tv Peter Wallison on Hidden in Plain Sight CSPAN October 17, 2015 11:15am-12:06pm EDT
>> [applause] >> enjoyed it. nice to meet you. announcer: also at the annual steamboat institute freedom conference in colorado, peter wallace and discussed the causes of the 2008 financial crisis and whether it could happen again. he served in the treasury department during the reagan administration. this is about 45 minutes. >> we have peter wallison, who has written a book called "hidden in plain sight" about the 2008 financial crisis and if it could happen again. this anybody believe that it could happen again? yeah, unfortunately. peter was here back in march. did a presentation at the strings pavilion that was very well received.
his -- his credentials on financial matters are impeccable. peter is the chair and financial policy study's for the -- [indiscernible] aei, he joining practiced banking corporate and financial law. he has held a number of government positions. during the reagan administration, he had a role in reagan's proposals for deregulation in the financial services industry. he was white house counsel to president reagan later. and then also served under new york governor nelson rockefeller. is the author of "ronald reagan." he has written many books on financial risks. he frequently writes columns that are published in the "wall street journal." as well as the op-ed pages of
the "new york times." ladies and gentlemen, let's give a warm steamboat welcome to peter wallison. >> [applause] >> ♪ [singing] ♪ well, it is: wonderful to be here. i must say i have to give a lot of credit to jennifer because i have written a book and it is an important book, i think, but what jennifer saw in this book when it first came out, which was in january of this year, she saw that there was a direct connection between what i was talking about, or would be talking about when i described this book, and the desire of the -- the organization here, the
steamboat institute, to protect capitalism. there is a tremendous relationship between what has happened in the financial crisis and the issue of whether capitalism is going to survive effectively in the united states. so, let me get started on that a little bit because i think these are really important issues. and although the book involves something that most of you have experienced, you probably don't understand why you experience that. could we have the slides that are available for this presentation? they coming up? there we are. ok. that is the book. that in the financial crisis, we had a lot of very bad mortgages in the financial system. what we might not understand is why there were so many bad
mortgages, and how these bad mortgages actually created a financial crisis. slides byhange the telling you to change the slides or do you have a quicker? will this do it? let's try that. yeah, ok, that works. i turned it off. ok. most of us really don't understand. most people in the united states really don't understand why we had the financial crisis, why these mortgages led to a crisis. what we have mostly read in the newspapers, what we have been told by the government, is that it was the fault of the private sector. risk-taking,ot of a lot of greed on wall street. and the private sector was insufficiently regulated. but -- let's see. well, let's see. the other direction. all right.
that is not it. [laughter] oh, ok. it takes a little time. actually tell us something completely different. what you are looking at here are the entities in the united states that were holding very low-quality mortgages. subprime and other low-quality mortgages in the united states in 2008 just before the financial crisis. , and the reda blue above it and the green above that is the government. these are government agencies. the black, that is the private sector. so right away, you should understand -- anyone should understand -- that the government created the demand for these mortgages. because these mortgages were on the books of the government.
: in 2008,are these just before the financial crisis, more than a majority of all mortgages in the united states were subprime or otherwise weak mortgages. million week and subprime mortgages. -- weak and subprime mortgages. booksse, 73% were on the of the government agencies. the blue happens to be freddie may and fannie mac. they are still in existence. they are, at the moment, insolvent. the government is controlling them and supporting them. just about that, the red is the at h a, the federal housing administration. and above that is a number of other government agencies. but the point is, it is the government that called for and
caused all of these mortgages to be produced. i am not trying to say that the private sector had nothing to do with this. we can see that about 25% of these bad mortgages were on the books of the private sector. but principally, if you're looking for the cause of the financial crisis, you would have to say that the fact that the government was holding 76% of all of these mortgages would suggest something about who was really responsible. let me go to the next one. stage --are we at this six years after the financial crisis -- why are we concerned ?bout this issue what you see here is a chart that shows the recovery of the u.s. economy since the financial crisis. and the recession that followed that. the black line in the shaded all of the average of
the recoveries since the middle 1960's. the red line is this recovery. and you can see that it is much worse than any recovery we have had in the past. that is the fault of something you just heard a lot about. the dodd frank act. in fact, sitting there in the amusede, i was kind of because i have given this talk many, many times. and many of the people in the audience are in the financial business. and i said, how many people here have encountered or know what i am talking about when i am talking about the dodd frank act? and very few people understand. even in the financial business. they know there is much more regulation, they know what they have to comply with the daily, but they don't understand that it is all the results of a new act. in that new act, the dodd frank
act, was adopted because of the diagnosis that the media, to a large extent, and the government itself had given to their causes of the crisis. we have been told that it was a lack of regulation of the private financial system that caused the crisis. i have shown you the data that indicates that actually it was the government. but most of the things you see in the newspapers suggest that it was the private sector. and that it was insufficiently regulated. so the dodd frank act was adopted in 2010. and that is by far the most restrictive, suppressive law in posed on the financial -- imposed on the financial system since the new deal. i want to talk a little bit about the dodd frank act because there is a clear relationship between the slover covering we are looking at here and the slow development and growth of our
economy, even after it came out of the financial -- after the recession that followed the financial crisis. there is a direct relationship, and that relationship comes through the new regulations that were placed on the banking system. our -- t happened to there we go. the new regulations that were placed on the regulation system in 2010 with the. frank act. now, in this country, there are 23 million community banks. a community bank is a bank with about $10 billion in assets or less. there are -- that amounts to about 99.5% of all the banks in the united states. supply smallnks business.
but what has happened when all these new regulations have been placed on these banks is that they have been required to withdraw substantially from providing new financing and credit. to all small business. business,llion small about 18,500 larger businesses. what is a small business? that is less than 500 employees. any business with more than 500 employees is considered a large business. now, what is the difference, then, between the small and the large in terms of the impact of the dodd frank act? it is really pretty simple. large businesses, those with more than 500 employees, are able to register their securities with the securities
and exchange commission, and they are able to get financing from the capital markets. they can issue bonds, notes, commercial paper, and other ways to finance their businesses. but small businesses, those below 500, do not find it easy or, in fact, sensible in terms of the costs to register with scc, so they get their financing from these sec, so they get to their financing from these community banks. one of the things that was adopted in the. frank act was a thing called the consumer financial protection bureau. many of you may have heard of that. many of you probably have seen some of the rules that have come out. a couple of years ago, one of the rules from the community
financial protection bureau was 1000 pages long. ,t applied to j.p. morgan chase which is a $2 trillion bank in new york, and it applied to a $50 million bank in a little town, say, in colorado. same regulation. but j.p. morgan chase in new york has hundreds of lawyers that can read and interpret this regulation for the bank. but the smaller bank has to hire a lawyer to read it, then has to person to do the underwriting that the rules now require. probably requires other experts to reconfigure entirely the way it relates to its customer base. all of those costs are
internalized by the bank, this small community bank, and that means they have to hire employees that are no longer in or business of making loans looking for new opportunities for the bank. in addition, there is a lot more regulation in which bank examiners come in and tell them how they should be conducting their business because the bank examiners are now told by the directors in washington that things have to be much more businesslike than they have been in the past. instead of making loans to someone you have known for years in your community, someone who is never missed a payment, now you have to have ordered financial statements from that borrower. the bank examiner wants to see those. and to the extent that they are not available, the bank is charged with inefficiency or
lack of quality standards. so that, too, causes tremendous costs for each of these little banks, making it much more difficult for them to finance small business. now, if that is all true, we should see a difference between the growth rate of the small businesses,e small and the growth rate of the larger businesses. and, in fact, the data shows that. -- e the financial crisis large businesses, that is those with more than 500 employees, have been growing at a rate that is consistent with that black line. that is, they are growing, they are recovering at the rate that they always have in the past. with businesses, those
less than 500 employees, are not growing at all. in fact, they have declined somewhat in size. so if you want to know why the u.s. economy is sputtering and not moving forward, why we are not seeing growth, it is because small businesses, which are responsible for about 64% of all new hires in our economy, are not being sufficiently financed so that they can get the inventory, they can grow, they can make loans that -- that -- that the banks can make loans that small businesses will be able to use to grow. so that is why it is extremely important to understand that dodd frank, the effects it had on the banking system, and the entire economy. one issue we understand now is
the reason we should be concerned about what caused the financial crisis is that we adopted a law that has made the -- that has made our financial system function much less effectively, much more slowly, and it will continue to do that as long as it is in effect. i am part of a group in washington and some other organization like ours to try and repeal the dodd frank act over time because that is the only way -- >> [applause] mr. wallison: that is the only way we believe this economy will ever return again to the kinds of growth that we had before. now, why did we have this problem? a -- a -- end up with a system in our mortgage financing business that caused
this financial crisis? the collapse of all those mortgages. what i'm showing you here is something called "the affordable housing goals." these were adopted in 1992. by congress. an imposed on fannie mae and freddie mac, i mentioned them before, the two government-backed mortgage companies. and they were required in 1992 -- the beginning of 1992 -- to make loans to low income borrowers for homes because fannie mae and freddie mac didn't make their own loans, but they would buy loans from originators, like banks. 30%they were told in 1992, of all the loans that you buy each year have to be made to people that are at or below the median income. in the places where they lived.
if you look at these charts, you can see that we actually started them in 1996, not in 1992 because by 1996, it had already risen to 40%. of the top. but there were three kinds of categories: one was low and moderate income, the next was underserved areas, largely minority areas, and then special affordable, people with incomes that are 80% or even 60% of median income. and so, over the years, as you can see, those -- those requirements went up. the black lines are the requirements on fannie mae and freddie mac. the red and green lines are fannie and -- freddie exceeding those goals each year. but what happens when you are required to by more than 50% of all your loans from people who
are at or below the median income where they live or, in some cases, 80% or 60% of the median income where they live? fannie and freddie were famous in 1992 before this law went into effect for buying only prime mortgages. what was a prime mortgage? you had to have a good credit score, you had to have a 10% to 20% down payment, and after the loan was closed you had to have no more than 38% of your income going for things like your mortgage or your credit card obligations, and so forth. no more than 38% of your income was used for those contracted obligations. those other three standards. now, they were particularly cap standards. apecially the requirement for 660 five go score -- fico score.
requirementse the before 1992. but once you are told that there is a government quota that says you have to buy mortgages that are made to people who are at or below the median income, at or below 80% or 60%, or minorities who had to combine all those things together each year, what do you do? you start to reduce your underwriting standards. and that is what happened. fannie mae and freddie mac were the dominant players in the residential mortgage market in the united states. caused their own underwriting standards to decline, all underwriting standards began to decline in the united states. so what happened after that? let's see if we can make this happen. there, ok. arm'sou see here is an
housing bubble. -- an enormous housing bubble. many of you probably experienced ins, a tremendous increase the value of your home. of reducede result underwriting standards. how do we know that? we know that because you can think about it this way: if a person has $10,000 to buy a home, and the requirement, the underwriting requirement, is you have to have a 10% down payment, well, you can buy a $100,000 home. but if the government causes the underwriting standards to change so that you only need 5% for in underwriting standard or a down payment, you can buy a $200,000 home.
and, of course, that is what happened. there was much more money, much more credit tasting housing prices starting at about 1997. and that pushed up housing values. another thing that happens, the person who was -- [indiscernible] payment, a0% down $10,000 down payment, has now borrowed instead of $90,000 to buy the home, has now borrowed $190,000. so that is a much weaker barware. manyrson with much more -- more and larger obligations than the person who would have bought the $100,000 home. so, this built a tremendous bubble. housing bubble. had gotten to a point where it was about -- all
homes in the united states where this was affected -- all housing prices have doubled in the 10 years. and, as you can see, it was a much bigger bubble than the previous ones we had had. but they normally decline, they rise and then they decline, like the oil price we see every day. but this bubble didn't. and that is because the government kept forcing more and more money into the residential mortgage market in order to keep it bubbling. now, this is not just in the clinton administration. this all started in the clinton administration, but it continued, unfortunately, also in georgia w bush's administration. in his memoirs, george bush says , i was delighted with the fact that so many new people were able to buy homes. what i didn't understand is all
of the risks that we were creating by imposing those rules. so, he actually now has understood what mistakes were made, but it is too late now to understand the errors. all of us have to understand is that a decline in underwriting standards of the kind that we had, starting in 1992 and extending through 2007, is not good for our economy. and yet, it is -- it is the government's interest to reduce underwriting standards. not just to make loans to low income people. that's a social policy. the government could have other reasons for doing it. but in part, all governments like to do this because if you get the housing market to grow, more people are buying homes, they are buying rugs, they are services, theyg
are buying all kinds of for nature, all kinds of things that makes the economy grow. so the government wants to reduce underwriting standards. and we, the people, have to understand the consequences of that for us. if you are someone who owns a home, you know probably if you try to sell that home -- you know that your home is connected with everyone else's home in the neighborhood. if your neighbor defaults on his car loan, it has no effect on you. it might if you drive him to work, but there is no other problem for you. if your neighbor defaults on his mortgage, that affects the value of your home. and so all americans have to understand that this is yet another thing the government can do which can cause huge losses for all americans if we don't watch what we are doing. and we are doing it all again. and one of the reasons we are doing it again -- and this comes
to the point that jennifer was making -- do you believe that we would have another financial crisis? the answer is we could have another financial crisis because the financial crisis we had came from government policies. and we do not understand what those policies were. that is what this book is about. this book tells you why we had these policies and why it is likely we will be doing it again. in fact, only a few months ago, the president said that he was going to reduce the federal housing administration's insurance fee by about .5%. what does that do? one thing it does is make it much more likely that people who are making risky mortgages -- people who are making risky mortgages are going to have more opportunities to do that. we are going to have more people taking big risks on their homes
than we had before. in addition, the regulator of fannie mae and freddie mac said also several months ago, you know, you have been buying mortgages now with about 5% down payment. that's already is too low. but you have been buying mortgages with 5% down payment. i want you to reduce them to 3%. now, this is all part of the same process. and that process is the government trying to boost the economy, trying to boost the economy by making the housing market bubble and little bit more. but it is dangerous for all the rest of us, so we all ought to be aware of that. so how did all of this then turn into a financial crisis? littleu see here is a chart of the mortgage-backed securities market. most mortgages are held by banks
and other financial institutions as whole mortgages. but many of them are packaged together into pools of mortgages. and then securities are sold against the income from those pools, which is principal and interest that people are paying on their mortgages. and, as you can see, that was a very vital market up until about 2007. in 2007, just as the bubble thelapsed, so did the -- mortgage-backed securities market. and that was important because most financial institutions held their mortgages through mortgage backed securities. and the reason for that is a little technical. it has to do with accounting and regulations, but the government actually gave the banks, and other financial institutions, an
advantage in their capital requirements if they held mortgage backed securities instead of whole mortgages. so most of them went in and bought a lot of mortgage backed securities. but what happened here in 2007 is that the value of those securities declined to almost nothing. because, as the bubble began to dissolve, as the bubble declined, and enormous number of new -- an enormous number of new defaults became evident. the newspapers were beginning to report these defaults. and data about the housing industry were showing a huge number of defaults. so what happened is that buyers in the mortgage-backed securities market simply walked away. they fled that market. they did not want to buy. and because they wouldn't buy, their prices fell to almost zero. it also happens that under accounting rules, financial
institutions are required to carry their securities at market value. but you can see that they had -- their mortgage backed securities -- had almost no value by 2007 or 2008. and so that is why you were reading in the newspapers that x bank, y thank was in serious -- thank was -- bank was in serious financial trouble. when you write down your assets, your capital the client, and also, in some cases, you suffer direct losses under the accounting rules. so that is why we had something that looks like this. and there were many financial and the two since all over this country -- financial institutions all over this country that were in trouble. it is the relationship between that problem and the government's decisions that then
cause the financial crisis as we understand it. if we had just left things alone over time, these values would have come back because what we had here was people fleeing the market until they understood more information about what was really causing all of these losses. but the government didn't leave it like that. there was a large investment bank on wall street, named bear stearns. in march of 2008, they were in trouble because it was one of the major investors in mortgage backed securities and it looked like it was failing and the government then decided -- the secretary of the treasury and ben bernanke he, the chairman of the federal reserve -- they decided to rescue bear stearns. i tell you, this is one of the major errors that has ever been made. one of the poorest decisions the
government has ever made that has caused a serious crisis. to rescue an investment bank like bear stearns. but they didn't. i call it the original sin. when they did it, they sent a signal to all the rest of the market that they are going to rescue all large banks, all large financial institutions. they won't let them fail. and that changed the way the managers at these institutions decided to operate. when yourrmally, assets go down, when your capital goes down, when you look weak or nearly insolvent, what do you do? you go to the markets and you sell more shares. because you want to tell your -- your creditors that you have plenty of equity under the obligation that you owed to them.
if the government is going to rescue everybody, what is the reaction of managers or creditors? in the first place, the creditors now stop being worried about their position because they figure if the company fails, they will be rescued anyway. and the managers of the companies say, well, why should i delete my shareholders? why should i reduce my shareholders -- or dilute my shareholders by selling shares for a low price? i will just wait this out. in septembers that of 2008, fannie mae and freddie mac, those two very large government-backed institutions, became insolvent. and the government also rescued them. what was the significance of this? the significance was everyone still thought that fannie mae and freddie mac were only buying
prime mortgages. no one understood how many subprime and other low-quality mortgages were in the financial system. that chart i should at the very beginning is entirely new. nobody had that data. , 2008. so when the market participates in the market, and realized that fannie mae and freddie mac were insolvent, and they, it was thought, were only buying prime mortgages because they had never told anyone that they had begun to buy these very low-quality subprime mortgages, people said things are much worse than i ever imagined they were. and then they began to pull their money out of all kinds of other financial institutions, including one very well-known now named lehman brothers. now, if the government had rescued lehman brothers after rescuing bear stearns, well,
things would have gone according to what everybody expected. but the government did not, as you remember, rescue lehman brothers. they allowed lehman brothers to go bankrupt. that frightened everyone in the market, and created a panic. and we saw then something that no one had ever seen. regulators, academics, business people, others. the biggest banks in the country would not lend to one another. even overnight. in other words, they were hoarding cash. and they were doing that because the fear was that to the extent that anyone can to them and asked forecast, if they couldn't deliver the cash immediately, a rumor would spread on wall street that they were completely in liquid and they would be ruined. and this is what we understand to be the financial crisis. problem: parts to this
the government forces down underwriting standards so that it creates this gigantic bubble and a lot of very weak mortgages out in the financial system -- a majority, in fact. the government rescues bear stearns, causing participants in the market to believe that that is their policy. they are going to be rescuing everybody. and then the government reverses its policy and causes a panic that we understand as the financial crisis. the result of this was the dodd frank act. and that is why -- which came about because the government blamed the private sector for taking all those risks with insufficient regulations. and as a result of that, we have this very slow recovery that i
showed you at the beginning. so this is the story. extremelys why it is important for all people in the united states to understand why we had a crisis. it was not because we didn't have sufficient regulation of the private sector, it was because we didn't understand what the government was doing when it was forcing what was essentially a social policy on the residential finance system by requiring fannie mae and freddie mac to buy mortgages that were not the prime mortgages that they had initially been famous for. so, that is what this book is about. book of think, the only its kind that explains from the beginning to the end what happened in the financial crisis with an awful lot of data. and i should mention that i was a member of the financial crisis
inquiry commission, which was set up after the financial congress.-- by let me see if i can get something up. nope. set up by congress to tell the american people to tell congress to tell the president what caused the financial crisis. and their effort, i think, was -- was -- was not intended to inform people. it was intended to create a foundation for the dodd frank act. so i dissented from the report of the financial crisis inquiry commission. i wrote a 100 page dissent, and this book is an outgrowth of that. fact, after it was all over, after the commission had departed, having blamed the insufficient
regulation for the financial crisis, after they departed i got an awful lot of information from the files that were never shown to me as a member. and most of that information is now in the book. interestedreally are in where we got to the place we are, this is the book that you should be reading. now, i think we might have a little time for questions. is that true? >> if i could ask one real quick, peter. canada, apparently, doesn't have this problem because they have consistently asked for higher down payment. the question is: do you think it is possible politically for us to go to that if we get a new s whodent with some cajone is willing to take the heat? mr. wallison: yes, of course it is possible. it is possible to have good policies. the important part really -- the government has real incentives
to reduce underwriting standards. it really helps them a lot. it helps the economy grow. so it is important for the american people to understand the problem. and that is, whoever is elected president is going to be told, if youyou know, if you -- really want the economy to grow, all you have to do is start reducing some of these underwriting standards and, of course, the economy will begin to grow more. that would be a gigantic mistake. and that is why if the american people are fully informed about why we had the financial crisis, we are a good policy no matter who is elected president in 2016. yes. >> i am curious as to what you think about the incredible irony when none other than barney frank would be the author of that frank -- of dodd frank. that was the very genesis of
subprime mortgages, and he should be the one to regulate how that should be fixed in retrospect. mr. wallison: [laughter] well, of course, if you are barney frank, what would you want to do? you would want to blame the financial crisis on something else entirely. you'd want to focus everyone's attention on the risk-taking in the private sector rather than on the government's policies. you can't blame him, but it is for avoiding the blame by authoring a law that focuses everyone's attention on the mistakes of the private sector rather than the policies that he endorsed and enforced. i was in the government at this time. i was at the treasury department well, in the0 -- reagan administration, 1981 to 1987. and i was also one who
communicated a lot with people in the bush administration in the -- in the -- in the 2000. and they were aware that there was something going on at fannie mae and freddie mac. they didn't know exactly what it was because, as i said, fannie and freddie were not disclosing that they were taking credit risks. but people in the bush administration were aware of this and they started to draft legislation that would impose much turkey regulation on fannie and freddie than existed before. and who opposed it? dodd and frank. right. they are heroes to the left. they are heroes. but to the rest of us in this room and the rest of americans who see this, they shouldn't be heroes. >> i was kind of surprised you didn't include any discussion of the role of credit default swaps in the recession and the amount of risk that a lot of the
investment banks were taking on in the portfolios. well, for one thing, i don't have time to talk about things like credit default swaps, but they are covered in great detail in the book. and in my view, they had no role whatsoever in the financial crisis. what a credit default swap does i one explain- exactly how it does because it gets a little technical -- but what it does is shift risk from one area to another. it doesn't increase risk, but it takes risk from one company that is holding that risk and assigns if you -- let's say you have -- of course, you do have fire insurance on your house. now, if your house burns down, you are covered.
on the other hand, if your fire insurance company fails, and this is the way the issue is presented sometimes on credit if a business has written a credit default swap like an insurance company, if it fails, the thought is everybody suffers losses in a case like that. but that is not true. if you have not suffered a fire and your fire insurance company fails, you can go out and buy another fire insurance policy. and that is what most people did when they were worried, for example, about aig. they went and bought other credit default swaps to protect themselves in case aig failed. and the credit default swap market functioned all through the financial crisis without any halt. even though there were lots of problems everywhere else the
, credit default swap market functioned fully and continued to operate. it is now much more heavily regulated than it was before. but the regulations, in my view, are simply imposing many more costs. they are centralizing the risks instead of putting the risks out , diversifying the risks throughout the financial system, where there is much more capital to take them. it is now centralizing the risks in various government-backed institutions, called financial markets utilities. as a result of that, they are a likely cause, in my view, of another financial crisis in the future. the way we protect ourselves is by diversification, not by centralizing risk. jennifer: peter, thank you very much. we're going to have to wrap up. [applause] thank you. [captions copyright national cable satellite corp. 2015] [captioning performed by the
national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] he said from the beginning, you know, "i look in the mirror and i do not see a president." my response was quick looking in the mirror. but from the very beginning, he said this is something i have never thought about. >> this sunday night, former public relations officer don cogman about his longtime friend mitch daniels and his decision not to run for president in 2012. >> i became convinced as we came towards the end of the process that he is very competitive. and i think if he had may 8 decision to do with that he would have had his heart and soul into it. but from the beginning, it is not something he thirsted after. >> sunday night at 8:00 eastern and pacific on c-span's "q&a." a beautification, to my mind,
is far more than a matter of cosmetics. to me, it describes the whole effort to bring the natural world and the man-made world into harmony. delight toefulness, our whole environment. and that, of course, only began from trees and flowers and landscaping. >> liebert was about beautifying the nation. a natural campaigner, successful business woman, and lbj. political partner to lady bird johnson on c-span's original series "first ladies: influence an image." examine the public and private lives of the first ladies and their influence on the president. from martha washington to michelle obama. sunday at 8:00 eastern on c-span 3. >> next, federal reserve bank of
new york president and ceo william dudley and stanford university economics professor the taylor talk about monetary policy choices of the federal reserve and the metrics used to guide those policies. therated by david wessel of brookings institution, this is about an hour and a half. david: good morning. i am david wessel, high-end drafter of the hutchins center on fiscal and monetary policy here at brookings. i welcome all of you. the purpose of the hutchins
center on fiscal and monetary policy is to help improve the quality of fiscal monetary policy and public understanding of it. we come together at an interesting moment for the federal reserve. interest rates have been at zero since 2008. now they may be about to rise or maybe not about to rise. i think it has raised a big question about what is the framework that the fed uses to make policy. i think everybody agrees that they need something better than the economic equivalent of looking outside and deciding if today they should bring an umbrella or not. we thought this would be a particularly good time to talk about where the fed finds itself and what framework is should use -- and what framework it should use as it enters the next phase after what was, by any definition, an extraordinary period and monetary policy. bill dudley, who joins us today, came to the new york fed from