Putin did this in georgia. He did it in moldova. That went for those who want to look west ward. I think for so long as you do not have offensive weapons along what is the Eastern Europe part assigned to europe, then russia is in a position, if you put offensive weapons, that changes the dynamics for russia. If all youre talking about is a defensive possibility, im not quite sure why that evokes, you know, putins actions. And well before any discussion of nato, the conversation was about ukraine looking towards European Union session more than nato. And i think for putin and his eurasia view, and new russia view. Ukraine is an essential element of that. It is not about defense or concerns. And without ukraine it is difficult to envision the type of new russia. So i dont think it was a mistake to enter into those negotiations. And i dont know which one of us is willing to suppress the aspirations for the same freedoms we enjoy in the United States. Senator menendez, im watching changing parties. Fascinating discussion. Thank you so much for joining us. Appreciate it. Thank you. Well, american Officials Say the the u. S. And cuba will start talks for full diplomatic relations. Theyre looking to open an embassy in savannah in the the coming months. Thats part of an agreement that includes the the releels and three cubans jailed in florida for spying. The the u. S. Says mr. Gross was not a spy. President obama will explain in the afternoon. Cspan will have live coverage of the president s statement at noon eastern. Hell open the phone lines to get your take on that situation. And there is reaction from capitol hill. Senator dick durbin tweets out today, expected announcement of opening the door with coup bar for trade, travel and the exchange of ideas will create a change for cuba. And Lindsey Graham says this is an incredibly bad idea. Well, coming up at 1 00 eastern, well bring you live coverage of a conference on coal as an energy strategy, including its economic competitive neness and viability as an energy source. And. And now coverage of the wall street journal ceo Council Annual meeting with Michael Daniel and the roles of the the government and private sector in preventing Cyber Attacks. This is about half an hour. Good afternoon. I hope youre ready because were going to ask for your participation in the session. Cyber attacks used to rarely be spoken about. But over the past year theyve dominated the headlines. We had major breeches starting with target, home depot and now most recently at sony, as the attacks have grown, confusion has also grown about the relationship between companies and the government and what that should be an how they should Work Together to prevent Cyber Attacks. And here to sort it out is Michael Daniel, special assistant to the president and Cyber Security coordinator for the white house. Michael, is it our imagination, or are the the attacks growing in both frequency and sophistication . Well, they are certainly growing in sophistication. You raise an interesting question about the frequency question. And its one that we debate quite a bit inside the government about whether were seeing an increase in frequency or our ability to detect them. I think its both. The rate of cyber intrusions is growing, but also our ability to detect them. And so thats why this sort of almost looks like exponential growth that were seeing. In terms of their sophistication i actually think its two factors happening. One is they are becoming more technically sophisticated. If you look at the kinds of m malware that we are seeing. They all show a greater degree of sophistication than ever before. But whats more interesting is the organizational sophistication that were seeing. If your image of the hacker that were worried about on the government side is the guy in his pajamas living in the grandmas basement, that could be annoying and a nuisance. But thats not what were worrieded about. Particularly in the criminal world, theyve taken a page out of the Business World and have applied Business Operations and Operational Research ideas to how they do their business. And so organizationally the hackers are much more sophisticated than they were several years ago. And that poses a significant challenge. What role did the state actors play in this . In 2013 they attacked the financial institutions. The russians, the chinese. You had several indictments of chinese firms earlier this year. How close is this link eed to t governments of the countries . Certainly when you look out across the array of Cyber Threats that were facing, you definitely see a significant chunk of them are state sponsored. The dni jim clapper said this in open testimony to congress about the threat that we face from china, from russia, from iran, from north korea, from other major cyber actors. And i would say in many cases the line is blurred between those individuals that are carrying out and operating for criminal organizations, those operating on behalf of governments, some that are operating with a wink and a nod from their government. And so its a very sort of, i would say rather than being discreet camps, what you have is a continue continuum of actors, like anonymous and things like that, all the way up through state level actors. And its not sharp divisions for any of them. Can we talk about china . You were at another conference happening today in washington. Joint clearance between microsoft and the chinese government. What was your message to the chi niz officials there . Sure. I mean, i think that the key core part of our message an our relationship with china is were at a very interesting point in our relationship with china. And im sure that we were listening to ambassador rices remarks backstage. And clearly thats an incredibly important relationship for the United States. But part of the message that we were talking about is the behaviors were seeing is putting us in a position where its raising friction in the bilateral relationship with them. And weve had really important recent successes. Including the Climate Change agreements, confidence Building Measures that have been put in place. Its clear we can operate and get things done with china. In the Cyber Security area, thats a great challenge right now. Are you convinceded the government itself is involved . Its clear were not getting the response we need to have and the conversation we need to have. Its not happening in the way we need for it to be as productive as it could be. We are continuing to search for ways to talk to the chinese government, and you know, weve seen promising openings recently, and i very much am sbregsed in following up on that. But this is a particularly challenging issue for us, and its one in which i expect there to be continued disagreements for some time and some friction, but i dont think that means that we shouldnt look for areas that we can make progress in. You know, for example, as china grows in its wealth and in its st stature in the world, it too will become a target of cyber crime and cyber theft. So they have a clear interest in addressing that. And i think thats an area that we can find some Common Ground to Work Together on. I want to move closer to home here. But before i do that, i would like to ask the ceos out there a question. Ment if we could get our first question up here. Has your company suffered a cyber attack over the past 12 months . A, yes. B, no, or c, i dont know. So where are we legislatively as we wait for them to answer . The president issueded an executive order on Cyber Security 2013. The house passed a measure twice. The senate has two weeks to go. Is there any hope of any kind of cyber legislation . Well, one of the things ive learned in 20 years in washington is i dont make prognostications about what congress will do or not do. But i do think we continue to work very hard to get legislation passed. I do think theres a possibility that congress could reach an agreement on less controversial pieces of legislation that theyve been working on. I do have to say that its hard for me to see exactly how they get to closure on several of the more controversial pieces. And we were working with them as closely as possible to make that happen. Okay, in terms of the percentages here, wow, 65 of the ceos say their company has suffered an attack in the past 2 months and 23 no. Talking to ceos over dinner last night, theres a sense they might get a call from the government if theyre being attacked. But pretty much theyre left on their own to defend themselves. Would you agree with that assessment . I dont think thats entirely right. I mean, i think one of the fundamental issues that we have to come to grips with when we talk about what were doing in Cyber Security, theres a fundamental nature of cyberspace. And one of the issues that i frequently face is a discussion about roles and responsibilities and who is responsible for wha. In Cyber Security. And one of the key things i think emerges, the argument you will often hear people make is that cyberspace has no borders. And that information just sort of freely swashs around the globe. And i would argue thats not entirely accurate. Cyberspace has a lot of borders. We have routers and firewalls and peering points and all sorts of edges and boundaries to networks. I would argue what cyberspace lacks is an interior. And the reason i go through this is it means our traditional model for security, where we assign the federal government the role of Border Security for example doesnt work when you try to map the physical world into cyberspace. Theres no iowa in cyberspace. Theres no interior to the country in cyberspace in that way. Its like it took everybody in the United States and made them live on the the rio grande so now Cyber Security is a mission inherently shared between the government so that means we have to work out some new partnerships between the the government and industry. And these relationships are not going to be the traditional regulatory relationships that weve had. Theyre not going to be the the traditional contractual relationships. So what is it . And that is one of the defining challenges we will face over the next three or four years. And actually working out what that relationship is going to be. And so we are trying on the government side to put in place the mechanisms to interface much better with the private sector. And build up our capability in the department of Homeland Security to interface with our critical infrastructure. Within the department of treasury to interface with the Financial Sector. With epa for the water sector, for example. And republican build the connections on the back end of the government to enable us to operate more effectively with the private sector, and i really think that Going Forward this is going to be something that were going to have to do in very deep partnership with our private sector. How can you address the liability issue . Home depot suffered a major breach. They are subject to 44 civil lawsuits. Dozens of f investigations. Theres an issue of trust that seems to need to be addressed here. Sure. Although i would like to distinguish between the investigations where we are trying to figure out what happened and how to do attribution of the intruders, which is still a difficult task. Versus investigations into wrongdoing itself. You know, i think the liability question is one that is, for me as a Public Policy geek, someone who spent a long time in the federal government. Its a thorny problem of how you get the right amount of Liability Protection to encourage companies to engage in the kind of behaviors that we want. Without actually having it be so broad that you incur a moral hazard in that space. Its proved challenging to its proved challenging to write in our discussions with the hill. I do think we are working on a couple of ore efforts. We are really trying to get the insurance mark market. We are working with treasury and the Insurance Companies to figure out how to get the Cyber Insurance market to really take off. Its there but some of the data has been lacking. The underwriting has been lacking. And were working on ways to try to improve that. So one of the ways we would like to deal with that is to have a much more robust market. Should government do more to protect companies from Cyber Attacks by sharing more information about threats . A, yes. B, no. One question as theyre voting. If the senate doesnt pass a cyber bill in the next two weeks, is there a fear that youre going to have to essentially start over . Well, in some ways give tennessee way the legislative cycle works, we wont be starting from scratch. And so we will certainly look to build on our previous work in this area. Okay. Well, this is a pretty resounding 97 would like the government to do more. One of the the elephants in the room here is Edward Snowden in the nsa. We were discussing backstage. The president s executive order in 2013 and snowdens disclosures in june of that year. How much more difficult has ma made it . In terms of which player should be the head agency in dealing with the private sector. So theres no question that the snowden disclosures made our lives more difficult in this space. The degree to which it on the level of the sheer bureaucratic level of the amount of time and effort it took senior levels of the government that meant they werent spending time on other issues. That alone is something that caused damage to us. So what was interesting to me is, for example, is that it did not derail if derailment of the Cyber Security framework best practices and standards. That in fact industry participation in that process, if anything, grew after that. And many more companies became involved in building that framework. As we really look at how the government is sfruktured one of the other lessons weve been taking away is trying to put one agency or element of the federal government in charge is not going to work either. How do you build organizations that are agile and processes agile enough to process that . Its the same in the Business World. Organizations that do more cross cutting teams and things like that. And you had to build into large corporations the ability to work across stove pipes. We have to do the same thing. Were just slower because were the government. But we have to catch up and do the same thing, and i think the same lessons are having needing to be applied in our area as well. So when i look at the teams that we have to deploy to deal with say a major cyber incident. Were going to pull from dhs. Were going to pull from fbi or secret service or law enforcement. Were going to pull from nsa and the Intelligence Community. You need all of those skill sets to really look at what are we doing in terms of network mitigation and Network Defense . Of the investigation . What do we know about the bad guys . We need all of that information to do a good job . Is the nsa playing a smaller role than it did heading into this . I would say no. The other agencies are playing a bigger role and have really increased their capability in many ways. The fbi is much has continued to grow in its capacity in this area. And dhs has really, with the National Cyber integration center, has really stepped up and has a much more robust platform to participate in things. And you have the other agencies. Many of whom didnt realize they were Cyber Security agencies, such as treasury, that have now sort of realizeded the deep importance, you know, i dont think you can get jack lew to give a speech where he doesnt talk about Cyber Security in the Financial Sector right now. So and i would say the same thing is true of the secretary at hhs. Those are two agencies that have become deeply involved in the Cyber Security issues. So youre one of the Many Companies that involved in a cyber attack. Do you cooperate with the government or do you not . What mistakes do you see Companies Make . Theres a bit of a sense that you wont be fined as much if you cooperate with the government. As bad as it is having fbi agents all over the country, its better than trying to hoond l it on their own. I think a couple of things that i can say on that score. We are very much in the government side, from the white house side, we are wanting the to build that partnership with industry. And companies to come and talk to us about whats going on. But even if you dont want to start an investigation having some sort of intersaction with dhs, or the big Cyber Security firm. Theres a plethora of them that are very good. Crowd strirk and others that can also help you think through and make sure that you have your plans in place and you can actually execute on a response and recovery plan. All of those are incredibly important aspects of this. And the most important thing is that Companies Respond proactively and aggressively to cyber intrusions. Do they have a choice whether or not to cooperate . Theres always a choice in that matter. Now sometimes i would say for those in critical infrastructure, we may be more interested in be more pushy in some cases. But theres always that choice. Translator one last question for you before we go to the ceo questions themselves. Cyber security is, a, a problem my company can manage, or b, a bigger problem than my company can manage. And politically this is an interesting question. The democrats and republicans, there are elements of each party very, very reluctant, to really push this legislation. Can you talk about how youre addressing that . To the Political Landscape in in area is an interesting one that is different, i think, it doesnt fall neatly along party lines in many ways. And the issues related to how you handle the privacy concerns, how exactly who should do what in the government. There are a lot of different opinions, and i think that trying to work our way through sort of the very complex issues around this are quite challenging. Part of it is the multidimensional nature of the Cyber Security. Its not a National Security issue. Its not just an economic issue. Its not just a privacy issue. We cant neatly bucket it, and that has always going to make it more politically challenging. Okay, i would like to open it up to questions for the crowd. Yes, please. Right here. 60 minutes about the problems with the irs. I filed my tax return on the 15th. Someone had already filed it. I dont know how they did it. Did you get a return . Thats all that matter edmatter. Did you get a refund . No. Just interesteded. And its happened to a few people. Sure. I mean, i think theres no questions that one of the lessons that we have certainly learned over the last couple of years has been that no part of the federal government and in fact no part of our economy is immune to the cyber threat. And i think that if i compare to this when i first started working on the cyber issues really deeply, my biggest challenge was convincing people that this was a problem that anybody needed to Pay Attention to, that we needed to spend money on. I dont have that problem now. Which is both good and bad. The good parent is now the conversation shifted to what do i do about it. And i think on the government side, certainly the irs is an example. Be u the others where we really have to take a hard look at how we are doing the Cyber Security and really starting to think through the full array of how you do endtoend security and not ruling about the fireball and other things at the perimeter. But really thinking about the whole life cycle of the intrusion so youre looking at all the different ways to break where the intruder is trying to do their job. And flipping the intrusion life cycle around on them. Its a very hashd problem. Its one that were working very hard on. Can i ask the answers to that last question be put on the screen. I think that was really quite interesting. So Cyber Security is a problem my country can manage. Half of the ceos say i can manage it. Half say that they cant manage it. That its a bigger problem than i can handle. What do you make of those in you remembers . Is that second half, the half that says i think my problem, you know, the first one, that my company can manage, is over confidence, or is it a statement that i dont want the government in my closet . In my business. Well, it could be a little bit of both. Although i will say in many ways the multidimensional nature of the problem that makes it so fascinating. In many ways much of what much of what needs to be done are things that have to occur at the torganizational level. If you in fact look at the fact that the bad guys usually get in through vulnerabilities that we know about, that we know how to fix. You can make the bad guys like really difficult. If youre just doing basic things like maintaining your doing a good job on patch management, for example. Keeping your software up to date. That wont keep out the really sophisticated bad guys. What you may be also seeing is a difference between those who who have been the targets of or the more sophisticateded threats versus those that face the pedestrian threats easier to defend against. Zblf so i should have added a third ponlt. Not that theyre overconfident but theyre getting good enough at managing it. Yes. Other questions. Yes, please. At the top. Can we get a microphone up there . Ted craver. Were this in the international business. And you talked a lot about prevention and what you do in a more sophisticated forms of intrusion. Like many things that hit critical infrastructure, how will you respond to tin evidentable is very much i would be curious for your comments on how we actually respond and how the Government Industry Partnership really shows up in that period of time. Sure. Ft so one thing i can say, if you look at the cyber frakwork. It lays out five broad tasks that you really have to do in Cyber Security. You actually have to identify your information that you want to protect. Which is much harder thing than most people realize. I cannot tell you how many times ive had organizations go through that exercise and come back and say we thought we knew what we cared about but it turns out we didnt know until we did that exercise. You have to protect the intruder. Know when somebody is on your network. You have to be able to respond, and then you have to be able to recover. Its that full speck truck of capability that were interested in. Building not just one piece of the building blocks. And what you care about as a company affects how you think about that. From the governments side, one thing we diskored is theres some instances of day that we want to protect from manipulation. It will ultimately be public. Were not concerned about people seeing it. What were really concerned about is that nobody can change it. That has an impact on how we protect it, how we respond to it and how we recover if we find out we have an intrusion. I would argue what were trying to do in the electric sector is a really good example where doe has been very working very hard with that sector to actually look at and how do we bring in, for example, the lessons of resillans from how we get with the physical. Can we build much call aid agreements in cyberspace . The so when theres a storm in one part of the country, you surge crews there. Those are the kinds of efforts that were looking at. And can the government facilitate those partnerships. Last questions. Yes, please. Right here. Post snowden, theres an influence that swept the world, right . Not just in china, but also through europe and other parts of the world as well. What steps do you feel the government needs to take as well as restore fears of Cyber Security . I think those forces were at play before snowden came onto the scene. Ch that those disclosures certainly accelerate ed some of those trends. I think that a large part of what weve been trying to do is to really focus on on in essence, the phrase i use is doubling down. And really expanding out the participation in that model. What has been interesting to me is for example, i was at the south hollow conference back last april. What was astounding to me was how isolated the voices really were that were calling for enormous state control over the internet. And there were differences of opinion, yes. But the resounding support that came out from all sorts of places around the world that supported that model was actually quite heartening for us. And i think weve been trying to capitalize on that momentum and build up and really support that. There are other efforts we need to do more of. More capacity bandage in other parts of the world. We need to work with other governments to figure out what their needs are so they can help build the economy in latin america and Southeast Asia so they have a greater stake in that internet. And i think the other piece of it as we saw with what happened in brazil with some of their legislation, once the brazilian Business Community, particularly the financial community, went and started having discussions with the congress about what the legislation would mean for them domestically, that legislation went in a very different direction. And i think energizing the Business Community more broadly around the world is a piece of what were trying to do. So were out of time. But let me slip in one last question that i got. Just a minute to answer this. How can companies, universities and others who have been targeteded help . Sure. I think that by continuing to discuss this issue with your peers and with your colleagues and also within your own organizations. Cyber security is not an issue you can relegate to the geek in the closet. This is something that must be dealt with as a leadership and ceo level issue. Excellent. Thank you so much. Thank you very much. Thanks, rebecca, as well. Some news today that alan gross has landed in the u. S. The Associated Press reporting the United States and cuba has agreed to open economic and travel tie ls. Cubans released mr. Gross in the exchange for the freeing of three cubans who were jailed in the u. S. The Associated Press announcing this follows more than a year of seek retalks. U poep francis sent separate letters to president obama and castro urging them to restart relations. President obama and cuban president castro were to separately address the the nations around noon today. The first president ial level discussions between the u. S. And cuba since 1961. Cspan will have live coverage of president obamas remarks beginning at noon eastern followed by your phone calls on relations with cuba. And tom says looking forward to hearing the president talk about normalizing relations with cuba. Great opportunity for new mexico and our nation. It says lets be clear. This was a swap of convicted spies for an innocent american. Trading mr. Gross for three convicted criminals sets an extremely dangerous precedent and may invite them to use american overseas as bargaining chips. I fear todays actions will put at risk thousands of americans who Work Overseas to provide humanitarian services. And another says this is long overdue. Improved diplomatic and economic relationships would benefit cuba and the United States. At 1 00 eastern, a live conch on coal as an energy strategy. Its hosted be i the center for strategic and International Studies in washington. That starts at 1 00 p. M. Eastern. This week, what she perceives as hypocrisy of liberals on their war on rhetoric. What is your problem of ted kennedy . Well, it goes back to like i said where the idea for the book came from was the 2012 Dnc Convention when they were showing a tribute video to him because he had passed away. And portraying him as a womens rights champion when he left a young woman to drown in his car, and if he had not gone back for nine hours and tried to save his own blind, she would have probably survived. And you cant do an entire video at a convention claiming to be preaching and fighting about the war on women and glorifying that. Sunday night at 8 00 eastern and pacific on cspans q a. And were airing one program from each year, starting december 22nd at 7 00 p. M. Eastern on cspan. Ment. With live coverage of the u. S. House on cspan and the senate on cspan 2, we compliment that by showing you the most relevant hearings. And then on weekends cspan 3 is the home to American History tv and programs that tell our nations story. The civil wars 150th an anniversary. American art fikts. Touring museums and Historic Sites to discover what the arti facts reveal. The presidency, looking at policies and legacies of our commander in cheer. And our new series, real america, featuring educational films from the 1930s through the 70s. Watch us in hd. Like us on facebook and follow us on twitter. And now retired general Stanley Mcchrystal and the former director Michael Flynn on leadership efforts learned from the war in afghanistan. This half hour discussion was part of the wall street journals ceo Council Annual meeting. Checking for lights. Were going to talk about something now thats of great interest to coe oz. Thats leadership. Well do this in the context of what is going on now in afghanistan and iraq. And we have two just excellent people to talk about those two topics with. General Michael Flynn and general Stanley Mcchrystal and their bios are in the programs. Leadership is something the military develop in its people and the military is seen as a place where leadership skills are honed and theres great deal of expertise. And general, you are now out on the stump with these lessons. Youre teaching at yale university, of course, on leadership. Youre speaking to a number of these ceos about youre coaching them on leadership. Can you tell us what they are doing right and what they are doing wrong . Thats a loaded question. What i see is sort of the same thing that i saw in the military, and that is you rise to a senior level and you start to focus on strategy, which is difficult and important, but at the end of the day, what i find the biggest problem is an organization can get the strategy right but then cant execute it. Were right near the battle of first bull run, general mcdowell commanded it, and if you actually look at the plan, they had a pretty good plan, but he didnt have an army that could execute it, and so it made it not a good plan, and so what i see in many firms is a siloing across different parts of geographically dispersed firms, difficulty communicating because of cultural barriers and distance and other things. Problems with Decision Making in terms of people will meet and then not make a decision, or they will make a decision and then it wont be implemented and people sort of wonder what happened. So its the execution of the organization and while that seems mechanical, its really an art. Its not a straight science to that. You cant do checklists and make that work. Its relationships and processes that you set up that make that an organic effective. You say in your writings that a ceo, a real leader shouldnt be a decision maker. They should be a decision facilitator. That sounds like that somebody could be waffling. What do you think joe, what do you think susan . Is that the dna that we now have in a ceo or is that a new model ceo thats going to have in other words, is this a Transitional Group to a new type of ceo necessary to run these big complex companies . I think it has to be. What i found in my own experience and i had joint special Operations Command and mike and i were there. I had grown up as an operator, so my tendency was to make decisions on operations. In reality, things have changed enough where i didnt have the most expertise in doing that and i had a lot of other people who could do that, so what i had to do is i had to pull myself and i found that when i finally got it where i thought it was closer to right, i made very, very few decisions and what i really did was i was sort of the ring master for this constant conversation across the command. That was my contribution, creating an ecosystem where the different parts of the organization spoke to each other and i could force that. Then everything worked fine because if i tried the hierarchical way, they came up and asked me the decisions, by the time it got back down again it was now wrong because the situation had changed too much and we had to upend it that my role had to change significantly. If i could. On that, i think one of the things that we are facing today is the speed in which information is almost bombarding the Decision Making processes that we are faced with. And i think that for me personally, and particularly in the last couple of years, what i kind of describe as trying to maintain a fingertip feel for your organization and the operating environment that they are in. At the same time making sure that everybody understands that we have one big strategy that we are trying to achieve and i think for the ceos of today and tomorrow, they are dealing with a decisionmaking process that has fundamentally changed because of the speed, the volume of information, and how they are able to precisely drive their organization to get them the right type of information while at the same time as what stand is highlighting is the ability to empower the organization down as far as you can to the point where you are almost uncomfortable allowing decisions to be made at a certain level and when you are uncomfortable, you are probably doing the right thing. Youve written about this topic. The speed that information is coming to you. You are in the intelligence business. Intelligence as has formed some of our decisions in the last ten, 15 years. You went so far as to write a paper with two other individuals called fixing intel. This is when you were working with general mcchrystal in afghanistan. And it was very controversial. You really took the intelligence gathering process of the United States, not just the military, but the United States to task and critiqued it openly, and you did something else. You published that paper outside of the military in a thirdparty publicati publication. Tell me about the leadership decision that went into writing that critique to begin with and the decision to put it in a publication outside. It got a lot of attention. Yeah, well i think for me, what we saw was we saw we needed to move much faster, and the Intelligence System in the United States was not responding to the needs, at that time, as fast as we needed it to respond to the needs of essentially 100,000 plus forces, you know, international forces, forward in afghanistan. It just wasnt responding rapidly enough. So the other part it wasnt very clear as to what it was that the Intelligence Community needed to respond to, and so that was the essentially the genesis of what was the concept of the paper and what was in the paper. While outside, and i always tell the story that i published the same month i published in an article in the military journal, on counterthreat financing and how we counter those, and i go no cards and letters on that one. It wasnt tweeted anywhere. There was a means for this center for new American Security which was the organization that we published it through, and they have a voices from the field and what i felt it needed was it needed an immediate sort of cold water, cold bucket of water on the head approach to responding to the needs that we had in a combat environment. And pit it got that response. Oh, it definitely did. Was it worth it in the end . The rabl rousing . Very much so. It change the way the intel the Community Responded to the war fighter. It changed the way and it also caused us to think about other aspects of our Intelligence System that supports our u. S. Government, and frankly were still involved with. I was in the middle of a phone call this morning with some folks talking about some of the impacts we are trying to address and, you know, we can see them. The title of the paper was fixing intel a blueprint for afghanistan. But you could say a blueprint for north africa, south africa, for central america, or cities in this country. General mcchrystal, you talk about, and you have already today, talk about teams, the importance of that kind of organic piece driving Decision Making in companies. What does that mean . What exactly is a team . And how do you talk about teams with executives and generals who are managing tens of thousands of people . When does a team suddenly become a department or all of us have been on teams and we fall in love with the idea were going to make this company a team. The reality is a team is small. Weve all been on sports teams and other things where you can finish each others sentences. You had enough familiarity that you had a common sense of what you were about, identity and what you were trying to do. The problem is thats not scaleable beyond a certain point. So when you get beyond a small group where you have constant interaction, you have to go to something i call team of teams because it cant be one big team because youre not rubbing shoulders with one another. Instead what you do is create a number of small teams but then you got to link them so there is a shared consciousness this is what you did with special operations. Thats exactly right. We had this siloed situation. Everybody sees it from afar and says, great cohes sif force. The reality is they hated each other. There were no diplomatic relations between them. They were too much alike. You know how it was. So, it was competitive and whatnot. We had to leverage those small teams but we had to knit them together into a team of teams and had you to change the culture across that. That became the biggest part of what i did in command, my focus. General flynn, tell us about the leadership style of al qaeda, the taliban, isis. What have we learned about their leadership style . So, were facing an incredibly ideological organization. And in many cases individuals. And as stan just highlighted, a very, you know, sort of i would describe it a bit differently, but were facing a team of teams, if you will. Their belief system is something that most the 9 of the people in this country dont truly understand. They are very adaptive. Extremely adaptive. They have networks and subnetwork and their ability to Leverage Technology should not be taken for granted. Theyre very smart. The leadership, enlightened, in some cases i would say, in how they function and how they connect to each other. How they get their message out. How they internally speak to themselves. How they learn. Very they are a learning organization and an organization that pays very close attention to their failures as well as their successes. They share lessons learned. Right . They share lessons learned. The funny thing is that very little of what they do is truly secret. They publish everything. Theres four, you know, online magazines that they have now. Thousands and thousands of followers in various twitter and social media. Its an interesting organization that is very adaptive, particularly at the top and if theres one thing that i would just offer over the years, weve always sort of gone after the leaders and they knew that right up front and so their ability to nurture subleaders or small groups of Leadership Teams to be able to take on the cause is actually very good. Very good infrastructure. Isis has an oil minister. Thats right. I mean, so they they are organized in a way that wouldnt be unlike some other line and block chart type organization. Its just, of course, how they operate. You received those papers, you and your broader team, received those hard disks and those papers that were taken in abbottabad, from the house that Osama Bin Laden was living in what have you learned about these organizations . They communicated frequently. They definitely viewed what we were doing and they shared what we were doing on a fairly frequent basis. They saw again, as i just talked about, they talked about their failures and how they could correct those failures in order to, you know, basically continue on this with movement that they have. They saw they looked at iraq very hard as an example. Was there a hint of isiss potency . Oh, yeah. They looked at what happened with the failure of al qaeda in iraq, particularly after zarqawi was killed and some of the things he had done. They basically communicated with each other to say, heres the things we need to be doing. And again, they are seeing they see themselves as a longterm capability and a longterm threat. And we should look at it like that. We should not think that they are, you know, flash in the pan at all. General mcchrystal, what leadership lessons should we take from the American Experience in iraq and afghanistan . Yeah, i think there are several. And theyre probably selfevident to most point. The thing s we didnt do Due Diligence before we went in. We didnt take the time to do it. We didnt nurture the experts. Mike talks about this a lot. If we gathered all the pashtun and arabic speakers in the u. S. Military, we could probably fit them on this stage. Yet after world war ii began, after personal harbor, we trained more than 5,000 military members to speak japanese. A difficult we just havent made that level of effort. The other thing that id really point to is, we go with this at different parts of our government and yet everybody wants to keep one foot on the base. Every agency wants to help but they want to protect their equities. And you cant do a complex endeavor like this unless you can build a truly integrated team in which everybody is focused. We had great efforts to try to do that. Made a lot of progress, but it was always difficult. Much more difficult than it should have been. And i think part of that is interpersonal, part of that is organizational equities, part of that is cultures, but it stops or limits our effectiveness to a tremendous degree. Can you sort of see that in the press today. The challenges of building truly Cohesive Teams outside of your cultural spear. If you had general dempsey, general of the joints chief of staff and the president of the United States, president obama now, a new president in two years, if you had the president and the chairman of the joint chiefs of staffs in a room, and it was just the three of you, what would you advise them, from a leadership standpoint, in what to do now in afghanistan . , yeah i mean, the first thing is, its interpersonal relationships on our team. Were not viewed from the outside as being a Cohesive Team. Military in general. Not just military, but it is across state and treasury. I would tell them to go whitewater rafting. Get three cases of beer and go whitewater rafting. It sounds like a joke. But when you get in the National Security council room. You think about, it everyone wears a suit and a dress. And everybody for your first time you think, boy, i made it, im in this room. This is kind of amazing and you look around you are not really a team. You are polite to each other and you talk. Think about it. Were fighting a war. You spend months preparing a football or a Baseball Team for the season above, but yet we take the most senior leaders, we put them in a room and we expect them to be a Cohesive Team to make tough decision and were not doing that. I literally would do things that started to build relationships so that you have something to fall back on when you disagree on the issues. When mike says something and youre sitting across the table and you say, i think that totally screwed up but you can go, but you know, i know mike and i know his value set and so theres something to fall back on. I see the same thing in boardrooms for corporations. If they come in periodically, they dont really know each other, theyre not cohesive, youre not apt to get a very effective outcome. I think thats huge. The strategy part is not that hard. Figuring out what to do, i think you can do on a saturday morning. Let me just add to that too because i think this is like critical for damn near anything. Part of what we have to do is we have to take a big step back and look at the relationships and the way weve had those relationships over the last 30, 40, 50 years, and say, are those relationships still solid, are they still sound . Do we have to form new relationships . Do we have to change the way we relate to each other . And this is not just in afghanistan, this is throughout the middle east, this is throughout the asia theater. Us with our allies or us with our allies, our friends, our partners around the world. Internally, as stan highlighted, is exactly right. And the thing i would highlight there is that people need to be better prepared. You need to understand what it is that we are facing and you cant go with up, im being a little pejorative. You cant go with what you see in the headlines. You have to have a much deeper understanding not only in your lane, but you also have to have an understanding of each others, you know, issues that theyre dealing with. And i think that if we are lacking something right now, and we were just, you know, trying to whats the ideology, which direction is al qaeda going, because its more than al qaeda. Its china. Its all of the various competitors that are out there. We have to have a much deeper understanding of sort of whos who out there and really take a hard look at our relationships and say, one, do we want to maintain that relationship or, two, do we want to change that relationship . Change it diplomatically, politically, economically, military to military, whatever. And i think we cant just sit back and again, im generalizing a little bit, but we cant just sit back and accept these guys have always been our friends, theyve always been there for us and theyre always going to be there for us. Thats not true today. You being an expert on those relationships within afghanistan, having run intel for general mcchrystal in afghanistan and now just having completed a term as the head of intelligence for the defense department, what happens now in afghanistan . Were down to about 10,000 troops. The mission of those 10,000 troops seems to be morphing slightly, perhaps be a little bit more active, but 10,000 troops, its a weak president. What happens now in afghanistan . Does it go the way of iraq . Yeah. I think that the threat that we face, and the threats, plural, that we face, theyre all paying very close attention to whats going on in the middle east. Thats a given. Thats something that were aware of. I think that what we really have to begin to help the people of afghanistan do is to understand how they will begin to operate and what responsibilities they are going to have to take on. Its beyond just ashraf ghani, president ghani. It has to do now more with dealing with this change and what we dont want to do. What we dont want to do is we dont want to decrease the confidence of those people in the International Community that just spent a lot of treasure on them. And, actually, when we look at the evolution of what has occurred in that region, in the central asia region of the world, we have to pay very close attention to not just how we feel today, but what that region could potentially be ten years from now. So, thats what we want to happen and want to have happen. The trajectory that were on now, is there is that likely to be the case, that theres somehow a continued cohesiveness to whats going on in afghanistan or does it unravel . Yeah, i think it stays i think for the next couple of years, were probably going to be a bit status quo. I think thats where were going to be. And and afghanistan and president ghani is going to have to step upation bit. Hes trying. Hes doing things to introduce some anticorruption efforts and things like that, but its again, its not something thats going to happen overnight. Its like everything else. It will take time. And, frankly, theres a commitment that we have to have. I think from the International Community, so we allow them to continue to contribute in some way, some fashion, so it doesnt become literally, a pariah kind of state, such as like a somalia became and, frankly, other places on the planet are becoming. Were going to go to questions in just a second but one more question for the two of you about your own personal leadership style. So, general mcchrystal, you had a difficult Rolling Stone article ill say. To contend with it. In it, some of your subordinates were to be found criticizing the administration. General flynn, in your case, we expected it to be a threeyear term at dia. It turned into a twoyear term. Some of the vibe coming out in the coverage is about disagreements on how much change was being asked for and whether the organization was willing to be pushed that far. What is your experience, general mcchrystal and yours, general flynn, about the leadership style of individuals who are rolling the dice, changing the paradigm, wanting to in the good term be change agents in the minds of their critics be rabblerousers, but people who say this isnt working, lets push decisionmaking down, in your case, change the difference between intelligence agencies. What does it say about your own personal leadership style. What have you learned . Why dont you start. First of all, im one thats constantly a learning individual. If theres anything i learned in working for great leaders over my career is maintain your integrity and never compromise your principles. Be prepared to compromise on issues, but not on your principles. And at the same time, as i grew up over the particularly the last decade, but if not the last half of my career, for me it was to see things that were happening around the environments that we are in and a lot of my experience has been as a as Senior Intelligence officer in global organizations, organizations that had global missions. So i saw these changes and i watched the community that i was growing up in, the u. S. Intelligence community, that wasnt changing in the you know, basically, in a way that i felt needed to adapt to this future that we are facing. And i can get into all kinds of details about that. And thats on one hand. On the other hand, its also the things that you see are happening around you, isis, middle east, china and everything going on with this whole snowden affair, as an example, those are things where you take a stand on something and you have to you know, you have to argue your stance and, you know, again, you stick with your with what you believe. And, frankly, at a certain point in time, when, you know, as a soldier you say, you know, roger, i understand where im at and heres my timeline and i step away. General mcchrystal . Mike and i worked together for almost a decade. He used to come into my office at night and tell me how to command. And he was invariably right. We were on the joint staff together and they told me i was going to take command in afghanistan. That night, about 8 00 before we went home, mike came into my office and he said, heres my advice to you. Dont change the way you lead. And i remember that because when you suddenly go to very senior levels, four star, ceo, whatever it is, there are new pressures. And suddenly you think you got to be a different person because you got to be in the political sphere, you got to be in the media sphere more. And so theres this sort of sirens call, should i be something that i havent yet had to be, and what do i do . His advice was something i kept close to my heart the entire time because we went to afghanistan in the summer 2009. It was a very unpopular war back in the states. It was unpopular in europe. It was failing inside afghanistan. So, there was great pressure to, what do you say . Do you say what you really think . Do you say what you really think we must do . Or do you sort of say what you think people want to hear, whats going to play . We made the decision not to do that. We made the decision with fixing intelligence and with the strategic assessment we did, to call it in a way that that i would absolutely comfortable now, still intellectually honest, but thats a lot harder than it seems. There are subtle pressures on you to to adjust what you say and to pull your punches a little bit. But i was happy when we didnt do that. And, obviously, people ask me what i regret . I regret the Rolling Stone article. I dont really regret anything else. I think that if we had not gone at it with that same idea that were going to do if right so we can look ourselves in the mirror later, that id regret that much more. Questions . Yes, right here on the end. Get a microphone up there. We have just a couple of minutes here. So just ask you to keep it short. Okay. Great. First of all, generals, thank you both for your service to the country, and what i think is probably the most honest mission of anyone in this room, protecting this great country, so thank you. Thank you. [ applause ] the question is both of you spoke about leadership and kind of one of the main topics was adjusting to the new world, new environment, turning your leadership style upside down or with the delta force, realizing you were managing a team of teams. But is there a consistency to what a soldier would expect when you arrived at your first post, second post, where that became your consistent message . For me its accountability is one of the words. But is there a consistency thats traveled with you that they would expect when you stepped and talked to them for the very first time . Whats the key message a leader should deliver . For me its values. You must everybody in an Organization Needs to understand what the values of that organization are. And probably the principle value for me is teamwork. And so if i show up to an organization, people know what you know, anybody thats sort of tracked what flynn has done in other places, its going to be to look at the organization and make sure that were ready, not just for today, but for the future, but to get there, i think the principle value for me has always been teamwork. And youll operate as part of a team. I think genuineness and you dont really know that until you are part way through your career, until youve led a few time. The best thing i ever heard is a guy who worked for me, other soldiers would come and ask him whats the deal on him. He responded one time and he said, general mcchrystal is the real deal. And that i think the genuineness was the most important thing because the soldiers will forgive everything. They will forgive you being incompetent, forgive you for making mistakes, forgive you for all that, but they wont forgive you if you pretend to be something youre not. We have one minute. Lets get a microphone right here. Quick question. Thoughts on snowden and what steps need to be taken to reestablish the moral authority of the u. S. Both to its people as well as internationally . Severe damage to the National Security of this country and there just needs to be its back to the things weve been talking about, which is which has to do with relationships. And i think we need to reflect on what kind of relationship we need to have that that the United States needs to have with russia. And sometimes relationships are more important than policies. Right. Shortterm policy things you want sometimes have to be sacrificed to maintain relationships and maintain our credibility in those. I think thats very important. I think the snowden case undermined many, as other actions have. We need to focus an awful lot on that because were going to need that. General flynn, general mcchrystal, thank you very much for your thoughts. Thank you. President obama is speaking now at the white house on new u. S. Policy toward cuba. You can watch that live on our companion network cspan. Allen gross, the american freed after five years in a cuban prison has arrived in the u. S. He was greeted by a congressional delegation, which included Democratic Senate whip dick durbin and members of the intelligence committee. The u. S. And cuba have agreed to reestablish diplomatic relations. That includes the u. S. Reopening an embassy in the capital of havana and highlevel exchanges and visits with the government. The u. S. Is also easing travel bans to cuba, including for family visits, official u. S. Government visits. Tourist travel remains banned. At 1 p. M. Eastern time today here on cspan 3, well bring you live coverage of a conference on coal as an energy strategy. Including its economic competitiveness and viability as an energy resource. U. S. And International Energy Company Representatives will participate in the discussion hosted by the center for strategic and International Studies here in washington, d. C. Here are some of the programs youll find this weekend on the cspan networks. Saturday night at 9 30 on cspan, actor seth rogen discussing politics and humor with daily show cocreator liz winsted. On cspans q the a Katie Pavlich as what she sees as hypocrisy of liberal. Cspan2 on book tvs after words, william deresiewics. And sunday morning before 11 00, book tv visits west lafayette, indiana, to visit several of the citys authors and tour literary sights. On American History tv on cspan3, saturday at 6 p. M. Eastern, historian damian shells talks about the life of Irish American soldier patrick claiborne. And sunday on real america a 1974 investigative piece by san franciscos krnotv on the history of Police Brutality in neighboring oakland. Find our complete Television Schedule at cspan. Org and let us know what you think about the programs youre watching. Call us at 2026263400. Email us at comments cspan. Org. Or send us a twee tweet cspan comments. Like us on facebook, follow us on twitter. This week on q a author and townhaul. Com author katie pav listen as what she sees as hypocrisy. That is your problem of ted kennedy . Goes back to, like i said, where the idea for this book came from was the 2012 Dnc Convention when they were showing this tribute video to him because he had passed away and portraying him as a womens rights champion when he left a young woman to drown in his car. And if he had not gone back for nine hours and tried to save his own behind, she would have probably survived. And you cant do an entire video at a convention claiming to be preaching and fighting about the war on women and glorify someone like that while not including that part of his life in a video about his womens rights record. Sunday night at 8 p. M. Eastern on cspans q a. Were airing one program from each year starting december 22nd at 7 p. M. Eastern on cspan. Jeb bush announced yesterday that hes officially exploring whether to run for the republican nomination for president in 2016. He sent out this tweet announcing that effort. This morning, washington journal talked to a reporter for about six minutes about whats next in the process and any obstacles ahead. What exactly did jeb bush announce yesterday . I mean, he announced that hes doing what hes been doing, essentially, giving serious consideration to it. But there was a much more official and formal way of doing this. I think it gives very clear signals to his potential supporters that hes learning towards a run, which i think some people have been doubting. And kind of squeezes the field, the more money folks, to give them a little more time. Its not an official declaration that hes a candidate but at the same time, its the biggest, clearest step of any of the major candidates that hes going to give this real thought. And puts a lot of pressure on some of other establishment candidates, especially his friend and ally, marco rubio and chris christie, because all of a sudden theyre looking at a real juggernaut on their side. A lot of folks who might otherwise be willing to support them. It was a move that i think some folks were doubtful he was going to run. Hes really ramped up in the last couple of weeks. I think most were doubtful he would even make a move like this. You mentioned some of the other contenders. What does it mean for lesser known possible candidates, other governors like john kasich from ohio, these folks who were also thinking or others wanted them to jump in. Yeah, i think it also has an event on kasich, possibly scott walker, some of these folks who had been very actively, especially walker, actively courting the big donor class and the Business Class and some of these folks can write very big checks and back a super pac. They would like to see jeb get in. With jeb giving this very serious consideration, he made it very clear thats what hes doing and thats why he did this. It kind of freezes the biggest effect is kind of on the money primary. And i think it will effectively make it very hard for some of these second level candidates who might otherwise have an opening on the more establishment business side. I wouldnt necessarily call it a moderate but the less hard line conservative types to get into this race because now the rationale for why they would run isnt necessarily there if jeb was going to be in the field. What is mr. Bushs calculations here about his chances . I think he sees a real opening. I get the dance that he is interested in being president. Ive never been convinced that he really wanted to run for president. Theres a few different calculations. This shows that hes getting more serious about the latter. And that he is giving serious thought to actually getting into this and undertaking what is essentially a twoyear slog. You know, shots have already been fired. Democrats are already jumping on this. Democratic Group Already had a book out, recirculatinging the jeb bush section saying if he gets in, its going to ruin his name. And democrats are worried about it. I talked to ed rendell, former pennsylvania governor and close ally of hillary clintons, also former Democratic National committee chairman. He was basically saying, hes the one were worried about. He doesnt think he can win the primary, but he said if jeb bush wins the primary, hes the one that really could give us the toughest race in a general election. So, thats something that, yeah, i think democrats are very cognizant of. They spent a lot of their heat targeting romney and saw him as their biggest threat. Youll see them going after jeb bush very early because of that. Cameron joseph, lets take what your your comments about not being able to win the primary. A lot of analysis today in the papers that he would be considered a moderate candidate. But is he really a moderate when you look at his governorship of florida . I mean, he was considered very conservative. He was very conservative. I think it shows two things. I think it shows the issues have moved and it shows the party has moved. And some of the issues that he is not necessarily in mind with the base of his party on two issues, immigration is always something he and his brother and a lot of the bushes break with, more hard line conservatives. He supports hard line comprehensive immigration reform. Common core is his other big thing. That was something widely embraced. Education reforms set by the governors, widely embraced by democrats and republicans, conservative republicans, a few years ago. Hes continued to defend it. Thats something the tea party base really hates now. On most other issues hes very conservative. He cut spending, did a lot of things conservatives love. More conservative than other republicans that have been in there. And so i think its interesting because hes not only emphasizing that yet. Him getting into a more active mode, gives him a bigger platform to talk about what hes actually done. Hespend less time talking abt immigration and two issues he disagrees with the base about the last couple of years. Cameron joseph, you can find his reporting on thehill. Com. Appreciate your time this morning. Thanks for having me on. Federal reserve vice chairman Stanley Fischer was at ceo Council Annual meeting this month. He talked about the Global Economic outlook. Topics included oil supply and surprises and shortterm Interest Rates. This is about a half hour. Good morning, everybody. Thank you, vice chairman fischer for joining us. This is a special treat in addition to being the vice chairman of the fed, mr. Fischer was the former governor of the bank of israel. And the number two at the imf. So, you have a sue neek perspective on the Global Economy and global landscape. People in this room have footprints all over the world. I want to talk to you for starters about the Global Economic back drop. First of all, i think everyone is talking about oil prices. Theyve fallen 25 this year, especially in the last few weeks. What does that tell you about how the Global Economy is may having . Theres clearly a big supply factor, which is the United States in particular. And sort of unexplained increase in libyan output thats taken thats taking place at the moment. But the deep underlying factor is the situation in the United States. People say, well, we still import energy. But we import much less which changes the balance of payments significantly. Thats a big thing. And then the issue of what opec did and its clear the lowcost producers in opec are trying to do what theyve done in the past, which is to get some of the other guys out. And to maintain their market share in this period. So, i think its mainly good for the United States economy. Obviously, not good for the Oil Producers in the United States. And very good on the whole for growth in the United States. I want to talk to you a little about china, the worlds second largest economy. The chinese have experienced almost three years of wholesale price deflation now. By some measures, Consumer Prices are lower in china than they are here in the United States. How serious is chinas capacity problem . Well, chinese i can never figure out how to tell people. Theyre growing at only 7 and then you have to do a reality check. They say they need to grow at Something Like that rate to maintain social peace. Thats their definition. I think that they overexpanded credit in the response to the great recession. And theyre trying to adapt to that now. Theyve got to be fairly tight on credit for a while, although theyve eased up lately. So, they have a problem of adapting to growth, more normal rates for a country doing well at their level of income. And, you know, the historical patent is from japan, from other countries, korea in the past. You you can grow at 10 for many years. The chinese have done it longer than anybody. And then it comes down and eventually you become a normal country. Theyre getting onto that process and the period in which you move down to lower rates of growth is not comfortable. Thats where they are right now. We still have to remind ourselves that china is a factor in the world economy. Growing at 7 now is much more important to China Growing at 10 even ten years ago. The gdp is double in that period, so its adding more to Global Demand now than it was ten years ago, even though its growth rate has slowed down. Christine lagarde said last night in talking about china, chinese authorities deliver. The expectation is that theyre going to deliver a soft landing. Ive become a little suspicious of soft landings having lived through a number of hard landings over the last few years. Do you have confidence that the chinese can deliver a soft landing . Well, i never believe in having full confidence in anybodys ability to work miracles. And theyve done it every time. Im not sure the period around tian men square was such a soft landing but theyve done it with one major crisis since the late 70s, early 80s. And its not going to continue forever, but for 40 years is close to forever in many of our lives. And well see if they can pull it off again. So, its tough. I want to turn our focus to europe. You were mario dragis professor. What advice would you give the student on whether qe. Ill only give advice when asked. Are you his deputy in this id be happy to relay the information. I think he could my goodness. I dont know if thats some kind of a signal about qe. That could be the signal of a hard landing. Not to embarrass anybody but Michele Smith of the fed told me if i did something, she was going to press the fire alarm. And i did. I guess it just happened, michele. I dont think the structure of the markets and the structure of the outstanding debt and the very complicated between nations, distribution of the debt is as easy for them as it was for the fed. But they would make they would do better to do something of that. They wouldnt none of this will solve the problem. There are other aspects that need to be undertaken, including in germany, which needs to let its demand grow more rapidly. But it would certainly make a difference and i suspect theyre heading that way, although i have absolutely no inside information. Before we turn to the u. S. , i want to ask a couple questions of the audience about the Global Economic outlook. If we can get the first question up on the screen. We want to ask you in the audience where youre investing. Let me see. We want to ask where your Company Plans its biggest investment increase in 2015. And i think we should have a few choices up here. Japan, United States, china, euro area, latin america or other. Where are you seeing the biggest increase in your investments in the coming year . So, while we wait for the audience to respond, maybe we could talk a little about japan. It looks like abenomics has hit a bit of a bump. Okay, actually, lets talk about this, because this is very interesting and then we can come back to japan. 77 increase 77 of the audience sees the biggest increase in the United States. Thats a pretty impressive vote of confidence for this economy. Lets ask the next question about where you see the biggest Downside Risk in the world economy. Well give you the same selection. Maybe we could talk about japan while people talk about while ceos make their inputs on Downside Risk. How serious is the stumble that japan has experienced right now . What mistakes have they made . The stumble is serious, but i think what theyre doing is appropriate. That is, postponing further the tax increase and the second half of the tax increase, because these things have a massive impact. It happened in 1997 and we got an absolute rerun like that right now. And karoda putting his foot on the accelerator, which was very near close to the floor, was also a good move in terms of what theyre doing. And i thought well, it didnt say upside risk in japan. It said, where youre investing. Im not sure if i had money, id invest it there. But its better than zero in terms of its prospects for growth. Its zero in this room. Huh . Its zero in this room. No, this is zero now its in the first one it was where youre going to invest. I dont think japan got a single vote. But lets move on to the United States. Theres been a lot of discussion at and around the fed over the last few months about the timing of liftoff, when you start raising shortterm Interest Rates. In particular, this conversation has been driven as unemployment is falling in the United States and the job market is getting better. Can the fed be raising rates at a time when theres so much downward pressure on inflation in the rest of the world . We talked about europe. We talked about china. Japan is also trying to get out of its deflationary funk. What do you do in a situation where the job market is improving but theres still downward pressure on inflation coming into the u. S. From abroad . Well, the question is, what is the impact of foreign slow demand or negative growth on the u. S. Economy . There is such an impact, but its not the main driver of the United States economy. And if unemployment continues to decline, if the labor market continues to strengthen, and if we see some signs of inflation beginning to increase, then the natural thing is to get the Interest Rate up. We call it normalization. Its important to recognize, weve almost got used to thinking that zero is the natural place for the Interest Rate. Its far from it. Furthermore, i think the first step is very important. Interest rates are going to go up. We need to start thinking as well about whats going to happen in the year and years to come. As we go back to a normal situation. Were still far from it. We will be far from it when the Interest Rate rises from the first time. There will be another process of years as we continue to try to return this economy to a normal situation. This is the feds expected scenario of unemployment continuing to fall and inflation. What do you do if unemployment continues to fall or if inflation doesnt move . Can you afford to let things run a little longer at this abnormal state of very low Interest Rates . We can do that and if the inflation is really heading south, we will have to do that. Weve said were datadriven. If were the data drivers, thats what we will do. The most impressive thing about the u. S. Recovery is its gone on now for a long time that the Unemployment Rate keeps declining. The economy is at a growth rate of somewhere at 2 , 2. 25 , 2. 5 , were hoping for 3 . And as that continues, well have to face the problem which we really have, which is productivity growth is way, way down. And thats whats driving the slow growth. Weve got to get to measures which will affect productivity positively. The fed has a meeting coming up in a couple of weeks. Youve been saying the fed has been saying since last march it would keep Interest Rates low for a considerable time. After the Bond Buying Program, the qe program ends. So the Bond Buying Program ended in october. Is it time to stop giving the public that assurance that rates will stay low for a considerable time . I think you saw in the minutes of the last meeting there was some discussion of that, so its clearer that were closer to getting rid of that than we were a few months ago. But it wouldnt be appropriate for me to give you a guess as to what my colleagues and i are going to do at the next meeting. So, maybe you could help us understand what it will mean when you do it. The market takes important signals from small phrases in these fed statements. When you stop saying rates will stay low for a considerable time, what does that mean . Does that mean rates are about to start rising . Were not going to you may assume that were not going to suddenly stop that and not say anything. Just take it out and leave no guidance on what how long Interest Rates will continue or how long, broadly speaking, Interest Rates will continue. As the approach, as the unlikely date nears, the likely situation is, we will use different words, i assume, to describe the situation. We dont want to surprise markets. On the other hand, we cant give precise estimates about dates that we dont know. Thats why the emphasis always goes back to the data and not to the date. You may say, how can you give me how can the markets have a correct date if you dont tell them . Well, they can guess when the data will be in the situation that justifies starting the process of raising the Interest Rates. The first increase is the start of a new process. It is not the end of something that matters any longer. Right. How high do you think rates can go in the cycle . Theres a lot of discussion at the fed and economic circles about the idea were in a period of secular stagnation and Interest Rates dont need to go up so much once this new cycle starts. Well, i mean, the secular stagnation discussion is very interesting. It has two definitions. One of which, i think, everybody can accept. There are signs productivity growth is much slower than it used to be. How do you think of that . Is that temporary or permanent . Well f youre an optimist, and i am, you think were going to get back to something which will take the economy to somewhere closer to 3 growth than to 2 growth because of the many innovations that you see around you all the time. And because of dynamism of this economy. Thats just how much does our knowledge improve, how much does our technology improve. The other view is a more a more dark one, which says that youve got to have negative Interest Rates to get full employment. Thats a different definition. If that were the case, then we couldnt raise the Interest Rate very much. I dont believe thats the case. Our longterm Interest Rates are positive, that is, the current Interest Rate minus expected inflation is positive, so i dont think that the markets think, nor do i think, that we need to operate with a negative Interest Rate over long periods to have a negative real Interest Rate to have full employment. I want to ask you about some of the criticismings that you hear and we all hear about the policies that the fed has employed over the last few years and other Central Banks are now employing, the ecb is now looking at qe. Theres a feeling in this room and outside, the fed that there are concerns, that the qe programs, for instance, have potentially stoked bubbles, asset bubbles in financial markets, that theyve taken governments off the hook for for putting through difficult structural reforms, addressing longrun deficit issues. How do you respond to those two criticisms in particular . One, that the Central Banks are stoking bubbles around the world and that theyre taking other policy ma policymakers off the hook. Let me start with the second. We have a very clear mandate set out in the law. The law is we should use the monetary policies to achieve maximum sustainable employment and stable prices. We cannot be in the position of saying, well, we wont do what we could do, unless you, the politicians do something. That is wholly inappropriate. Weve given a message. Weve been given tools. We have to use them to try and achieve the goals that have been set. So, this taking the governments off the hook would put the fed in a really difficult position of saying to governments around the world, well, yes, we could do that, but were not going to do it until you do the other. Whatever the other thing is. Id much rather they did more infrastructure, investment, for example, but if they dont do, it i dont see that i have that we have any right, according to the law, to say, well, because youre not doing that, were going to reduce the growth rate relative to what it could be. Thats a political game we should be very far from getting into. I dont buy that part at all. The bubbles question is more complicated. In any economy in which the Financial System is whole and sound, operating with zero Interest Rate is likely to produce pressure on asset prices, taking them close to possibly bubble proportions. I have to deal with that in the bank of israel because the Financial System withstood the crisis without any problems. In countries where the Financial System is broken, as it was in the United States in 2008 and 2009, you do not necessarily create bubbles. In particular, i dont think anyone thinks we have a real estate bubble in the United States. If you look at the financial at the Financial Difficulties that lead to crises, financial crises, they typically involve real estate and construction. There are other times there was, of course, the hightech bubble at the turn of the century but basically its real estate. Were very far from there. There are a few areas where risk premium is lower than you would like to see them, but i dont see an overall problem of that sort. So, i think whats been done is that those countries with healthy Financial Systems, norway, hong kong, singapore, israel as well, there are another 10, 12, have had troubles australia, have had trouble with real estate prices that are very high and frequently rising. Other countries which are in the crisis havent had to deal with that problem because the Financial System isnt doing what it would normally do. In the United States were seeing booms and leverage loans, junk bonds, other asset classes. Doesnt that worry you . Look, we cant sit around judging every single asset price and deciding this one the fed will deal with rather than let the market deal with it. And that one well deal with. You have to let the markets basically do their things and to make an overall judgment on the overall level of whats going on. If we see a crisis that looks like a bubble or a boom in a sector, that looks like well have major consequences for the whole economy, we need to intervene. If its something which the markets should be correcting, the markets should correct it. Lets get some questions from the audience. In the meantime, mr. Fischer, were trying to figure out if it was the chinese or u. S. Bond market sending you a signal with the Building Collapse here. Martin sorell, please. I know its difficult to generalize but how would you describe the animal spirits of corporates at the moment . Are they focused on investment and growth . Are they focused on cost . Increasing or decreasing it it . Making Capital Investments . I know its difficult to make an overall generalizations, but could you give a view from your lofty perch . Its not from my lofty perch. This is from my shave this morning where for some reason i actually thought about that. I dont know if were coordinated. But i was away for eight years. Coming back ive been here often, but coming back and living again in the United States, you have a sense of a certain loss of confidence in the society. And its got a whole lot of reasons, which we dont need to go into. I have a slight sense that animal spirits are not as animallike as they used to be. And that will take a while for business to regain confidence in the environment in which it works. And for the society to begin to trust business and banks again. So, i think theres more rebuilding to be done, and i think that is visible in the fact that the level of investment is not as high as you would have expected given Interest Rates, given the rate of employment the low rate of unemployment, relatively low, et cetera. So i have a sense that factor is around. Yes, please, right here. In the back. Just identify yourself, please. Ted craver, edison international. Dr. Fischer, i recently participated in a conversation where the gist of it was the pace of technology, the pace of innovation is occurring at such a rapid rate, much more rapidly than the employment or people can react to that and that that was causing some of the unemployment and income inequality. Id be curious as to your reaction of that. Well, the pace of change looks very rapid. One of the problems with that view is when you look at the data, you dont see it. Theres a famous quote due to my former colleague at m. I. T. When i was there, robert solo, in the early 90s which is the computer revolution is visible everywhere except in the data. And then a few years later, it became evident in the data. I think that were at that stage with regard to the to Current Technology. Whether Current Technology is producing inequality, there is some of that. The rewards to talent have seemed to increase. Theres a lot of fa nom that that one can describe. Let me ask you a question that was sent in on the tablet. The Unemployment Rate in the u. S. For skilled positions is near zero and for unskilled positions remains high. Is it really the feds responsibility to deal with this issue through Monetary Policy rather than congresss responsibility to deal with education, the safety net, et cetera . Well, as long as were we are very aware that were dealing with the overall rate of unemployment. That we dont have tools to discuss this, one or the other. It would be good if the Government Programs to deal with a variety of issues, like the ones youre talking about. So i dont think its the feds i dont know whether its the feds job or not, but theres another factor. The fed doesnt have the tools to deal with the issues youve mentioned. And so it is so it is if those are important to society, and they are, its incumbent on others to do it. If we had the tools, i dont know whether wed try to use them given our mandate, but we dont. Yes, please. Let me get a microphone. I am jim tesch. So the tapering has done tapering. Quantitative easing is over, at least for now, and thats all been met by a big yawn by the bond market. Tenyear notes last i looked are trading at about 2. 25 . Do you find it somewhat surprising that in light of the buying by the fed ending, that Interest Rates in the tenyear and 30year sector of the market have not moved up . Well, its very hard to do controlled experiments, and we almost did one unintentionally when the thenchairman of the fed announced there was going to be an end to tapering. That was a controlled experiment. It was said one day, and the next day you saw the market reactions. It seemed to work in the direction you think didnt happen over the period long period in which many other things have happened in the economy, chinese slow down, japanese, et cetera, and you could go on. So wed expect the term structure to be upward sloping. It is. We expected it will be affected by what the fed does, and i dont think we need at this stage to worry that normal fed policy will not normally fix the Interest Rate. I want to ask you a question before this ends about bank regulation. I know this is important to a lot of people in the room. I want to ask you a broad question and a more specific question. The broad one is that there are a lot of people here who think theres too much of it, and its restraining bank lending. I wonder what you say to them. The more specific question is the fed relies right now very heavily on models through the stress test programs. Econometric models. Why should we have so much confidence that the models will work to find the next source of financial instability . Well, theyre not the same models, for one thing. You know, when i listened to this, you would imagine that the Banking System was working wonderfully well when there was less regulation up to 2007, 2008. Im reminded a little bit about what happens when you visit a country where something has happened, say apartheid has disappeared in south africa. Turns out nobody ever supported aparthe apartheid, at least nobody i ever speak to supported apartheid in south africa. You would think that we didnt have this banking crisis and everything was going well, and then the fed somehow got involved and made a mess. There was a huge mess that had to be cleaned up. There may be too many regulations, there may not be. What a lot of my colleagues say is if we could raise capital rates, Capital Requirements higher, then we could reduce the amount of regulation, but were always operating on a margin where the banks are trying various things to raise their rates of return. Theyve got a lot of money they can use for that purpose. And were assigned the task of trying to maintain Financial Stability. Now, if anybody thinks Financial Stability doesnt matter, you have a very, very short memory. We went through the worst recession since the 1930s, and its only thanks to very courageous actions by hank paulson, by ben bernanke, by tim geithner at the time of the crisis, including doing stress tests on banks when it wasnt clear what the results were going to be, that we got out of it comparatively cheaply. I wouldnt say its cheap because were sitting with a period of were sitting in a period of low growth thats gone on for seven or eight years. Fortunately, growth is going up a little bit. So we need to be reexamining. We dont want to do more examination than necessary. Its difficult. The illusion that the public has that the examiner knows should know everything that the management of the bank knows and should be able to spot every problem in the bank when the management presumably is not interested in having a london whale or Something Like that is an illusion. We have to do our very best, we have to set a framework of regulations that will be supportive of stability of the Banking System, to do that in a very levered framework. Banks are extremely levered. Before the crisis they had about 2 capital. Theyre levered 50 times. You never thought of that. You thought theyre very stable. But Banking Systems are vulnerable, and when they are vulnerable to a loss of confidence, and when the confidence goes, you have a tremendously difficult time putting it back together. Thats what were trying to do. I think the United States Banking System, fortunately, is in a very good shape now, and we will keep on reexamining regulations. I hope that the private sector will make clear which regulations they find are unnecessary to produce Financial Stability and keep letting us know. Events like this, groups, professional groupings, groups of banks, all can have an influence if they write things and explain or talk with us about what it is that needs to be reduced and that can be reduced without creating greater risk of financial instability. With that well have to end. Please join me in thanking stan fischer and john hilsenrath. [ applause ] president barack obama announced today the u. S. Is reestablishing diplomatic relations with cuba and easing restrictions. In a speech today, he thanked the pope who encouraged the two nations to begin talks. The u. S. Is planning to reopen an embassy in havana. While president obama was speaking to the u. S. , cuban president raul castro was speaking to his country. He says he welcomes the restoration of relation was the United States but he says profound differences remain between the u. S. And cuba u. S. As Foreign Policy and human rights and sovereignty. Those will be available in our Video Library at cspan. Org. This week on q a, katy pavlich on what she perceives as the hypocrisy of liberals. What is your problem of ted kennedy . It goes back to like i said where the idea for this book came from was the 2012 Dnc Convention when they were showing this tribute video to him because he had passed away and portraying him as a womens rights champion when he left a young woman to drown in his car, and if he had not gone back for nine hours and tried to save his own behind, she would have probably survived, and you cant do an entire video at a convention claiming to be preaching and fighting about the war on women and glorify someone like that while not including that part of his life in a video about his womens rights record. Sunday night at 8 00 eastern and pacific on cspans q a and to mark ten years of q a were airing one program from each year at 7 00 p. M. Eastern on cspan. With live coverage agecove. Here on cspan3 wee complement that coverage showing you the most relevant public hearings. On weekends cspan3 is the home to American History tv with programs that tell our nations story, including six unique series. The civil wars 1 50th anniversary, visiting battlefields and key events. American art fashth facts. History bookshelf with the bestknown American History writers. The presidency looking at the policies and legacies of our nations commanders in chief. Lectures in history with top College Professors delving into americas past and our new series real america featuring archival government and educational films from the 1930s through the 70s. Created by the cable tv industry and funded by your local cable or satellite provider. Watch us in hd, like us on facebook, and follow us on twitter. Live now to the center for strategic and International Studies here in washington, d. C. , for a Conference Today examining coal as an energy strategy, including its economic competitiveness and viability as an energy resource, the current state of Clean Coal Technology development and how it factors into the Climate Change debate. Representatives from u. S. And International Energy companies will offer their views and well hear from the Deputy Assistant Energy Secretary for clean coal. The event should be getting under way in just a few moments. Live coverage here on cspan3