Motors chair and ceo daniel son he will beer speaking on the state of the audio industry. The house has completed its legislative work for the year but it will gather at 11 00 a. M. For a brief pro forma session. Tw nominationso remain. Several other major items include the budget agreement and the bill setting out the defense policies for next year. Furthermore, we spoke this morning with a capitol hill reporter. Host thank you for joining as. This is the final week in session. Give us what we can see over the next couple of days . Theyre coming into session after he got this afternoon and to work there a couple more nominations with folks at 530 as is fairly normal on monday afternoons. We will see the confirmation of and patterson to be a state as well as the confirmation of jeh johnson to be the secretary of homeland security. That will clear the decks out to. E able to move forward it will limit debate on the budget deal with the Defense Authorization falling a little bit later in the week. Host lets talk about the bills for a second. From what youre hearing, doesnt have enough support of Senate Republicans to pass . It looks like it will. Sunday from ron johnson who said he was going to support it. We heard a number of republicans who have signaled that they may vote for cloture. They would vote to break a potential filibuster which is the vote on which the democrats will really need. Even if they vote against the measure itself. It would be tough to see the. Eal of not going through this is happened before. There have been situations in the past where Minority Leader Mitch Mcconnell has pulled his caucus away from agreements and what has happened is that there are no longer the votes for something that previously a lot of people thought would have. Barring that situation, that deal will get through. The defense bill looks like it will probably be an easier ride at the end of the day. Partly because the Defense Authorization bill has been passed by Congress Every year for 52 years. Is one of these annual traditions. Day, that billhe will get through before the end of the week. There will be some consternation of thee stalling because way the bill basically came to the senate floor and did not have any votes for amendments to speak of. Anytime that happens you get a number of people who are not happy with what is going on. At the end of the day that will get through to. Both measures will be heading to president obamas desk before he leaves for the holidays in hawaii. Last time we spoke harry reid was about to deploy the Nuclear Option to change Senate Procedure rules. I know a lot of Lawmakers Said they thought that would think reese what is already a very bitter partisan divide in congress. Has actually gotten worse . I think it clearly has. The first one being last weeks marathon session. The senate was in session for more than 48 hours continuously. As democrats look to push through a number of nominations, taking advantage of the new procedural rules they set up for themselves, much to the consternation of republicans. I will also give you an anecdote, which is myself and several other reporters were talking to john mccain late last sayingd he basically was he was one of the republicans who was frequently part of these yield making coalitions these was making coalitions, he saying that a lot of the normal dealmaking that would normally go on would not happen. Out for sure when the senate goes to leave for the year whether or not they are routineclear this nominations package that they normally too late at night when very few people are watching, which is largely routine military but routine military if all of that gets jammed up, we know we are going to have real trouble as the senate moves and 2014. Host if you are in middle or high school student, we want to know what is the most important Issue Congress should address next year. Make a five to seven minute video and include cspan programming for a chance to win the grand prize of 5,000. The deadline is january 20. Get more video information a studentcam. Org i wish you a Merry Christmas and a bright and prosperous new year. This is beginning on thanksgiving day. Would you mind autographing some of the christmas ones as a special favor for santa claus . This is one of the things that i do best. It is a good thing you have santa claus. Likeu must have perform this before. My father santa claus gave it to me. That explain some of the dog hair in it. The first ladies influence in image. Edith roosevelt weeknights at 9 00. The current head of the economics team, nathan sheets, so this has provided stimulus to the economy but it is not a Silver Bullet to the economy. He was speaking at a symposium about the history. Other participants included a former governor of the central bank of cyprus any former member bank of the policy committee hosted by George Washington university. This is about 50 minutes. Thank you all for coming. I know you have been focused on the federal we are going to try to go global and pullback of the lens. Here we are five years after the crisis. The worlds major Central Banks are still the biggest players in the economy. I am sure they wish they moved on by now. Japan, and the bank of england we will focus on. To start, they have a lot in common. They all had to deal with the crisis, the recession, and have struggled to revive their economies during the sluggish recovery. They talked together all the time. The meat and. They share they meet. They share. They studied and talked together. They are a special club right now of Economic Policy makers. At the same time, there are differences. Mandate has a different that is the marching orders from their respective government. Different economies and Banking Systems that present challenges. What we would like to do is talk about how these differences affected their response to the crisis. What lessons can we learn . Is there anyway to consider how it might affect policy Going Forward . It explain tot, us the different mandate and how they about to be so different from the others. Think George Washington university for hosting this event. Us really started our careers in the Federal Reserve system. That is what we share in common. Going back to the question, before the crisis, a consensus had evolved globally about how Central Banks would operate and in particular about how Monetary Policy would be designed around the globe. Recognized price stability among the lives of what they had mentioned this morning. Mandate terribly long term and the ability of Monetary Policy to help economies grow as long as they kept their focus on price stability. Consensusmy mind the at least before the crisis that are doing this both as a result of Academic Work in very much the practical experience before that. Legal mandates a very quite a bit. Here is where we have the Federal Reserve with the deal mandate that was developed in the 1970s. Essentially, instructing the Federal Reserve to place on a full or maximum employment mandate as well as price stability. That is in contrast to what we have seen in the European Union where we have the bank of england. Add may talk more about that. Union dy in the european bees the mandate of this to the price stability as the primary objective. It is only subject to maintaining price stability. There are other objective of government. Before the crisis, this was in theeted similarly anded states and in europe many other countries and economies. The crisis, we could see differences. In the last couple of years when the Federal Reserve has introduced language with explicit mention of the Unemployment Rate as a threshold for policy and the explicit mention in the statements they put out this january about the attention to unemployment. I think we have seen the Federal Reserve go closer to the legal texts than what the european banks are. This has appeared right now. If i can pick up on that. At the federal bank of new york when they were at the board. I do not get hired by the board. It is interesting that there was this convergence. Aagree that it started to be more apparent diversions in the last couple of years. There is a mistake we are making to emphasize too much to mandate. If you go back through recent history or the last couple of years, they have very little predictive power. Swiss National Bank which was one of the most price stability oriented banks and always delivered very low inflation had a mandate of about eight different targets including something to do with agricultural milk prices. Fed isot just that the more literally interpreting the mandate, it is that the ac ecb is more ostentatiously ignoring the mandate. In what way . It is supposed to have a pursuing price stability, meaning an inflation rate of close to or below 2 measured in the way they specify and theyre supposed to be having a monetary color for monetary growth. The euro area has been below the inflation target by a significant month and the growth area. They decided they will not do anything about it. They have other goals they want to pursue. This idea mandate is misleading. Does it not matter . The bank of japan ignored to the mandate for years, too. Go. Et me let nathan i appreciate that. I think adam is right in 99 of the cases. I really do believe that in recent years we have seen some of the 1 manifest itself. It would haveif you hav been harder for the Federal Reserve to justify the qe. Inflation was very close to 2 . That was the only objective for the Federal Reserve, coming in with these big guns of 85 million a month a month the would have been very difficult to justify. This was very much about hoping the labor market had a dual mandate. Athink that if the ecp had dual mandate, i think there would have been additional pressures on the ecb to respond to the soft economic performance. Hat we have seen there if you think hard about the mandate that they have, that they have not been vigorous in trying to achieve it, i think if there have had been another leg been it would have additional institutional pressures on them to stimulate. I the bank of england while was there, we have an inflation target. But we interpreted the mandate to say we are not going to kill the economy. You can look forward. You cannot sacrifice your price stability anchor. To say that we were somehow constrained by our target is wrong. Is my next question. I want to respond. At least a little bit to adams suggestions. Is violatinghe ecb its legal mandate . Absolutely. I should respond to that. [laughter] it is not true. Thent to highlight one of major difficulties of the Central Banks including the Federal Reserve. Central banks around the world or incredibly overburdened. Need different solutions. We have problems in the United States. And many other problems in japan. Area, wese of the euro have a major structural flaw in the way the euro is structured and that the governments have not figured out how to help each other get out of the crisis. To seto has not managed up an entity that would take care of the crisis. To holdis really asked the euro area together. That is the second objective it to price stability. I agree with you that it would have been nice if the ecb could have engineered higher inflation to be closer to 2 . We would agree with that. The question is how much they can with a fraction of that system. [crosstalk] everything is a mandate acc. They are ignoring price stability right now. Let me jump here on the overburdened point. Upshot of aof the Global Financial crisis is the now Central Banks throughout the an implicitize additional mandate. That is a mandate for price stability. Now you have a Federal Reserve that is facing for employment, price stability i. If you lay on additional responsibilities, one risk is you have to choose. Which way do you go . Much Human Capital can one institution have . Some people would argue in washington that the fed should have a single mandate. By giving them a dual mandate youre setting them up for failure because Central Banks can only control inflation and not employment. Your leading authorities off the hook. That the fed is overburdened by the mandate or that the other banks are too restrictive by their single mandate. The actually agree with components of a single primary mandates. This is how politics interferes with central Banking Systems. And the importance of loosening them. Think about easing policy and tightening policy and how you need to be symmetric in order to maintain price stability. Direct. Ess is not it is much harder to tighten policy when a central bank needs to tighten price stability. Asymmetricom being in this way. I believe in the policies we have seen. I believe how the fed has operated over the years. Lets be clear. How it is unrelated to reality. There is the time and consistent model of inflation. It has dominated academic discourse. It has ever had any in. Support. It is not sure that the curve is vertical in the short or medium term. A is not sure that it is difficult to get inflation down. Your political claim which is supposed to be the real basis is not sure either. The Federal Reserve is under a thee attack right now from rightwing. You should have a single mandate and have been stymied from things they would otherwise like to do. There are such a huge political reaction. Is what is happening right now. You look at europe right now. Be more in europe would reactive to the banks. The political pressures are all about making sure the german and french banks do not get losses. Totally deflationary. Youre saying things that are demonstrably wrong. To i do not agree with you. I think i agree with adam on this. I do believe that mandates matter give them my religion and background i like the dual mandate. I think the justification for it is in reality Central Banks do have to trade off price stability again something. Two legs of the mandate is manageable. When he moved to three i start getting nervous. When you move on to three i start to get nervous. There have been more books written about the banks response to crisis. How would each of you rate the Central Banks response to the crisis culturally or individually in if theres anything you would do differently . Tell me one thing you would recommend. You need to break up the crisis in two parts. The first part is the severe seizing up of the Financial System from same mid2007 to the end of 2009. On that when i think the Central Banks were fabulous. I think they were innovative. They were created. It was true of all of the major Central Banks. I say we give them an a plus. Where it gets difficult is how to judge and graded the 2010 2013 timeframe. Ontory is very much out this. We will have to see. Students will be writing their dissertations about this for decades ahead. I will personally give the fed and a minus. Responded to passively. O the financial crisis ill probably give all in maybe a b minus for the ecb. Englandive the bank of about the same as the fed. What would you do differently . Glaring mistake that i think be Central Banks made ecbs lagging response to the financial crisis that emerged. Inhink if they had gone early in 2010 and establish that, i do not mean there was necessarily any predetermined mandate from the heavens that there would have been an enormous european crisis. I think the slow response opened the door and led to be fumes back in from 2009 and let them out again. We have another round of crisis. I would first agree with nathan on the response following the lehman episode. It was phenomenal. It was probably the best example in the corporation among Central Banks but we have been here it was very coordinated of an effort to keep the system afloat. In the past it would have generated a lot of conflict and questions among the measures of currency. Goond that, i am going to back to the issue of what do we expect Central Banks to deliver when they do not have the tools . In japan fiscal crisis for example. Do we expect the bank of japan to fix that . Couple of to talk a minutes about europe. In europe, we did have what was really a very tiny hiccup in late 2009. Is only 2 of gdp. Even if you thought they had a problem equal to 50 of their gdp, it would still be 1 of gdp of the euro area. There it was mishandled. Very mishandled. Was that an issue for the central bank . Where i would differ with her. I do not think this was a problem that the central bank would fix. The euro area was designed to monitor where governments had to figure out where to help each other. Miserably on that front. Should the central bank try to predict that the governments are going to mishandled the crisis a year or two later and try to undo some of the damage with Monetary Policy or doing things outside the mandate . I do not think this was feasible to do. Even though the outcomes are terrible in the euro area, it is not clear to me they are terrible because the ecb could 2010 ore thing