 Hi, everybody, and welcome. Thanks, David. I'm Dennis Kelleher. I'm the president of Beta Markets, which is a nonprofit advocacy group in Washington, D.C. And we're now entering the final stages of the conference. And it's great that you're all here, because we really do have an all-star cast for a very important topic. I'm not presenting a paper, but I did want to plug the one that I wrote that's on the website with this panel called Financial Reform Is Working, but deregulation that incentivizes one-way bets or sowing the seed of another catastrophic financial crash. That title intentionally echoes the panel's title, doubling down on failure, subsidizing more one-way bets. By the time we're done, we're going to echo more than the conference title, because you might conclude after this panel and listening to these papers that it might be better titled From Reawakening to Root Awakening. And I say that not just because of my paper, which talks about the deregulation activities in Washington, D.C., and how they are sowing the seeds for another crash, but also because of some of the discussion we're going to have shortly. Our first speaker is Ed, and Ed is a rock star. He's in disguise right now. But trust me, he's a rock star. He's been working on these subjects for so long, and yet still brings a new perspective and new analysis that shows us, again, why it is we need to be worried about too big to fail banks. Ed's paper is a brilliant discussion of something actually Winnie alluded to at dinner last night, which is zombies. And his paper is a discussion of zombie banks. Very important in not only the United States, but across the world. Ed's going to talk about zombie banks too big to fail subsidies, legal and regulatory loopholes, upside down incentives. Very importantly, the revolving door in moral hazard and how we all pay for it, and how we will continue to do so. Why, how, and a new way to actually measure that is the focus of some very exciting work that Ed's going to talk about. Ed's going to be followed by Anastasia. She has a new analysis of the asset backed securities market. Now remember, asset backed securities were the components of the financial bombs that blew up in 07 and 08. That's why Warren Buffett called them derivative, that derivatives were weapons of mass destruction. They were more structured products than derivatives, but the point holds. Remember that Trump's National Economic Council Chairman, Gary Cohen, is the former president of Goldman Sachs and his bonus for the single year of 2007 was $70 million. And that's mostly because he unloaded Goldman's big pile of CDOs while simultaneously making a fortune shorting the market. Now Anastasia's discussion is how that headline view of ABS, along with collateralized debt obligations and credit default swaps, has blinded us to some important features of the ABS market. And if you want to know if it's relevant or not on what does old guys call the front page of the Wall Street Journal or maybe the home page, although because it's refreshed so often it may be gone, but there's a very important article today in the Wall Street Journal about the reemergence of CLOs and the leveraged loan market that goes right to the point that Anastasia's making about asset-backed markets, very important paper. Wrapping up via teleconference is gonna, video conference is gonna be Professor Michael Greenberger who's done some extraordinarily important work on derivatives, particularly regarding international regulatory arbitrage. And given that derivatives contributed significantly to the 08 crash, and very importantly, derivatives acted as the conveyor belt that distributed financial time bombs throughout the global financial system, you wanna pay close attention to what Michael's talking about. Now they're gonna be summarizing their papers, but I encourage you all to go to the website and read their papers. All the papers are posted there. They're well worth your time. And we're fortunate enough to also have two excellent people to discuss the papers. Professor Perry Merling from INAT, among other places. And as you all know, Dr. Robert Johnson, the head of INAT, among other places. So without further ado, Ed, if you wanna jump into zombie banks and wake us all up, that'd be great. Well, I hope nobody's asleep actually. Anyway, my title is really two ideas that most of the megabanks in Europe are either actually zombies or on the edge of zombiness, and that the regulatory arrangements are very deferential to their interests. So there's three main talking points. I think I gotta move this. I should be able to read my own talking points. So the financial crises are not well understood that they really are the last games, last stages of games of chicken that are initiated by the megabankers. The bankers know or certainly ought to know that they can benefit personally from aggressively risking the ruin of their firm and then holding the macroeconomy hostage and basically scaring the regulators into letting them stay in business in an uninterrupted way. Now, if we wanna change the behavior of the banks, we have to recognize it's bankers whose behavior needs to be changed. And the regulatory systems of the world today focus on punishing banks. It's almost as if the problem is reckless banking much like reckless drivers. And if we punish the cars of the people that drove recklessly, we wouldn't expect to get much benefit. I mean, you know, put a dent in the right front fender if you do one thing and put a couple more dents in the back. So what's new about my research, and actually Dennis has basically given my paper, that is that it provides a new statistical way of assessing how much help taxpayers are providing. And it really supports its evidence. It supports this chicken game model of exogenous financial crises. It supports the model by offering new ways of measuring the particular subsidies that are flowing through these markets. So what the method does is track and compare changes in the various term, long-term and short-term probabilities of default with how the credit spreads, that is the interest rates that have to be paid over government rates and how much responsiveness there is in the interest spread. And for zombie institutions, we'll see there is very little response. And for others that are near zombiness, we see a much reduced effect. So what do I mean when I say that the zombie mega bankers play chicken with crisis managers? Is well, if you read any of these books about what was going on in the Treasury Department in a few days when they were trying to decide what to do about the crisis, the big bankers were coming in and telling them how the world would come to an end. Basically, there'd be no more finance anywhere if they didn't come in and save them. And they say, besides that, what's gonna happen to the macro economy unemployment will be much more than otherwise. And so the zombie banks are kept alive by the guarantees that these games of chicken extract and these guarantees are getting more and more valuable over time. And these managers succeed in doing this by in the period leading up to these last stages, cosmetically misrepresenting their economic conditions and pursue profit making opportunities that basically exploit their customers and counterparties and regulators' informational disadvantage. So here is a picture of what the global safety net looks like in fact. So if we look at it on the far left, your left, we see what are called sometimes the gypsy elements of the EU, Portugal, Italy, Spain, and Greece of course. And they're reaching for a bunch of money that has come out of, I'm not really sure whether Germany is trying to get some of that money or throwing it, but the ECB and the EU are providing money and the IMF has been watching this and realizes that it is of course the international element of the safety net and it turns around and says to the US taxpayer, we may need some help if this doesn't work. And I'm saying here that the US taxpayer is the sturdiest element of the safety net as the size of these hidden losses in European zombie banks keeps expanding. So the basis of people believing the Federal Reserve stands behind these European banks is continuing evidence of post-crisis support and of course the huge amount of crisis support. If you get ahold of my paper, you'll see a documentation of the trillions of dollars really that the Federal Reserve lent to the big banks in Europe, but they continue to have currency swaps and interest on foreign bank deposits at the Fed. Their foreign banks are paying negative interest rates to each other and are able to get substantial amounts of what is an arbitrage at the Federal Reserve. Now this has allowed the country regulators in Europe to give zombie institutions the benefit of what we can call the accounting debt that is they don't show that they are deeply insolvent or even a little insolvent, but that's because they may have to keep their bad loans holding at par either by paying them off, lending people the money to pay them off and start them over again, perhaps with a difference of sitiary. And you can see on these currency swaps that much of their purpose is every quarter, they expand tremendously right at the reporting date which allows these banks to improve their balance sheet. Okay, now my main point here is that post-crisis arrangements for resolving banks in future crises sounds very good, but these are largely a bluff and I have a cartoon to make the point that here is a shell game going on and this is the regulators and the regulator is saying, see we're putting new regulations on banks to protect the world's ordinary citizens and the customer is looking sort of blank at this and there's this very small little part, this is a cartoon by a man named Tolu voice, has a topper at the bottom of his cartoons and so it's sort of like what would be the next picture in the panel saying, now watch, I shall demonstrate and that's what we're seeing. So why is this a problem? Why don't these regulations work? Well, I've thought about this problem a long time instead of suggested and I have come to the conclusion that it really has to do with the regulators' culture and how they see their job and so it isn't that they don't think these rules are helpful but when it comes to a tough situation the early stages of a crisis that giving them more supervisory and resolution authority doesn't change the norms and share assumptions that govern the exercise of this authority. So let me just focus on the two red ones but to justify this I use the methods of cultural anthropology. For about 60 years I have served in various capacities in the Federal Reserve System at the board at at least three banks and I've gone to conference after conference where I've had discussions with these people. So I'm saying first they see the culture of regulation thinks it's not only all right but a good thing for big banks to hide losses. That's just fine and that's because it makes sure that we won't have a run and they as a result have to try very hard to understate their tolerance for non-performing loans. So we see a lot of non-performing loans in Europe but okay and secondly we have the sort of mercy norm that they feel that they need to help firms again in trouble and they also have a benefit of the doubt norm that if they don't trust the accounting they'll give a firm a benefit of doubt for a long time and now the norms of individual career management include blame avoidance norms which I think you've seen in many bureaucracies that rocking the boat or challenging higher ups is a kind of career suicide. And the other point which is that it's okay to nurture one's post government employment and speaking opportunities and many of the people that brought us the crisis have made a lot of money in the process. All right so these norms lead to what I call the culture driven mega bank bailout model of central bank behavior that is to say it's saying that the culture gives us too big to fail and just changing rules on banks as opposed to bankers is not gonna correct it. Now the second part of it is the durability of concealment and benefit of the doubt norms at regulators and central banks. That is these norms that I just talked about. And the third is the high correlation of standalone default probabilities of course major banks in the US and EU. And it's one form of evidence of the existence of the mega banks in Europe is that seven months ago when I first downloaded these correlations in the pairs of mega banks these correlation coefficients between the European banks and the Bank of America were more on the order of 0.50, 0.60, they are now hurting. Okay it seems unbelievable to me. Anyway these figures are from October. So what I have to show you is evidence of bailout expectations of the model is based upon 2.2 million observations and more than 2,700 defaults. The 35,000 firms in 61 countries it's updated daily and the Federal Reserve subscribes to this service. All right so here in the slide we study 11 weakest banks operating in the United States regardless of where their headquarters is as those who were subject to C-card stress testing in 2016. Now if we just look at the last 10 year cumulative probability of default we see that these banks which include Deutsche Bank, Bank of Santander, BVVA and HSBC all have very high 10 year probabilities of default and even substantial three year probabilities of default. This is inconsistent with the promises we're given about all these reforms that have been put in place. So how a firm's credit spread moves into stress depends on how fully its creditors feel covered by the safety net. If you think the government's gonna support the bank no matter what you'd expect is probably the default to go up but not to show in the credit spread. So the credit spread is the yield of the bond minus the match maturity treasury. We're gonna see the light blue line show the volume of trading so the bonds I've chosen have a lot of trades. Orange line will be generally the one year comma core risk information default probability. The green line will be the 10 year unless otherwise noted. So here's an example to train you that this was general electric. It's not really a financial firm. It has a financial component but you see that the blue dots move sharply in the crisis and more or less covered this probability of default. Now, and it's one year probably default works itself out slowly. All right, because the problems we've slowly resolved. Here is Citigroup that in the same period it's probably default way up surge to the roof and there's only a small expansion in its credit spread because there's always some chance that the government might not bail them out at this time. So I've explained that the non-standard behavior and distress of these credit spreads says that somebody else has thought to be guaranteeing these, that is to say the safety net. So here's Bank of America, the same pattern. Here's a very interesting case. Lehman Brothers thought to be too big to fail. It had a surge during the last couple of months before its failure and it's probably default. Very little movement in its credit spread but then in the last day you can see the trades went through the roof until it was worthless. And we see the same thing in Banco Poplar in Spain just a couple of months ago. So using that US experience as a touchstone notice here's Deutsche Bank and we see two periods. We see what happened in the crisis. We also see that its surge actually predated the US crisis. That this is where the crisis originated. Of course it originated holding US mortgage backed securities. So it's not like the US didn't contribute to it. But look what was happening at the end of 2016. There was a big battle over some fines that the US Treasury was talking about developing. And so to get a better picture of that time period I got a bond that didn't exist now in the crisis and you see the same thing as surge in the default probability and very little movement in the credit spread. Here's Banco Santander which took over Banco Poplar. And again this is a bond that just a long bond that was just issued this year, late this year. And you see that the long-term probabilities of default even though it's a long-term bank bond are more or less irrelevant. The people, we will see that the crisis, there's a prediction more or less that within 10 years we'll certainly have a crisis. This is a five-year green. So, but people are saying I don't care what you've done to try to change bank regulation. I don't think that my bond is not gonna be paid. All right, so then here is, I think it's credit. Can you see it? Anyway, it's Barclays to show you. Now all the British banks are like this just so you know that it's had a surge in one-year default probability, even further surge in the five-year. And more or less what's, it is being priced here as the liquidity of the bond, the liquidity risk that they may have some changes in interest rate levels. And so UBS and Bank America show the same pattern in recent years and so I need to deal with the rest of this but let me just go to this last thing which comes from a paper by Ferguson and Johnson which I'm in here, that why does the revolving door do so much business, all right? Well, the salaries of the top regulators here are compared with the incomes earned by the top managers in the private sector. And you see how this is surged from what people were calling today the golden age of the economy that these regulators' salaries haven't kept up. So in order to really price your skills as a regulator, as an executive, you almost have to plan to go back into this sector. And so you use this investment, this time investment of human capital as a top regulator to build your reputation and this doing this reflects, puts great constraints on what you're willing to do to discipline and anger banks in the economy. Thank you. Thanks, Ed. If she's gonna go up in there. Thank you. My paper will be about debt. One of the many papers about debt. We seem to know a lot about the importance of debt. It's completely tried to say that we have become over dependent on debt. For example, because global debt levels are now estimated to be over 300% of the world's GDP. But I would argue that debt of course comes in many forms and functions and these aggregate figures only conceal those functions. One of those functions belongs to instruments of securitization, to debts as financial instruments. Securitization has been widely blamed for the financial crisis in 2007, 2009. It's subsumed now in the discussions of shadow banking industry and yet it remains important. Although marginally it's only 5% of global capital market funding but it is more important historically for the US which is the largest securitization market in the world and the deepest capital market in the world. So this paper is about one particular instrument that is a form of structured credit but that is easily confused and conflated with other toxic securities that have been just as Dennis was introducing at the heart of the Malays in 2007. These are asset-backed securities. If you want their first floor paper between the ground floor more traditional securities bonds issued by governments and corporations and more complex kind of second floor securities that you see movies about, CDOs, CDO square, synthetic stuff, really an alphabet of paper. So these asset-backed securities have a very important but largely overlooked function in today's finance and our paper with 40 is really about that. This graph is from one of the funds in London and the purple rectangle really represents private label ABS issue although all of the categories of structured credit instruments are essentially asset-backed securities. It's about a $10 trillion market globally and private label is just over one trillion out of it. Again, coming back to 2007, it was this stuff that crushed the system that spread the contagion, collateralized debt obligations. The issuance went through the roof in about four years between 2003 and 2007. Nobody was really paying attention to them initially. Now they thought that it would be priced and then one day it couldn't. So remember this graph? And now we have something else. This is the statistics from today. Something called CLOs, collateralized loan obligations. Very similar structures, only they're stuffed with debts, not from consumer finance and households but from businesses, sometimes really bad businesses or very bad business affairs of firms. They've been on their eyes and apparently Wall Street Journal has just had its own view on that. And you can see they're at pre-crisis or even above levels today. In 2006, there were two deals matched and they seem to be the historic all-time high for CLOs. It's a little bit worrying, possibly even more worrying than a little bit because there is a reason why investors are choosing these complex securities. There are risks of artificial inflating them, of mispricing them and again ignoring all the stuff that already had happened to the system. There are two main reasons why investors are putting their money into it. One is that there's been a massive regulatory onslaught on the financial system since 2009 and these tight regulatory constraints are actually preventing the production of those first-floor securities, the asset-backed securities that would be needed or that are very much needed by the investor base. The second reason is probably more interesting and perhaps even more dangerous. It's intellectual or I would say even doctrinal. Regulators don't really appear to understand the nuances of securitization. They don't really appear to be paying too much attention to the problem of demand, of investor demand and the political economy of that demand for yield. And therefore, this again, the functionality of IBS in the financial system today is ignored. You heard about financialization, very ugly term. Apparently, 50 definitions have been produced in academic literature. Most of those 50 definitions would say that financialization is about the increasing role of financial markets, interests, motives and prices in our everyday life. On this graph that McKinsey put together a few years ago about the global stock of financial assets of wealth, financialization represents two trends. One is the move away from blue part of the graph towards the gray parts of the graph, away from bank-based funding, towards capital market-based funding. And within capital markets, it's also the more proportionate role, the increasingly large role of bonds as opposed to equities in serving as a key financial instrument. And this has direct implication for the new, the actual role of bonds as important instruments in political economy of finance today. The key role is of course for any bond, wherever, if you're a government, a local authority university, a firm is to get your money. It's a borrowing instrument. It gets you, you know, relatively affordable capital if you can afford it and you have to repay it back after future date. The second function of a bond is an investable security and that's the demand side that tends to be overlooked in most of the debates. This function is absolutely central to large institutional investors that are very much you and me. These are pension funds, insurance companies, endowments and asset managers and everybody else. So sometimes, you know, these discussions about financialization is very much about finance vis-a-vis the rest, finance vis-a-vis the real economy, but there is real economy just there and it needs to be understood. Investors of course do give money to those issuing entities, to corporations, firms and local authorities when they credit them, but they also use bonds for another purpose, for conservation purposes, not so much for liquidity, not even so much for trade, but for conservation purposes, they use them as stores of value for their clients. This is where they pour their clients' money and they need to be able to extract value to meet the contractual obligations of their clients. We, our knowledge about bonds as debt is dominated by the first function. Every textbook you can get, most of the theory is written, is really about that first, the supply function, it's about financing instrument, that's how they associate with debt so strongly. We know very little about the second function. Again, there are two reasons for that. Historically, mainstream economics wasn't really interested in incorporating the very complex issues about the financial system. Perry would even say it wasn't interested in incorporating finance at all. He developed a whole money view to say it in detail. At the same time, even for those who are trying, and I noticed several papers at this conference who are trying to do that with household debt, for those that are trying to work with finance and feed it into the macroeconomic models, there have been such profound changes in the organization of the financial industry as such, and into the institutional investors in particular, that we, for example, are far away from the time when Minsky wrote about money manager capitalism. It's that capitalism has changed and we now are in a very different system by scope and scale. There are many factors behind what Andy Holden called the rise of asset managers. On the one, political demographic, political scientists, my colleagues would call it neoliberal politics, but the most important is, of course, the switch from universal pension provision to more specialized forms of welfare and pensions. As a result, mid to high income households have become, they had to become more yield oriented. They have to safeguard their financial future themselves. As a result, they came to rely less on bank forms of funding and more on capital market. While still being risk averse, they still need that professional manager to do it for them. So this is a graph illustrating the developments in Europe, in the Eurozone area, where the gray part of the graph is banks and deposits and everything else is various types of financial instruments. You can see how proportionately more important it has become apart from the few abnormalities for Cyprus, that is an offshore financial center and Luxembourg, same thing. Institutional investors need to accommodate this large inflow of funds and they tend to prefer bonds. Again, some people have called this process de-equatization. It's supposed to be rather bad. It's supposed to be one of those moves of finance away from the interest of the real economy. And it might be quite bad from the production point of view. Firms and companies now are more constrained in raising capital. However, from the point of view of the institutional of our state makes a lot of sense, because bonds, A, they help them manage their portfolios because it's a balance sheet operation, but also because bonds pay interest by law and not like equities who pay interest by discretion. They're able to conserve value in these instruments for as long as prices of these instruments are stable, because of course bonds or any financial security doesn't have any intrinsic value. It's only valuable as long as the price is there. And here we come to this important but overlooked function of ABS paper. There can be structural mismatches between the demand and supply of bonds in the markets. Supply of bonds tend to fluctuate with business cycles. Firms and governments react differently to economic recessions or economic booms. Sometimes they cut their provision of bonds, sometimes they expand. But the demand for bonds is increasing monotonically. It doesn't really show any decrease, any fluctuation in retreating. In fact, the asset management industry is very bravely projected to grow by about seven to eight percent per year over the next two years. This is according to industry calculations. As we all age and as we all have become more aware of the financial future, there will be more and more inflow of demand for those financial storage values. So there are quantity mismatches that are not really equilibrated by the price movements, not like in product markets because prices for bonds cannot really go down because then they will lose their value storage capacity for the investors who are using them. So this extra demand has to find somewhere to go. It has to find a vent in the overall universe of financial paper, of financial products. As you can see, there are many functions and there are many forms that fulfill that. And ABS, private label asset-backed securities are important albeit small, fulfilling that equilibrating function. They have to be there to compensate for the structural imbalance between demand and supply. However, it's very difficult for them to do that because post-regulatory policy post-2009 has at least suffered from two big problems. A, there has been a wide diagnosis that it's underestimation of risk by pretty much everybody who was there in the system, US households, the states, the banks, they all were doing something that they were not supposed to because they were mispricing the risk. These diagnoses tend to square on the shadow banking system including securitization processes and including the production of financial securities and financial innovations that constitute the alphabet of structured credit because they were the numerical manifestation of all the miscalculation. And of course, regulatory policy has tended to focus on banks and not on the rest of the financial system. The story might to an extent be true but it's certainly incomplete because over half of the amount of these securities were created in a space of short four years between 2003 and 2007. And our answer to why there were, it's not like suddenly everybody woke up in 2003, US households, you had state, US banks and started to undervalue the risk. It's because there was a massive inflow of foreign capital demanding US safe assets and that demand couldn't find all of its scope in traditional paper. Some of it went into ABS paper, some of it went through sub-prime and because at that time the production of ABS securities were constrained by the amount of credit-worthy borrowers, they had to be producing the CDOs and the CDO square and all the other creations that became fashionable. So I just spoke to that. Today we're in a very similar position. The constraints today are not due to the lack of credit-worthy borrowers but due to tight and indiscriminate regulatory approach by the central bankers and financial institutions. You can see how both in the US and in Europe securitization has shrunk massively since the crisis. It's supposed to be a good thing. They're congratulating themselves on finally conquering the monsters of the shadow banking system. This comes from the Financial Stability Board which declared that aspects of shadow banking now have declined significantly and generally no longer pose financial stability risks. I could just end the presentation there saying remember Minsky, stability is always stabilizing. Every time you put something like this in an open public view, you know, beware but I have two more slides. The report continues. They said that we are so good in the shadow banking system regulation that new consolidation rules to put all of balance sheet vehicles before, that were they before on balance sheet, it will ensure prudential rules and prudential behavior by banks. But all this unfolds in the context of three big developments that are happening independently. There is a decline in production of that important bridge between supply and demand of bonds. There is QE and its effects who have boosted immensely the super rich who provide additional source of demand for value storage assets because they want to get richer. And this demand has to shift to more complex stuff which it has, it has shifted to CLOs. Therefore, and this is the final slide, the conclusion is that having failed to identify that important investor demand for value storage before 2000 crisis, the regulators are repeating the same mistake again. And together their actions and also poorly informed vision of the financial system might just risk creating all the preconditions for another financial crisis much sooner than they would have hoped. Thank you. Thank you. Thank you. Hi Michael. Hi, how are you Dennis? Everybody, this is Michael Greenberger. Suffering from a retina detachment and I can't fly for another four weeks which is why I'm in wonderful Baltimore rather than Edinburgh. Also Dennis referenced that you can find papers and other materials on the INET website. First of all, let me say I'm deeply indebted to INET not only for the support they've given me for the paper I'm about to talk about but because of the outstanding work INET has done since its founding, just listening to the two prior papers those papers would have trouble finding institutional outlet in the United States. And I'm very indebted to INET and to Rob and Tom especially who I've worked with since the financial crisis in 2008 and they've been stellar colleagues, companions both substantively and personally. The subject I'm talking about today and I must compliment the prior speakers much of what they've talked about supplements what I, my paper and my paper essentially addresses the question it focuses on the four biggest U.S. swaps dealers in the United States. JPMorgan, Citi, Goldman and Bank of America. Those companies are organized under United States law their principal places of business are in the United States. They have had access to the Fed window. They ran into serious financial calamities in 2008 they were bailed out by the U.S. taxpayer. I am focusing on those four institutions. The subject I'm talking about has been captured by the banks where there is no focus on these institutions. There's a one size fits all and the question is whether the community banks for example will be unfairly treated with regard to the question I'm raising. On July 21st, 2010, the United States Supreme Court dealing with a SEC issue with transactions by non U.S. companies in Japan the question was whether the SEC's regulation could apply to those companies. The United States Supreme Court on that they said there is a presumption that a regulatory statute does not have extraterritorial effect unless Congress makes it clear that it does. Three days later, the United States Senate in considering Dodd-Frank and addressing the Supreme Court decision said that if the extraterritorial transactions could adversely seriously adversely affect the U.S. economy or if the extraterritorial transaction is a ruse to avoid Dodd-Frank, Dodd-Frank applies. As we sit here today, those four big U.S. bank holding companies are able to assign, negotiate and execute swaps in the United States, mostly Wall Street. But if they assign the swap to a foreign bank subsidiary they're out from under Dodd-Frank. Now Dodd-Frank as you know provides transparency, margin requirements, capitalization, consumer protections, anti-competitiveness and the list goes on. But these banks can avoid this by simply sending their transactions for example to the United Kingdom. How did that happen? Well, between 2010 and 2013 the CFTC promulgated over 50 rules implementing the spirit of Dodd-Frank. They let the question of extraterritorial impact go to last. And in July 2013, and I admire the work that the CFTC did in those years and Gary Gensler who's the chair was responsible for those activities. But on July 2013 they adopted their extraterritorial interpretation. And let me say generally it was not something to be applauded, but as far as this issue is concerned as I framed it, if a transaction was done by a guaranteed subsidiary of one of the big U.S. bank holding companies that subsidiary was deemed wherever it was located in the world a U.S. person and subject to Dodd-Frank. The key word was guaranteed. Now the July 2013 interpretation of extraterritoriality was massive. It had 662 footnotes. Interestingly enough, footnote 563 of 662 footnotes was seized upon quietly by ISDA in August of 2013. And they rearranged the ISDA documentation so that banks could check off clause that allowed the banks to de-guarantee their guaranteed subsidiaries. Now, let me say when swaps were getting started in the late 80s, early 90s, the fact that the ISDA documentation provided for the guarantee of foreign subsidiaries was very important to give assurance to the industry. By 2013, not so important because as many people have said in this panel the implicit guarantee by the U.S. taxpayer is more than enough. And knowing that it would not be a marketing problem, the four big U.S. bank holding companies with the consent of their customers revised existing swaps agreements and future swaps agreements to de-guarantee foreign subsidiaries and took the position that because the subsidiary is not guaranteed, it's out from under Dodd-Frank. Now, arguably it's under the UK or the EU or Japan but has as has been so well articulated on this panel the EU, Japan, and certainly the United Kingdom which will have more flexibility after Brexit have been a regulatory catastrophe. And they are nowhere near as transparent and capitalized requirements and margin as the U.S. Dodd-Frank requires. So this has been a vehicle. Some 95% of swaps, certain swaps transactions are no longer deemed to be United States transactions and are deemed to be the transaction of the de-guaranteed subsidiary wherever it is located. Now, there's been a lot of talk about the lack of stability in the economy as we confront it today. Let me go back and say I appreciate the importance of collateralized debt obligations and collateralized loan obligations but the history of the meltdown was not just the absurdity of these instruments but that they were insured by people trying to short the market. That's the subject of Michael Lewis' book, The Big Short. So what does that mean? These are called naked credit default swaps. These investors could pick among the tranches of CDOs that they didn't own and ensure risk that they didn't own. So if those debt obligations failed, even though they didn't own it, they were fully insured and collected for the losses. This goes back to the early 19th century during the Napoleonic Wars. Sharp trans actors in the city were insuring cargo on British ships that they didn't own. And then they would alert the French to where the ships were. The ships sunk and they collected their insurance. It has been a standard rule of insurance. Since 1806, when parliament said you can't insure other people's risk. Now, we're hearing about the explosion of these indebted transactions. What I would tell you is for every indebted instrument you see, there are bets by people who don't own the obligation that those transactions will fail. That could not have happened under Dodd-Frank because Dodd-Frank requires too much transparency. But once you get out from under Dodd-Frank, you can sell insurance on that indebtedness. In the meltdown, there were three to four times as many naked credit default swaps as there were credit default swaps. That is people who actually owned or had liability coming from the indebtedness. And studies have been done housing mortgage failures. You just didn't have the failure of the real mortgage but there were mortgages that were bet on nine times to fail and money collected. So the subject of the defaults was aggravated substantially. Now you will have seen since August, October 13th announcements that the United States has agreed that it will take EU margin requirements for unclear swaps. In early 2016, the CFTC being aware of this use of footnote 563 put a stop to it as it applied to margin for unclear swaps. So that's one of 13 different regulatory applications of Dodd-Frank's to swaps. So you have these four big banks now that are required to use US margin rules for unclear swaps. However, if they can convince the CFTC that the regulation is comparable in the country where the foreign subsidy area has done the transaction the CFTC on October 13th said, we will accept EU regulation. And I think it's been made fundamentally clear here. EU regulation is nowhere near what Dodd-Frank is, although the CFTC is telling us as of October 13th that it's comparable. It is comparable in the way that the first amendment is comparable to the free speech protections in the Soviet Union's constitution. In language, it may be comparable, but in practice, it's not. And the zombie banks in Europe and the failing banks that were talked about earlier are a reflection of the weakness of the EU regulatory format. My final point, it may be that these four big banks are now able to deem these transactions, even if negotiated in New York as London or Germany or Japan, that's moved abroad. What hasn't moved abroad is the risk to the American taxpayer because as has been made very clear on these panel discussions, if JPMorgan City, Goldman Bank of American fail, it has already been built in to economic expectations that the taxpayer will bail them out. And if they fail as AIG did because of its London subsidiary or if they fail for transactions like the London Whale done under JPMorgan, it will not be the British. It will not be the European Union taxpayers. It will be us. And I think the point has been very well made that in fact, the EU is looking to the US taxpayer to back its system up. The final point I would make is I think to prevent a great depression, a second great depression, these bailouts must be done. However, the politics are such today that I'm not sure that the bailouts would be approved by the Trump administration, the Tea Party or other conservative institutions. Bailouts are very, very unpopular. The Tea Party got started over concerns about the bailouts. So what does that mean? If we don't have bailouts, that means... Thank you, Michael. Boy, talk about subsidizing one-way bets and talk about going from reawakening to a rude awakening, huh? And to comment on these papers first, we'll have Perry and then we'll turn to Rob, Perry. Thank you, Dennis. So let me try to pull together some of this just to remind you where we are in this tale of woe. We began with banks. Then we talked about basically the market-based credit system, ABS. Then we talked about the derivatives through which risks are moved around in this market-based credit system. And what I wanna mostly talk about is the actual sort of explicit backstop structure that is there, hopefully, or not, okay, when trouble comes, okay. And in particular, and in particular, the lender of last resort. What we learned, I think, from the global financial crisis was that we need to adapt our, the operations of central bank that what's important in a market-based credit system is not so much lender of last resort as dealer of last resort, the ability to support the liquidity of the kinds of structures that Anastasia was talking about. And I have tried to crystallize that learning in a reformulation of the badger principle that we're trying to backstop liquidity, not solvency, that is the badger principle. But markets, not institutions, that's sort of new. Outside spread, not inside spread, that's a version of buying low and away from the market. And core, not periphery, I'll come to a little bit more about that in the next slide. I'm not sure to what extent, I mean, this is the lesson I take from this, right? And this is the lesson that I urge that people need to take from this. Has Congress taken this lesson? Will we be able to do this? The fact that we have since the crisis 10 years ago definitely been using the central bank to goose asset prices, you know, that's not outside spread. And so we violated some of these principles already, and I do think that there's ongoing obstacles to thinking clearly about the modern financial system, and I list some of those there. The continuing sort of conception of banks as intermediaries and internationally, the conception, when I say core, not periphery, I wanna emphasize what Ed was saying, which is when I say core, that means dollar, okay, is the core of the global system. There's also, of course, a core of the US system, which we'll talk about as well. So the triple coincidence assumption versus financial globalization, we're living in this global world, we just heard some of the consequences of that, being able to do business in New York and book it anywhere you want. And I think there are the political economy frame, okay, which Ed Greenberger mentions, where we're just not at all clear about the relationship between public and private. The Westphalian frame, this notion that all nations are equal and yet all the liabilities of nations are desperately unequal. The money veil frame, which we still teach to the students, sort of money is a veil and it's really all about real stuff behind the scenes. And I must say, in this conference, sometimes there's a sense of that. This session is the money and finance session, okay, in a three-day conference. And so we have some learning to do and that can be an obstacle for the operation in a time of crisis. Are we prepared? Are we not prepared? My next slide is to get to this tiering point, this core versus periphery. And this relates somewhat to what Ed was saying there. The bond markets naturally are tiered. You see high-quality bonds and low-quality bonds and this credit spread is not just a default spread. There's also liquidity spread there. That market's due by themselves, okay. But central banks are then an overlay on that, okay, through their collateral frameworks, whether explicit or implicit, where they're prepared to take some of these bonds as collateral, I'm emphasizing the collateral dimension because of the market-based credit system. The consequence of that is that some bonds are preferred over others, okay. And if the bonds you're holding are the ones that are preferred by the central bank, they are liquid in a crisis. If your bonds are not preferred by a central bank, they are not liquid in a crisis. So what we have is a system that's elastic at the core and has discipline at the periphery, that is to say, credit expansion at the core, price movement in the periphery is how these imbalances are resolved. That's true within countries and it's true between countries, okay. And the United States is the core of the global system. What that means in terms of moral hazard, which is the title of our session, okay, is that moral hazard is particularly a problem of the core of the system, okay. And that's sort of what we were hearing. It's the four big banks. It's the core of the system that's the problem, not the periphery, okay. It's the best credits in the world, if you will, okay, and which are therefore at the top of the pyramid, that are the problem, okay. Not where the risk is. And that I wanna emphasize because that's, that also was the illusion in the global financial crisis. Everyone thought, yes, they knew there were subprime mortgages, they knew they were gonna fail at some point, but they, and they thought there were these low tranches. The problem was in the triple A tranches, you know. The problem is at the core of the system, not in the periphery. But I'm not sure that that is even the major source of the problem. So now I'm gonna talk about a couple of other emerging areas of vulnerability and moral hazard that I think should be on our radar screen. One of the effects of Dodd-Frank and other regulatory interventions is that funding is now often termed out, okay. So you're not, you're not borrowing overnight to support a portfolio. You're borrowing at three months, okay. But that has led to expanded use of derivative hedging in order to hedge the interest rate risk residual there. And so we have had quite a bit of expansion of these are the swaps. These are the swaps that Ed was talking about. Similarly, interbank money markets are now secured, okay. Sort of killed the Fed funds market, killed the Euro dollar market and replaced it with foreign exchange swap markets and repo markets, they're secured, okay. But are they safer? They're very strange asset price movements, okay, that are emerging and these are untested. It's not at all clear that this regulation is making us safer, not to me. And meanwhile, Anastasia was mentioning how the regulation of new credit issue in the core, okay, in the UK in particular, is reducing credit expansion. All the credit that has expanded in the last 10 years is in the emerging markets, okay. It's in the periphery. It's in the periphery. And the BIS is all over this, paying attention to this, the emerging markets debt bubble. At the very same time that all of these emerging market countries are getting much more integrated into the global financial system and all of this accredited expansion, a very large proportion of it is in dollars. Where's the backstop of that dollar expansion in the emerging markets? Nobody knows. Nobody knows. We will find out. Dealer of first resort capacity constraints are limited and dealer of last resort capacity limitations are untested, these liquidity swaps you were mentioning. They exist, unlimited permanent swaps between the top six central banks. The handshakes, two-page documents. Will Congress allow this to happen? We'll see, we'll see. But that's not even the thing I'm most worried about right now. What I'm most worried about right now is the state of policy, stabilization policy, okay in the core of the system, which is to say the United States, the Federal Reserve, seems to me operating as a source of very significant moral hazard in markets right now. Quantitative easing is equivalent to shadow banking. That is to say money market funding of capital market lending on the balance sheet of the central bank, but with the assets deliberately mispriced in order to create stimulus in the economy. Forward guidance is essentially a profit guarantee for dealers meaning liquidity risk, to borrow short and lend long, meaning liquidity risk is mispriced as a tool of policy. Negative interest rate policy is delaying the clearing constraint, okay, which is the thing that creates coherence in a market economy. The survival constraint is mispriced. These are policies that are distorting behavior and speculators are responding to them. But I don't wanna put too much emphasis on these prices. We're talking now about exit. Every central bank is talking about exit, getting out of their balance sheet positions, moving interest rates back to normal. That's going to be a big challenge, but the big challenge is not just getting asset prices back to some place where private dealers are willing to take these positions onto their balance sheets. The biggest challenge is institutional change. I think the unfinished business of Dodd-Frank is institutional change, that the times we're living in now are very much more like the times immediately after World War II where we're trying to put the system back together again institutionally, okay. This is about what requires is reconstituting the system through which liquidity is provided, not by central banks, okay, but by private profit maximizing dealers. This is about renegotiating the boundaries between public and private. Those boundaries are completely enmeshed at the moment, and it's about renegotiating the global hierarchy. What is the relationship between the US and countries farther down? This is, we are not even started doing this. So there's a lot of work ahead of us in terms of putting Humpty back together again, even though it's been 10 years. Thank you. Thanks, Perry. Rob? Yeah, because everybody should take a deep breath after that. I was gonna say, INET's been in business for eight years, we'd better get started. I'd like to just talk in the large scheme of things. I think Perry and Honestasia and Ed do a very good job of describing a certain set of, and Michael, I'm sorry, Michael's also with us. A certain set of excesses or unresolved potential excesses. And Ed, I know you went into a little bit of why there are things like Thompson, my plate in your deck on the opportunity cost of doing good for a civil servant who has a child that someday has to pay $50,000 a year to go to college and things like that. But let me back up for a minute. I think of a central bank or a central bank embedded in a financial regulatory apparatus, meaning perhaps the supervisory or whatever could be outside of the central bank. Clearly the securities regulators are in America. But I think of, let's just call that, let's aggregate that and call a central bank-centered financial system. And I see three essential tasks. One is macro stabilization, business cycle management, that's the standard textbook view of monetary policy. The second is crisis management after the onset of a crisis. And the third is crisis prevention. And I wanna talk a little bit about how these things interact and how that interaction is important to society and how the way we manage that interaction is important to the legitimacy of governance, the kind of feelings that people have as citizens and voters. The clear evidence I think for a long period of time and a pair of you more of an economic historian than I am is that it's easier to restrain inflation than it is to push ourselves out of deflation. The old pushing on a string notion means that the breaking and deflation of bubbles is a place where the central bank's tool bag but to interest rate policy is not very effective. That means you shouldn't put yourself in harm's way by having a bubble. Next, crisis management. Tim Geithner gave a pair of Jacobson lecture a little over a year ago. Where he basically said, if you're at that fork in the road between big banks failing and as Michael alluded to going into a depression or bailing them out, you better be darn good at bailing them out. The problem I have with that is that's not done in isolation. When viewed in the context of moral hazard, the better you are at bailing out and guaranteeing the more the spreads on the cost of funds for the big banks will be at an advantage and the bigger bubble you'll be tempted to blow unless you have crisis prevention. And in this world, in the world of, say, Tom Ferguson's research, the biggest problem advanced economies have is crisis prevention. In the moments, in the months, in the years, before a financial crisis, it's very often the case that both borrowers and lenders will be mad at the regulator that tries to stop the blowing up at the bubble. So now you have this triangle that I talked about of the three interactions. The better you get at crisis management, the more you inspire, more risk taking. And the greater is the risk that the bailout is bigger and when the bubble bursts, macro policy can't handle it. So you have to repair what you talked about as the boundary, what you call hybridity between public and private with integrity or you're going to use your fiscal capacity. Now, what Ed did, which was quite interesting, was he talked about how that fiscal capacity doesn't quite conform to the old treaty of West failure boundaries, but the United States guarantee system is encouraging forbearance and too big to fail in Europe, which I would conjecture may come at the detriment of things like the Greek citizens. When you're caught in a debt overhang and your creditor isn't forced to take their losses and Troika's come in and grind you through the mill, a lot of things happen to your society to extend and pretend the notion that those bonds are solvent. And the more daring the authorities in Europe are likely to be when they know if they guess wrong, if they hit a banana peel, the American guarantee is there to underpin so things don't spiral out of control. Now, where I'm very troubled by all of this is that I don't think what happened in 2008 and the inadequate repairs after are really about a financial crisis. I think they were about a crisis of governing the legitimacy, the notion of unfairness, the notion that people are bailed out and a year later get bonuses had a lot to do with why Barack Obama's first term lost control of the House of Representatives. It's also why in Massachusetts, a place where Elizabeth Warren now holds a Senate seat when Senator Kennedy died, it was won by a Republican because that by-election and Martha Coakley, the Democratic candidate's pollster was a good friend of mine. It was one week after Goldman Sachs and G. Poon Morgan announced their bonuses. And people went nuts and they penalized the Democrat. Martha Coakley had nothing to do with the financial sector, but she was a Democrat and was viewed as done on that watch. These are anecdotes, but the inflammation that produced the Tea Party and Occupy Wall Street was related to this sense of injustice. If what we're doing now in the contorted political economy is subsidizing and fortifying money powerful too big to fail banks. I don't remember the quote or the precise amount, but Winnie Biennial last night, talking about somewhere in between four and six hundred million dollars a year in lobbying expenditure. Dennis, you probably know from the financial sector, this looks like what a guy named Donald Trump called a rigged system. And so at the core, I think the biggest worry, and Michael, you really emphasize this, we're putting contingent fiscal capacity on the table with all of these guarantees. And how that system is playing out is being legitimated or justified, and I think quite superficially, by suggesting that you can't let things fail in the event of a crisis. Well, you shouldn't put yourself in a place where they can fail, but we can't muscle up to that. Central banks can't muscle up to that. The revolving door inhibits adequate enforcement. And we're pushing ourselves closer and closer to a dreadful set of decisions. One, we reserve and use our contingent fiscal capacity to guarantee a bloated financial sector rather than deal with retirement and education and health and infrastructure. And that applies to any of these countries. And secondly, we run the risk that we continue to demoralize people. And what I think really underpinning the design of this entire vision of this entire conference is something that started to accelerate at the time of the 2008 crisis. And that is an inflammation and a despair in a body politic, which now is brought into question. Some people are very condescending about how people chose to use their vote out of despair for Donald Trump or Marie Le Pen or for Brexit or for the AFD. The process of what you might call dealing with traumatized democracy is scaring us all. And if there's anything that I would think poured gasoline on the flames, it would be to go back to the place and make the same mistake a second time and pretend again we didn't see it coming. Thank you very much. Well, that was sobering. We were gonna end on a high note and we were gonna do that by providing a bailout to all of you, but we decided not to. But wait a minute, didn't one of them just tell us that the Americans are guaranteeing everything? So all you Europeans, we can go out to dinner. It's gonna be fun tonight. Yeah, it's one of the key things I think that Rob mentioned that's worth emphasizing is that people think of the cost of the crisis, whether it's in the US or in the world in terms of what it costs. Better markets did a study and said, lost GDP is about $20 trillion and counting and it's the same elsewhere. But a very important point that Rob makes are the indirect costs which is that the massive diversion of that money into the financial sector and then ameliorating the social woes that come out of that actually prevents the expenditure and availability of that money for all of society's other priorities. And so that's what's so fundamentally important about what appears to be this kind of cycle and treadmill actually of where we're given these implicit guarantees. We've blurred the lines as Perry was saying between private and public and as Rob's saying is what is happening and you end up with a demoralization from a traumatized democratic electorate across the world. And so the consequences could not be greater and they continue with us today and they grow each day and I think naming them, identifying them and talking about them as Anastasia, Ed and Michael talked about directly and then Perry and Rob teased out the implications of are really one of the most important tasks that we have and it really ties right back to that's the awakening we need. We're done through as Geithner would say the fire and the response to the fire. And now we think we fireproof the building and yet if you listen carefully what people are saying is we're actually just putting the kindling back in place and that's why we need to focus on these subjects so hard. So I thought we have very few minutes I thought we'd go to the audience if that's okay with the panel unless somebody feels very strongly about rebutting or responding to anything. So let's go to the audience if there are any questions we have a mic over there and a mic over there. Right here, Steve I think if my eyesight is working I'd give your name. So I'm Steve Ramirez I'm a law professor at Loyola University of Chicago and I teach and write about Dodd-Frank. So Dodd-Frank included a provision that expanded the feds lending capacity under rule section 13-3 and they issued final rules November 30th of 2015 to make widely available bailouts available in times of economic disruption and you can look that up on the feds website. My question is this I think what we're really talking about is contingent monetary capacity not contingent fiscal capacity and I really don't know how to get my hands around the limitations to that capacity. In December of 08 it went to about $20 trillion in short-term loans. Now we're talking about supporting the EU banking system too could the fed inject $50, $60, $70 trillion into the global financial sector and rescue us from our great depression too? Good question Steve. It's not only fiscal exhaustion of fiscal capacity but monetary too Ed. Well I mean the way we are running the Federal Reserve is it is doing fiscal policy. If you provide a loan at an inappropriate interest rate a too low interest rate to a troubled bank you are giving away taxpayer money. And so it's almost like welfare for the banks as opposed to welfare for a troubled person. That I would I'd like to just say something about Timothy Geithner that this man was in a very tough place but he didn't have the philosophic training. The kind of training that the kind of discussion that we just had here from Rob of understanding what the long-term consequences of this complete hair no haircut policy was. I don't know why he didn't think he could give him 10% haircuts. Any at all? Well I mean no I'm just saying you take his mindset he's not he's going to subsidize the system but why so completely? Why? Because it's simplified his job. It's very easy to give away money it's hard. Think of it as a parent you know you punish a child you were thinking you're doing something good for the child on the long run but it's much easier to ignore the behavior. Rob? I think I saw Andrew Sheng, yeah there you are. We've been a meeting the last couple of days we're about every 15 or 20 minutes you perk up smile and say well they'll just print money. So I thought maybe you'd wanna answer Steve's question about are we using monetary capacity or fiscal capacity or running a long-term risk of inflation from running the presses to smoke the financial sector what are the risks? The reason why I've been silent I totally agree with the discussion. The underlying issue behind all this is that central bankers got dragged in because we didn't want to face the political consequences of restructuring the zombie banks. So the central bank de facto guaranteed the liability side of every single bank de facto. It's no longer too large to fail, it's too small to fail. And having bet the bank as if you really want to say this the only issue is how much do you want to print? Right? And so the point is it's not just the Fed wanting to deny the, put the responsibility on the US taxpayers, the Japanese are willing to fund as much as possible the holding of American bonds at very low interest rates. And so we have kind of a perpetual machine out there for which we do not know what is the trigger that will cause the collapse as it were. I totally agree with an, I think it's Anastasia's argument but we've shifted, we haven't changed the game. What was the game? The game is that we've subsidized debt and if you try to regulate it they put it off balance sheet. If you regulate some more it pushes it offshore and then you have a great convenience of saying it's all shadow banking. You mean the shadow banks were not regulated? The shadow banks were right in front of you. Basically it was a very convenient excuse for all the central banks and the regulators to say don't blame me, it's all the shadow banks. And so it was a very beautiful political slate of hand to deny responsibility. So we have a wonderful pretense of stability. You know, that's all I can say and I've gone silent on this particular problem because none of the so-called responsible financial papers and journals are willing to discuss this issue. Thank you very much. You know, I'm, let me just make a quick comment. Andro, I'm a little bit concerned because as you know, for the intro and outro of each session I try to control the music playlist and I forgot to include the song Don't Worry, Be Happy for this session. Yes, one, we get time for one more question right here. If you could identify yourself. Hi, my name is Paolo Bors from the National University of San Martín in Argentina. I have a question for Professor Nesvetaylova on assets, risk and alternatives. Now emerging markets are facing this inflow of money from Europe, from Asia that don't have an outlet like you mentioned in the supply of assets to invest so they come to many emerging economies. What, now, they are issuing different types of assets with different risk as you mentioned. Not every asset has the same risk so we need to look into that. What alternatives do we have in emerging economies to direct those inflows into assets which are more manageable for the capacities and capabilities of our markets and our governments which are rather small and train most of them in handling those inflows? Thank you. Thank you. Right now. Gosh, that's a political economy question. You need to construct a political economy that would accommodate that demand because at the moment all of that demand is channeled into U.S. assets. The capital markets, they are underdeveloped. Europeans are desperately trying to construct their own capital market and it hasn't been going superbly at all. And there is no liquidity, there is no alternative but it's not just about the creation of an asset even in the form of a bond. You actually need the infrastructure and the institutions and a believable future. In fact, Latin America on that graph of asset under management growing is the most top line. It's been growing most aggressively in terms of wealth being managed. So it's a very serious problem. And the answer is not just about one isolated element. It's about fighting poverty. It's about creating assets. It's about ensuring the future. It's about state buildings. Thank you. Rob has a couple of things that he wants to say to wrap up but first let me say thank you to everybody on the panel. Thank you Michael for coming in. We appreciate you coming in by video. Anastasia's got a run to catch a train and Rob's going to make a few comments. So feel free to run. Well this is how I say the ending of the plenary and those of you who were at lunch heard me start to thank people who had been extremely helpful. We've had a group that helps our staff with all of the video and production issues including Bales Carlin, Sarah Testament, Taylor Jay, Andrew Burnett, Chuck and Remy, Mars and Andreas Wagner. At a deeper foundational level there are two groups of people that I really want to thank and they are the founders, Jim Balsilly at his foundation CG and Ro Hinton Madoro who's on our governing board who plays a very active and constructive role in collaborating with Inet going back to our very first meeting. Bill Janeway, one of our founders who you've seen in the program is an extraordinary backer and a rebel thinker and George Soros who provided a tremendous amount of financial freedom and content freedom to this whole enterprise and I want to thank him for trusting us for all these years. I want to thank the two young men that run the Young Scholars Initiative. You felt the injection of intensity and enthusiasm during these last couple of three days and before that there were two days of a Young Scholars Conference down at the corn exchange where 8,900 people came in that constructed booths in particular one of our staff members, Gonzalo Fonseca created a magnificent tour in the history of economic thought and this exhibit and his website on the history of economic thought are just gold mines and we'll be featuring those on the website in the days to come. And finally, indirectly I want to thank the Nobel Prize Committee for the year 2001 and that's because George Akerlof, Joe Stiglitz and Michael Spence who shared the Nobel Prize that year are tremendous, tremendous advisors and backers to INET. Thank you all.