other waivers that are generally attached to modern contracts. for example, forfeiture of remedies that one might be entitled to under statute. for example, in many cases involving contracts, a consumer would have the right to have their case heard before a jury. contract provisions these days also include the waiver of the rights of jury trials. it also cluincludes many of the
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contracts you've entered into require you forfeit your right to punitive damages. you forfeit your right to statutory damages. often statutes contain what are called liquidated damage provisions. provisions in which certain amount of damageless are assumed, those provisions are also -- statutory rights are often waived in contracts. so you're asking, wait a minute, these are statutory rights. these are rights congress thought were important enough to guarantee the consumer has this remedy in the event of breach. how could those rights be waived. well, the supreme court has held in many cases that arbitration substitutes the procedures, and indeed, oftentimes some of the substance that would otherwise
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be available if resort to court were available to the consumer. so for example, the supreme court is upheld arbitration agreements, even where it is clear that a statutory right cannot be vindicated in arbitration. so even where it is clear, is this a case called italian colors, rights important enough to en shrine in statute, couldn't be through an arbitration agreements. tough, the right is unenforceable. class action provisions also often include sacrifice procedural rights that would otherwise be available. if you sue in court, you have certain rights of discovery, get access to the other side's documents, you may be able to take oral statements, depositions of witnesses, who have information that is pertinent to the case.
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class action, excuse me, class action rights are often afforded by statute that are abregated by contracts. they not only deal with the underlying transaction, but a long list of rights that consumers forfeit by entering into a contract. and the courts have shown no interest in pushing back. i in making matters worst, juris prudence has been go away to consumers. there are a number of cases involving form contracts, a case involving at&t, where the court split 5-4 on the enforceability of these consumer contracts that could only be vindicated by groups of plaintiffs suing
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together, because the dollar amounts were reasonably low. and so one form of assault on consumer protection has been the courts enforcing contracts literally to the extent that they sacrifice statutory rights, and the supreme court's aggressive affirmness of private dispute, private ordering over transit, over transparent judicial proceedings, where the public at least has some insight into what's going on. second form of assault, and this gets back to mike's point earlier about shrinking herman. so 20 years ago, grovis says to shrink government where it could be drowned in a bathtub. in large measure, he has succeeded. if you look at the staffing of the consumer protection
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agencies, they've been hallowed out. i was the director of the ftc for four years. the ftc today is about two-thirds the size it was 20 years ago. population of the united states has grown by one-third an the economy has doubled, yet the number of regulatory cops on the beat has shrunk. if you go up and down the list, we all depend for health and safety, they are quantitatively smaller. my colleague, fomrmer boss, hea of the highway traffic safety administration, responsible for overseeing auto safety, truck safety, tires, everything that moves, they have about 600 people. to regulate the entire global automobile industry. really? i mean, that is sufficient? the commodities future trading commission, a small agency, but has regulatory authority over
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most of the commodities trained in the united states is about the same size. antitrust authority, has about 1,100 people in contrast to the 1,600 that it had in the '80s and '90s. even the cfpb, the new sort of, you know, the first line of defense in terms of financial products and services, at the most, will end up having about 1,400 people. so you know, when people rail against the size of government, you need to understand that with respect to the agencies we depend on to protect us in the marketplace, those agencies are very thinly staffed, overworked, and to make matters worst, the stakes which used to be an equal partner in consumer protection matters, have also been hallowed out. when i was at the federal trade commission, worked closely with
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colleagues in state attorney general offices. they have been cut massively because of budgets and other state restrictions. so to the extent that we depend on government to be our first line of defense against egregious misuse of power, the government does what it can, but it is a very thin line that is spread thin. and i want to echo another point mike made, which is there is a lot of talk about agency officials not being tough enough. they're between a rock and a hard place. the tougher they are, the more they face funding cutbacks. when i was at the ftc, we were very aggressive and i was called up on the hill with some regularity to basically say, you know, your funding is in jeopardy and you've got to be careful. so it is a very difficult position for federal regulators.
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let me talk about one other market failure. which is the courts so have been equal partners in some extent in the ratcheting back of consumer protection. so take one field. so identity theft is now rampant in the united states. last year, the justice department estimates that 17 million americans were victimized by identity theft. i measure this, because the federal trade commission has essentially a part of its website for people who have been victimized to get police reports and other forms they would need in order to try to reclaim their own identity. last year, half a million americans used that site in order to file claims about identity theft. so the identity theft is the predictable debris of an
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internet economy where data security is not taken seriously. and so this is an area where congress has refused to act. they have asked for authority to force the people who store your data to take adequate steps to safeguard it. ironically, of course, they safeguard their own intellectual property data very well. your data, your payment card information, your social security number, the prescriptions you take, whatever other personal data these companies have is not very well protected. part of the reason is because there is no economic deterrence for companies to have lack security. the courts have repeatedly turned away people, claiming injury from identity theft, and the supreme court's recent decision in a case called spokeo
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versus robbins, still unsettled if you have a right to sue, when your personal data has been compromised due to a data breach. all right, so that's the assault. and the assault is real. and the erosion of our rights has been sedteady and predictab for 20 years. what can we do about this? there have been some bright signs on the horizon. the passage of dodd frank and consumer protection bureau is an enormous step forward. the agency has been in existence for four and a half years. it has done policy work to protect those people who are not entitled or not eligible for anything other than subprime loans to protect them in the market. it is proposed some, some curtailment of the right to
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mandatory arbitration. but that's just the first step. that agency is under assault constantly in congress. i talked to my friend, rich cordray, he has stopped counting the number of times he has been hauled up to the hill to testify. i think it was 50 at last count. he has only been there for a few years. we need more legislation. in order to do that, we need to organize, we need to personally these stories, and we need to look at the lever of powers that are available to us, and tries to exercise power. so let me talk about a few things. one is if you look at mandatory arbitration, congress understands it. there are exceptions to it. when dodd-frank was passed, the most fierce lobbying was not
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done by the banks. it was the auto dealers. why, because they wanted a provision in the bill that made it illegal for the auto manufacturer to require the auto dealers to arbitrate disputes. that's one of the few odd carve outs in dodd-frank. the auto dealers had a point. we need to -- we need to force congress to take a hard look at arbitration, mandatory arbitration. the only way we're going to do that is if we come up with a number of stories that drive home just how unfair, undemocratic, and essentially, how perverse that process is. the other thing that we need to do is we need to win the battle in the courts, and this is where the -- you're going to hear from paul bland and people from public citizen groups early on. we've been fighting in the court, but the court is now up for grabs.
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justice scalia's seat remains vacant. justice ginsburg, justice breyer, the next president will remake the supreme court in all likelihood. most of the decisions that i've been fretting about have been 5-4 decisions. one vote can make an important difference, and one vote on november 8th can make a huge difference. thank you very much. [ applause ] thank you professor vladack. the next speaker, president of public citizen group that you have heard about, and you will hear again today. he has been leading public citizens since 2009, where he is
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now spearheading to loosen the choke hold that corporations and wealthy have over our democracy. following the supreme court's decision in citizens united, he established the democracies for people program, which is a project of public citizen, and specifically intended to fight for a constitutional amendment to overturn the ruling and curb money and politics. please welcome robertwi weissma >> thank you. fortunately or otherwise, i'm the last person between you and lunch. so try to amuse you. unfortunately, this microphone is taped down and i can't walk around. i don't have any pictures, so i'm just going to talk. was suggesting that maybe we
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could entertain with shadow puppets, because of the good light. we have the people, and we have the koch brothers. there a story of conventional wisdom, which is america is deeply divided. we're red and blue states. i heard on npr with some actually interesting reporting in some shocking views. we're plainly a country divided profoundly by race and equal as profoundly and less often recognized by class. i would say that that political story, that's the dominant narrative to try to explain what's going on in the country that we're a divided nation. and it has some truth. that story has some truth. that's why it works. but it overshadows another story that is at least as important, i
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think probably more important, which is that we're actually an amazingly united country, when it comes to policy agenda that americans favor. astoundingly you united. compare them to the fact that four out of five people agree that the earth revolves around the sun. so that's a marker. and it is not -- that's not -- nothing do with american science teaching. it is cross culturally true. however, 83% of americans think that the top 1% have too much power and have used it for economic advantage. three quarters of american favor a steep rise in the minimum wage. people oppose corporate trade deals like the transpacific
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partnership. the vast majority of americans agree with breaking up the big banks. four out of five voters, expanding social security. not protecting it, expanding social security. by three to one margins, americans want to close corporate tax loopholes. the president's controversial clean power plant is favored by two to one margin. three out of four americans favor stricter air pollution standards, clean water act has 80% support. the completely ridiculous and misleading choice cost to the economy, 59% say they want stronger environmental protections. more than nine in ten americans want origin of labelling, country of origin labelling for meat. 83% of americans favor giving medicare the right to negotiate drug prices. more republicans rate drug prices as a higher --
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republicans right -- high drug prices as a higher level concern than obama care. they're more concerned about drug prices, republicans. not the country, than obama care. almost nine in ten americans say we should have tougher enforcement of law and regulations that apply to corporations. so there is an amazing consensus in the country behind a progressive populous agenda. there is also, as david, mike and others were saying, amazing lack of progress on that agenda. this huge disconnect between americans want and by overwhelming numbers, and what we get. what do we get out of congress, the executive, city councils. you can't explain that adequately with anything other than looking at the power of corporations and especially corporate class in our elections. so corporate political power is not only expressed through money and politics, but that's the cutting edge.
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the problem precedes, of course, the citizens united that oliver was talking about in 2010, but it got a lot worst with that decision. that decision held that corporations have the trite spend whatever they want to influence election outcomes, most of you probably aren't in the business of reading supreme court decisions, but if you want to pick one, although it is a long one, it is worth reading citizens united, because it is astounding, and even though it has law stuff in there, you'll understand immediately why it is astounding. it is predicated on the idea that the first amendment protects the right of oppressed people, and you read the majority opinion about justice kennedy about the first amendment and the right of the oppressed and it is eloquent and moving, until you realize that the oppressed class he is talking about is the corporate class and worried about the right of dupont and exxon and
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wall mo walmart and not be discriminated against. that's why we got citizens united. and what it stands for, this right of corporation, but what it has enabled is the wild west era in campaign spending. so the world has become material, the political world has become materially worst since that 2010 decision. in 2012, there was about $6.5 billion spent on federal elections, which was a huge record. and you get these records, right. we're going to smash that this year, for sure. those numbers totally undercount how much is being spent for a variety of reasons. the advertising business says they spent -- they tal lied $9.4 billion and in the 2012 cycle, expecting to get over $12 billion this year. that itself would be an undercount. so the amounts involved are just extraordinary.
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what are the impacts? most of the things that follow are familiar to people, but actually, how bad it is, maybe not be completely obvious. one thing that's long been the case is that the need to fund raise for political candidates means they spend their time with rich people. that affects what they think and what they say and what they do. president obama may have written about it more he will queloquens book, "audacity of hope." i found myself with people of means, investment, venture cap lists. they were smart, interesting people, public policy, dot, dot, dot, but they reflected almost uniformly the views of their lass. and he says, and i started to think, hanging out with them all the time. just, you know, more precisely, if you look at the 2012
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election, "the new york times" reported right at the end of the election that the president obama had spent -- attended twice as many fund-raisers as he attended campaign rallies, and mitt romney disappeared, because he was so busy fundraising. if you wonder what happened to hillary clinton in the august period, part of it was a strategy to sort of see if trump could shoot himself in the foot everyday, didn't work out perfectly, unfortunately, but a lot was she was spending her time fundraising. traffic was messed up everyday, because clinton was riding around going to fund-raisers. it's kind of funny. but even all this, so that is what happens to the candidates. but the money we talk about is worst than it seems at first glance, because the money doesn't get spread out equally. and what we now have outside money, super pac, so-called dark
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money that citizens united enabled and spurred along, coming in at astounding members. $1 billion in 2012, and way more this year. it gets focused in the races that are tight. in the tight senate races, most of the outside spending groups spend more than the candidates. they decide what is being debated and discussed. they spend almost all their money on negative ads. everybody hates negative ads, but they work. that's why people use them. the candidates are a little deterred from using negative ads, because they can be held accountable. the american future fund, whatever, whatever colbert's par rod -- parody, outside groups, 90% on attack ads. the state of the political dialogue is meaningfully degraded. of course, we have a lot of that
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money coming in the form of secret spending and dark money, which means you can't trace where the money is coming from. the one thing you might be able to could to hold them accountable, who the funder is. but when all the funders are secret, you can't do it. the vast majority, you hear these numbers the koch brothers, they were going to spend a half billion dollars. you won't see any where near that money, couple million in disclosed and all the money pouring in, going through groups that don't report. we do have some rules still in the books about campaign finance. but they're not enforced, and honored in the breach as the former chair of the federal election commission will tell you. anyone is free to break the rules, she says, because there is no enforcement from the enforcement agency. super pacs, you're not supposed to coordinate with candidates. no one thinks that doesn't happen. they used to say it was a wink
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and nod, but maybe it is a nod now. the wink is gone. they're out-and-out coordinating money sloshes, so you can't follow what went to whom and where. thanks to another supreme court decision in 2014, the mccutchin decision, make it possible for individuals to donate huge amounts to candidates, up to $3 million. you may remember, controversial during the democratic party that george clooney hosted for hillary clinton. and just to get a good seat at the fund-raiser, you had to contribute $300,000. it is worth asking, why could anybody contribute $300,000, if the maximum contribution in a primary is $2,700. that's because the supreme court said well you can string it together, pile these committees, write one check and it is all fine. so stuff is really honored in the breach. that's kind of like, i think,
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sort of the lay of the land of some of the key elements of this. but some of the consequences make aren't sufficiently recognized. there is two that are dominant. obvious but maybe less obvious than first appears. the first one is that all this money that's coming in, it is provided by an incredibly small number of individuals and corporations. make sense to think about them together as a corporate class, a really small number. so i would say that occupy wall street, which did a great service to the country, kind of got it wrong, write. all the discussion about the 1%, right, the other 99, the 1%, it doesn't explain what's going on in campaign funding. if you talk about -- you need to talk about the top .01. the top .01, take about 4% of national income, 30,000 people, something like that, they take -- they provide 40% of all campaign contributions.
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top .01%. even that, actually, undersells the stories. if you look at super pacs, you're looking at 100 people who dominate what's going on. usually the top 100 donors are responsible for the super pac money. 52 people or families that gave more than $1 million to super pac. this year, we're already at 100. so i guess the bench mark for being taken seriously rises. not surprisingly, these people are overwhelmingly male. people of color don't have this kind of wealth. so almost all these giant contributions come from white people. the other thing that's really undera appreciated, the if we connect back to the long list that americans agree on, mostly not even talked about or not
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talked about as much as they should be, given the consensus in the country. they're not talked about because that interest doesn't lineup with the -- unlike rudy giuliani getting a cell phone here, sorry. that interest doesn't lineup with the donor class interest, and the politicians have to be responsive to the donor class to be taken seriously. so at the end of the day, the donors decide effectively who runs, they have a huge influence over who wins. they have a giant influence over what is debated, raised as political conversation, and after the election, what's going to be talked about seriously in congress. so what do we have to do about it. the policy agenda is pretty straightforward. the americans don't have any disagreement about that. just like the other numbers, americans are completely c
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consensed, it is between 80 to 10 and 90 to 10 who want reform. "the new york times" had a remarkable poll that said the country is split not only the need for reform, but whether the system needs fundamental change or to be completely rebuilt. i'm not actually sure which is the more radical of those two. but that's basically everybody agrees on one of those two things. nobody agrees the current system is fine, or even needs small changes. the changes that we need are familiar. so the small thing is to have disclosure, everything, all the money, outside money, direct contributions, all of that has to be disclosed. end the sort of silliness of secret money dominating our elections. we need a system of public financing for our elections. there are good systems in new york and elsewhere to show us how to do that. and overturn citizens united that both entrench that they
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have the same rights as people, but also make it possible to have all this outside spending. the good news is that americans completely agree on that agenda. but we know from the first part of the conversation that agreeing on the agenda isn't enough. people have to get mobilized on it. people actually, since citizens united, and we've had a change in the conversation is on money and politics to a good government thing to a fundamental democracy issue, corporate power issue, and understanding the connection between the money and politics issue and corporate power and everything else that american -- the whole agenda that americans want to see realized. just using the constitutional amendment as a marker two, senators who support the amendment in 2010, when the idea was thought to be either frivolous or too extreme, to 26, 2012, when it started to gain traction, we had 54 senators voting for, remarkably in 2014, one of the presidential
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candidates now says that she would introduce an amendment within the first 100 days of taking office, and it is a core part of the agenda for the democratic party remarkably. we haven't broken through yet. this used to be a bipartisan issue. mitch mcconnell has stopped that. but it will be in the near future. the total key to winning is mobilizing. the polls are insufficient. everything is about showing passion and the people care. this past spring, we had the first large demonstration around democracy issues in a generation, the first money and politics maybe ever in washington, d.c., with 5,000 people turning out to support the agenda that i just talked about, as well as a broader democracy, crucial of voting rights as well. that was a good, small first step. we have to be at least in order
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magnitude bigger. when people literally laying down in the streets to make a difference, that's what we have to do to win, and we have to win on this issue to win everything else that's being talked about at this conference. we're talking about breaking through power, this is really a central issue for breaking through power. last thing to say is okay, how do you get connected. if you don't know the website for public citizen, you should, please sign up for our e-mail list. we will send you a lot of fund-raisers, but also send you a ton of information about things you can do, if you actually care to be really involved in organizing, get you hooked up with you on the ground, going on across the country. these red states and blue states, to win this fundamental democracy reform. thank you very much. [ applause ] here is a look at c-span's upcoming race. live tonight, utah senate debate
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between mike lee, seeking a second term, and democratic miss see kn -- misty snow, one of the first transgender in a federal election. live at 8:00 p.m. eastern on c-span and the c-span radio app. tomorrow, a d he bait for the 8th district of pennsylvania, incumbent republican congressman, michael fitzpatrick is retiring from congress, but his brother brian is running for that seat. brian fitzpatrick will meet steve santero. later, north carolina richard burr, seeking a third team will meet debra ross, live coverage starts at 7:00 p.m. eastern on c-span, and the c-span radio app. and on friday, former wisconsin democratic senator, russ feingold, is seeking to win back the seat he lost to ron johnson in 2010.
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the two meet friday, at 8:00 p.m. eastern in a debate that's live on c-span. and with senate minority leader harry reid's retirement, nevada has an open senate seat this year. republican congressman joe heck is running against attorney general democratic, katherine cortez mastos. they debate at 10:00 p.m. eastern, live on c-span, as well as the c-span radio app. before the final debate between hillary clinton and donald trump, we're looking back to past presidential debates. this saturday at 8:00 p.m. eastern on c-span, the 1984 debate between president ronald reagan and walter mondale. >> we are a democracy, a government by the people, and when we move, it should be for very severe and extreme reasons that serve our national
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interests, and end up with a stronger country behind us. >> i will not make age an issue of this campaign. i am not going to exploit or political >> then the 1988 presidential debate between vice-president george h.w. bush and massachusetts governor michael dukakis. >> you have a president that will work with the congress and the american people, we can bring that deficit down steadily, build economic growth, build a good, strong future for america, invest in those things which we must invest in. economic development, good jobs. >> i wish he would join me as a matter of fact in appealing to the american people for the balanced budget amendment to the federal government and for the line item veto. i'd like to have that line item veto for the president because i think that would be extraordinarily helpful. >> and the 2008 debate with illinois senator barack obama
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and arizona senator john mccain. >> the situation today cries out for bipartisanship. senator obama has never taken on his leaders of his party on a single issue. and we need to reform. and so let's look at our record as well as our rhetoric. that's really part of your mistrust here. >> so we're going to have to make some investments but we also got to make spending cuts. what i propose, i am cutting more than i'm spending so it will be a net spending cut. the key is whether or not we've got priorities that are working for you. >> watch past presidential debates saturday night at 8:00 p.m. eastern on c-span. watch any time on and listen at 8:00 p.m. eastern on the c-span radio app. next, a look at monetary policy and trade and the impact
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of federal reserve district banks. this house financial services subcommittee hearing is just over two hours. >> the committee will come to order and the chair is authorized to declare recess at any time the committee -- i'm sorry -- of the committee at any time. this hearing is entitled federal reserve districts, governs, monetary policy and economic performance. i will now recognize myself for
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five minutes to give an opening statement. economic performance couldn't be stronger, especially in light of the deep hole that president obama inherited. well, that's the story you're going to hear from my colleagues on the other side of the aisle, and they've been telling it for years. but the fax clearly contradict this situation. the fact of the matter is we are mired in the slowest recovery since at least world war ii. historically, our nation's economy has grown at a 3% clip. the obama administration now pretends that a new normal of 2% counts as a success. small on its face, the difference between 3% and 2% is 50%. unfortunately, economic opportunities are now disappearing even faster. and while my friends on the other side have been crowing about this recovery for years, republicans have been calling out for what it really is, completely unacceptable situation. but today it will be different in at least one important respect. our colleagues on the other side of the aisle will finally join news acknowledging that our economy is underperforming. and together we will examine the
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important role that the federal reserve's districts play in expanding economic opportunity, a role that unfortunately is under heavy attack. this attack has been brewing beneath the surface for several years. in late july, the democratic party finally made their true objective clear. the party platform adopted in philadelphia promises to increase opportunity for all. instead, it has taken aim at the very foundation of opportunity in my opinion that is the governance and monetary policy and the subject of today's hearing. democrats have constantly resisted reforms that would modernize the federal reserve, bringing much needed transparency to what most americans consider an impossibly opaque institution. while such reforms promise increase of accountability, democrats falsely claim that a better disciplined, more predictable and clearly communicated monetary policy with congress and the public would somehow jeopardize the fed's independence. reforms such as these included in the format and the draft financial choice act would help insulate the fed from any
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opportunity killing political pressures. however, my friends on the other side of the aisle would like to double down on what frank/dodd started. co opting the federal reserve district banks by subjecting them to the same politics that has kicked economic opportunity to the sidelines in the name of reinflating asset prices. their platform promises to press the pedal to the metal in a drag race to printing money for the politics of those in office. they now have launched a hostile takeover of the federal reserve itself. and i'll note that this is a dual edged sword that some might benefit now. and they'll rue the day if this were to go through later. real economic opportunity cannot return until washington puts an end to the pretensive knowledge. well cannot promote economic policy for all that targets assets that benefit only some. oracles from the eckles building have been promising to do so for a decade, but where are the results? i'm as fed up as anybody. we are fed up as anybody. where is the promised opportunity? how could the fed have created
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trillions upon trillions of dollars from thin air in the name of buying questionable assets that they have left us with, with not only the slowest economic recovery in our lifetimes, but increased inequality to boot? i know that a better way is available, one that reverses the increased centralization of monetary policy in washington's politicized board of governors and restores the historic role of district banks as a critical source of local economic information and an institutional source of support for sound monetary policy. i believe my house passed and the financial choices committee act offer a much better way. instead of doubling down on dodd/frank, these legislative solutions bring monetary policy out of the political shadows and into the sunlight of and
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strengthen monetary independence by restoring the voice of the bank district presidents on monetary policy matters while subjecting regulatory and supervisory services to oversight where they properly belong. i look forward to hearing from our witnesses today. and the chair now recognizes the ranking member of the subcommittee, the gentle lady from wisconsin for five minutes for an opening statement. >> thank you and good morning, mr. chairman. and good morning to my colleagues and to this distinguished panel. i so look forward to the tremendous assets that we have here in front of us, mr. chairman. and i especially welcome the honorable spriggs, who is a very well educated gentleman from the university of wisconsin madison. i think that your perspectives are going to be extremely valuable. and we thank you for giving us the time here. the federal reserve is the central bank of the united states. plays an extremely important role in our financial markets and economy. i think we have seen this post our recession. it's also very misunderstood.
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so i actually think that it may be helpful to have had this hearing to discuss the federal reserve and the federal reserve system. i'll have to admit to you, mr. chairman, that i was initially extremely suspicious of this hearing due to some proposals that i think would disastrously inject partisan politics into monetary policy. and we've heard some of them. i think it's interesting, mr. chairman, you talked about, you know, not wanting to inject politics into the federal reserve since we've heard these cries to audit the feds and balancing the transportation budget with federal reserve monies, and just your statement today, wanting to bring the federal reserve into more of congressional compliance. but short of undermining the independence of the fed with policy audits or appropriating the budget, i have been open, mr. chairman, to you and others
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about improving the diversity of thought at the fed. the fed was created and established to be independent. and i think that independence has fuelled a lot of these misconceptions and misgivings about the fed. and i think that we ought to and should explore smart reforms that balance maintaining the fed's independence, but it also bolsters public confidence and faith in the fed. we've made some tweaks in dodd slash frank, including having the gao study conduct a study and make recommendations on reform. and i think that that's appropriate. and i think the gao recommendations are a good place to start any conversation on reform. and i also signed on to a letter
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with some of my democratic colleagues, encouraging the fed to seek greater diversity. and with that, i yield back the balance of my time. and i look forward to this hearing, mr. chairman. thank you. >> the gentle lady yields back. thank you for that. today we welcome the testimony of esther george, president and chief executive officer of the federal reserve bank of kansas city. i know you're coming off a busy august with the jackson hole conclave that was put together. and i know that you met with a number of folks that are represented here today in the office, or in the audience. jeffrey lacker, president and chief executive officer of the federal reserve bank of richmond. robert jones, bob jones, chairman and chief executive officer of old national bank corp., former board director for the federal reserve bank of st. louis. and mr. william spriggs, chief economist for the afl/cio and professor of economics at howard university. apparently he missed putting in the wisconsin part, ranking member. but i think that was undergrad.
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>> this is dr. spriggs. >> yes, dr. spriggs. each of you will be recognized for five minutes to give an oral presentation of your testimony without objection. each of your written statements will be part of the record. and with that, ms. george, we will recognize -- i'm sorry, we're going to go right in order, i guess. different from my sheet. but dr. lacker, we're going to have you go first. and you're now recognized for five minutes. >> thank you. good morning, chairman huizenga, ranking member moore, and chairman hensarling. i'm honored to speak to the subcommittee about the governance structure of the fed's regional reserve banks. to understand the fed structure, it's essential to understood the fed's purpose. prior to the founding of the fed, the banking system was often unable to adjust the supply of monetary assets flexibly enough in response to the changing needs of commerce. the fed was founded to furnish an elastic currency, in the words in the preamble to the federal reserve act. clearing houses, bank-owned cooperatives in larger cities
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played an important role in how periodic crises were resolved before the fed, including the issuance of currency substitutes. but clearing houses were widely viewed as favoring the interests of large banks. reserve banks were modelled after clearing houses, but with note issue powers and universal eligibility for membership the aim being to improve on the role of clearing houses in a way that served broader public interests. a plan for a centralized institution was rejected out of concern about excessive wall street influence at the expense of diverse regional influence. proposals for a government-controlled central bank were rejected as well for fear the federal government would use control of the money supply to resort to inflationary deficit finance. at the same time, a measure of public oversight was viewed as essential, consistent with progressive era thinking, and so the act included a federal reserve board whose leaders were politically appointed. thus the final federal reserve act reflected a balance of competing considerations, a
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federated set of institutions to provide for representation of a diverse range of geographic and commercial interests with a hybrid public/private governance structure to provide for public oversight but contain potential misuse of monetary authority. the governance structure of the federal reserve is still effective in my view because the considerations the founders wrestled with are all relevant today. the federated structures benefitted policy making by ensuring the diversity of perspectives on policy and economic conditions are brought to the table. reserve banks historically have shown intellectual leadership on topics that initially went against the grain of mainstream thinking but later became broadly accepted. and reserve bank presidents have a record of challenging conventional views. in addition, the federated structure has promoted broad regional engagement of the institution across the country, deepening the fed's understanding of the diverse economic challenges facing american communities. to be sure, our country's understanding of diversity has expanded since 1913.
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and it is in keeping with the spirit of our founding the federal reserve has taken the importance of diversity seriously, as we have sought to ensure broad representation of views in the formulation of monetary policy, including those associated with disadvantaged communities. i believe our record in this regard, like that of many other organizations in the united states shows a combination of substantial progress and areas where more can be done. in addition to bringing diverse viewpoints to bear, the fed's public/private governance helps the policy focus on longer term objectives. at time there is a temptation to provide excessive economic stimulus in the short-run and leave the subsequent inflationary costs for future policymakers to deal with. evidence from around the world, along with our own history in the united states amply demonstrates the temptation of short sighted monetary policies is a bipartisan vulnerability,
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just as the fed's founders feared. for central banks, this implies that meeting-to-meeting monetary policy decision immediate to be insulated from short-term political pressures driven by electoral consideration. but independence with regard to the choice of monetary policy interest rate settings must be paired with strong economic ability. accountability rests on transparent communications which help congress and the public evaluate the fed's performance against its mandate. the fed's public/private structure supports monetary policy independence by ensuring a measure of apolitical leadership. the reserve bank's autonomous balance sheets, protected appropriation status, and independent capital stocks all play a role as wells by limiting high frequency interference that might diminish instrument independence. the presence of bankers on reserve bank boards is said to represent a conflict of interest, but strict rules limit bankers' roles. they simply have no avenue through which they can influence supervisory matters.
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moreover, best practice for any board is to seek members with expertise relevant to the organization's activities. the fed's large payment processing operations make the original rationale for having bankers serve on reserve bank boards still valid in my view. in addition, bankers are particularly well positioned to report on economic conditions in their footprint. in conclusion, while some claim that the federal reserve's governance structure is a historical anachronism, the continued relevance of the tradeoffs taken into account by the authors of the federal reserve act argues for the continued utility of this finely balanced arrangement that they crafted. thank you. >> thank you, dr. lacker. with that, ms. george, you are recognized for five minutes as well. >> chairman hensarling and huizenga, ranking members moore and members of this committee, thank you for the act to share
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my view on the roles of the role of federal reserve banks as part of the federal system. because the federal reserve is an institution that makes institutions of consequence to the broad public, a discussion of these matters is worthwhile. if changes are to be considered, the public should understand not only the congressional intent for its current design, but also the strong safeguards that assure its accountability. central banks are unique institutions. they have important responsibilities for a nation's financial system and economy. congress as it contemplated a central bank for the united states more than 100 years ago took note of central bank molds for the united states from other countries. while keeping in mind to earlier attempts at central banking in the u.s.. ultimately it opted for a different approach, one that recognized the public's distrust of concentrated power and greater confidence in decentralized institutions. federal reserve's unique public/private structure reflects these strongly held views and is designed to provide a system of checks and balances.
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challenges to this design have surfaced throughout the federal reserve's history, not unlike they have today. but in the end, our country has remained most confident in this decentralized governance structure. criticism of the quasi private nature of the regional reserve banks was anticipated from the start and indeed the federal reserve act leaves no unchecked power. >> i vote to approve the president's as well as the chief operating officer and they approve salaries. the board reviews the bank's performance and that of its president. finally, the reserve bank's operations are reviewed by the board of governors as well as an
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outside independent auditor. notwithstanding the strong public oversight, some questioned the role of commercial banks within the fed structure. here too important safeguards exist. supervision and regulation of the federal reserve's member banks is a statutory responsibility of the congressionally confirmed board of governors. anchors who serve on reserve bank boards are prohibited by law from participating in the selection of the bank president, and no director can participate in bank supervisory matters. finally, all directors are required to adhere to high ethical standards of conduct and avoid actions that might impair the effectiveness of the federal reserve's operations or in any way discredit the reputation of the system. the capital stock supplied by these member banks serves as the foundation for the decentralized structure allowing for separate corporate entities. through the regional reserve bank's private citizens, from
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diverse backgrounds and from the largest to the smallest communities have input into national economic policy. strong and varied independent perspectives more easily emerge to engage in difficult monetary policy discussions, and the central bank has provided insulation from short-term political pressures. altering this public/private structure in favor of a fully public construct diminishes these defining characteristics in my view. it also risks putting more distance between main street and the nation's central bank. former fed chairman paul volcker understood this well. he experienced first hand how public pressure can be exerted on a central bank when it must make unpopular decisions that he and the fomc judged to be in the long run best interest of the economy. in a 1984 speech he noted the important role of the structure of the federal reserve system in supporting the central bank's decision-making.
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he said, it was all quite deliberately done by men of political imagination, designed to assure a certain independence of judgment, continuity and professionalism in staff, a close contact with economic developments and opinion throughout our great land, and a large degree of insulation from partisan or passing political concerns. to that end, i extend a personal invitation for any of you to visit the federal reserve bank of kansas city to see what a regional federal reserve bank provides in support of the central bank's objectives for economic stability. thank you. i look forward to taking your questions. >> thank you, ms. george. mr. jones, you are recognized for five minutes. >> great, thank you. chairman and ranking member moore, good morning. it is my honor to speak with the distinguished members of this committee today about the role of commercial bankers on our reserve bank boards. in my belief it is critically important that bankers continue to serve in this capacity. i sit before you as the chairman
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and ceo of old national bank corps, a 182-year-old community bank headquartered in indiana, serving indiana, southwest michigan, wisconsin and kentucky. i am also a proud former board director of the federal reserve bank of st. louis, as well as a former member of the federal advisory committee of the federal reserve board. i'd like to begin my remarks by touching on a partnership that has changed the lives for the better. at its center are two individuals, roselyn jackson, a former substance abuse counsellor in western kentucky penal system, and ben jergens, national bank corps's financial empow empower officer. ben designed a program that provides nonviolent offenders in our region with the tools to gain financial independence once they've completed their debt to society. launched in 2014, this program led the american bankers
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association to recognize ben with its george bailey distinguished service award. more importantly, it has led to nearly 2,000 individuals out of a cycle of despair into independence and was fueled by their inability to manage their finances. one graduate of the program summed it up this way. i learned that you can always clean up the wreckage of your past and take control of your destiny. this is just one illustration of the many ways that banks big and small work to strengthen the communities that we serve. old national is a fairly typical community bank with $14.4 billion in assets. we are headquartered on main street in evansville, indiana. our clients are small, farmers, young families, retirees and community leaders. we invest millions in support of community causes and our nearly
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3,000 association are known for their volunteerism, having donated more than 100,000 volunteer hours in 2015. in 2016 our company was named to the world's most ethical company list for the fifth consecutive year, and recently we were named one of the best banks to work for in the country. the strong connects that banks like ours enjoy with their communities we serve gives us a unique and valuable perspective. not only do we serve as community catalysts, we are on the front lines every day assists our clients who represent a broad cross-section of neighborhoods. we learn how they view the economy and how those views shape their decision-making. conversely, the bankers who sit on the nation's reserve boards gain incredibly valuable information that they can take back to their community. i experienced this reciprocal relationship first hand during my tenure. fueled by the knowledge i gained from my board experience, old
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national spearheaded the creation of the first bank-on program in the midwest back in 2009. in the nearly 8 years since we adopted this program we've added another 16 programs in our corporate, helping the unbanked and underbanked individuals take greater control of their finances. again, all of this dates back to the knowledge i gained serving on the federal reserve. in my time as the director i and other bankers on our board not only brought valuable insights from our committees into our discussions, we frequently reached out to a diverse set of community leaders to gather specific feedback that helped drive policy decisionment over time these trusted voices from main street began seeking us out to offer their views on issues of the day. these candid regional perspectives were invaluable to our discussions on the drivers of our local economies. that is why i feel so strongly that bankers are a vital asset. i recognize the concerns that have been surfaced over whether
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bank directors might somehow attempt to control or manipulate decisions for the betterment of their own institutions. while no system is perfect, i do believe this issue is effectively addressed through the current policies and procedures of the federal reserve system. as this committee knows, the banking industry is highly regulated and bankers fully understand the consequences if we violate these regulations. these same consequences apply to the regulations and policies that govern the federal reserve system. the existing governance model is strong, and i applaud the controls currently in place. i can assure you that during my tenure i never felt that my integrity or ethical center were in any way challenged or compromised. as banker, our role in the federal reserve board is limited yet crucial. we serve as managers, budgeters, auditors and strategic planners and supply a vibrant and important regional voice on issues that affect small and medium sized towns all across
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our great nation. i encourage the committee to retain this vital link. thank you for your time. >> thank you, mr. jones. with that the honorable williams spriggs is recognized. >> thank you for this opportunity to speak today. i want to start with a clear statement that i don't disagree with the current set of policies that the fed is pursuing. in fact, we are in unchartered waters when it comes to this recovery. unlike in the past, the fed has not had the help of fiscal policy to stimulate the economy. on all previous occasions when we've had downturns, congress
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has held up its half of the humphrey hawkins act to fully address full employment. when we look at the deficit spending under president reagan and the deficits that were run up under president george w. bush, we see that congress clearly understood the need to act and to respond to the downturn. so this is unprecedented for the fed to have to act on its own, and i would think as was the case with chairman volcker, it has led to a lot of public criticism. that is very hard for the fed, and but for its independence, chair yellen could not be steering us in these unchartered waters. i also want to say that it is fully possible, possible, under the current standards, to have regional bank presidents who are quite open to public
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participation and truly do think that they have to represent and listen to all the voices from their region. you have president george here on the panel who has let the doors of her bank open, has left the doors of her bank to engage her community and to talk to all the citizens in her region and hear from those who are affected by fed policy and to respect their voices. so it is possible. i want to give my statements with regard to your theme which is policy outcomes, and to look back because of course we cannot ignore the great recession and what led up to it. so that's going to be the tone of what i would like to speak about. you see the chart that's up now. this shows the record of inflation pre-1978.
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you already heard about chairman volcker and his war on inflation, and then post-1984 what economists call the great moderation. and when you see the chart you can clearly see that inflation averaged a much higher level before 1984. since 1984 inflation has run at a significantly lower amount. but more importantly, the variance in inflation has greatly reduced. so there is great stability that has occurred in terms of price stability. you can see the green line shows current average inflation post-1984. the red line shows inflation in the period before. the next slide, however, shows you the performance of the labor market. here you see a clear difference. before 1978 the average monthly
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unemployment rate was 5.1%. during the great moderation it's been 6.1%. that one percentage point difference means a lot. in the great moderation, only 25% of the time have american workers been below 5.1%. this lack of voice on the part of workers affects the way that the fed looks at things, and it's not guaranteed into the system. class b members often do have influence. the current president of the philadelphia bank was a class b member, shared the search committee, stepped down from the search committee and then became president of the bank. there are at least 12 instances in which class b members chosen by the banks have ended up being
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class c members, those who then govern the regional banks. the voices of others need to be put into the mix so that we can have guaranteed the voice of everyone. when the banks were established in 1914, we had a much different banking system. today the level of concentration in our banking system is at record high levels, and that means that we can't think that the regional banks really represent regional views. we need to have a way to assure that that will be the case. >> thank you. i appreciate that testimony. the chair now recognizes himself for five minutes. i'd like to point out next week marks the 8th anniversary of lehman brothers collapse.
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console lett consolelers have guarded against mistakes and tend to be overly concerned about accommodated policy than politically appointed colleagues. while this has been criticized by advocates for extending what is already the greatest monetary government in history, the theory that doing so will increase wages at lower income levels. research also suggests that we need to do just the opposite. for example, dr. christina roemer, a berkeley economics professor and the first person to chair president obama's council of economic advisors observed that, quote, compassion at policy is the most likely to, quote, permanently improve conditions for the poor. president george, do you agree with president obama's first cea chair, that sound monetary
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policy is most likely to permanently improve conditions for the poor? i'll ask everybody just for a yes or no. >> yes. >> yes. how about you, mr. spriggs, honorable spriggs, do you agree? >> i think that sound monetary policy includes making sure that the wages of workers rise with productivity, that we are at full employment so that the nation can have the highest level of productivity possible. >> is that a yes or no? >> that's my definition of sound monetary policy. >> okay. how about you, dr. lacquer? >> i agree with christina roamers. >> mr. jones? >> i agree, yes. >> i do too. and it seems to me that we share a common interest which is the widening wage gap, the
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underrepresentation that has occurred for those in low and moderate income who have not seen their wages increase. we all know and if you've watched my subcommittee at all or watched me in committee, i have said this many, many, many, many times. wall street is doing just fine. i'm concerned about main street and what's going on. you literally, mr. jones, are at the corner of main street in evanston, indiana. this is something that we have to tackle, and i think that there really is something that the right and the left share which is a suspicious view of the federal reserve and want to make sure that there is a proper check on the federal reserve, and i believe the district bank presidents do that. i also want to do a quick -- do you agree that the federal reserve presidents bring important regional and local
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knowledge? if you don't mind touching that briefly. you're at the table. >> yes, i do. it's intense focus of every regional reserve bank to understand economic conditions in their district and the way it compliments the national economics statistics and is more granular and thoughtful than the statistics at the national level can reveal, so yes. >> ms. george? >> and the transcripts show that a significant portion of the discussion about the economy does come from talking about regional aspects of the national economy. >> actually, i've had my own little experience in that my family is involved in construction in michigan. i own a small third generation sand and gravel operation. my family has been involved in construction for decades, and when i went to visit the president of chicago reserve bank, first 15 minutes of that was an interview of me, what was happening in the local economy in west michigan. given those changes in
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populations and demographics, does the current rotation of who votes in each fomc meeting fully leverage the local perspectives that can bring to monetary policy? ms. george, i'll start with you. >> the importance of those regional connections come through access that we have in those district lines through our branch optionffices and through board of those branch officers. despite demographic changes that span, that each regional reserve bank takes seriously, which is to make sure they understand within the confines of their district how that economy is performing. >> dr. lacquer? >> i think you asked about voting rotation as well. all the participants in the meeting, whether they vote or not, have a voice and do bring their characterization of regional economic conditions to
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the discussion and it's part of the discussion. where voting comes into play is just where is the center of gravity of the committee and where does the chair find it useful to find a consensus. the current rotation was crafted decades ago and altering it would alter the balance of forces within the committee and i'll leave it at that. >> my time has expired but i'll end quickly and have a light gavel with my ranking member as well. that is one of the reasons why i felt it important to include in the form act provisions. we've had such a weighted view towards new york and that permanent seat, i wanted to make sure all those voices are being heard. with that, my time has expired and i recognize the ranking member for five minutes. >> thank you so much, mr. chairman. i do want to thank you all for your testimony. i think i heard correctly from all of you that you think that
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the independence of the fed is really critical toward your being able to do your job. was i -- did i hear correctly from all of you? yes, so you all agree on that. that being said, i guess i'm concerned about -- i guess i want to hear from each of you about what you think is the importance of having a more diverse reputation on federal reserve board. would that enhance the decision-making process? i was on a letter with about 100 lawmakers which asked the federal reserve to look at greater diversity, so i guess i would like to hear from each of you just very briefly whether or
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not you think that efforts to diversify the board would interfere. >> so we take diversity very seriously. i know that that's a commonplace cliche almost, but diversity, as i noted in my statement, is built into the structure of the system. the idea of bringing diversity to the table, the value of diverse perspectives and strengthening a decision-making process predates the concerns of this decade or the previous decade in diversity of access to economic resources and opportunities. we've been focusing on it. our board of directors level, diversity for several decades now. i know that we and others have had minority representation, women representation on our boards going back several decades. it's something that is a regular part of the discussion and regularly reported on. >> thank you. i want to give others the chance
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to answer it this question as well. >> i would say that a problem with having it owned by banks is regrettab regrettably, the board of directors look like banks, so they look like the executives of ban banks. 83% of the directors are white. 75% are men. these are people who look like bank directors. they are trained and they talk like bank directors. so it's not necessarily a capture in the usual sense of regulatory capture, but clearly in a cultural capture and the transcripts that you see going up to the crises, even regional bank presidents who are in regions where the epicenter of the subprime crises hit hardest had no comments about what was going on in terms of the effect of the subprime crises on the african-american and latino
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community or an understanding of it. >> mr. spriggs, my time is limited so let me take you here. there is often a lot of resistance to the bank doing their duel mandate to look at unemployment. and unemployment in the african-american community, african-americans are not experiencing the recovery as other communities are. so what do you think about reforms that might or activities of the bank that focus on reducing unemployment, especially among african-americans? is that something that would interfere with the other mandate to control inflation? >> the mandate of the bank actually comes from humphrey hawkins act and the clear mandate is full employment. full employment benefits everyone, and that means full employment for everyone.
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actually, african-americans' employment population ratio is rising faster than anyone else. it's gone up 10%. the problem is that often the fed ignores the importance of that trend continuing, and often thinks that it can stop recoveries before full employment is actually reached. when full employment comes, we know that workers are better allocated. we get the efficiencies of the labor market at full employment, and discrimination falls. currently that's what's taking place. currently the gap in the unemployment experience of better educated african-americans to less educated whites is closing because the labor market is beginning to heal. but it's not at full employment. wages are not rising with productivity. we do not see rates to show that workers are being reallocated and we do not see the level of discrimination dropping. >> do you think a reformation of
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the board, moving from class b to c or some sort of programming would enable -- would inform the board about the importance of focusing on the full employment part of their mandate if we were to diversify the fed more? >> yes, because finally the worker's voice would be at the table and the worker's voice from communities that really are hurt the most would be at the table. in 2010 when the african-american unemployment rate was always above 15%, no one mentioned in the transcripts anything about the african-american unemployment rate at the fomc. >> thank you for your indulge e indulgence, i yield back. >> the gentle lady yields back. the chair recognizes the vice chair of the committee for five minutes. >> thank you, chairman. i want to try and talk about three parentally different things and see if i can weave them together.
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if you give me a second to try and do that. i heard each of the three of you who have been presidents of the regional fed talk about the importance of knowing your district. i admire and respect that and believe that you're doing that. in fact, i talked to dr. lacquer about the district that he lives in and that i share. i weigh that against my personal experience. i can never forget being at a home builders conference in california in 2006 or 2007 and the keynote speaker was a high ranking member of the san francisco fed. it was not janet yellen at the time. the subject of his speech that night was that it was the studied opinion of the san francisco fed after having done intensive research that on a national basis the home building business would never go into recession again. that the restrictions on supply of new housing was such that we would never see a housing recession again in the country. just to try to know your district with the human trait of
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being wrong sometimes. i would draw each of the panelist's attention to not only a recent article but a solidly piece of work that was referenced there. i think it's professors morse and jorgenson. one from duke and two from cal berkeley. it goes into a very interesting analysis of what market returns have been in the weeks after the private fomc meeting. if you had invested a dollar in the stock markets in the week after the meetings, your return since 1994 on that dollar would be 12 times, 1200%, versus almost zero if you had weighed in on every other week. i'll read from the article very briefly. the console letters speculate that there's a causal connection. those who attend the meetings have informal contact with the
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media and eventually the content of those meetings makes its way into the stock market. again, i would commend the study to you folks and be curious to know your opinion about it at another time but it reminded me that there is an investigation going on into the leak involving medley global advisers that's still ongoing where we know information was leaked out of the fomc meeting. dr. lacquer, you mentioned in your testimony, we've talked about it in this committee several times which is and i'll read from it, at times there's temptation to provide excessive economic stimulus for future policy makers to deal with. evidence from around the world along with our own history demonstrates the temptation of short sighted monetary policies as a bipartisan vulnerability just as the fed's founders feared. monetary policy decisions need
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to be insulated from short-term pressures. >> certainly my policy is experiencing that now. we have a fed chairman appointed by another party, a different philosophy than we share. and my guess is that my democratic colleagues may some time share that same concern if a republican nominee holds that chair. what do these three things have in common? it seems like the current system makes it very difficult -- that our record of predicting the future at the fed is fairly poor. it also seems that there's a risk of market distortions just from us doing things. the article, the piece doesn't suggest there's nefarious activities. it's just casual connection. lastly, you have the risk of political pressure from either side on the fed. why? because they're people appointed by other people and there are human tendencies here. my question to all of you is this. doesn't a rules-based approach to monetary policy lessen the
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possible distortions to each of those weaknesses? doesn't it take away and make it less important if we make big mistakes in terms of our predictability and information is distributed to the market so that some can benefit and some can't. doesn't a rules-based system solve a lot of the problems that we face at the fed? i'll ask dr. lacquer and then mr. spriggs. >> sure. we consult rules very regularly. i think having a sense of the pattern of past behavior of your own institution that gave rise to a good outcome is an important benchmark. i gave a speech about this last friday. i cautioned, i drew the parallel between the search for the right rule and the san francisco fed study you cited which was clearly obviously well meaning. they believed their results sincerely, but there was some
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measure of uncertainty to the conclusion they drew and i think you have to attach some measure of uncertainty to what you chose as the optimal rule. for that reason i think a consultant is a guide to good policy but not follow it mechanically or slaveishly. but i do think it's important to give attention to rules that encapsulate good past behavior in our conduct and monetary policy, and we do that. >> professor spriggs? >> i'm sympathetic to your point. however, the fed has limited tools to influence the economy. the problem is that many of the problems are more complex and can have counter balancing effects. so i don't think in all situations you would want them to adhere to the rule. the rule in fact may be not the best policy. for farmers right now, the problem is an oversupply of commodities and this hurts them.
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the value of the dollar hurts our manufacturing sector. so there are many things that are moving at the same time, and i think you wouldn't want a rule that would bind the fed in dealing with how those different -- >> i thank you. it sounds like the two gentlemen may not be that far apart. i appreciate the time. >> thank you. the chair will note again, i have a light gavel, but 4:40 second chair question might not leave a whole lot of time for answers. moving along with that, the chair recognizes mr. foster of illinois for five minutes. >> thank you, mr. chairman, and thank you to our witnesses here. it seems to me that a big part of the diversity challenges of the fed system are driven by the fact that the geographical regions of the fed districts are very far from representative of today's population, distribution
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or the gdp distribution or however you might assign the region. this is a huge problem in the distribution of legislative power in our country. just the fact that the senate is grossly unrepresentative of the actual population distribution of the states, results in about half a trillion dollars per year wealth transfer from the high population states which are underrepresented in the senate to the low population states which are overrepresented in their power in the senate. and a huge economic distortion to our country that costs us a lot. i know it costs my home state of illinois about $40 billion a year and is the primary driver of our fiscal difficulties. so i was wondering what your reaction would be to a proposal which has been floated from time to time to periodically redistrict the fed system. perhaps once a century and with enough decades of time that you
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would actually have time to plan and it wouldn't be disruptive. how big a problem do you think the mall distribution of political power inside the fed is to its current operation, and do you think it would net out positively to redistrict the fed every century or so? >> i don't think that we are handicapped by the current district lines, notwithstanding the changes in demographics that you described over the last 100 years. and the reason i say that is because each region, regardless of how its boundary is defined, is focused through its operations on making sure that it understands every part of that region as though the federal reserve works carefully as we do in can kansas city to sure that all parts of that region are not only represented but we understand the economic issues there. >> that would be true with or without redistributing.
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that's a separate issue. if you redistricted things, it would represent people in its district. >> i would offer that it appears that way, but over time some of the district lines have been redrawn, so detroit once was represented by cleveland and now detroit is with chicago as the whole state of michigan is. so fine tuning -- >> i think there's still something like a factor of six difference in the number of people in different districts which is a big number. >> yes, but i think more important would be an assurance that the people of the district actually were represented. the issue now is that the banks are represented, so i think an issue is how can we make sure that the people themselves are represented. how do we make sure that an actual farmer in illinois is
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represented, not some giant agricultural chairman of some huge corporation. how do we make sure that the workers on the south side of chicago are represented? because these policies affect them and their voice needs to be integral to it. currently this is at the whim of the banking community whether those voices really factor into the decision-making because those people aren't on their board, on the boards of the regional banks. >> i was very struck by a study paper from i think one of the federal reserve study groups talking about fiscal hawks and doves and if you look at the course of a cyclical downturn and the choices the fed makes of facing constant inflation or constant employment. if you focus on constant employment it has real distributional advantages to those at the bottom and conversely, if you choose to optimize the other way. so i think this is a fundamental
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reason, fundamental argument for diversity. there are real distributional effects because of the intrinsic tradeoffs that the fed has to make. just a final comment or question on rules-based system. if you did go to a rules-based system it seems like the sort of rule you would need to realistically represent today's economy would include gdp growth in china and every major country in the world as a fundamental input to that so you're not talking about a simple tailor rule but a very involved macro economic model which i take it exists but really sort of hard to specify in legislation. i was wondering if you had comments on that complexity tradeoff. >> in the models that we have that capture the economic activity, implementing a tailor rule gets very close to the optimal rule that would be dependent on a broader range of things.
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i mean it's an empirical matter whether that's true or not but it looks as if the tailor rule gets you fairly close. >> prior to the rule there was another economist whose name i forgot had a more complete and general version of the tailor rule and obviously because it met more parameters did a better job. so it's not an argument that started with the tailor rule. >> right. >> i will be a rarity and only be a little over time here and yield back. >> thank you, mr. foster. appreciate that. with that, the chair recognizes mr. lucas of oklahoma for five minutes. >> thank you, mr. chairman. and for my time, since i am a resident of the kansas city fed, i'd like to turn to president george. my colleagues just a moment ago with his observations about realigning the district touches on a subject that he was a historian as well as a ceo, goes back not just to the beginning of the fed but to the very beginning of this country about where the concentration of capital should be and control
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over the economy and how that capital flows. from the very beginning the great battle was should the money centers -- new york, chicago -- should they be the dominant force. i suspect that's why my pred assessers in this congress demanded the 12 districts and the lines laid up the way they were to protect the entire country from a handful. now that said, this is an issue that is not just theoretical, it's a real subject. in 2009 when i was the ranking member of another committee with jurisdiction over the derivatives market, in a meeting one night, the senior administration official wrote up the topic of realigning the fed as we were preparing to launch into dodd/frank. taking the 12 districts, did we need that many, shouldn't the districts reflect the economic strength of a particular region.
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rather quickly both republicans and democrats, the house and senate members in that meeting, made it clear to the senior official that that was not a topic that was acceptable at the time to congress. even as recently as 2009 it was a subject of real debate apparently at the highest levels of administration. now that said, from my perspective, i like not only the 12 feds but the sub-feds. i like the groups in our district, in denver, oklahoma city and omaha to act as consultants, advisers. could you expand for a moment on the involvement of those communities within the kansas city fed, president george, how they add to the process. >> the branch offices for each of the head offices play very important roles and in the case of the kansas city fed, i rely heavily on the input from those
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branch boards. for example, in the state of oklahoma to help me understand what's happening in our energy markets, in what's happening in agriculture. and the diversity of input that comes onto those boards serves us well in the head office. so that sort of regional input is essential in my view to make sure that all parts of that district are well-understood. the regional economists who head each of those offices are out in those communities, engaging on a daily basis with those that affect that economy and are affected by it. so that structure has served us well. >> so even though you don't clear checks anymore and those regional banks aren't big currency repositories and you don't grind up paper money, they still serve a purpose? >> absolutely. the federal reserve has changed dramatically in its operations.
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but its commitment to those regions remain constant over that time. >> side question, deviating just a little bit from that subject matter, but your district is manufacturing, of course, it's agriculture, it's energy. we seem to be under pressure these days in kansas city district in all three areas. how much concern do you have as an economist and as a banker with the circumstances right now, in your district? >> so we've seen over the last six years a clear shift in the economies of that region, based on commodity price falls. so the drop in oil prices, the fall in agricultural product prices, and the strong dollar on our manufacturing have affected that region significantly, so that today we do see more unemployment. we are seeing flatter growth,
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although some sectors are still growing. so those are important inputs as we look at that region relative to the performance of the national economy. >> so it does matter, having eyes and ears all over the country. thank you, president george. i yield back, mr. chairman. >> the gentleman yields back. with that the chair recognizes mr. perlmutter of colorado for five minutes. >> thank you. and president george, you're going to get some questions from me too, although mr. lucas stole a few of my questions. let's just go back to basics. how many directors are there for each of the regional banks? >> there are nine directors. >> nine. and what are the basic requirements of those nine directors? >> the first requirement is integrity. and of course beyond that, there are three bankers. there are three businesses. and there are three that are selected by the board of
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governors. so six of those nine represent labor, represent community, represent generally what is reflective of the region in that district, as well as the three bankers on our boards. in the case of the kansas city fed, those three bankers are community banks. they are individuals who connect tightly with many aspects of meeting the credit needs of our region, as well as community leaders that we have in our class "b" category and on our class "c" directors. >> okay. and this applies to all of the regional banks, nine directors for every one of the regional banks? >> yes. >> and similar kind of criteria. i was looking, it sealed like it was agricultural, industrial, commercial, and financial, seemed to be the basic core principles. and i noticed, looking at your website, you have these regional
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kind of boards within your regional banks. so you've got a head office, a denver office, an oklahoma city office, and an omaha office. and dr. lachnor used the terms, everybody is looking for diversity. to the two of you i would say, okay, what the heck does that mean to you? we'll start with you, president george, then to you, dr. lacquer. what do you mean by diversity? >> so diversity is built into an institution like the federal reserve who is serving a broad public. it is essential to the public's trust in this institution that the public sees themselves around those that are making decisions that have been put to policy. >> so do you mean, and this really applies to both of you, and mr. jones and mr. spriggs, jump in if you wish, does diversity mean ethnic backgrounds, does it mean level of income, does it mean regional
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diversity? what does it mean? >> it means all of that. we will not be successful without having ethnic get there on our boards, without having the interest of labor represented on our boards, as well as multifaceted contributors to that economy, whether they are business, ag, energy. so we look broadly at all aspects of that. >> dr. lacker? >> i agree with how president george characterized it. there are multiple dimensions, when we're looking at rounding out a board, we look at. ethnic diversity is certainly one of them. gender. but we're also looking at diversity within our region. ours goes from south carolina, maryland, out to west virginia. we're diverse economies, we want representation from around the region. we want coverage across different industries. we want some representatives of someone in touch with consumers and consumer groups.
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labor. all of those perspectives are available to us. we try and balance that when putting together a slight. >> if i could just add, i think that's one of the key roles that commercial bankers play towards diversity, because diversity is race, it's religion, but it's also neighborhoods. it's also communities. if you think about the bank on program that was started, it was really driven through the fed to say, how do we better serve the underbanked and unbanked. that's the key role bankers play. we have a moral obligation to ensure that all of our communities are served. as we sit on the fed boards, our primary folk is to make sure those voices are heard. as you prepare for meetings, you talk to folks from the underbanked and the unbanked all the way to the gm running toyota. and you bring those voices to the fed and say, here is what we see and what's going on in our markets. that's what's so critical for us as a commercial banker. because we're one of the few industries that his everything. that's the value we bring. >> let me ask mr. spriggs, the same thing.
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>> we believe there are only three labor members among the 12 regional banks. so considering the importance of workers and workers as consumers, i don't think the current system gets us the kind of diversity that we need. in the entire history of the fed, no, zero african-american or latino has ever been chosen to be president of a regional bank. so i don't think the system is designed. it looks like bankers. it talks like bankers. it's people bankers are comfortable with. but it doesn't have a built-in way to assure it. currently, we do applaud the fed for paying attention to this and trying to address it. but -- >> my time has expired. i got it. i thank you for your answer. i thank the panel for appearing
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today. >> the gentleman's time has expired. with that the chair recognizes mr. schweikert from arizona for five minutes. >> thank you, mr. chairman. this is one of those occasions there's so many things to ask. we'll try to do this with a little caffeine in our soul and go quickly. doctor, i want to make sure i got my head around something you had before. it was a comment of fiscal policy, meaning stuff we do here. and the overtone i was picking up, saying, hey, there's all this monetary liquidity out in the system, but you guys in the fiscal side, you need to put more cash in the system. was i misunderstanding that? was it dr. -- dr. spriggs. and my reason for that is, even in this year, we're going to push up close to $600 billion of deficit spending in a year where just a couple of years ago our projections were, hey, we're only going to be about 245, 265 this year.
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so somewhere here, we're deficit spending like crazy, which functionally is a type of liquidity in the system, borrowing the money, putting it out the door, plus the a accommodative. can you really make the argument, in a world with almost zero interest rates, was i mishearing what you were saying here? >> no. you weren't mishearing. but it's not putting liquidity. it's actually putting demand into the system. so at the current rate we're going, we're not getting the level of investment that we should. and that's because we have not had our state and local governments in a position to take advantage of the current low interest rates. they have -- >> okay. let's back up. okay. demand in the system. does demand in the system come from more saying, let's go borrow more money and build something? or does demand in the system ultimately come from the
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regulatory, the environment we've created here? and a good example would be, when we look at some of our environmental rules, i can come to you with a way of saying, you know, if we crowdsource much of this area, we can clean it up, do it cheap and her faster. instead we still engage in a regulatory model, command and control, put paper in file cabinets, and say that's good environmental policy, it doesn't have anything to do with cleaning the air, it has to do with office buildings full of people shoving paper in file cabinets. our labor policies, some of these things. if you wanted fiscal policy to increase demand, don't we need to be doing a series of things where we rationalize some of the crazy regs we're in, whether it be labor, environmental, all the way down to some of the creative destruction aspects that actually create new lines of economic growth, that we've created barriers


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