Undermining of the Federal Reserve may be a dangerous distraction that jon you are listening to fed chair janet yellen testified before the Economic Committee of congress. Some of the big headlines she serve hero fullterm through january of 2018. She acknowledged a great deal of with the federal infrastructure under president elect trump. She is a staunch believer in the fed plus dual mandate. She says gradual increases in rates are likely appropriate and on questions about the dodd doddfrankshe says diminishes the odds of another crisis. Speaking of the president elect, there was we have been monitoring that. The call for the trump team. So far there have been theifying they said that economic landing team will be announced monday. The domestic landing team will be announced on wednesday. These teams will go to various agencies to work on transition. And an aide also tells bloomberg that trump is having a twohour transition meeting tomorrow. As for those coming and going from trump tower, jeanine shapiro, onetime candidate for attorney general, arrived at trump tower. Rudy giuliani was there earlier today and is declining to speak to reporters afterwards. There will be an update this saturday and sunday as well according to spokesman jason miller. Viceast thing president elect mike pence has held a closeddoor meeting today about legislation next year. Sets the newsbama conference with chancellor merkel. This is president obamas final foreign trip as president. You can watch and listen to those remarks on the bloomberg. Lets get back to Janet Yellens testimony. What assurances can you give us, please . Chair yellen let me start by saying that i agree very much with your assessment. This is one of the most significant risks our country faces, and we are cooperating with the regulators, as you indicated, internationally working with the g7, cooperating with the Financial Institutions to make sure that we have a system that is prepared to do with Cyber Security risks. We are very focused on this in our own operations, and i can provide you more details if you are interested in the various things that we are doing to make sure that our own systems are safe and meet the highest standards. Working closely with Financial Institutions to make sure that the controls that they have in place are appropriate and to keep part of our supervision. We recently put out in advance notice a proposed rulemaking that suggests Higher Standards of Cyber Security protections for institutions that are systemically important, and for those that are really interconnected, where a problem could spill over to the entire financial system, we are theng the various very highest standards that those firms should meet given the fact that they could be a source of vulnerability to the larger financial system. I would say that while we are focused on this in our own supervision and working closely with other financial regulators and with the u. S. Treasury, taking the lead here, this is Something Congress needs to look at very carefully. It is not just a matter of the fed and Financial Institutions, risks involved merchants and others involved in the economy, and it is a very broad threat that we alone are not able to deal with adequately. I hope you will stay involved. I will look forward to taking you up on your offer to sit down with a more detailed discussion as to what is happening with the Federal Reserve. I serve on congress as well as homeland security. Is, as you stated yourself, the most significant threat we face right now, Cyber Security. I look forward to working closely with you. Thank you. Chair yellen thank you. Ok. Before we go with the byzantine process of Going Forward here, i we areare between going to give you your five minutes. Thank you. One of the controversial things with the Federal Reserve i want to ask you about this last time we were in a crisis, you bought a lot of Mortgage Backed securities, correct . Chair yellen we did. Did you pay above market value for those securities . No, we always purchased securities in the open market at marketplaces. At market prices. Ok. Could you give me a description of other private bonds that you purchased over the last two years . Chair yellen we have not purchased private bonds. We are only allowed to purchase treasury and Agency Securities. You id chair yellen Agency Securities are issued by fannie and freddie. So you consider that a government bond. Chair yellen it is an agency bond, that those are permissible investments for us. We buy securities in the open market in a given process, an auction process that we purchase at market prices. Mortgage backed securities to those marketbased securities have a face value . Say all the mortgages will be paid in full . Chair yellen they do have a face value, and then of course they trade in the market, and prices can deviate from those phase values. When you were purchasing, what were you paying compared to the face value . Chair yellen i honestly i do not have we published that information. I do not have that information. Gives just a wild guess. Maybe it is an unfair question. 90 , 80 , 70 . Chair yellen we would have been paying market prices for securities at that time. . Was that 70 i realize you do not know exactly, but you must know about. Think theen i do not discounts were that deep, but i may be wrong. Ok. That is my final question. Condiment, thank you. Senator leahy . . Senator lee thank you. In 2013 there were 12 banks, as i understand it, that controlled 69 of the industry assets. I think we have been seeing a market increase in the share of revenues concentrated in a relatively small handful of firms. I see you nodding. I assume you would not disagree with that. Chair yellen i believe that is true. Lee we learned from a study in 2012 that there were some 33,000 fewer Business Establishments in the finance and Insurance Industry than there were in 20 in 2007. Over that fiveyour period, we business entities that left the market or were consolidated into something else. I think it is worth evaluating the potential problems that increasingly concentrated and potentially less competitive Banking Sector might pose, especially in light of some of the concerns surrounding the toodaytofail concern. Let me ask you this, chair yellen. What risks do you see that might come from the concentration of power, the concentration of market share within the financial industry . What risks do you think that might pose to our overall Financial Stability . Largeyellen so, interconnected complex firms it is not just a question of it, but size is part of of the characteristics, they matter, too. The distress of failure could pose significant risks to Financial Stability. A great deal of our regulatory and supervisory response since the financial crisis has been directed at those firms that pose systemic risks. Imposed much higher capital standards and capital standards for individual firms that reflect our assessment of the individual risks that each poses tosystemic firms our financial system. Pose,e of the risks they they need to have a lower probability of distress to be better managed, have more liquidity, to have resolution plans that we need to make sure these entities are resolvable, and diminish their risk of failing. Through our stress tests and capital requirements, resolutions fans, living wills and other things, they have improved the safety and soundness, especially of those institutions. Sen. Lee lets talk about those efforts. You mentioned stress tests in particular. Since the enactment of doddfrank, the fed has undertaken various measures, some of which you referred to. I wonder whether some of those efforts might including retirees who invest in them. Involvesanding concern process uncertainty in the law. James madison said this. That it would be of little avail to the people that the laws may be written by individuals of their own choosing if those laws be so voluminous, complex, and everchanging that they cannot be understood. Or if they undergo such incessant changes that no person who knows what the law is today can be sure what it will be tomorrow. My understanding with the stress tests is that the standards are constantly changing, and there. S kind of a black box if the law, what it is today, and we know even less about what it will be tomorrow. Enforceable by the fed, carrying the force of law, what it will be. How is that consistent with due process, and how can the lack of be consistent with our timehonored standards and process . Chair yellen we disagree that there is a lack of transparency. Formulas usedal to evaluate bank portfolios. We have published and shared with the industry a great deal of information about the models that we use. A great deal of information about them, but that does not mean they know with the models are pretty models themselves are the basis for legal standards. Chair yellen we want the banking organizations to have sound risk management, and that means developing their own capacity to evaluate the risks in their portfolios rather than ,sing a model that we hand them and the gao review of our stress test saying did not recommend. They looked at this wrec carefuy and they did not recommend that we share with the industry the exact details of the model. We have put out for Public Comment policies about how we inign stress test scenarios the industry. The industry understands how we go about devising those scenarios, although they change from time to time and they have a great deal of information about the models that we use. And what is contained in them. But we want to make sure that they have appropriate incentives to analyze their own unique risks of those organizations that may not be captured in our stress tests and that they build models that are appropriate for each individual firm. Sen. Lee my time has expired, and i have to respect the clock and the chairman and my fellow committee members. Gaont to put out that the revisedded the g. O. It, but i do not think we can overlook that simply because something is important that we simple can subject the American People to laws that are constantly subject to change, laws that are not even written by individuals of their own choosing. Are written by people who unelected and therefore unaccountable to the people. It does not mean that they have bad intentions, it means that there can be no due process in that environment. We have to be very mindful of that and look for ways to reform. Thank you. Thank you, senator. Senator casey . Y i want to thank senator coats for the work you did, working with others on this committee. We are grateful for that. Madam chair, we are grateful to be with you again, and thank you for your testimony. When you provided this testimony, we always learn from it. Thank you. N casey my copy of your remarks are highlighted in yellow. Wages, orroblem is lack of wage growth. A basic disconnect lately, where with a good recovery corporate profits are healthier, thank goodness. Time wage to her over not the most recent numbers, but over time has been a different story. So we have a disconnect where folks see corporate profit going having goodstreet results in their own wages not growing over time. I think it is a problem for both parties to come together and tackle it. I believe we need to focus on shortterm strategies to deal with that, as well as a set of longterm priorities that i will just quickly mention. In thehave seen not just context of the election but even prior to that, maybe most especially, people leading lives of real struggle, and a lot of it is connected, i think, to the wage issue. You are familiar most people are that one of the studies, the Economic Policy int institute, which said that wages 29 yearsbe as 91 for after world war ii, along with the alignment of productivity growth. 1973, even around with productivity increasing more than 70 , wages flatlined, by one estimate 11 over 40 years. If that data and analysis is accurate and i believe it is we are looking at wage growth of 11 over four years. We cannot endure another 20 or 30 or 40 years with that lack of wage growth. One thing we need to do is to focus on ways to help communities when they are dramatically affected by substantial job loss in the short term. Thinking of a place like eerie county, pennsylvania, the city oferie and the county erie. They suffered a lot of job losses when companies moved to texas. Provide we need will we need to over time focus on more strategic actions, quality, affordable childcare, a commitment to early learning, and which we do not really have as a nation. And something we have heard a lot about lately, and i hope we can get agreement on in both parties investment in infrastructure, not just the roads, bridges, but also broadband deployment. It is hard to run a business or grow a family farm if youre in a Smaller Community that has no access to broadband, especially in rural america, were the problem is usually alarming. Of ruralentages america that does not have broadband. I want to get a sense of not what you hope we would do, but maybe from a Vantage Point of what you think works. Shortterm strategies to raise wages as well as longterm investments that might result in that, if you have any ideas or opinions about that. Chair yellen you pointed to the that theour comments , theior of wages disappointing growth in wages, is not just a recent phenomenon. It is not just something that is associated with the Great Recession following the financial crisis, although that took a huge toll. It is a longerterm trend. Many economists feel it reflects both technological change that is persistent that has persistently favored skilled workers and diminished the Job Opportunities of those who do work, andne globalization i think also plays a significant role. Though many economists believe these forces are good for in some sense the economy as a whole, there are many individuals who are very badly and very negatively affected by these trends. I agree with your focus that it is important to think about how to help individuals who are not trends ofcause of technology and globalization, and putting in place inclusive policies that will help those individuals and make sure that the gains are broadly shared in our society. I do not have foolproof methods to do this, but you gave a very good list of things that are congress and the administration considering. Certainly when you see rising mostbetween the wages of skilled and less skilled workers since the middle 1980s, that is a signal that investing in people and education, investing in Workforce Development now there areee high levels of job openings, and yet there is a certain degree of mismatch of skills with openings , investing to make sure that individuals have the skills they need to fill the jobs that are becoming available. And there is a good deal of research on Early Childhood education that is important. So there are a wealth of investment possibilities that could help to mitigate this. Rend and other interventions i definitely think it is appropriate for congress and the administration to consider a broad range. Sen. Casey i appreciate that. Let me say in conclusion one part that i did highlight, which is good news on wages you say in part, some signs that the pace of wage growth has stepped up recently. That is reflected in the 2015 wage increase. Chair yellen we are seeing some evidence, and i think that is good. But over the longer run we had the trend here, and it is important to do more than that. Sen. Casey thank you very much. Thank you, mr. Chairman. , let me justinrich state that the shuffling that goes on between various congresses, it appears that you are going to move up significantly into this chair. Is myelcome you to that understanding is that the chairmanship now reverts back to the house. It could be mr. T very, but i am not sure about that. We look forward to your leadership here. I will give you the chance here to talk with chair yellen, who i assume will be one of your key witnesses. I want to say what a pleasure it has been to work with both of you on this committee and on the intelligence committee. Chair yellen, i am going to jump into some questions because senator casey went exactly where i want to go as well. A long way has come in the last few years. It is certainly growing, but i think historically we have had this approach that if we can just make the economy grow, you will have a rising tide that lifts all boats. A fromr people, and we saw the same sentiment in the recent election, that some of those boats just have not been keeping up with the rest of us. Problema fundamental with the quality of our economy. So things like wage growth, and the seemingly broken link between productivity and wage growth, some of the lack of wage growth you can ascribe to skilled versus unskilled. But we have also seen this very divergent path, where historically we were able to keep wages tied to the same trajectory as productivity. We have seen those split apart. Do you have thoughts for why ,hat is and how we can seek through Vocational Training or other policies, to relink those things together for a broad swath of america that is not feeling the benefit of a growing economy or a rising stock market . So, productivity growth is important over the long haul to real wage growth, and it has been extremely disappointing over the last decade. But i also agree with the point that you just made, that we have real wages where growth has not kept up with productivity growth. That is also true. Data that shows that, if you look at the share of the pie and by pie, i mean our Gross Domestic Product or output bundle of the economy. Rewardsvision between to labor and records to capital. That share was essentially years, and more recently we have seen an increase in the share of the pie going to capital. That is consistent with the real wage is not keeping up with productivity. There is some research on that. The United States is not the only country that has seen that happen. I am not certain what the cause of it is, but i would agree with you that that is something that has happened. I think we are seeing a little bit of a reverse now that the labor market is very tight and wages are increasing more rapidly. But even if wages were productivity along with productivity, we do have the fact that we are seeing rising income inequality. We have seen that for a long time. Inoss of middle income jobs the face of technological change and globalization that was probably accelerated in the aftermath of the financial crisis. So we have people who lost good jobs where they were earning good incomes, and even if they can find work because after all, the Unemployment Rate is low and there are job openings sen. Heinrich the nature of the jobs really changed. Yellen the nature of the jobs really changed, and they are taking large wage hits. I just go back to the points i made in response to senator caseys comments. I believe there are lots of things that could be considered that is not in the domain of Monetary Policy, but there are structural policies, training, education, and safety net. Sen. Heinrich ok. You answered some questions earlier that were really focused on mortgages and the tightening mortgage requirements. I wanted to swerve quickly to the we are just going to break away from fed chair Janet Yellens testimony. Closing,ean equities and it looks like yellen has given a bit of a boost to the stoxx 600. The biggest closing high, the theest closing gain since day after the election, the day after donald trump was confirmed as the next president , the stoxx 600 up. 6 . Cheapestto the relative to the world index that is a good stat. All Industry Groups on the stoxx 600 are gaining today. Once again, it it alternated between gains and losses. That is something it has done for eight consecutive days, the longest streak in two years. Something significant is happening to the euro. It is falling for the ninth consecutive day against the dollar. It was up earlier, now down for the ninth consecutive day. That is the longest can losing streak that is the longest consecutive losing streak on record, the longest run in the wake of Donald Trumps election victory. Stirling is the best performing major currency against the dollar since trops win since umps win last wednesday. Cooler weather boosting spending. Lets finish off with the bond market today. U. K. Yields, the yields off the 10year risen to the highest level since may. A slight decline in germany. The spread between the german 10year and the u. S. 10year is the widest since 1989. That is my favorite stat of the day. Spain, yieldsin rising in italy today. Lets go back to fed chair Janet Yellens testimony. There are those who say the easy money has made it easier for big corporations to arbitrage as opposed to make money by longterm capital investment. Going back to my conversation with former chair greenspan, he said that if you go to a board of directors and you say we need a 30year spending plan for Capital Investments, they are going to say, where is the certainty. On the other hand, if you say we can invest in whatever we can invest in in the credit markets or the bond market, they will have a return. Comments, i am told, is ribute into rising chair yellen there are a number of factors depressing gdp growth. A number of my colleagues now estimate that longterm growth rate is likely to settle under 2 without some change in policy. We have two more slowly grow the , and Educational Attainment of the workforce, which had been increasing at a more rapid rate, now leveling off. There is that contribution there. I agree with you that Capital Investments has been weak. That is one reason why productivity growth has been as depressed as it is, even outside of investment. Improvements in technology that come from other sources also seem to have diminished. Mindit is not clear to my why it is that investment spending has been as weak as it is. Initially, we had an economy with a lot of excess capacity. Firms were clearly operating without enough sales to justify a need to invest in additional capacity. And more recently, with the economy moving toward full , we would expect to see investment spending pickup, and it is not obvious exactly why it has not picked up. I would not agree that the feds Monetary Policy is actually has actually hampered Business Investment or been a negative factor. I am not aware of any evidence that suggests that it is. Sen. Cassidy if i may, because i am almost out of time i have a graph that shows in about began toproductivity decline. You mentioned excess capacity related to the great financial crisis. Climbroductivity began to. Qe1, it modestly began to decline. Then in qe2 it plummeted. Then it has been kind of like this, kind of lackluster, staying about the same on net since qe2. You are saying that the excess capacity associated with the recession had to shake itself out. It does not make sense to me that between 2007 and 2009, productivity would have grown so robustly. Chair yellen i believe what happened is we had a huge financial crisis. Firms found their sales collapsing. They took measures that they thought was necessary for business survival. That meant firing every worker that a company could possibly do without. Arcs were so huge, there was a surgeon productivity. They cut workforce to the bone, and productivity surged. Those productivity gains continued for a while, but eventually the amount of labor that firms had was so low relative to their output, that as hiring picked up and their sales picked up, productivity growth then subsided. There was a huge surge at the beginning as firms did everything in their power to cut costs. It is not largely a reflection of trend. Sen. Cassidy to the specific question, if a company has the chance as mr. Greenspan, he was not related to this but he said if a ceo could go to his board and say we need to make a 30 Year Investment with all the uncertainty of Interest Rates and regulatory environment, etc. , versus invest in these Financial Instruments, that they are choosing the Financial Instruments over the productivity. Andd you say that is true on relevant, or not true . Chair yellen i think we see a shortterm decisionmaking that is disturbing. The causes of that i think are. Ot clear i certainly do not think it is our Monetary Policy, but it is we commit to projects. In part, they do not see that many projects that they think will produce returns that justify those investments. It is conceivable that we see evidence that the face of technological change has diminished, and it me a reflection of that. Sen. Cassidy thank you. Janet that is fed chair yellen speaking before congress and also, president obama and german chancellor Angela Merkel are holding a News Conference in berlin. For thes thanking obama reliable u. S. German relationship. She said the paris climate treaty would have been impossible without president obama. You can see all of these remarks on the bloomberg at live go. House Speaker Paul Ryan is delivering his weekly address. Some of the headlines he says president obama should not have landed new regulations before leaving office. He also talked about mike pence, who had a warm conversation with lawmakers. We know mike pence, that he told them to get ready for a big year. Paul ryan also saying he will leaders today on the transition. That oncan see all of live go on your bloomberg. Lets return to congress and the fed chairs testimony. The respect that i have for that staff and their working together is enormous. I want to give special thanks to chair yellen. She is our star witness. We have had many wonderful witnesses that have come before. S here, but she is the star the coordination between the congress and the legislative is extremelye fed important to the Economic Future of our country. Chair yellen has been more than available to come here and to speak with us, to deal with all the questioning that takes place. To better explain the role of the fed a relationship to the role of congress and the legislative branch. You are transparent. Avenue you have listened this morning, she is very thorough s morning to the answers with the answers to the questions we have raised. I just want to thank her for her availability. We wish you the best of success Going Forward in the future. Economy, muchour of it falls obviously to both areas here on the legislative as well as the administrative. It is a very important role, and we have certainly learned a lot more about with the fed is doing and your leadership. Thank you,n senator. I really appreciate your kind words, and to say how much i appreciate your inviting me here to testify, and how much i have. Njoyed cooperating with you i appreciate your leadership. I wish you the best in the future. My parting gift with you is that we are actually adjourning early. At least to give you more lunchtime. T yellen vonnie janet yellen has been speaking before the Economic Committee. She said the fed will adjust as secure. Ecomes she fully intends to carry out the full term, the full fouryear term. She said a gradual increase in rates is likely appropriate. We have many other headlines. Congressional appointees, as we heard everything from legislation to Interest Rates. Mark janet yellen addressed that. She said that she is a big believer in the feds dual mandate. Doddfrank was also bound to come up. Sure enough, it did. Janet yellen did support the efficacy of doddfrank, saying that if it fosters a stronger banking system, it diminishes other crises. The big take away was that she would serve fullterm before the 2018, crossing any speculation and it was, wasnt it that she could fall under criticism. Vonnie that she may the inclined to or that there may be pressure placed upon her from Fiscal Authority makers. Speaking of fiscal authorities, donald trump is in trump tower meeting with people today are the next is nikki haley, governor of south carolina. The Campaign Manager saying they are eager to get nikki haleys advice at this point. We will get more up dates over the weekend, saturday and sunday, we are told. Press briefings will occur. Oh, onetime candidate you are watching bloomberg markets. Mark live from london and new york, i am mark barton. Close onhe european bloomberg television. Speculation surrounding president elect Donald Trumps candidate continues. Discussing thoughts on donald trump, whether or not he is the Second Coming of ronald reagan. Here is what he had to say. It is too early to tell. There is loss of cross current here. We will know in the there is lots of cross carried here. We will know in the transition. You have a series of pronouncements by the president elect, as well as others. Some say he wants to dismantle doddfrank. Backe other hand, bring glasssteagall. Those are diametrically sort of on opposite sides of the coin. Raising questions, in my mind, where is the philosophy here . We will know more as we see more appointments per number two, as i indicated with both bush and theylesser extent obama, conspired to change the view. Dayink at the end of the , something to keep in mind. The window to shape this policy will be very short. Even with two houses, both w and obama got very little done on the economic side in the first two years of their administrations. Obama republicans under were deficit hawks are they got their antideficit religion that they lost under the w years. Now people are betting that they will forget about deficit again. People are making very big bets on infrastructure, caterpillar surging, base metal surging on the idea that we will be building all these bridges and hospitals. What do you think . Jim the driver for commodities and Construction Equipment is not going to be the United States. Even with an infrastructure boom. We are talking about it doing 1 trillion over 10 years. That is 100 billion a year in infrastructure. China does that pretty much in a week. So china is slowing down. Maximalista scenario, this is small potatoes. Jim that tune plays in beijing, not in washington. Steven mnuchin is said to be in the running for treasury secretary. He says the trump team is looking into setting up an Infrastructure Bank to find different projects. Nevermind the fact that Hillary Clinton was proposing something similar and the trump team dismissed it and said it was an awful idea. Talk about the potential pitfalls for Infrastructure Bank set up for these kinds of projects. Jim have been down this road. That, again, is just from reading mr. Trumps is that it would be a Public Private partnership. It would not be classic keynesian pass a law and build bridges and borrow money and increase the deficit. It would be a hybrid. If we look at some of the hybrid publicprivate partnerships, toll roads, parking meters, they have not been great successes. The amount needed to get a return to entice the private sector tends to make it less of a good deal for the taxpayer. And you only get projects that will have an immediate economic return. The key about Infrastructure Spending is that it generally spurs lots of other things. So replicating a toll road between two busy cities with an existing road does not help as much as, for example, being in something new somewhere. This is the problem with Public Private partnerships. Sees a short seller, do you , with a Public Private partnership with money coming out of d. C. , do you sense opportunities in the days ahead . For betting against the crowd . Know specifics. We do not know implementation. We do not even know the people yet. It is early to tell what a roadmap for the political aspects are. And we are bottomsup people, so we are looking at the companies. You indicated at the beginning up wayas led to a whoosh to play things. That usually ends up disappointing people. The idea that this will immediately help is much more problematic. Mark jim chanos there. Another event taking place today, separate to Janet Yellens testimony. And chancellor Angela Merkel, the german chancellor, holding a joint News Conference in berlin. Angela merkel has said germany will be more engaged with nato purchase said the paris climate treaty would be impossible without obama, and she says she will work on a good cooperation with trump great obama has said that Germanys Merkel is a great friend and ally. Reiterating the need for a smooth brexit. If you want to follow the News Conference, follow it. You are watching bloomberg. Stay with us. And newve from london york, i am mark barton with vonnie quinn. This is the european close. Time for the Bloomberg Business flash, a look at some of the business stories in the news right now. Housing starts in the u. S. Jumped to a nightyear high in october. Residential starts, 25 . Buildingamily home rose indicating that the family home market was on a whole. Retail sales in the u. K. Last month, increased 1. 9 . That was far more than economists expected in october. Cooler weather led to more spending, fashion, clothing, and more than inising 2. 5 years. Saudi arabias Energy Minister is optimistic opec will reach an agreement to cut oil production. The carteltv wants to impose a ceiling on each of its members to help those prices. Opec has tried to persuade russia and other nonmembers to join. Bloomberge latest business flash. Take a look at where European Equity markets finished. Up at the end of the day after janet yellen testified before congress. Indicating a hike is likely in december, a fed hike. Only the first since last december. We shall see. Onel time before that next takes place. The stoxx 600 up at the close. The ftse up. Cac all trading higher. Lets go to berlin, where president obama and Angela Merkel are holding a News Conference. Pres. Obama his full commitment to nato as the foundation for our international security, i think, is very important. Finally, in terms of my conversations with president putin, these are conversations that took place before the election. As i indicated, there has been very clear proof that they have engaged in cyber attacks. This is not new. It is not unique to russia. There are a number of states where we have seen low level and industrial behavior and other that we think should be out of bounds. I delivered a clear and forceful message that, though we recognize russias intelligence sometimes will it will sometimes take place the it will sometimes take place even if we do not like it. We are monitoring it carefully and will respond appropriately if and when we see this happening. I do think that this whole area , atyber is something that an international level, we need to work on and develop the frameworks and International Arms so that if we do not see a lot oface countries have advanced capabilities. Given the vulnerabilities of our economiesture and our , two digital platforms, we have to be careful in making sure that this does not become a wall of lowlevel battlefield. And we have started to try to put together some principles that were doctored in the g20. The g summit, and at the u. N. Levels. A lot more work remains to be done on that front. Chancellor merkel allow me to aderline, that in spite of very tough election campaign, this transition period in the United States of america because this follows democratic principles and is working smoothly because this is all about the American People, about the destiny of the American People and the Outgoing Administration is sharing its knowledge, its expertise, with the incoming administration. To continue the good cooperation we have built between the United States and germany and mutual interests and we will continue this. I will continue and approach of on thed i will do it basis of a deep conviction with president elect donald trump. I can onlyn russia, repeat what the president said previously. This is all about respecting certain principles. I am saying from the european Vantage Point and a german Vantage Point. The fact for over 70 years, we have been able to enjoy peace, to live in peace depends on territorial integrity of each european country being respected. In european history, the