It's a pleasure to welcome all of you to Minnesota meeting tonight. Minnesota meeting is a public affairs form which brings National and international speakers to Minnesota since 1982. Minnesota meeting has grown into one of the most significant speaking forums in the United States introducing major political academic and business speakers to Minnesota leaders for over 8 years. Minnesota meeting has brought to Minnesota the world's leading thinkers and opinion makers. We have presented former presidents prominent economists ambassadors for many countries and critical thinkers presenting diverse and thought-provoking ideas on the most important political economic and social issues of our time. Likewise our members are special the more than 1200 members of Minnesota meeting represent this communities leaders from business the professions government and Community organizations. For those of you present tonight who are not members of Minnesota beating. I invite you to join this important leadership organization. We also extend a welcome to the radio audience throughout the Upper Midwest who are hearing this program on Minnesota public radio's. Midday program broadcasts of Minnesota meeting are made possible by the law firm of Oppenheimer wolf and Donnelly with offices in Minneapolis. St. Paul and major cities in the United States and Europe. Tonight is a very special event for Minnesota meeting and we are honored and I am particularly pleased to have Federal Reserve board chairman Alan Greenspan address our first annual dinner meeting following his presentation chairman Greenspan will respond to written questions from the audience. Please use the cards at your tables to write down questions. It is now my pleasure to present to you Mike right CEO of Supervalu and the chairman of the board of directors of the Federal Reserve Bank of Minneapolis who will introduce to you Alan Greenspan. Thank you. Thank you, Gary. My term is Chairman of the Minneapolis Federal Reserve Bank ends at the end of this month and I've been Associated now for five and a half years with Minneapolis fed. I want you know, it's been a great honor to be associated with the Federal Reserve Bank here and also at the system level in Washington. I would like to take a moment to introduce to you. My successor is Chairman of the Minneapolis Federal Reserve Bank who's here with us tonight? Our current Deputy chairman Del Johnson. They all would you stand up so everybody can see you. Dell is the president and chief executive officer of Pioneer Metal Finishing Company with headquarters here in Minneapolis and operations in both Phoenix and Green Bay, Wisconsin. I would also like to just for a moment let you know that my association with the bank has been a very pleasant one and an enjoyable one, but I think it's important that I mentioned the fact that this bank here in Minneapolis and all those I become associated with the Federal Reserve System. Our outstanding people who were dedicated to doing the right thing for the communities they serve and for this great nation of ours is a businessman. I'm proud to say that these banks are operated extremely efficiently and is a businessman all of you would be proud of the way. They're operated and what they contribute I just wish I can say that about every aspect of government both state and National. Let me say that it's a great honor for me to have the opportunity to introduce. Dr. Greenspan to you Doctor Greenspan became chairman of the board of governors of the Federal Reserve System on August 11th. 1987. The Board of Governors is of course the Federal Reserve systems Chief policy making body. Dr. Greenspan is a native of New York, and he holds bachelor's Master's and PhD degrees in economics all from New York University prior to his appointment. Dr. Greenspan was chairman and president of Townsend Greenspan & Co Inc and economic consulting firm in New York City. A former chairman of the president's Council of economic advisers. Dr. Greenspan has received numerous distinctions and awards including the prestigious Thomas Jefferson award for greatest Public Service performed by a non elected official presented by the American Institute for public service has been my pleasure to become acquainted with chairman Greenspan as part of my work with the Federal Reserve Bank of Minneapolis is an impressive policymaker in a key position at a very crucial time. I know his topic will be of interest to all of us which is economic implications of the Middle East crisis. Please join me in welcoming to the Minnesota meeting chairman, Alan Greenspan. Thank you very much. Mike. I haven't been in Minneapolis for far too long and must say that when I was in the private sector. I had the privilege of coming here quite often and one of the shortfalls in my new activity is I don't come up here often enough and it was really a pleasure to come and see a number of old friends here again. Ordinarily when I get up and discuss any topic which even marginally touches on the issue of interest rates or exchange rates or Market rates in general I fall back into a level of in coherence, which we at the FED move we call it mumbles speak and I become really extraordinarily skilled in the use of the language to such an extent that I often warn people that if I'm up discussing the issues of Market sensitive questions, and I appear inordinately clear to you you were obviously mistaken. Being somewhat concerned about coming all this way and saying virtually nothing. I decided that since I have exposed myself in our current position to the Banking Committee of the House of Representatives yesterday. I thought that what I might do is since I'm required legislatively to be a little clearer when I go before the Congress, I thought what I might do is expose you to an updated version of my testimony of yesterday. If I had waited two or three days would have surely become obsolete. after that, I will cook as Gary and Mike mentioned that I will try to spend as much time answering questions as you allow me to. The the issue incidentally that I'd like to expound on in which I testified essentially before the Congress yesterday is really quite extraordinary one in the sense. We've never really seen anything quite like what's going on in the world economy today. But before I get into an examination of the effects of higher oil prices. On the United States and the world economy and a number of the other collateral issues that are involved. I think it might be useful to get a context. So that by stepping back and reviewing the trends that our economy appeared to be following prior to the Iraqi invasion of Kuwait. On the positive side, the data released in recent weeks have clearly confirmed that the economy was still expanding when the oil shock hit indeed Real gross national product currently is estimated by the Department of Commerce to have increased approximately one and three quarters percent at an annual rate in the third quarter, which is somewhat quicker Pace than the number of people had anticipated earlier in the year. in addition the index of industrial production increased at an ear for percent annual rate last quarter indicating that much of the strength in the economy during the summer was in the goods producing sectors where a weakening of overall activity activity typically would be expected to show through most clearly On the negative side. However growth of private payrolls was at a virtual standstill in July and the unemployment rate which had fluctuated narrowly for several quarters began to rise around mid-year albeit from a level. That was quite Low by recent historical standards. On the inflation front data through July suggests that price increases had not yet begun to decelerate as of midsummer. In fact, there were disturbing signs in the first half of this year that the so-called core rate of inflation had crept up someone. However, the latest data on hourly compensation and its underlying the tale. Hint that labor cost increases were beginning to slow in the third quarter and had oil prices not jumped after August second some easing of the underlying price pressures that we were aware of Might. Well have become evident by now. To summarize the data that we have received during the past four months indicate that prior to August the second the economy was expanding at a moderate pace and underlying inflation pressures. Probably were beginning to ease. This suggests that things were developing in line with the federal reserve's policy objectives, which were to achieve a slowing of inflation in the context of continued expansion of real activity. Regrettably, however, the events in the Persian Gulf have altered the immediate economic situation rather substantially. Consumer and producer price index has have jumped in the past couple of months because of surges in the prices of Energy Products. Other Less Direct effects are becoming evident as the higher oil prior all costs are being passed through into the prices of items that are heavily dependent on oil notably airline fares and other Transportation costs and materials that rely heavily on petroleum feedstocks. Over time the higher prices May feed through to labor costs as workers seek to delay the inevitable declines in their real incomes. These same influences are being felt in one degree or another in most other economies regardless of whether they are net oil importers or net oil exporters. Not only have the higher oil prices added to the overall price pressures here in abroad they also have begun to restrain real activity these effects work through several channels and are difficult to sort out with great precision. First to the extent that the United States is a net importer of oil a hike in oil prices drains away purchasing power from American Energy uses to foreign oil producers specifically the higher prices cut into the real disposable income of households, which in turn reduces their spending on all categories of goods and services. Second the weaker path for consumption subsequent subsequently is likely to spill over to business investment as many firms their profit margins already squeezed by higher energy costs lower Capital spending in response to the reduced demand for their output. In addition to the effects of the higher oil prices per se the enormous uncertainty about how and when the tensions and the Persian Gulf will be resolved also affects the economy in a negative way. Such uncertainty tends to engender withdrawal by producers and consumers from their normal activities as they respond cautiously to new developments. However, the surveys of people's concerns about the Outlook have pointed to Greater weakness than has been revealed by what people at least to date are actually doing Most of these same influences on prices and activity are affecting the economies of our major trading partners as well. Although countries that are not net oil importer such as Canada and the United Kingdom do not face the net drain on real national income from far from higher oil prices. They are adversely affected by economic developments in the oil importing countries and by higher oil prices, which tend to depress real personal income at least in the short run. Consumers and producers in these countries are also affected by the uncertainty surrounding the entire situation all this has negative feedback effects on our own economy through lower exports. In the current episode the clearest manifestation of the actual effects on the United States is in the labor market where private employment and hours of work dropped markedly in October and we're initial claims for unemployment insurance have moved significantly higher in recent weeks. In addition industrial production, especially in the motor vehicle and Construction Supply sectors fell in October and the weekly data through mid-november. .2. Pronounced further weakness the drop in employment and hours is causing personal income to decline at the very time that Rising Energy prices are squeezing many household budgets. This drop in real purchasing power along with plunging consumer sentiment does not bode. Well for the near term Trends in consumer demand, especially in the context of an already low savings rate. It is noteworthy that retail sales in October were about unchanged in nominal terms and undoubtedly fell significantly in real terms. Higher oil prices. However are not the only Force restraining activity. In particular there was considerable evidence earlier this year that Banks along with other lenders had tightened terms and other conditions for supplying Credit Data since then including Federal Reserve surveys of Bank lending officers as well as the recent sluggishness of the monetary Aggregates suggest that the tightening of credit has proceeded somewhat further. As yet there is only limited statistical evidence on the extent to which tighter credit conditions have directly affected businesses and consumers. However, the available anecdotal information clearly suggests that many types of businesses are in counting encountering greater difficulty obtaining financing. This has been seen most clearly in the commercial real estate market, but it extends to borrowing for a variety of other purposes as well. The interaction of rising oil prices Persian Gulf uncertainties and credit tightening is apparently creating a greater suppression of economic activity than the sum of the forces individually thus although we can ohmic activity seems to have been better maintained through the summer than many forecasters had expected all indications are that are meaningful downturn in aggregate output occurred as we move through the early weeks of October and into the most recent weeks towards the end of November. Admits these adverse developments the depreciation of the dollar we've seen that so far this year other influences aside. May be expected to provide some stimulus to our exports and restrain our Imports. However, a weaker dollar also is a cause for concern. It adds upward pressure to u.s. Import prices compounds the inflation impulse emanating from the higher oil prices. And may put at risk our ready access to net inflows of foreign savings. In the oil Market itself rates of overall production of crude petroleum currently appear to have been restored to pre-crisis levels after a temporary disruption in the wake of the Iraqi invasion. At the end of July OPEC had agreed to reduce its production rate from about 23 and a half million barrels per day to 22 and a half million barrels today per day. Before the new Accord could take hold of course Iraq invaded Kuwait. The subsequent United Nations sanctions embargo removed 4.3 million barrels per day of Iraqi and Kuwaiti crude oil production from the market and the amount equal to almost 10 percent of production in market economies. This loss has since been fully replaced through increased liftings by other members of OPEC chiefly Saudi Arabia as well as significant increased production in the North Sea. As a result in October crude production and market economies was back up to about the same rate as during the first half of this year almost 46 million barrels per day. Although the replacement Croods are slightly heavier than the Lost oil and therefore yield less output of light products such as gasoline and kerosene such differences do still appear to be manageable. While the response of world crude oil production to the Iraqi Invasion can be gauged fairly readily the reaction of world oil consumption is more difficult to discern. Available data on world shipments of petroleum products actually show a greater than normal increase in the third quarter despite the high prices but a substantial portion of this increase is thought to have been reflected in so-called secondary and tertiary Stock Building rather than in an increase in actual consumption secondary stocks incidentally are those held by product retailers and Distributors while tertiary stocks are held at the point of consumption such as an industrial plants. The much larger primary commercial stocks of petroleum and products held on land by refiners and marketers in the industrial countries appear to be a bit above normal for this time of the year. In addition rough indicators of the level of stocks of float suggests that after a small decline in the third quarter. These stocks may be increasing. There is in fact some evidence that the inventory situation is such that a number of the tankers rather than moving quickly to port for unloading are actually now slowing down a bit in order to make certain that they get when they get there they're is inventory space for them to be received. So it's clearly a situation in the oil Market it which is scarcely one of the shortage indeed. There are stocks held in Ocean tankers which represent unsold substantial amounts of heavy crude oil from Saudi Arabia and Iran. Overall, then World stocks of petroleum and products currently are at levels that under normal circumstances probably would be viewed as being comfortable or perhaps even slightly excessive. This relatively comfortable situation is consistent with the current pattern of Futures prices, which show a decline of about six to eight dollars a barrel by the second half of next year from the recent spot levels of about thirty three dollars per barrel for West Texas intermediate crude, 's the standard Benchmark against which pricing is generally made in this country. Indeed at the current apparent balance of supply and demand for crude oil spot prices may have been expected to be substantially lower worth not for the uncertainties associated with the situation in the Gulf. What we have seen in varying degrees since August the second is a general Scramble for existing inventories by refiners both here and abroad to guard against a possible further short-term disruption of supplies. This has contributed to a bidding up of prices in the spot markets. The situation in markets for a few specific oil derivatives may be somewhat tighter than in markets for crude. The shutdown and blockade of refineries in Kuwait and Iraq removed an important 2% of the world's Refinery capacity from the market the lighter end products, which these Refinery specialized in such as kerosene and jet fuel. Went primarily to Japan and other Asian countries. Temps recently by Asian consumers to replace the Lost products coupled with increased Gulf related military demand resulted in a bidding up of world kerosene and jet fuel prices during September and October relative to the price of crude and even relative to the price of petroleum products that is refined products, generally. But it's apparent that that huge increase which created a major problem in the airlines has come off in most recent days and the spreads that were very substantial have since retraced most of their earlier increase. At the time of the invasion refineries and Western Europe had been operating at relatively low utilization rates and there appeared to be some excess capacity globally in operations that convert convert heavier products into lighter ones. The production rates of these catalytic cracking and other types of facilities have presumably risen in these areas since the invasion. In this country gasoline markets were relatively tight over the period prior to the invasion owing to strong demand and the series of disruptions at domestic refineries. Stocks of gasoline fell further and August rebounded through September and the first half of October and have edged off since the level of stocks last week was roughly in line with its level a year ago and about six percent above what is considered the minimum operating inventory required to insure against normal operating problems and shortages. The rapid rise in crude oil prices following the Iraqi Invasion helped boost the domestic average price of gasoline from approximately a dollar ten per gallon in the second quarter to an average of roughly $1 40 during the past two months. However, averaged margins between the cost of crude oil to refineries and the retail prices at the pump fell significantly from July through October recently margins have recovered somewhat, but they are but they still appear to be 5 to 10 cents per gallon below their average level in the second quarter of this year. Turning to the question of how the gulf crisis has affected monetary policy. The first point is that the uncertainty surrounding the situation are obviously considerable and that it is difficult to isolate. The federal reserve's response to this particular event when so many other things are affecting the policy equation. Moreover we must not lose sight of the fact that there is no policy initiative that can in the end prevent the transfer of wealth and cut in our standard of living that stems from higher prices of imported oil. The role of monetary policy is to provide the financial environment that is consistent with the nation's long run economic objectives. Since the spring of 1989. This has implied some easing of Reserve conditions and the federal funds rate The crucial short-term rate of a which we have control has come down from nearly 10% in the spring that is an 89 to its current level of approximately seven and a half percent. Our latest policy adjustments have been in response to indications of a weaker economy partly as a consequence of the prospects for a degree of fiscal restraint as a result of the budget agreement. And partly because of some further tightening in the availability of credit since Midsummer the so-called credit crunch. In this context we shall want to make certain that money and credit remain on appropriate growth tracks with due attention to the credit situation. Whether further adjustments to policy will be needed cannot be spelled out in advance and will depend on the specifics of the circumstances as they develop. In the final analysis the Federal Reserve can only offer the assurance. That we will seek as we have in the past to Foster economic stability and sustainable growth. As in the past this will require not only attention to the level of economic activity, but also the pursuit overtime of price stability a task made all the more challenging by the effects of the gulf crisis. Thank you very much. I'm Andrew Tchaikovsky chairman of the Minnesota meeting. I'll be handling the question-and-answer session tonight. I'll be asking the questions and chairman Greenspan of hopefully will be giving the answers. Hopefully first question is are we in a recession? Well needless to say that was the first question. I got when I made my presentation yesterday and it's become de rigueur to try to find a way not to answer it fortunately. There is actually a real problem in the in the issue namely that we really won't know whether we were in a recession until after the fact because no matter what the definition is of recession and the most generally used one is two successive quarters of negative economic growth that is of the economy declining for at least two successive quarters. Since as of the first week in October, we were still actually creeping up. We can't be in that sort of recession and we'll put it this way. We wouldn't know it until. April May of 1991. So in that sense having said and in fact what we see actually is a decline in activity. In from October through the current period and obviously if the economy continues to decline through the month of December at the rate, it's been going in October and November the 4th quarter will be negative. And if the first quarter shows up negative will in that definition be a recession. The reason I all seriousness the reason I think we have to be a little careful about jumping to conclusions about the way the economy is going is not all of the data which we are looking at in recent days are as negative as the general sense of weakness and discouragement that a number of people have in fact it is a there is something of a puzzle in that all Our measures of consumer and business confidence are far weaker than the actual data that we see in for example. The surveys of consumer confidence are extraordinarily weak. In fact, I think I use the word plunged in my prepared remarks and indeed. That's exactly the way it looks. What one would normally expect from that sort of change is that deferrable items such as Passenger cars and light trucks would drop very sharply. The thing which is creating problems for a number of analysts is that if one looks at the standard 10 days sales figures which are reported by the automakers in this country and seasonally adjust them and then adjust for the newest phenomenon that there's an increasing proportion of least car sales in those numbers. You still get higher levels of Auto Sales and is historically consistent with the type of consumer confidence weakness that one sees similarly with profit margins declining and business confidence survey showing very marked declines. We nonetheless end up with a figure on durable goods orders manufacturers durable goods orders published yesterday for the whole month of October which are actually modestly firm. Produces durable equipment which is a standard measure of capital goods was higher than we had expected and indeed when you look at the details of the number it is not consistent with what we all sense about the nature of the weakness. It's a puzzle and lime us say one of my colleagues this morning suggested one possible explanation of what is going on is that we have not really seen economic weakness since 1982 83 and it's been so long Nationwide that we have been not not seen this process that now seeing the first signs of real softening in the economy on a nationwide basis. The response psychologically is much stronger than is typically the case when the business cycle say goes through short 3 and 4-year Cycles. I frankly don't know whether it is true or not, but it's an interesting hypothesis as to what may be explaining this issue. So in summary, let me just say that what evidence we have since the first week in October is that the overall economy is declining. It has not yet reached a point where it is definable as a recession it may get there. The probability that it will clearly is higher than it was three or four months ago, but it is not there yet and recessions at this stage remained to be remain as a forecast and I've been in the forecasting business for enough decades to know that if you exhibit certainty something is going to strike you down. The next question the recent action to lower the annual deficit is a good start. What can we as members of the business Community due to see that a move substantial and more substantial determined and responsible effort is made in this regard the deficit is our problem. How can we solve? No, I think that's a very important issue. There's extraordinary amount of skepticism in the marketplace about the deficit reduction package that the Congress passed and the president signed all of them seemingly reluctantly. The numbers as you look at them seem as though they are just an ordinary budget deficit reduction package, which over the years we've learned to dismiss with deep-seated cynicism. It's turning out that when you look at the details of this package and I must say there are aspects of it. I don't personally like in the sense that I would much prefer much substantial part of the reduction in the deficit from the expenditure side than was in fact the case. Nonetheless, I think the very large part of the deficit reduction is in fact real and that the means by which is presumably to be enforced. If there is a will will work. And I suspect that we will find out relatively quickly whether that mechanism which is now in place the so-called enforcement mechanism actually suppresses the expansion of deficits and indeed under the existing program under existing statute. turns it down to be sure there are assumptions in the budget package on the economy, which are obviously by least my judgment far more optimistic than they should be but even when you adjust for for more realistic economic forecasts, you do come out with a dramatic decline in the overall budget deficit by the end of the five-year period I think what has to be done basically is to make certain that what is a statutory reduction in the budget which exists on the books now be allowed to work. Remember this is not a constitutional issue where it is almost impossible to get to get around it. It is the Congress passed this and it can change it if the president acquiesces in it and I think to the extent that political pressures are merge for that to occur and I might add is where the cynicism in the marketplace comes from to the extent that that happens. I think that will be exceptionally unfavorable for the American economy. And I hope that even though numbers of you as I myself believe that the composition of the way the deficit Action occurred was less than Optimum. Nonetheless. It does create a very marked reduction in federal borrowing if enforced as I believe it will and that will be a extraordinarily important issue in the long-term growth of our economy. The next question we continue to hear talk of a credit crunch. Is there a credit crunch? If so, what caused it and what if anything can the Federal Reserve do about it? What is the impact of risk-based capital guides on Bank Lending? Yeah. Yeah, there is a credit crunch. Let me explain to you what what I really mean by that trouble with the term is that it sounds more like a new Candy than it does of financial variable. the trouble that Financial system had in the middle 1980s Was that commercial banks of the depository institutions expanded credit at a far faster pace and with more laxity than I think clearly in retrospect was desirable and the way we know that is that there has been this extraordinary rise in loans, which are in deep trouble. What we see is non-performing loans, especially in the real estate area, which were put on the books in the early 80s and through the mid and they say 85 86 87 and it's become a parent to a lot of Bankers that they were two lakhs. Like all human beings who make a major mistake. They pull back and most of the pro back to more sensible. standards is obviously desirable and healthy for the financial Community because the not doing so would lead to financial disaster. The trouble unfortunately as human beings are prone to do and human nature seems to reassert itself in these situations. All the time is that we overdo it pulling back and while we at the Federal Reserve thought that the pulling back in lending practices the tightening up so to speak was desirable perhaps through the spring and maybe the early summer of this year it became clear to us that were going over the line. in the summer and we at that point decided the only thing that we could do to offset that in part was to lower the cost of funds to commercial Bankers on the grounds that if their lending is being pulled back lowered cost of funds to the banks would create at least at the margin for a number of banks incentives not necessarily to lend more but not to pull back. And indeed I think from what we can judge about that episode. It was successful. It did not eliminate the credit crunch, but I think it did make it less onerous. We've subsequently repeated that on occasion as we observe the crunch tightening up. There is of course. A limit to what one can basically do strictly in monetary. He's because there are a number of bankers. Who are so concerned about the state of their capital and the solvency of their Institution? That even if the cost of their lending funds goes down. They are not apt to move at all. They're sort of traumatized in place. Indeed. It's probably quite instructive that despite a fairly significant decline in the federal funds rate. The prime rate has not come down it stayed up there which is in the sense of reflection of the fact that there is this pulling back and concern in the banking Community about capital. Now the causes of that concern for Capital are not all that simple or easy to discern. There have been a number of commercial Banks who have argued that it is The Regulators who by imposing increasing lending standards? Have induced the banks to pull back now. I think that's partly true in the sense that if we're going to argue that human nature is relevant to commercial Bankers. We least at least it is arguable that it is also relative to bureaucrats like myself who work in Regulatory Agencies the ability of a an examiner for example example to have been involved in say finding no problems with some of the loans that ultimately turned sour. Having say looked at the books at an earlier stage the his ability not to pull back and and to restore a firmer view I think is quite limited. I think there's got to be some retrenchment occurring on the basis of both the commercial Banks and some of the examiners and Regulators. That's normal as normal human psychology and a goodly part of it is highly desirable. But we have to be careful about is that we don't carry it over to a point where it becomes destructive. But I think the most important issue which I think we have to become aware of. is that Even if there were no Regulators out there, even if there were no Capital standards such as these risk-based standards, which you allude to what you lewd in the question. I think that commercial Bankers would still be Pope be pulling back because what the markets are basically telling them is that the solvency of their institution and far more importantly their ability to attract funds to be deposited in their institution or the willingness of individuals to put their money's voluntarily in the institution requires that there be appropriate capital in the bank and so long as the head of the bank or the lending officer believes that that capital is inadequate to attract the amount of deposits that are required one can be reasonably certain that the way the banker will act will be to try to restore Capital by tightening credit standards. That is rational act. It is a desirable act. It is the way our system functions in the way our system balances out. The only problem that I have with it as a number of my call and a number of my colleagues agree with me in the other regulatory the banking Regulatory Agencies. Is that it probably has gone a little too far under certain circumstances and indeed as early as this spring. The controller of the currency the head of the Federal Deposit Insurance Corporation and myself made a very unusual visit to the directors of the American Bankers Association to discuss this issue with them to make sure that what we communicated to them was in fact that there was a potential here for over reaction. It is a very subtle problem. I don't know if we can ever get it done. Right? But all I can assure you of is that we are trying as best one can to try to get the right balance in the right policy mix which creates credit for credit worthy borrowers and does not induce an inordinate and irrational contraction of credit at the same time being certain that we maintain the standards which are so crucial to these. solvency and safety and soundness of our institutions themselves The next question will there be a major overhaul of the banking system next year by Congress can our banks survive globally without being given new powers to enter other businesses. I don't know how the situation will evolve. I do know that we will be supportive as we have been in recent years that as we at the Federal Reserve for significant alteration, hopefully elimination of the glass-steagall ACT, which prohibits commercial Banks from number of activities, especially in the investment banking area. I think it's fairly clear that for our banks to be competitive and number of things have to change and I have innumerable times appeared before of the Committees of the House and Senate strongly supporting legislation, which would enable most specifically increased Branch Banking across state lines investment powers and a variety of other elements, which I think are essential to the viability of the Commercial Bank franchise which in turn in my judgment is a necessary condition for a sound Commercial Banking institution, especially one which can compete on an international basis. Okay one final question. You were quoted in the Wall Street Journal today is saying you were concerned about the weak dollar. Why isn't it good for exports? Anyway, what can we do to stop it from falling? what I indicated yesterday and is basically that Klein in the dollar is a two-edged sword. That is if it declines obviously it appears to exporters that they're getting more competitive. On the other hand to the extent that it increases import costs and reduces the propensity of foreigners to put savings into the United States. It has the capability of engendering the types of inflationary pressures, which could offset the competitive advantage of exporters in the sense that the exchange rate may go down, but the internal costs of production may go up. I mean, it's fairly apparent that weak dollar or more exactly a weak currency per se is not of particular value to an economy. Has a number of countries especially in Latin America have observed time and time again over the decades. the basic direction of exchange rate policy. We have always argued should be towards stability because to the extent that exchange rates tend to be stable on a worldwide basis or even on a trading basis amongst groups of countries, the risk premiums associated with business decision fall and to the extent that risks go down investment goes up standards of living go up and one can very readily see that stability in those markets are highly desirable for international economic growth and trade. so the issue that I was Raising yesterday was basically a reiteration of this particular proposition that we are concerned about the value or currency as we should be and our general focus is as we have reiterated as the Secretary of the Treasury is reiterated to maintain as best we can Exchange rates which 10 towards stability. Thank you very much. Ladies and gentlemen.