Transcripts For CSPAN2 Key Capitol Hill Hearings 20160706

So many of our laws today are directed at people we dont like or metadata, not people we are afraid of. I used to practice law years and years ago. When i was in law school taking my criminal justice, or rather i criminal law required for graduation i was taught to things. What is a crime . Thats the first question we have to answer in class. I suspect most of the people in this room may not know what a crime is. But i was taught that a crime is what the statute says is a crime. Thats not true today. There are lots and lots of things that are crimes that have nothing to do with statues. The second thing i was taught in law school, which i fancy pants law school where we are supposed to know everything. Certificate was taught was to commit a crime unit had the intention of doing the actor was violative of the law. Thats no longer true. There are things that are crimes that a legislative body never voted on but there are things that are crimes that nothing do with ones intent or ones beliefs or ones knowledge. We have entered an era where we are locking up all sorts of people because we are not at them and not for all sorts of reasons that have nothing to do with our safety. Is driving up costs, and more important than the cost, is depriving people of their liberty. I will begin we can all agree that is a last resort, response. Grover norquist with the americans for taxpayers reform. You are one of the more visible National Figures in the criminal justice debate and you been committed to this for some time. Tell us about how you got your and what your organization focuses on. We are a americans for tax reform, not in the business of performing tax returns. But they can do whatever they want. Within reason. I was interested in the subject a long time. I went to tria trials instead of going to senior and high schools which is a lot more fun. Its a very important issue. For many other reasons down talked about, its kind of rough on some if you put them in prison for executing and you better know what you were doing. You dont want People Living in fear of not to be. But as a conservative activist, spent a lot of my time, Taxpayer Group spent a lot of time focusing on things government shouldnt do. We are very good point out that stupid think of no government shouldnt do that or the federal government should do that. We didnt spend a lot of time on those things the government ought to do like a military Strong Enough to keep the canadians on their side of the border. And putting people, bad guys in prison and executing murderers and being tough on crime your i always assumed while the generals and the wardens and the prosecutors would take care of that and i would work on the things government ought not to do, a point of fact, theres a lot of work to do for conservatives if we are going to be governing instead of whining. We need to look at those things government ought to do and say how should this be done in the least destructive way and least expensive way, least expensive in terms of lives and families and dollars. When you realize the left was incapable of participating in reforming criminal justice because they were not interested in the subject, and nobodys going to listen to them if they got the right answer in vermont, nobody was going to listen to them. Theres a wonderful chart that you have, that texas was the first day to work on criminal Justice Reform. In utah gross out from the red states, from the republican and conservative states. This whole criminal Justice Reform from mens rea to civil Asset Forfeiture, fighting against over criminalization to looking at licensing laws which keep felons from getting a job when they get out of prison. So theres a licensing requirement to rob banks so you could do that but you cant braid hair. All of these things that are very good conservative positions have been adopted in republican states and now and simply states as well as its move forward. I think we need to spend as much time looking at the pentagon and the criminal Justice System to reform them, not to abolish them as we do this programs that we would really like to see get much smaller and oracle await because a government ought not to do x, y or z. The left can participate in this debate until he open up the zone. When texas did this, i testified in various states and your testified, they did this in texas and all of a sudden people look up. All, so its not one of these weak on crime let all the murderers out things youre talking about. I say they did it five years ago. Five years ago . Two election cycles and nobody lost an election over the subject . It not only comes with a place in terms of being serious about fighting crime. He saw the wonderful numbers on crime going down while these reforms, perhaps these reforms are going through. At the same time they want to know that it is safe from the somebody will not yell at them that they are weak on crime. If these ideas had been thought up in vermont they wouldve gone nowhere because you could not a gone to the people of mr. Inslee theyve got a great idea in vermont. You try. But texas any other states that have moved first have allowed it to move forward. This whole idea of federalism where we are getting more and more states to do this and not looking at the federal government making similar reform at the national level, we are not asking anybody to vote for something that isnt politically safe. We havent been losing house state legislators seats, governors races. All just the opposite. Its been a wonderful opportunity or conservatives to message i care and to me. And its worked state by state. Weve learned more. Weve gotten better at it. This is a model for conservatives to engage but the other model is passive in the states. I dont think any federal law should be passed unless 10 states have done first. Do it in a bunch of states can show it works. Thats what the movement has that and i think its a model not just for this issue but for others. We are going to take a specific issues that are being debated in congress, in that there is built but for everyones information there will not be any endorsements of bills from the panelists today or picking one over the other. One of the important things i kind of want to clear up because i think its important for the context of this discussion is that the impression that each of you have in your organizations and working in this, because in washington, d. C. , often people say on the 6 00 news and on the sunday talk shows, wheres the compromised . Where are the people in the middle that can split the baby and come up with legislation. Grover can start. I think youll hear a lot from us but is this about compromise or is this about working towards shared values of principled people on both the left and the right, grover speak with the people in the middle do this to us to the status quo qaeda because of all the reasonable people thought this was the way to respond to everything. Leftright coalitions and criminal Justice Reform is one of a handful that it been successful. First of all in this case conservatives have led what the left doesnt have credibility. If they let the same fight, it just wouldnt work. I wouldnt join their parade because im not sure i trust everybody, but on a right Left Coalition there is no compromise on principles. We are working to do the same thing perhaps for Different Reasons the may be different like expenses, different senses of what works and what doesnt but when you sit down with the guys on the aclu they are very serious about mens rea, criminal intent. Intent. They think i this is an importat thing. There are other guys on the left who arent because they want everybody to go to prison for environmental rules made up by bureaucrats. To our people on the left of principle who actually think well of law matters, and they get scared at the idea that the wrong guy ends up in charge and they are the target of the regulators. This is not right and left get together and do something in the middle they both agreed a stupid and destructive but it was halfway from where they wanted to be. This is where weve been able to say to we need to keep this many people in prison for this long, yeyes or no, does it work . How to get people out so they dont come back to prison . Civil Asset Forfeiture which was touched on. Cops stop your car, we say we think you might have drugs in the car. You saw the new one, they take your debit card, take the money out of your bank account. We are getting some laws passed in the United States to not let the police steal your car and the money in your car. Unless theres a conviction. If youre convicted and it really was proceeds of bank robberies, okay good. But they shouldnt steal it and let you been convicted. You saw the numbers, theres more money taken away from americans i and civil Asset Forfeiture last year than robbers. Its a big deal, ma a very sad, big number. All of these reforms are ones people of principle right and left can agree on. We dont agree with everything the theres a whole bunch of criminal justice things were working on but the ones we cant agree and pass legislation state by state and federally, its not a question of sacrificing principles. There isnt any bill we look at, theres other good stuff in there where thats not the deal. This is not a compromise with stupid ideas. This is working with people who on principle we can agree with. Before we go to dan, i want to reinforce that i can imagine a bill passing in any state cant that showed an increase in crime. Theres been no evidence, and interest in the states with ever reform that they passed have done a much better job than the Historical Health of tracking things. And every proposal from the right and the left and every bill that is going any traction at all is actually improve Public Safety. I think that gets lost in the debate. Is this a compromise of the american conservative unions values or a chance to express your values and find them attractive to a broader audience . I think your first question kind of related to the legislative process, and the left and the right compromise. And i just want to reiterate that so much of what is going on now within the criminal justice sphere is not legislated in orientation. There is no compromise. Its going on bureaucratically. Professor strauss at columbia has championed the idea that the bureaucracies should capture the political process, it should leave politics. It should control the people but that runs counter to the entire founding of our nation. We believe that sovereignty resides in the person, and at our nations founding we understood that because our whole constitution begins not with we the Continental Congress or with the states but we the founding fathers, but we the people. There is this concept not were typically left is pushing the bureaucracy to move ahead of the people so than the bureaucracy creates all of these laws, criminal laws, that include cars ration as well as stiff fines. Outside of the political process, i do not mean partisan process, but how people govern themselves, political philosop philosophy. And as weve seen the legislative branch diminished in stature, one of the consequences of that is in the growth of the criminal justice state. We need, Congress Needs to take its rightful place in this process and we need to return to a place where members of congress on the left and the right can Work Together to address issues in a bipartisan way. Taken to this process. Take it back from the bureaucracy and then as members of Congress Move forward, understand everything they do needs to be based on the idea that the liberty of the individual is paramount and should only be outraged when someone has committed something that is really bad. At prison fellowship we a traditional apply things by saying amen. Thank you for that. Derek, right on crime is involved in coalitions. Its been heavily involved with the states that have experienced that only for success legislatively, where the legislative branches have done what dan describes and what we Hope Congress will do, but youve been around to see the results of the work and to see it play out. In those cases do you feel that right on crime was a principal player or do you feel you were drawn into compromise up until . Most certainly the former. If you look at this in terms of a spectrum of ideology can we are not just groups meeting in the middle of a bell curve. Its more of a you and we just havent overlap of these particular issues. Rate example of this coming from taxes in 2015. Prior to we wanted to states the use of the criminal Justice System has basically been you a first resort for kids skipping school. You have a class c. Misdemeanor for skipping school if you are absent or late for three days or more. I always make the joke that this would basically make me a criminal both bonnie and clyde when i was a youngster but we were one of two states that still use that. And through a concerted effort between us on the right and texas appleseed on the left, we were able to compromise, or overlap on this particular issue with the same exact policy prescription. Neither of us cover my cigar valley. They are still advocating for payday lender reform and school to prison pipeline reform in things like that, things that we are not a system advocating for. But on the criminal justice side i would say interlude into school discipline, we were 100 agreement on. This is just one example of where we find that issue as opposed to changing what tbtf stand for. You see that across issues come across the specter another great example of that in michigan. You saw the Mackinac Center and the michigan chapter of the aclu both shoulder to shoulder champion in the mens array of reform. And again this might show that the federal process tends to be a little detached from it but both of them have natural constituencies that were very proximally affected by this law or as the case were that lack of law. You generally find these on, allies overlapping on these particular issues and then they move forward on that without changing the core of their beliefs. The next question it seems in the elephant in the room, if you will, when discussing these issues for a number of congress would be, for 40 years weve had a template that to be successful politically whether youre running as republican or a democrat to lock people up for longer periods of time and more people in prison is the political safe move. Had to do the opposite is a political risky move. We are seeing overwhelming evidence that the visual forms that these reformed actually reduce new crime. Has that change the political dynamic in america . Is a no vote on reforms that address fiscal oversight and liberty issues, the performance of the system, whats a member of Congress Looking at when theyre presented with these bills that have the research and the support in front of them . I think you hit both the good and bad on the head in that question. You have generally a policy issue, criminal justice and reform is a policy issue that requires an elevator speech. It doesnt sound like very well. However, here we have this litany of successes both in the states and across the variety of programs. I also think the fruit of it, clinically speaking, as a neutral third party observer, i think that is diminishing if not wholly gone. What youve seen in recent campaign cycles is that where i would say the tough on crime has been invoked, it tends to be more of a definite as opposed to a tip of the spear and when it has aired pictures has not had any flooding. He also see that all the polling that goes on in tandem, a texas weve been polling on this issue specifically since 2013. 2013 we were a good five years on from our reforms in 2007. We wanted to look at what about the hearts and minds . Are the hearts and minds with us ask we found not only does the fact of people wanting to see common sense reform, and conservative reform, not only did we see that very strongly supported, weve actually seen some very credible effects on the. In an article that me and others put into criminal journal, we saw that conservative identification predict a decent amount of ones affinity towards rehabilitation. You see that in and of itself tends to drive a lot of the public preference. Thats not to say that isnt a punitive element to the. That element is overshadowed by the rehabilitation and a user plays the second second filter a lot of people say we need to have a strong deterrent system. When polled on deterrence itself, deterrence gets at most 7 of people saying they should be the purpose of our criminal justice is a. Its not that they dont want to punish. Its not that they dont even want to be, thats something not what drives a. We found people, almost two to one would rather spend money on effective rehabilitation programs and custodial sanctions, prisons or jails. That persist across the board, across ideology and age groups. This is in texas. This isnt what the average person in kennebunkport thanks. This is what people in tyler think. So i think when you look at whats going on in the states its really giving a better sense of where the american political policy imagination is on this. Grover, you mentioned in your remarks already about the performance of governmental institutions and that conservatives have traditionally looked at quite after the things they consider unnecessary or overstepping the proper role of government. This is an area where theres probably consensus that this is a proper role of government but there has been a lot of scrutiny. My dear wife stacy was at home is sometimes better at summing up of the issues and policy issues than i am. She would simply say hospitals are supposed to make people healthier classrooms are supposed make people smarter. The criminal Justice System is supposed to reduce the crime, hold people accountable and pay back victims. Whats your take on the performance of the system from a taxpayers perspective . It hasnt done a very good job. Its gotten extremely expensive because people dont focus on it but we are spending 50,000 a year in california to put an adult in prison for year, 25,000 in florida. These are pretty significant numbers. If you can punish somebody and or rehabilitate them in 10 years instead of 15, thats a lot of money that has been saved. If you can keep someone out of going to prison without, and keeping them away from crime, that saves a whole bunch of money. The other think it is you take somebody out, take a parent of a household. That somebody could be earning support for the family, the film ends up on welfare. Doesnt do any good to have a fatherless household, particularly if the father is imprisoned or its tough on kids. A lot of damage that is anemone to figure out how to punish crime, deter crime, work on rehabilitating people who could do better. At the least amount of damage. Not just dollar caused by damage that we do. We dont do that well because when i focus on. It has passed a law against people making each other in prison. For how long was that a punchline in jokes backs its kind of sad. I think it would focus on getting it done, with the least amount of destruction to peoples lives and pocketbooks, we can do a lot better than we have done. One thing to add. Sometimes feels a there was a spike in putting people in prison and maybe thats responsible for action some of the criminal, a drop in crime. Primus continued to fall as weve moved away from spiking the number of people in prison. What the drop in physical violence, physical crimes, rape, murder, assault, the drop in those crimes is matched with passage of concealed carry legislation in states. And they pass it state by state so you can compare states that did it 10 years ago, 15 years ago and states that did it five years ago. Thats where youre seeing real, people still steal your car but in concealed carry states that are much less likely to monkey. Thats one of the reasons youve seen the drop your when people say the drop is because of crime. Theyre part to try to get away from the fact you can actually track conceal carry passage of the number of people with concealed carry permits with the drop in physical violence. 14. 2 million americans with an active concealed carry permit. Im not surprised would seem that kind of crime decrease. Thank you, grover. I reserve my right to interject and i was the one thing before i go to dan. On statistics of wha whatcom ane pickup what grover said, one of the casualties of the passage of locking more people up from the early 70s up through a few years ago was the actual arrest and conviction clear its right of murder and Violent Crime rates senator tom cotton side in arkansas paper that the Current System leaves 47 of the murderers ago without even having an arrest. No time served, no sense, no probation, no reentry, no collateral consequences. Where im from in detroit they want about a 50 arrest rate. In chicago in 2012 they were running at 30 . 30 arrest rate for murder in chicago. In the 60s before we started focusing on locking up more people for lesser crimes, the arrest rate for murder was significantly higher in some years into the 90 percentile. And so statistically what weve done is weve moved our focus away from where i think america would think that members of congress have focused on who they are arresting. My question for you, as the oldest and one of the most respected conservative voices in america, the american conservative union, from your Vantage Point how to believe that we got here . What brought us to this point where we are having this debate in Congress Today . I was looking around the audience earlier. Com ask people to raise their hand at how many of you are 50 years of age or older . Please dont raise your hand. But my guess is that maybe onefourth or onefifth of you are 50 years or older. The rest of you are quite a bit younger. For those who are under 50, you may not recall the time when the mantra change from crime never pays to crime does pay. Ithere was a period in our nations history when the focus was on the fact that you could commit a crime and get away with it, and that makes great sense. Congress started to get tough on crime and that was a phrase that was often used in the 70s and 80s. Tough on crime. It was a phrase that was supposed to mean theyre going to pursue justice for victims, but i think the pendulum has swung so far in the other direction that we now have all of these cases where a young man from detroit is moving to hollywood. He wanted to be a video producer. But atf boarded the train in new mexico and i couldnt figure out what a young black man had 40,000 on hand. Atf thought he does not deserve to 40,000. He must be up to no good a. So atf took this young mans 40,000 under the Asset Forfeiture law. That young man has to hire a lawyer to prove his innocence. Forget innocent until proven guilty. No, he is guilty. His money is guilty. His money was taken from him. We have swung so for any other direction, the young man who earned 40,000 to begin his life now has to hire lawyers and those who years of trial to get his money back. This is just obscene. Fortune we have people like hal stratton who are fighting hard to reform these Asset Forfeiture laws but across the board weve seen this extreme move where the individual is no longer thought to be sovereign, where its the state who controls the individual. Frankly, i think this will election we are approaching is asking this question, does government control the person or does the person control government . As a conservative i think we need to restore the rights of the individual. We need to pull back on these extreme criminal laws that turn everyone into a criminal. Thank you. We have a few more minutes together i believe. We are going to talk about some of the issues, i cannot endorse any specific build some of the things that members of congress are confronted with today. I will give my commentary as somebody who reviews the built in both chambers that by and large if you divided the criminal Justice System into three parts, sentencing while somebody is paying their debt back, serving the time, if you will, and then postrelease. Most of the congressional bills that are being debated and what is a strong desire for passage or consideration yet this year before theres a new congress and a new president relayed to the first two, either sentencing or the conditions of confinement to the derision of confinement, when people can leave a federal institution. So you heard of the panelists talk about mens rate in criminal justice, sorry, civil Asset Forfeiture throughout the remarks but specific to those policies, lets go a little briefer with those t two, with l the panelists talking about the importance of Congress Addressing those. We will start with grover. We just had a little tutorial today on mens rea, the reason Hillary Clintons putting what was supposed to be secure documents on email is okay and not a crime, according to the fbi director is because quote there was no intentional misconduct in connection with that effort. Mens rea. I think that might be an extension of mens rea a little bit far but do you have a whitecollar crime, the whitest of white collars been told that no intention, no crime. Somewhere between 300600,000 regulations that can put you in prison. Mens rea is not attached to most of them. People in prison can say they filled out the paperwork wrong because the of plastic instead of paper when there was no particular reason to use either. Just the law. Step one. Lets give everybody a hillary rule. All laws need mens rea and whatever we are going to do to fix the law, everybody should be treated at least as well as Hillary Clinton, including businessmen and women. The other one is this over criminalization issue. Its not in one of the bills but it was together by the late senator specter, and i would recommend it to a congressman or senator. Pick it up. Thats due to a base closing bill for federal crimes. Java commission and decide which military base that the pentagon doesnt it and unless Congress Votes not to get close. That lets anybody off the hook for a is closing in this day because the pentagon didnt want but they were allowed, and was able to happen. Lets do the same thing for federal laws. If we have 4000 federal laws, 300,000, we should have a number by the way, but if we got several thousand federal laws lets of a bunch of judges to give you a look out which ones are redundant, which ones are yesterdays news. It is federal law carjacking, all 57 states already make carjacking a private somebody wanted to have one x number of years ago so that a federal law. Its not a federal law, its just illegal in all the states. Theres real opportunities to give back anything the base closing bill, base closing approach would allow us to do that for federal overcriminalization in the same when we are able to head back a lot of unnecessary military bases that were not part of our National Defense but were expensive. Civil Asset Forfeiture, the president tomorrow could solve a lot of the problem by telling them that the feds will not get involved theres a list of whos done good stuff and who hasnt at one of the best states for reform is new mexico. You have to be configured before they can steal your stuff. When they steal your stuff it goes into the state budget, not to the sheriff which is at that instant when the money goes to the guy who was there with a gun taking your stuff. And his immediate friends. Editor go into the general budget because been the only take it is actually a bad idea and it doesnt enrich them. But in new mexico the local cops can go and bring defense and on the bust and then the money goes to the federal government. It comes back and the administration stop that temporarily announce back open again and that is a pipeline for ground to civil Asset Forfeiture in the states. The president could stop that tomorrow. We really need, even without the law, but a law would be helpful. To the point of civil Asset Forfeiture, and which are legal background, we do believe its immoral hazard for the staff at the local apple but my question for you is at the federal level is it proper for the federal government to chime in . Is a constitutional, isnt civil rights that congress can talk about a standard for civil Asset Forfeiture that they believe this consistent with the constitution or without the overstepping for congress to get involved . I suspect most people dont know the history of civil Asset Forfeiture, but if you have ever watched miami vice in the early 80s, you would not the little speedboats would run drugs up from mexico, at least thats how it was always portrayed on tv. So hey, lets stop the drug flow by taking away the property of the bad guys. Seemed like a great idea, but instead of asking who is indicted when some of these assets are taken because nobody is indicted, but what, what is guilty of the crime . The asset is. Its the 40,000 in cash that that young man had that is apparently guilty of a crime. So is a constitutional . I didnt know that votes in cash had constitutional rights. But the owners of those properties have constitutional rights, and their rights to property are being violated. But also kind of go back and address some of the broad issues you address. The sentencing reform, judge pryor has been a real leader instancing before. He was included among the 11 candidates that donald trump might select for obama to the Supreme Court if trump were ever elected president judge pryor has done a great job. When he was in the stake him before he was a federal judge, hes the one guy who let on sentencing reform. Alexis de tocqueville explained a long ago that what makes america truly unique is a voluntary society, how we take care of each other voluntarily. And, frankly, here is where, this is an area where conservatives and american or broadly have really dropped the ball. Alleges society. I would encourage everybody in this room to engage in their communities more. Thats our nation requires ever going to be a healthy, prosperous nation. In terms of confinement, theres one bad idea floating around, which is for the federal government to take over the bail bond program. Our constitution contemplates that theyll have to set up the appropriate rate and not too high to but the idea that government would take over this function is a privatesector function, thats a bad idea. But while some is incarcerated, maybe ill go back to my law school express one last time. In my criminal law class i was asked what is the purpose of prison . I was thinking its to lock up bad people. Know, is a retribution . Is a to give even . Or is it rehabilitation . What is a . I think as a nation we need to, its just a incontrovertible. We need a much, much better job. Actually hoping people become productive members of society again. Derek, what do members need to see, which issues with the clock running in this congress and this president from right on crimes perspective, what elements do you think would be most impactful of a was just mention . I would say all of the above. Specifically, you know, i really think that we are at a watershed moment on the issues that you mentioned as far as sentencing. I do after your sentiment as wilwell but we do need to do a better job of when we abolished federal parole if one isnt look out tough on crime we are. Not only tough on crime, we are also incredibly reckless. I think several exams have underscored that point actually. I think the civil Asset Forfeiture debate, to grover and dans point both, that is something that the federal government does provide an end around for the cause all sorts of trouble and takes away from the Actual Police powers of the state, and thats something that needs to be a dress. However, if you look to the federal government expected to be addressed i think is a bit too far. What you need to do to combat that is you need state in the budget reforms can put handcuffs, pun intended, on their Law Enforcement agencies indeed with equitable sharing agreements. They could run these particular agreements to the attorney general, just one possible example of many. That really gets away from offering that even as a legislator said was to protect our citizens Property Rights this way, allowing of individuals to go around it. Thank you. We are going to bring this part of our discussion to a close momentarily but to set the stage for your questions i think the panel as we all know from our experience in working these issues with members of congress but also in the states that there are only two ways to affect the number of people that are growing and the federal prison system. And that is the number that you sent into the prison and the number that you let out of prison. We didnt get a chance to talk much about the postrelease but i did want to be clear in my comments that that is going not prominent in any of the congressional bills that are being discussed. You can ask questions related to that, but as grover encouraged members of congress, i know we have a number of Staff Members in attendance here today to dust off a criminal task force bill, but i would also encourage the members and the staff to look at what can be done postrelease as prison fellowship, one of the core of what we believe with the criminal Justice System exist for his restoration of those affected by crime and incarceration. You cant actually do that is when somebody pays back their debt are really truthfully they are not allowed to pay back their debt in america today. So with that, joe. State your name. Im director of the campaign for the first sentencing. Thank you to you for being and for your leadership on these important issues. I am wondering what each of your organizations would advise are both our presumptive nominee for president on what their priorities should be on criminal Justice Reform in the coming years . We are going, i did set the stage well enough so i will set it now. We have about 20 more minutes together and we want to get to as many people in the audience as possible. So where possible, direct it to one of the panelists and if it is to all of us im going ask it be short but we can just say pass your prison fellowship believes, thank you for the question, believes that each human being is created in the image of god. And that each life is of equal value and you too can. And my friends on the left and secular world that iran and criminal Justice Reform create that with fairness as a people are created equal. When you talk about presumption of different things, i guess i think its something that laws have been passed to these the prosecution and the processing of people almost in a spreadsheet manner in america which is not consistent with American Values of each life having a value. Before we take away someones life, liberty, pursuit of happiness, that we should slow ourselves down enough to take the individual case seriously. Im not trying to offer come again we are not endorsing specific things on this panel, sweeping legislation to im saying thats the corner we should fight out of and we should go as far as we can. This is something the government should be in the business of doing but it should not reduce the value of the people that are going before this process for efficiency. Does anybody else want to chime in on this one . Maybe one or two sentences. At the federal level 90 of the instances of prosecutorial misconduct come out of me just as yet only 10 of the prosecutors in the u. S. Government worked out of the main justice. So the next president of the United States i would hope there attorney general would take control of that office a few blocks away, get control of it. The state level i dont update but there may be some instances where people are trying to at the expense of peoples liberty. Thank you. Janice, im president at justice center. I would like to ask grover this. What are we doing about our judges with a 10,000 people who go to jail illegal. I was illegally jailed and tortured in the city of alexandria. I snuck out documents to get up at 14 days in solitary confinement. Theres a with me to go to all of my complaints have been ignored. Our judges are running wild is like the wild, wild west for the. Nobody is policing them. I want to know what you think can be done. We seem to keep thinking theres a conflict of interest to hold them accountable but we have three judges who have retired early that we will all pay for, especially Richard Roberts in d. C. Who raped a 16 year old. We are going to all pay for him to retire. To the issue, there are real challenges. Ive heard stories of judicial abuse and im not sure what the best either legislative approach is but we need to look at all. We shouldnt go prosecutors are always right. We shouldnt go for judges always right. We shouldnt of the defendant is always right. And too often different individuals or the whole system takes the position prosecutors never make a mistake or judges never make mistakes. I dont know the answer to your question but we have to focus on it. One thing i would bring up is in texas with a case involving a judgment who was wrongfully incarcerated for 26 years and a judge and prosecutor in in the case of structured dna testing for six years which exonerated him. Dna of a bandanna. Oath of them have been sanctioned by our judicial conduct commission, our state bar of texas. So need to strengthen those sorts of remedies to make sure theres not statute of limitations that you realize someone committed misconduct of wrongfullwrongfully convicting e until many years down the road. Image in solitary confinement. A lot of states have reduced solitary confinement such as maine and colorado. Something to getting rid of it entirely for juveniles but we still have people in texas and new mexico and other states who are discharged directly from solid to confront to the public and thats a practice we needed and then dramatically reduce the number of people in solitary confinement, treated because it has proven to lead to high recidivism once there ultimately released to the public. I am very so pathetic to the situation. I was prosecuted for two and a half years myself at one of three levels of having dismissed the. It is not case law. There is no oversight for prosecutors. They have a point check without a boss. I didnt want you to get [inaudible] i understand. I didnt want to think people to be dismissive of it, but that is for the staff in the room that is curly come is a very serious issue, one that ive lived personally. You can read about in my book, highly functional, but its not currently thing contemplated it is an issue that would be nice for the federal government to look into in the future. I think one of the bigger issues, this will undergird a lot of what the people vote on this panel and in this room believe, is that the reason we do have abuses in the criminal Justice System, at whatever level i whatever functionary is because whether very poorly prescribed i did about the criminal Justice System is supposed to accomplish. Is it supposed to be this force for the state . Should it be the guarantor of rehab and services . So we really need to have a public conversation on what the true role of the criminal justice this. I think, i couldnt at the dance point more forcefully into the pendulum has swung so far that weve gotten into this kneejerk reaction where we are going to say tough on crime, the prospect is always right. I think as you sing by the on this panel, thats starting to go away. This is the political reality of this is become one much more of the liberty consideration as opposed to one of kneejerk policy response. Theres a question that behind you. I really appreciate grover and dan joining us this be the import of these bills. My question is to be concise, we heard from members come specific members, that have issue with retroactivity or any kind of mandatory minimums. What would you say to some of those individuals who think that we shouldnt do reforms to those parts of our criminal Justice System which is what so many people in prison . Dan, do you want to start with that . The question was i think retroactivity and mandatory minimum, so it is really kind of two questions. For both of those questions, i guess i get back to this idea that the presumption has to be that we preserve peoples liberty. Thats where we always have to start. So on retroactivity, whats the goal post is the gold locket as many people as we can, to reach back and grab as many people as we can or is the idea to preserve the rule of law and lockup only people who we really been as committing really heinous things . On mandatory minimums, is the idea to a cookiecutter approach where theres no discretion, where, you know, you check out this box, this box, this box and thats what the result is . That i think lies in the face of the idea that the first presumption is that we have to protect peoples individual rights and their sovereignty. One of the problems they should not consider a persons risk level digital consider what the victim wants which is in many cases restitution. They are surveys of victims. Instead of politicians our study without knowing the facts of the case, theyre substituting their judgment for that of the judge in texas we do a lot of juries distancing. With regard to retroactivity its happenstance whether you committed the crime yesterday or five years ago, and, obviously, a number of states that updating their drug laws to reduce penalties have, in fact, made by the acting and the sky hasnt fallen. Its asia for people to get the job now that its a misdemeanor rather than a felony on the record. I also just believe, to understand i for prosecutors say if you retroactively reduce penalties for Violent Crime, thats tough for me to go to the victim and say gosh, that sense is what we told you once. That i understand, and we can have a discussion about the. Making reductions in drug penalties, for example, i really dont see how anyone could possibly object to that. Look, take a look and see if you think its wise to reform the mandatory minimum unjust to victims as well as to general society. And if it is then retroactivity is not that big a problem but if youre going to decide that youre changing the law, change it back i think makes some sense. If it doesnt make sense to fix the mandatory minimum, i think a lot of them are too long and theres too much rigidity, dont do it. But if it does make sense it makes sense for the kind two years ago as well does two years from now. One more question behind you. Steve johnson here because im 74. I think not because im part of the committee. A short question i think. One of the pieces the legislation that they keep talking about is possibly a constitutional amendment on parents rights. Perhaps nothing is more deprive somebody of a right is to lose a child because the economic position and so one which in many ways is a lifetime if not two or three generational punishment. What is your view of that legislation and does it in chance of getting quote bipartisan support . I just did ask a clarifying question if you are talking that. Being taken away or the child . Fessenden is a middleclass person comes dustin. It takes the child away from the paris despite the apparent intention to raise the child as best he can. I served on the board of directors which supports the amendment. This is a softball i guess. I think its a great idea and i commend your attention and your bosses attention to constitutional amendment parental rights and the pace and put into the constitution the idea that parents have the right to raise their own kids. As the late Justice Scalia said, that ought to be a right like that but there isnt into prostitution and im not going to see it if its not written down. So i think its a good idea to put that into the federal constitution. It does come. I was a hearing in texas death by a woman had gone to joe for a small amount of marijuana and she lost her child. A child was put in some center of the east texas. She couldnt get the child but even after she was discharged. She told me, she testified they said my child is depressed. She said hes depressed because he doesnt have his mother. A lot of the average women in prison, the two neptune and, of course, was mentioned a lot of breadwinners as fathers are tortured as well and their children miss out on their father. This is a huge issue within the criminal Justice System as well. At least one more. You mentioned the leftright coalition in doing sort of criminal Justice Reform work. And my question is that is broad our partisan support in the senate for the semaphore and collection act. My question would be what is message at this point to get senator mcconnell to bring it to the floor . If anything people in this room could be doing to help move that forward . That again, not sticking to the advocacy of a particular bill at this panel. Reporting to this audience, so my understand of what is going on is that there is a very large number of United States senators that do in fact support that legislation just as the various bills in the house. Theres a very large number of members of house of representatives from both parties that support those bills. And the gentleman who asked the question is properly noting what the hurdle is. What does it take to get the leadership in either chamber i would add, to actually move legislation so it would have time to pass before we seek a new congress. I will let others comment on that, but from our view at prison fellowship its the age old issue that congress has a limited number of things that they can bring up to that level. While this is a significant priority to many americans, its competing with other priorities. So to be specific about what would work, what icing work on any number of bills is when people bring in the values part of the discussion and that they are not trying to convince their member of congress on a new set of values but they are trying to remind the members of congress that this is the values that they campaigned on, their own values and its an opportunity to express that. And the second is this is a very real human consequence in that we are talking about increasing Public Safety and reducing crime. And theres nothing more respectful to victims that we can do that to improve the criminal Justice System so we have less crime in america. And the federal government can contribute to that now if in the remainder of this session take steps forward with the right of bills that were available for them and how they express that. And so from there its a traditional advocacy. But as youve seen, this panel was convened to show that the base of folks on one particular side of the isle and much thanks to should be on the top of the agenda and very much believes that this is something leadership should tak take take. Fly with a little one fair, my friends. Think theres a lot of consensus out there on what we can do. There are some of her friends on the hard left who dont like mens rea. I think today may convince them that they do like mens rea and that the rest of the country, not just Hillary Clinton should have mens rea in the laws that they face. The idea that regulations passed by some bureaucrat somewhere never passed by congress dont have mens rea protection. The first lady just was granted it, properly, you know, a lot of proper catchup to know what you were doing. But its very important that mens rea be part of this and those people are standing in the way our standing in the wake of reform. Go talk to them. Again, just to elaborate. What weve heard as public, speaker ryan indicated he would like to bring this to the fore in september and i believe he could have mens rea as part of a bill that would have a huge, passed the house with huge numbers. That would put considerable weight guide in the senate to overcome some of the voices on the other side. Having that huge overwhelming number, i think would bode very well whether its before the election or even in the lameduck session of the biggest challenge, there are very few working days left as all of you know. The house bill, put them all together, that should pass with strong bipartisan support. But in the senate, few people can be obstructive. I would just add that mark and i on this panel, its almost flitted to say but we can claim beltway outsider status because we are in the eye 35 beltway down in austin. But one thing i think you are saying and that hopefully the polling data has come to regard us of stumbling block is, not enough days on the telecom not enough hours in the day or so political insurance, whatever the case may be this is a very, very, very safe issue. And has wrote of the voter base no matter how you slice it up. You see and ideological across the ages, across genders, too. You generally see theres not much of it at all by party affiliation. Itself is a safe issue. May not just put respond to the . The american of the union is hosting se cpac, the annual conference for conservatives. We had a panel on the main stage of cpac of criminal Justice Reform. Some of these philosophical foundational questions so that informed thinking going for you have to expect the sovereignty and dignity of the individuals to presume innocence until proven guilt, these are some bedrock principles that we need to restore as well as the first branch of government. The first branch of government needs to be doing oversight of federal aids and justice. Federal judges have been impeached in the past for wrongdoing. Congress needs to take back its rightful place and we need to return to our foundational principles. Thank you. Joe. Lets thank our panelists, please. [applause] i do want to go back to that last question. A big part of the reason why we help us in the rayburn meeting today is the senate bill has gotten a lot of attention. The house bill looking like its going to move. The house bill is going to move first. The question is when are we going to start moving things over here. I want to thank chairman goodlatte and his staff who helpful and getting us this room. Will is broken into to your life from Federal Reserve board member in Daniel Tarullo on britains decision to exit the European Union and its impact on the Global Economy. Hosted by the wall street journal. Live coverage on cspan2. We will talk appeared the three of us for half an hour and then open the two questions to people here in the audience and also our audience watching on and cspan. You can do it through twitter by hash tag wsjfed. This is our central banking throughout and in our contacts that means on the left side of the range, john is the right. On the wall street journal, we will start on the right. We are just going to get right into it. Lets start with the news. The british voted to leave the European Union. There is a fair amount of turbulence in financial markets. How do you assess how the Global Financial system has absorbed the shock, if you want to use a turn and more specifically how the u. S. Has absorbed it. The Global Financial system was reasonably well prepared for the initial shock. Even though the vote itself was in many quarters, the bank of england had done an enormous amount of work overs team the u. K. Banks to make sure theyre in a viable liquidity position. The u. S. Banks had run internal stress test to try to predict the kinds of developments which they might encounter in the media that are not of the vote. And i think he thought notwithstanding flight to quality in the down position equity market, it was something the Financial System with better able to absorb and in some instances the turbulent in the past. But as people have said from the out that, doubtless just the initial reaction and i think we are all going to have the watch to see over the medium term Macro Economic developments play out. The one thing we can be certain about, theres a good bit of uncertainty as to what the future holds for the precise relationship of the u. K. To the European Union in terms of the kinds of exit agreement that they will negotiate. And when their sons urgency as everyone knows, there is some inhibiting effect upon Investment Decision and maybe household decisions as well. How much of that turns out to be the case, we will just have to see. And i know that Central Banks in the u. K. And inferring for our very much focused on developments in responding is appropriate to developments. In terms of the u. S. , igad, things to this point have gone about what we ask that sort of the medium scenario. Again, that was just the first chapter in development and we will be monitoring Macro Economic development closely as we would in any case. Weve heard the number of officials in the last few days talking about taking a waitandsee attitude. This is the first stage. How long will it take to get your hands around the effects of that particular weeks or months. I dont think we know. And in some sense, the impact of brexit as it transmits to the economy is just going to run into the impact and effect of a lot of other developments as well. For us it will be a matter, as it always is at survey economic developments more broadly. The uncertainty point, you dont know how long that is going to last. Indeed, we dont know the magnitude of the effect. We are pretty sure about the fine, which is that there will be some inhibiting effect, particularly in the u. K. Euro zone on investment and maybe on household behavior. Governor carney has indicated the risks to the economy in the u. K. Has been greased. But none of us really knows the magnitude of it and i doubt there will be a moment where people say okay, brexit is done. It will be something that accumulates over time. Lets talk about the u. S. Backdrop and monetary policies, the two themes people discussed. The fed raised shortterm Interest Rates in december. Weve been talking all year about when youll do it again and keep waiting. What are you going to need to see in this economy to get to a point of comfort to raise Interest Rates again . Let me first say when you use the second person, im taking the second person killer. When you say what do you think about what i need to set. I do not speak for the fact. Only chair yelling on Sharon Yellen speaks for the as a whole. I dont think this is a normalization process and the people some times talk about it using the term normalized or normalization. I dont believe that there is some target that Federal Reserve should be moving towards. What the right level of Interest Rate is dependent upon the manifold or is that arafat and the economy in the short term and over the longterm fiasco for me me, it is a judgment as to how taken a pragmatic look at things, how we can best pursue to do what a price stability. In current circumstances, what does that mean . First, it is worth focusing on a mac among employment goal. The Federal Reserve access went to pursue maximum employment, not the concept of full employment, the maximum employment that is consistent with price stability. I think as weve seen that even though for nine or 10 months now, some people have said we are at or close to full employment. During that period was created eight or 900,000 jobs at the rate essentially still the last month. That tells me that there was more slack in the economy. That tells me that we have the opportunity to create more jobs that is obviously good for those eight or 900 billion americans, almost surely those that in the margins labor force and almost surely could for groups like africanamericans in his panic traditionally with higher unemployment rates. I have looked at this as an opportunity for greater maximum employment in a context moving to the second point in which inflation is not at our stated target, not near our stated target and hasnt been sewed quite some time. This is not an economy thats running high. This is not the late 70s. This is an economy moving forward in a grudge for recovery, modestly above trend for some time now. As i said a moment ago, surely not running high. It is also an economy in which we probably are not dividing us much stimulus as people may think. The initial rate of interest is surely still come come down a good bit precrisis period. Probably because of slow productivity, selling demographic growth, probably the global environment. For all those reasons, we are not as far away. Finally, as many people observe, the risks we face present us with their asymmetric set of tools. Were the economy to pick up more rapidly, which should be a welcome development, we have the tools to respond appropriately. But worth it to slow down, we obviously would face a more limited set of tools. So for all those reasons, for some time now, this is not a brexit proven issue. For some time now, i have thought it was the better course to wait to see more convincing and again that inflation is moving toward and would remain around the 2 target. You dont sound like an individual anywhere near comfortable raising Interest Rates again. Certainly to this point i have not seen that kind of evidence. But i think the audiences benefit, john and i were talking before the session got started about correlations, which may have prevailed for some. In the past which may be our prevailing any more areas labor market relations, things in the market and the like. Under those circumstances, one needs first not to have some sense that there is a normal rate of interest to which we are moving, but also one has to have a sense of being sensitive to do things that do happen and i hope that i will remain expect to remain sensitive to indication that perhaps things have picked up, that things are picking up. If i stopped development suggesting that inflation really was moving core inflation has risen. Risen modestly. It was off of 1. 2 well below where we need to be. I want to be more convinced that the underlying rate of inflation was around 2 . Not simply the fact that oil prices are not declining anymore has taken some of the downward pressure. 12 to 16117 not being. It is a sign as many expected that the removal of the downward pressure with a substantial drop in oil prices would have the core inflation rate coming up somewhat again. But it is not enough to this point to convince me that the rate is headed in a nontransitory way to around 2 . That evidence may well be forthcoming and that is why i know its a bit of a cliche, but we should all mean that. I dont want to say he does see it now. Maybe in three months, maybe in six months. You just have to be sensitive with to meeting. You are not one of the normalization guys. You do probably marked another set governors just use the macroeconomic growth, but issues of financial instability. A lot of people out there say the longterm period of near zero rates create tremendous sensibilities, rex financial markets, distressed asset prices come and express discover difficult. How do you strike the balance. Well, i think you have to separate a positive observation from an armored recommendation. As a matter of fact, the zoologist rate environment that lasts for a long time create conditions that might pose risks to Financial Stability . Did it that way, the answer is probably that there you have to watch, but if you can see the logic of it. That is a different matter from them saying normatively that you should raise rate. If that is the implicit recommendation, that seems to be not to follow. In the first place, if market to regard economic prospects as only modestly moderate going forward, then raising shortterm rates is almost surely going to flatten the yield curve, which generally speaking is not good for financial mediation and in some sense could exacerbate Financial Stability can learn. As i said, the observation is a reasonable basis for paying more attention to Financial Stability issues, but it doesnt translate into therefore raise rate for novelty well. You voted to support the rate increase in december. Were these Financial Stability issues at all in your mind when you voted to support . As he politely said a moment ago because of the regulatory role i play in Financial Stability or issues to regulate thinking about Financial Stability concerns, i didnt think then and i dont think now that the kind of phenomena or developments that are contemplated in jakes question are working in a manner that causes immediate concerns. Youre not worried about bubbles. No, im not. They will always destroyed norms. Everyone should be a little bit humble that you can identify a niche market where he prices soared about of line and you can then dial it back. What we should look at is whether a broad range of asset first price is significantly above historic norms. But secondly, when you think about Financial Stability, you really want to look at how the assets are being funded because to the degree that there is leverage, particularly shortterm leverage, youve got raider risks. To the degree that there isnt, there may be money lost and assets proved not to have the value that the market assigns to them. But that is the way the market economy supposed to function. Moving into the regulatory arena, which describes to the most powerful man. Trying to sundays papers. My question for you, this is a judgment that not only exists in our reporting, and that among a lot of people are taking communities. My question for you to should a regulator in washington be the most powerful man in banking . I was semifacetious, but semi serious trying to come up with these things to make stories interesting. To the degree, you know, what weve all gotten to not need. This is the United States government with the three banking regulators, the market regulators, certainly the congress and passing dog frink. All of my colleagues on the board, with loves to a fundamental reform of our financial regulatory system in the wake of a crisis. Perhaps a sheer longevity since id been here since early 2009, my name and dumping more things that have been done because ive been here during that period. Ive been occupying this role. This is not a set of decisions that ive made. This is a set of decisions to close out by the collective judgment by congress, the executive branch, the president who signed the bill and are regulators now that we needed to make a basic set of changes in how we relate to the Financial System. When you take the side of our words and put them into yours and understand where you see the ultimate goal. In that story where he interviewed cummings said, and i quote, in some cases theres guys in Business Model of the cases organization. I dont tank using all the adjustment made when we do stuff like that and leaving the changes in the stress test coming. Theres a further round of adjustments. When did you mean by all that . Just what i said and what you quoted. Firms have already made some adjustments. In some cases expand production in the Balance Sheet. In other cases it has been a shift in the composition of asset moving from riskier to laugh riskier assets. I think not just for regulatory reasons, but for market reasons, Business Environment reasons, many financial and to schindlers till in the process of adapting to the regulatory business which they face in 2018 as opposed to the first decade of the 21st century. The adaptations will bury with the firm. At each firm needs to make a judgment and i believe is making a judgment as to how his Business Model should evolve, given the regulatory requirement , particularly on capital and liquidity that have been put in place and as you point out with respect to the stress test, the further changes we are likely to make over the course of the next year. So when you say what exactly did i mean, i dont mean we dont have anything specific in mind. In a sentiment that is the point. The point is we should put in place a set of regulatory requirements which designed to make the firm safer and founder of the financials of moores table. And then allow each for them to make its decisions on its Business Model, working within those regulatory requirements. Help us figure out how far along in the adjustment process we are. 2006, 2007 asserted the endpoint of the utopian idea over the American Banking system. Are we out of five . Are we hadnt ate . I dont think i want to assign a number on the spectrum that certainly we have come a long way since 2005. Youre a big baseball fan. But in an rbn . The thing about baseball as you know is there is no clock. The fifth inning can be the longest inning of the game. 629 youve got that good set of relievers in innings just kind of go by like that. There have been a lot of changes obviously and how much capital has been built up in the system, number one. Number two, and the changes in funding structures at the reduced dependence on shortterm wholesale funding has been something significant. On the capacities of the firm to understand and manage risks, a part which should not be understated. So a lot has happened. I think that the adaptation by firms not just the regulatory requirements, but to the fact they built the capital and are shifting liquidity profile. Id aim that is some being that can probably continue to do and i believe in that interview what i was thinking of specifically was as we incorporate the surcharge into the pose stressed minimum requirement thereby effectively raising Capital Requirements for many if not most of the eight firms. We are talking about the stress test. Systemically important. No acronym will. We should have a buzzer. I think in washington you know what direction youre in based on the acronyms. I suspect that those firms are continuing to make these kinds of decisions based on seeing where the regulatory requirements are going to be. A New Invention scenario where the eight largest banks have met the criteria that are important but remained largely the same in terms of structure and size. I dont know. I think we are going to continue with the Resolution Plan process which has occasioned changes in Structural Organization liquidity and firms. We are going to make these changes in the stress test, which is increase of Capital Requirements. We will continue to Pay Attention for funding. When it comes down to it, and funding as caller to Financial Stability, potential for cap throughout the economy and the annual assessment exercises. We are going to be paying more attention there. So there will be more changes and obviously our team is to get to a point where we can say that the Financial System is relatively speaking stable, safer, sounder than it was a decade ago. You mentioned funding and liquidity. I wonder if he can talk about the most of that has adopted for capital, but liquidity. Those are kind of an experiment to govern what banks have been liquidity. Whether there is some flexibility. If we could define liquidity for people in the room who are not just with the act amends. We will do a little bit. Why do you worry from our point of u. S. Regulators, liquidity can mean a lot of things. It basically means developing capacity to sell an aspect of what you think of something close to its actual value. If you have a liquid market, you should be able to do it quickly. 100 shares of capital stock, you should be able to do that quickly because there are many people operate in the market. If you own a home way out in an area where there are very few homes and very few buyers and sellers, that is something that may take a good while to sell at a price that fairly reflects the values. Thats the basic concept of a quiddity. Why do we as regulators care so much . There is this old aid and financial regulatory circles that liquidity is most abundant when you dont need it and it begins to disappear when you do. If you look at what happened in the runup to the financial crisis, what we thought then was that because there had been a big asset price shock, meaning that investors, market actors didnt know how much mortgagebacked securities were worried because they didnt know how much of mortgages were worried because there is so much concern about housing prices. Under those circumstances, they were not willing to do the buying of the things that they normally would be. When firms were holding ifad that they held because they borrowed money and do a short term. They have to reborrow every seven days, every 30 days others are willing to run the money because they dont know. They are forced meaning they couldnt our money anymore. They owed money. Therefore they sold a lot of these assets. The liquidity it were not quantitative liquidity requirements. We have taxes, but only a qualitative observational liquidity. So what the liquidity coverage ratio and then Stable Funding ratio, which are the two liquidity requirements coming into place are doing is trying to make sure that the largest firms in the u. S. , these are requirement in the largest firms do not get caught in that situation that i described to you, where they have assets that are of longerterm board that are not so black wave and they have liabilities that are shorter term. It really is to match the liquidity of asset of my abilities and therefore to minimize the impact of runs. Cap does work and are you willing, as you see them unfold, adjust them in ways . You know, the exercise as firms went to the process, they were finding that the liquidity coverage ratio requirement have in fact moved them into positions where they were in a better situation to him most dresses and market. We have found in our review of the implementation of lcr that firms are able to and have been able to comply with it. I think they are is a 30 day requirement. I think we feel is that this has been a pot of its contribution to the regulatory structure. I would totally confident that liquidity rate irish both in and out of it to touche and system being that is in the best position . No. There is for a fair amount of work remains to be done somewhat inside financial institutions, but particularly out my. We are seeing a number of funds freezing withdraws in the u. K. Its a little hard for me at a distance to tell how much of that is unusual because as i was using in my example before, individual pieces of real estate are relatively less liquid. But the issues that it raises is one that we have been addressing, we meaning the u. S. Regulators had in addressing. I am sure you have all seen some of the things the fcc is proposing to do with the issue of redemption and then i said managers, which might pose a similar kind of rest because i got to get the funds to reteam the shares. The asset manager may have to engage in some name. It is a real issue, which in this case is something that the sec on the Financial Stability oversight council. An Interagency Group forms. Before returning over to the audience, we want to briefly take it out of the policy into the personal. How much longer are you going to be in this job . Will you be here a year from now . Is it affected by his president . I am doing the job that i was put in place to do and there is a good bet that remains to be done and that is what im working on time as i dont have much more to say than that. We forget to audience questions, youve been very involved in implementing requires that the fed include a vice chair for supervision in place. The white house has not nominated anyone for that position. Is that okay . It certainly has an effect to the way we function. As you know, what the law basically dies is to shift the discussion on designating who it said will coordinate regulation from the fed chair has traditionally been to the president. It doesnt have any powers. It requires the person to be accountable for through the process and through regular testimony. Always available for testimony. Wideawake take questions from the audience. Raise your hand. A couple programming us some questions. We are going to ask you to ask one question. Jake and i reserve the right, but we will withhold the right to governor tarullo to cut you off if questions go on for too long. We want this to be an inclusion conversation. We want as many people get an opportunity to ask the governor questions as possible. Also a reminder that we are taking questions over twitter at wsjfed. Good morning. Aaron from cached on here in washington d. C. Thank you for being here and for doing this. My question is not an action by bank of england governor yesterday where he reduced the capital buffer for you to from 50 basis point back to zero effectively as a means of sprayed monday and in the u. K. And started attacking the notion that there is not a lot of further ammunition they can be as with rate so low and effectively and to spur the economy when he acknowledged that market risks are crystallizing. One could say that is the exact opposite time youd want to reduce the countercyclical backer. The i think its a very good question and its probably worth, if you guys dont mind, given the little contact about acronyms to understand. The argument as you know has been there needs to be much more capital than there was prior to the crisis because you need funds with big losses. They were unable to find in no small part as the capital was so low. That has been in the u. S. , cert in the u. K. And more generally and the national. The questioner was saying if you want wellcapitalized eggs in a position to land, why would you reduce their Capital Requirements . That seems to remove their capacity to do more lending because they had the capital restraint. While that is the right way to think about service through the Capital Requirement and the reason to get capital up, particularly in nonstraight times in the countercyclical capital buffer is a specific innovation that was put in place in the aftermath of the crisis, which permit the National Authorities in the u. K. At the bank of england to decide that in some environments where there is some asset market in order to make sure that the bank will be more resilient if things turn in the market. At least in the margin, perhaps due disincentive by some of that additional monday. It was designed specifically to be reactive to the currently prevailing conditions through the cycle capital. The bank of england has been among the First National authority of the National Authority to use it. They had already created a positive countercyclical Capital Requirement. Ours is just zero. But the bank of england did yesterday was to say we dialogue requirement when we are today. And we thought it was too much activity inside the markets. Under the postbrexit markets, we are going to remove the requirement that had been put in place. I think it is important to distinguish the use of the countercyclical buffer by saying we will reduce Capital Requirements. Brien tracey from the journal wrote a story today in which he quoted an academic essay misses very interesting. The first time its turned down. Now we will see if it works. Everyone will be watching that. What is your exit patient . It depends. When banks are wellcapitalized already and they feel comfortable making the landing, the reduction of the countercyclical capital buffer could have a salutary effect if there is demand for the love. Erases the question of whether reducing some of the x but patient and more broadly regulatory requirements that they are up against and helps burlington economic growth. This is sent a new here quite regularly that the Regulatory Burden is too great and is holding back landing in output. What i hear much of the time and some dude with which i agree is that Capital Requirements for smaller institutions in the united state due to be simpler than they are. Our small banks are very well capital small banks are very wellcapitalized. We do have a set of Capital Requirements more complicated than they need to be. I dont think that capital constrained is the reason why we dont have more lending. First off, blending has been increased in the u. S. In recent years, but increasing obviously more than gdp. I think back to the degree more lending is not taking place, it is still a demand story. People not seeing reason to have investment in capacity to make sure the demand is there. Gentleman in the front row. I know the fed is not contemplating over the moment, but it will move to the future, how do you think about the effect of being Balance Sheet and the health of the Financial System . First begin by restating the primacy had at the beginning of the question that we are not thinking about negative Interest Rates. Chair yellen has made that very clear. On the issue of what would have been for negative Interest Rates to come into being whether or not the Central Banks own actions, our stress test this year for the proposition. What we found was by and large the financial and editions of the United States are quite wellpositioned to manage the challenges that come with negative Interest Rate. Somebody had a banker saying we learned a little bit about how we need to function operationally. But in terms of the lapses that would be absorbed, we have seen of course depending on the circumstance is, but that is sent in with tested for and that is why we do different scenarios in the press test every year. Is to get a microphone, i want to remind our audience watching a on the journal or cspan that you can tweet out question and the colleagues at the table here will read them. We want to encourage the entire viewing audience. Victoria guido with politico. The fed is working on a boat with a ownership of physical commodities. I was wondering if you could talk about your latest thinking on mac, with the most important priorities are to deal with that and whether you think its important to get rid of the grandfather in position. The things that we can address through regulation really go to the relative risk associated with the possession and trading of physical commodities and that is the thing we will be addressing in the rule. The answer is yes to the second part of your question, which is the Graham Leach Bliley act back in 1999 had an interestingly drawn position, which is laid exempted institutions currently engaged in the commodity activities that might have some point in the future become a holding come to and thereby has given a grandfathered rate to a couple of turns to engage in a far broader range of commodities related activities to another bank holding come the names. As ive stated before public way, i do think that something which is anomalous in the regulatory system and will be better to face that out. But we do have the capacity for the Capital Requirements with respect to certain entities related to commodities and that is the direction will be headed. Why dont you tell us to have a twitter verse. A couple questions from twitter. Only minor asks if mr. Tarullo can speak to the reasoning for that chairman of Health Financial services with his ratio proposal. Sure. So, the proposals around to substitute for other Capital Requirements, the single leverage ratio requirement. To make sure everybody is on a Common Foundation here, if Capital Requirements can be based either on just the dollar size of the Balance Sheet so you take the amount of capital and divide it by the size of the Balance Sheet, that as leverage ratio. The second is the same number of the numerator, but its just that denominator based on the relative riskiness of the assets in the banks for olio. The idea of the risk way theyd is obviously a portfolio can pose very different dangers if it is composed of a lot of landing a lot of unsecured monday to people with no incomes during as opposed to very save landing that is done by another institution. They may look the same, but the riskiness of different. We have different Capital Requirements. An idea has been to say if you just have a higher leverage you really need now and you need to be meaningful. As a quick followup, their broader point was it built point was it built point was it built by japans delay, chairman of the house Financial Services committee and history bigger divide up or regulation. A lot people, certainly fellow regulators like neil hash kari who say that doddfrank has thousands of pages of stress tests and all proposals and s. To johns point about regulator involved in the new shot of holiday is run. Their view is lets keep it in play. But thats higher capital rates and let the banks decide how to adhere to it rather than go to dan tarullo with parts of their business plan. How do you respond to that . To have a single, simple requirement and to make people comfortable that that requirement would enough to ensure resiliency, it have to be substantially higher than people are talking about. The largest financial institutions, even if they look like traditional monday night editions, they are still pretty complicated entities. Coming to grips with a different kind of risks that they have i. Think its something that we need to expect them to be able to do and we need to have the capacity to monitor. Id say about it too earlier, when it comes to smaller institutions and certainly community banks, indians duchenne under 10 billion, i think we can and should have a capital system, one that looks more like the original basel i limited number of categories. As i said earlier, they are by and large very well capitalized in it cost them in proportional terms a lot more to have to invest even in the reporting of more complicated capital. I just want to ask you to bring it back to the economy and Monetary Policy for a second and quickly try to get back to the audience. The u. K. Is now talking about cutting Interest Rates at their august meeting. Theres a lot of expectation in the mark is that the Japanese Bank of japan may cut Interest Rates as early as this month. Can raising rates at a time when other Central Banks, major Central Banks are in the process of cutting rates to respond to his low growth in their own domestic. I think again the question of whether we should be Holding Rights where they are, all of that depends, obviously axiomatic on the macroeconomic environment that we face, an environment that is affected by the actions about the Central Banks around the world, can certainly have an effect on inflationary situation, disinflationary if other if many other economies have lower rates. I dont think we say that is the way its going to be. We have to make and watch to see. The potential constraint given the disinflationary effect. The constraint when we face constraints, and they are what we observe in the economy. If a series of policy actions, fiscal, monetary, otherwise around the world have a probable effect on the Global Economy in such a way that it affects us, and then sends it constrained, but it no more lesson they constrain them decisions by firms to make investments or not make investments. We had a question over here. Thank you good richard manual from columbia. Governor tarullo columbia threadneedle. My question is the process, i dont know how it do d. Acronym that. The process that this point is so robust, youve done such a great job stretching his organizations and forcing them to realize other sources of risk and how much capital they should hold a gun and. Why at this point arent they allowed to pay out all the capital in excess of the minimum at the end of the stress. Is there a point at which that decision goes entirely back on saddam and they can pay out all of the excess capital. Just to be clear, paying out dividends to shareholders. So, first off, thank you, but i also want to qualify the complement a little bit. We dont account for all risks. That is why we changed the scenario on a yeartoyear basis. We will do so next year again. It is one thing and i really do mean this. Stress tests and regulatory to think in the lobby and their spirit that is one thing. Second, firms are free to submit the capital plan making proposals for distributions that they see fit. If a firm feels that it is in a Strong Capital position, that it has a very good capital process that can adapt to unforeseen developments occur, they can submit that plan and supervise a solid value made it. There is not a prohibition in the regulation. The regulation requires that the firms be in a comfortable minimum position relative to minimum Capital Requirement. There you have some variation in what different firms are doing because they do have different Business Models. They do have different capacities. They knew what their regulations were going to be. So there is nothing that prohibits people from putting in a capital plan. But it does have to be quantitatively and qualitatively good capital plan, a sound capital plan. I think most have continued to think that a continued bill in capital one they can increase distributions is the right path for them for both business and regulatory reasoning. We will go to a question from twitter and then this gentleman in the friend. Thank you. This is from Joshua Hoffman to last if there is consensus that the fed to raise s. I besie president his Bank Regulation agenda is overreach. Just to speak for myself here, throughout paris doddfrank, it during doddfrank, postdoddfrank, they are continuing discussions on what the right set of regulatory needs to confront today to fail, an area i continue to think needs more attention, the funding in and out of the regulatory sector. It is held eight to continue to have discussions that might produce some ideas that havent been produced or developed before. Those of us who are policymakers throughout this discussion need to continue to do the work we been charged with doing, which in our case is increasing capital and put in the stress testing regime in place, pursuing the Resolution Plan, dealing with liquidity issues. Again, people should people in this room talk, academics talk. Robert policy organizations talk. That is a healthy thing to have more discussion and debate and if concrete things emerge that what congress is looking back on the regulators looking out for many process is a good day. Those of us who are actually charged with making policy have to go on and do our jobs as best we can join her other discussions, it will probably continue indefinitely. Relief this discussion at this point as the u. S. Senate is about to gavel in for the day. Today, working on it though that would block funding from sanctuary cities and counties that are local Law Enforcement officials from cooperating with immigration authorities. Centers will take a procedural vote later this afternoon. A vote later on judicial nominations. Members are expected to recess at 12 dirty a clock eastern for their weekly party lunches. Live coverage here on cspan2. The chaplain let us pray. Father, we come to you, the source of our hope and strength. We have recently celebrated americas independence, but each new day seems to bring reminders of how our nation and world are