REMARKS AT CENTER FOR AMERICAN PROGRESS: 2014 POLICY CONFERENCE

FROM:  U.S. STATE DEPARTMENT 
U.S. Mission to the United Nations: Remarks at the Center for American Progress' Making Progress: 2014 Policy Conference
Samantha Power
U.S. Permanent Representative to the United Nations 
Washington, DC
November 19, 2014


AS DELIVERED

Senator Tom Daschle, Moderator: Let me begin the conversation, if I could, by talking about America’s role. There’s a growing debate across the political spectrum, within really both political parties, about what America’s role in the world should be in this day and age; what sort of leadership we should play in foreign affairs. Over the years, especially in the last two decades in particular, we’ve experienced everything from unilateralism to coalitions of the willing to a reliance on our core alliance structure of leading from behind. But there are little consensus about the role of America today and how we should play it, and how best to advance American interests. U.S. leaders face – many U.S. leaders have called for retrenchment, and some have even called for isolation on both the right and the left. So, Ambassador Power, I’d like to start by asking you the question: is it up to America to be the lead actor in the world today? How should we look at that role? Is there a correct model as we look at the circumstances we’re facing worldwide?

Ambassador Power: Thank you, Tom. And thank you everybody for being here, and to CAP for putting on this conference and doing such important work. I mean, you put your finger on a key question for our times. I think that what we see today in the fall of 2014 is American leadership being used on key issues, whether climate, Ebola, ISIL, but whereby we don’t take simple ownership of the issue and decide that we’re going to bear the entire burden alone. We invest our resources, we lead the world, and we bring other coalitions to our side.

So, in the effort against ISIL, in Iraq, in order to support the Iraqi government forces as they try to fend off this monstrous movement, our use of airstrikes. And then we went around the world and said, “Okay, who wants to join on airstrikes? Who wants to join in providing training and equipment to these forces as they reconstitute? Who is going to take care of the humanitarian burden of all the millions of people who’ve been displaced as a result of ISIL’s explosive move across that region?” And now we have a coalition of 60 countries.

Ebola, equally dramatically; President Obama goes before the United Nations in September and says, “Look, here’s what I’m going to do. But if I do this,” and it’s a lot, “it’s not going to suffice.” And if we tackle the problem only in Liberia where the U.S. is deploying more than 2,000 troops and hundreds of CDC and USAID personnel, and aid workers and partnering with Doctors without Borders – but if we just do Liberia, and other countries don’t take the lead in Sierra Leone and Guinea, then our efforts in Liberia are going to be pyrrhic, because people can just cross the border and so forth.

So, you lead by articulating to the American people in the first instance, and to the world why it’s in your interest, and in the collective interest, to act. And then you mobilize other countries to make sure that you’re not bearing these huge burdens alone. And it’s not just even about burden-sharing and resources, which are major issues, but also just the very nature of these kinds of transnational threats, as you all know, are ones where, even if we had all the resources in the world and could bear every burden, you just, you can’t. You know, the foreign fighters in Syria, unless you get other countries to tighten their controls on their borders and prevent people from traveling, the United States, even if it wanted to, couldn’t deal with the foreign terrorist fighter problem alone. And so I think the mobilization of the world around what President Obama said way back when he was a candidate, are common security, common humanity.

Senator Daschle: This conference, as you know, is about making progress, and that applies both domestically as well as in our international efforts in our agenda. We talk at a lot at conferences like this about core progressive values. How would you say core progressive values align with American interests internationally today?

Ambassador Power: Well, I think probably people would define core progressive values in different ways. For me, it would start with regard for human dignity; the dignity of work, the dignity of a fair wage, the dignity to be treated with respect by your neighbors or respect for your own preferences in the way you live your life. And I think President Obama has really urged us to inject concern for human dignity in our policymaking, whether that’s being hugely generous in the face of ethnic violence in South Sudan, or in the face of the horrible displacement out of Syria, or wanting to close Guantanamo, recognizing again that that is – remains even – a recruitment tool and something that terrorist movements use a way of mobilizing their base and so forth.

But I think dignity is one piece of it. And then I think not only looking to make sure that you have domestic legal authority, but also being very conscientious and very dedicated to international norms and international law, while of course always pursuing U.S. interests. So, I think that those: dignity and recognizing that we live in a broad – we live on a planet where our interests also depend on having other people play by the rules, so we are stronger when we lead ourselves by playing by the rules of the road.

Senator Daschle: One of the important roles for the United States historically, and I think especially today, is bringing other countries together in multilateral forums. And there could be no one more sensitized to the need to do that and the importance of doing that, than you at the UN. But whether at the UN or as we saw with the ASEAN and G-20 forums last week, there are multilateral settings that offer opportunities for progress, but can also get bogged down, in part because –

Ambassador Power: I’ve noticed.

Senator Daschle: – of conflicting agendas, in part because you get into just a lot of talkathons that come with the very nature of groups wanting to make points. So how can America balance the importance of working with partners around the world, and the efficiency of our ability to pursue core interests on our own?

Ambassador Power: Well, I get to live a daily talkathon up in New York, so I feel I have a privileged positioned on which to talk. You know, there are a lot of inefficiencies in the international system. Just as within governments, we need to constantly try to streamline and simplify and enhance the interface that citizens have with governments as they regulate, you know, so too in the international system. If you imagine aggregating government habits across 193 governments, imagine what you end up with, right? I mean, that is not ideal. It’s not – if you were starting from scratch in 2014, you’d build a different, a different airplane, probably.

Having said that, if the United Nations didn’t exist, you would definitely build it, because you want a venue to come together. And even those countries with whom we are estranged or not cooperating in visible ways, it’s a channel for communication so you don’t have misunderstanding. It’s a way of pooling resources. You know, it is very, very obvious on the one hand, but also striking to live it where you see that the things that matter most to us, you know, may be very low on the mattering map for other countries. And so too the things that matter the most for them may not be in the top five for us. And so finding – but yet we need them to cooperate with us, let’s say on foreign terrorist fighters, where they think maybe that’s a distant problem compared to, you know, economic development or even climate change, and they need us of course to invest in their economic development and in their dignity, particularly in developing countries.

So we've tried to – I’ve certainly tried to mix it up in New York. And my impatience is the stuff of legend now, insofar as, “How are we still talking about this? I mean, what are you doing?” So, I think you’ve got to inject that spirit. You can’t accept that these institutions need to just be talkathons. We’re trying to do much more brainstorming, you know, much more – trying to bring countries together sort of staring out at a common problem and defining it as such, and then being in a position of, what could we do about it, rather than this sort of positional form of diplomacy that we’ve done, and where there’s certainly a place for that.

The one thing I’d just add finally is it’s tempting to sort of see bilateral dealings as somehow separate from or juxtaposed with the multilateral framework. But the fact of the matter is the way multilateralism works at its best is you start small, and then you expand the circle of consensus and the circle of problem-solving. But ultimately, successful multilateralism will turn also on the extent to which we have maintained, you know, stable and healthy partnerships with different countries around the world. Aggregating those friendships is what allows us to come together. And aggregating the sense of shared destiny and shared interest is what allows us to get a lot of countries to the table around shared threats.

Senator Daschle: So, how does our approach to multilateralism compare or contrast to other great powers, like China or Russia, or even allies like Britain or Japan? Similar or a lot different?

Ambassador Power: That’s an interesting question. I think that – we have embassies in just about every country in the world. And every minute of every day, we have a foreign policy of some kind with that country. And I think we view the multilateral system as a place to advance, whether human rights and fundamental freedoms in the country, or economic prosperity or trade relationships, etc. So, we’re constantly looking to advance our very particular foreign policy objectives in particular countries.

So, for instance yesterday we had very important General Assembly votes on resolutions on the human rights horrors in Syria, those in the DPRK, and those in Iran. And these votes – you know, we treat each of those votes as if it’s a huge priority for the United States. We have our embassies fanning out around the world trying to make sure that countries in the Caribbean or countries in the Middle East are voting a certain way vis-à-vis DPRK, in order to send the strongest possible signal to the regime there that they’re going to be held accountable, particularly in light of the recent commission of inquiry, the horrible commission of inquiry report on the camps and the human rights conditions in DPRK.

That ambition, you know, that range, that ability to draw on those resources, I think, is distinct about the United States. And that belief that it is in our interest to go all out on the DPRK at the same time we go out on Iran at the same time. Most of the time with other countries you’ll see some subset of the larger global agenda prioritized and that kind of effort perhaps being brought to bear, although without the resources and the reach that we have. So, and even countries like China that are taking more and more assertive leadership roles within the UN system, including by increasing in a very helpful development, increasing their contributions to UN peacekeeping in a substantial way, sending doctors and other medical professionals to deal with Ebola. So, you’re seeing them begin to step up. But, still, that – what I just described in terms of campaigning around a discrete issue, whether on economic development, on climate, on human rights in any particular country – you wouldn’t see, again, that same kind of ground game or yet that prioritization of that set of issues, certainly with human rights issues, needless to say.

Senator Daschle: So, as I look at our options, is there a downside to bilateralism, like what we’ve just recently seen with our announcement on climate with China, versus taking the traditional multilateral approach?

Ambassador Power: You know, I think that when we do strike big deals and deepen partnerships in very visible ways, it’s a lot – the relations between countries are a lot like that between individuals. Like there’ll be someone over there saying, “What about me?” Like, “Why wasn't I a part of that?” And I think you see that a little bit here and there in the margins, but compared to the good it does – for instance, if you take the historic agreement, the CAP alone – that past and present CAP leader John Podesta, his leadership in helping negotiate that on the president’s behalf; hugely important agreement. And with China and the United States leading together and early, and constituting the two biggest economies and the two biggest emitters, that puts us in a position to lead the world. And the leverage associated with us doing that together, I think, vastly outweighs any momentary kind of sense of, “Oh, I wish that would’ve been a bigger multilateral framework.” And as I said earlier, that is the way you do multilateralism. You start and get key stakeholders to make agreements, and then you broaden out the circle. And that’s of course what our hope is to do on the climate.

Senator Daschle: So let me ask one more question on multilateral institutional infrastructure before I – I want to give to couple of other issues before we run out of time. A lot of the institutions created from multilateral cooperation were created after World War II. We had a big role to fill. Those institutions really haven’t changed much, whether it’s the UN Security Council, the IMF. To what extent do they reflect today and the world as we see it globally? And to what extent, if it’s not as reflective as they should be, is there a potential for reform as we look at making these institutions perhaps more reflective of the current lay of the land?

Ambassador Power: Well, let me separate a couple of different planes on which one can look at that question. I mean, I think you’ve seen over the life of the Obama administration a real emphasis on the G-20 as a hugely important global forum, not only to deal with economic issues, but as we just saw, the G-20 issued a very strong statement on Ebola. And we would view that group of countries as in the first instance the most likely group of countries to contribute health professionals, money, building materials, etc. in the context of Ebola. So, it’s a convenient proxy for those who should have resources that they’re prepared to invest in dealing with common threats and common challenges.

So, that, I think, shift and that emphasis has occurred over the life of the Obama administration. With the crisis in the Ukraine, of course, the G-7, now, has taken on new importance, particularly with regard again to that set of issues. That’s a very useful forum for that, and for a host of other things. So, again, that venue remains important, but the G-20 is of a different order than it would’ve been back even in 2008. And this was happening with the Bush administration toward the end, as well.

In the United Nations, Security Council reform has been something that many have aspired to, for many, many years, for the obvious reason which you state, which is surely 69 years after the founding of the UN, the dynamics, the power dynamics, the economic dynamics, and so forth in the world, the demographics, everything has changed and surely there should be some modernization. The challenge is that one of the reasons that we would, that one would wish to see an updated set of international institutions is to enhance legitimacy and effectiveness, and to enhance a sense of shared ownership over the entire United Nations, because there’s a sense of alienation by some of the powerful countries that have been doing more than their fair share, like Germany and Japan – you know, tremendous contributors to the UN over many years, but were not part of the regular decision-making body.

But having said that, and with that alienation, and with that aspiration to render it more effective, there is no more divisive issue in the UN membership. And so there just hasn’t been a proposal that has attracted a kind of plurality or a majority because everybody wants – at a moment when things are being revisited, everybody wants in. And so, just as I was describing earlier in the context of bilateral deals, so too this is something where people want UN Security Council reform, but they, again, have very different views as to how you would bring it about.

So, we remain open, you know, and as these debates play themselves out – they’re heating up now because it’s the 70th anniversary approaching. And the question it poses of course rightly being asked. But it’s not clear that there’s a pathway that could gather a critical mass. And, of course, we would remain very attached to our veto, which is a hugely important feature of our leadership within the UN system. So that’s not something we’d be prepared to give up. But on the membership, we certainly see the case.

Senator Daschle: Let me turn to a couple of very specific challenges that you’re very involved with. The first is Ebola. You just came back from Africa a couple of weeks ago.

Ambassador Power: I did. Thank you for giving me a hug earlier.

[Laughter]

Senator Daschle: Yeah, and I’d do it anytime. But I’m curious, as you explored the challenges we face, as you saw firsthand what we’re up against, and the progress or in some cases maybe the lack thereof, how would you characterize our biggest challenge today?

Ambassador Power: Well, we just still don’t have enough. There’s not enough that has been committed. Progress in – whether it’s funds, health workers, beds, as in beds in isolation units, ambulances, fuel. I mean, since again, President Obama went to the UN and stood with the Secretary General and made this appeal and we waged a full-court press around the world to get people to contribute, we have closed, we have narrowed, we say, a very large number of gaps.

But, again, particularly as you get out into the rural areas in the three countries, I mean you still have people who have never heard of Ebola. Our ambassador in Guinea was just out hiking in the countryside away from Conakry, the capital, and just went up to a group of women and said have you heard of Ebola, speaking to them in the local dialect and everything – we have a wonderful ambassador in Guinea. And so, just, social mobilization, basic, again things that money can buy: SIM cards for cellphones, cellphone coverage in parts of the country that doesn’t exist, and how that – and these are the kinds of things you can’t turn on a dime.

So, what is so gratifying is in my own experience in dealing with crises and foreign policy challenges, there’s something very unique about the anti-Ebola effort, in that you can really measure progress. You can – on my trip a couple of weeks ago, four days before I arrived, the rate of safe burial within 24 hours in Freetown, the capital of Sierra Leone, was only 30 percent. The British had come in, they revamped the command of control working with the Sierra Leone military and civilian authorities, and that safe burial rate, just in a four-day period, had gone up to 98 percent within 24 hours, which stands to play a really important role in infection control, because unsafe burial is a huge source of infection. Same in Monrovia, because of the U.S. effort.

The U.S. has deployed these mobile labs around Liberia. We visited one about an hour flight away from Monrovia, about an eight-hour drive in Bong Country, and there are these three Navy microbiologists who had just set up this lab two weeks before we arrived. One of them had decided to become a microbiologist 20 years ago because he read Hot Zone, the Preston book about Ebola. So he can’t believe his fortune that he’s sitting here looking at Ebola under a microscope to test local samples. Before this little three-person unit of microbiologists, contributed by the U.S. Navy, arrived, the testing in that area was taking as much as a week. The samples were being driven on motorcycle, and sometimes getting lost en route to Monrovia. There was only one lab in Monrovia, and everyone in the country had to wait in order to get their test results.

So, just by showing up, that one-week time has now been cut to between three and five hours. Now what does that mean? Tangibly, it means that before, people who were Ebola-positive and Ebola-negative but didn’t know it were cohabitating within Ebola treatment units for a week. That’s not good. That’s not isolation; that’s not what one would seek. Moreover, the beds were full. And now the testing results are coming back, and 70 percent don’t have Ebola; they may have malaria, they may have a cold. If you’re lucky, if there has been social mobilization, people will be coming forward. So, now those beds are being freed up, and you’re starting to see efficiencies.

But back to your original question, I am personally, I think we’ve done a very good job on the hardware, which is the Ebola treatment units, building the facilities where people can be isolated. The software, now, is what is needed: more healthcare workers in the here and now, but also if you look out four weeks or six weeks, that next tranche, who’s going to replace the people in-country today? And this is where us making clear as the American people just how much we value the work that American doctors and nurses are doing as they go over there. So, health workers and the social mobilization, getting the locals to do away with the stigma and the fear that pervades, so that the next time our ambassador goes hiking in the countryside, everyone you meet is telling you about Ebola, rather than again, it being perceived to be foisted upon the countryside by the center, which is a bit of a risk right now.

Senator Daschle: So let me ask you – it may be too early to be able to answer this with any clarity – but to what to what extent are there already lessons learned for the next Ebola, the next H1N1, the next SARS? What can we take from this experience that might help us prepare more proactively for the next one?

Ambassador Power: I think if you look at the funding request, the resource request that President Obama sent up a week or two ago to the Hill and that we are working very constructively with both parties now to refine, I think you see some of those lessons already put in place: making sure that every state has the capability to deal with infectious disease or viruses like this that may be foreign in the first instance, but where you have training protocols that are put in place very quickly. Research into vaccines, you know, investing more in the prevention side of things. In the countries in question, part also of our funding request is to make sure that we don’t invest billions of dollars here in dealing with Ebola, get to the back end of the crisis, and then the Ebola treatment units get dismantled because they’re just tents and bricks, and they’re not themselves sustainable structures, the white vehicles belonging to the international community all get put back on cargo ships. And then what’s left of the health infrastructure of these countries?

The reason that it spread so quickly, in addition to some of the issues related to where the outbreak first occurred, being in a border region and with travel and so forth, but is that the systems were too weak to deal with it – unlike Nigeria, which was able to draw on the expertise acquired in an anti-polio – a polio eradication campaign – a generation ago. That expertise was tapped to deal with the challenge in Nigeria. Nothing like that existed in these three countries. So in addition to the U.S. preparedness, which is very, very important in making sure it’s done at the relevant, with relevant health officials at the state level, really investing not only in these countries’ health infrastructure, by bringing the World Bank and others into that effort, but also looking across the continent. And this is what the President’s global health security agenda, which predated the Ebola crisis, is now, but now has new adherents in the international community because of what’s happened. Hopefully, that’ll be the venue in which some of these changes will take place.

Senator Daschle: We didn’t get to ISIS, we didn't get to Syria, we didn’t get to Iran. There is a whole list of things we didn’t get –

Ambassador Power: Sorry about that.

Senator Daschle: But your answers were terrific, and I just can’t thank you enough for taking time out of what I know is an incredibly busy schedule to be here.

Ambassador Power: My pleasure.

Senator Daschle: And I know I speak for every person in this room in thanking you for the incredible leadership you give us every day. Thank you.

Ambassador Power: Thank you. Thank you so much.

PRESIDENT OBAMA WARNS OF SYRIAN CHEMICAL WEAPONS THREAT

FROM:  U.S. DEFENSE DEPARTMENT 
Obama: Syrian Chemical Attacks Threaten Region, Globe
By Jim Garamone
American Forces Press Service

WASHINGTON, Sept. 6, 2013 - Chemical weapons attacks in Syria are not just a tragedy in that country, but also pose a threat to regional and global peace and stability, President Barack Obama said in St. Petersburg, Russia, today.

At a news conference following the G-20 summit, Obama said the Syrian regime's chemical attack on its own people threatens to unravel the almost century-old ban against using such weapons.

The president said the Syrian government's attack killed civilians, making this more than an esoteric subject. "Over 1,400 people were gassed. Over 400 of them were children," Obama said. "This is not something we've fabricated. This is not something that we are ... using as an excuse for military action."

The Syrian attack threatens Turkey, Jordan, Lebanon, Iraq and Israel, and threatens to further destabilize the Middle East, the president said. The actions also increase the likelihood that these weapons of mass destruction could fall into the hands of terror groups, he added.

"Failing to respond to this breach of this international norm would send a signal to rogue nations, authoritarian regimes and terrorist organizations, that they can develop and use weapons of mass destruction and not pay a consequence," Obama said. "That's not the world that we want to live in."

G-20 leaders were unanimous that there was a chemical weapons attack in Syria on Aug. 21, Obama said, and also were unanimous that the chemical weapons ban is important. Where there is a division in the G-20 has to do with the United Nations, he added.

"You know, there are number of countries that just as a matter of principle believe that if military action is to be taken, it needs to go through the U.N. Security Council," he said. "It is my view ... that given Security Council paralysis on this issue, if we are serious about upholding a ban on chemical weapons use, then an international response is required, and that will not come through Security Council action."

In a joint statement released today, the leaders of Australia, Canada, France, Italy, Japan, South Korea, Saudi Arabia, Spain, Turkey and the United Kingdom joined with the United States in calling for "a strong international response to this grave violation of the world's rules and conscience that will send a clear message that this kind of atrocity can never be repeated. Those who perpetrated these crimes must be held accountable."

Obama said he was elected to end wars, not to start them. "I've spent the last four and a half years doing everything I can to reduce our reliance on military power as a means of meeting our international obligations and protecting the American people," he said. "But what I also know is that there are times where we have to make hard choices if we're going to stand up for the things that we care about. And I believe that this is one of those times."

The president announced he will address the American people from the White House about Syria on Sept. 10.

READOUT OF SECRETARY HAGEL'S MEETING WITH SPAIN'S MINISTER OF DEFENSE PEDRO MORENÉS

FROM:  U.S. DEFENSE DEPARTMENT 

           Pentagon Press Secretary George Little provided the following readout:
           "Secretary of Defense Chuck Hagel and Spain's Minister of Defense Pedro Morenés met today at the Pentagon.

           "Secretary Hagel and Minister Morenés spoke at length about the violence in Syria. The two leaders discussed Spain's support of a joint statement issued at the G-20 in St. Petersburg condemning the horrific weapons attack in the suburbs of Damascus and supporting the efforts undertaken by the United States and other countries to reinforce the prohibition on the use of chemical weapons. Secretary Hagel praised Minister Morenés for Spain's support on the issue and the leaders agreed to remain in close coordination as the situation evolves.

           "Secretary Hagel thanked Minister Morenés for Spain's support of U.S. forces, specifically at Morón Air Base and Naval Station Rota. The two leaders discussed Africa and the continent's security challenges including piracy, illicit trafficking, and terrorism.

           "The two leaders also discussed the importance of supporting security and stability in Afghanistan post 2014. Secretary Hagel thanked Spain for being a valued ally, and conveyed the United States' appreciation for Spain's steadfast commitment to Afghanistan."

U.S TREASURY ON WALL STREET REFORM

FROM:  U.S. DEPARTMENT OF THE TREASURY
Wall Street Reform for U.S. Department of the Treasury
As prepared for delivery
NEW YORK – Good afternoon.  It is a privilege to address the International Section of the American Bar Association, and to be speaking about international regulatory reform. The subject matter is particularly timely given that the world’s finance ministers will gather in Washington, D.C. for the G-20 this weekend.

We have learned from recent events, including the financial crisis, that financial systems and markets around the world are more integrated than ever.  Therefore, financial reforms around the globe must be consistent and convergent.

I will touch on three key priorities that were agreed upon by the G-20 – capital, resolution, and OTC derivatives – as well as insurance regulation.
We are transitioning now from regulatory design to implementation.  We must acknowledge that the task is both difficult and complex. We must work together through the G-20 and the Financial Stability Board to make the new rules effective. We all share a common interest in a global financial system that is safe and resilient, and that supports growth.

The Importance of Reform
Let me begin by retreading familiar ground: the financial crisis revealed that the risks facing our system can be correlated and crosscutting, and that they can affect multiple firms, markets, and countries simultaneously. The crisis laid bare the fundamental weaknesses of the previous financial regulatory infrastructure.
To preserve financial stability, it became essential to establish a regulatory structure that could properly assess the financial system as a whole, not simply its component parts – a regulatory structure in which the failure of one firm, or problems in one corner of the system, would not risk bringing down the entire financial system.  It was important to establish a modern regulatory framework that could keep pace with financial sector innovations, restore market discipline, and safeguard financial stability in both the United States and abroad.  The United States has played a leading role in this global financial reform by enacting the Dodd-Frank Act.

Some have argued that these new rules and standards put U.S. financial firms at a competitive disadvantage.  While we must always work towards having a level competitive playing field, I believe such arguments are misplaced.
First, by moving quickly, we in the United States have been able to lead from a position of strength in setting the international reform agenda.

Second, there is already evidence that our actions – both the immediate response to the crisis and permanent reforms under the Dodd-Frank Act – have bolstered the recovery of the U.S. financial system.  Bank balance sheets are stronger. Tier 1 common equity at large bank holding companies has increased by more than 70 percent or by $560 billion since the first quarter of 2009. Additionally, at the four largest bank holding companies, for example, reliance on short-term wholesale financial debt has decreased from a peak of 36 percent of total assets in 2007 to 20 percent at the end of 2011. The firms’ liquidity positions are more robust and their funding sources are more reliable. Firms have significantly reduced leverage. Recent stress tests showed that the bank holding companies are better able to withstand significant shocks.

Third, I believe that consumers, investors, and businesses feel more secure when they deal with financial institutions that are well-regulated and transparent, because these attributes engender trust. Trust is essential for the financial system to perform its most basic functions, including credit intermediation. For many years, investors from all over the world have trusted the U.S. financial system. Regulation that is both strong and sensible is essential to continue that trust.

Over the past three years, we have made substantial progress in restoring this trust to our financial system and thereby improving financial stability. Long-term economic growth and credit intermediation are only sustainable under a model in which there is confidence in financial stability.

International Coordination
All of this being said, it is nevertheless important to remember that financial systems are interconnected and that risks both transcend and migrate across national borders. Therefore, we must work towards building a system where there is broad global agreement on the basic rules of the road.

Global coordination is important not only for maintaining a level playing field, but also for promoting financial stability.  We can ill afford the risk of regulatory arbitrage.  If riskier activities migrate unchecked to jurisdictions with inadequate rules and supervision, the threats that will emerge will have implications not just for the host country, but for the global financial system. The financial crisis exposed the failure of weak regulation.

Europe has taken important steps toward reform.  The EU is working through its most extensive financial services reform.   It has proposed or adopted around thirty reform measures, including almost all of the key measures agreed to by the G-20.  The United States and the EU are aligned on the fundamental goals of regulatory reform, and are united by a shared view that it is necessary to complete at an international level the work that is underway.  Treasury and U.S. regulatory agencies have worked closely with our counterparts in the European Commission and the European Supervisory Agencies to align our regulations more closely.

It is unlikely that we and our European counterparts will attain perfect alignment.  But most of the differences between us are technical, not matters of principle.  While we must work diligently to resolve our technical differences, we should not let them overshadow our shared commitment to reform. We must also see to it that other regions follow through on implementing reforms, particularly Asia, given the importance of financial centers like Hong Kong, Singapore, and Tokyo. The global financial system will continue to strengthen as a result of our efforts. Backtracking on reforms is not an option.

G-20 and the Joint Reform Agenda
The G-20 has been, and will continue to be, a key vehicle for coordinating our reform efforts. Since the first meetings of the G-20, and especially since the Pittsburgh meetings during the height of the financial crisis in 2009, the Group has worked to increase the strength and effectiveness of the international regulatory framework through a comprehensive agenda for reform. This agenda has been reaffirmed and further developed at each subsequent Summit.  The Financial Stability Forum, which was expanded and strengthened as the Financial Stability Board (FSB) in 2009, has also played a key role in this process, with support from the global standard-setting bodies.

This year in the G-20, the United States is emphasizing progress on implementation in three key areas: capital, resolution, and OTC derivatives.  Let me now turn to discussing these three priorities as well as international coordination around insurance, which will also be an area of focus in the coming year.

Capital
The crisis showed that financial institutions were not sufficiently capitalized to withstand significant market pressures.  To maintain financial stability, taxpayers in countries across the globe had to provide capital support to financial institutions in order to prevent their failure.  There was little question that, going forward, banks needed to be more resilient, with better quality capital buffers.  

The international regulatory community acted with dispatch and urgency to achieve consensus on Basel 2.5 and Basel III capital standards.  The new Basel capital standards provide a uniform definition of capital across jurisdictions, and it requires banks to hold significantly more and higher-quality capital.  The reforms to the Basel Capital Standards also establish a mandatory leverage ratio and a liquidity coverage ratio.
More work remains with respect to the Basel Capital Standards.  International agreement on standards must be followed with implementation by G-20 members.  Moreover, important debates continue around issues such as liquidity run-off ratios and measurement of capital deductions. The Basel Committee is now working toward more consistent measurement of risk-weighted assets across jurisdictions.

While these points are relatively technical, it is important that the new rules be consistent not only in principle, but also in practice. Consistent cross-border application of capital standards is important to maintaining a level playing field.

Resolution
Strengthening cross-border resolution regimes is complicated.  But it is a critically important topic.

The U.S. experience with Lehman Brothers showed the potentially devastating consequences to financial stability of the disorderly bankruptcy of a financial firm. Thus, the Dodd-Frank Act provides for orderly resolution of financial companies, including non-bank financial institutions. The FDIC and Federal Reserve have already adopted a number of rules pursuant to these new authorities, including a “living wills” rule that requires large bank holding companies and designated nonbank financial companies to prepare resolution plans.  The largest bank holding companies will submit the first living wills in July.
The goal of international convergence was furthered this year when the G-20 endorsed the “Key Attributes of Effective Resolution Regimes for Financial Institutions.”   This new international standard addresses such critical issues as the scope and independence of the resolution authority, the essential powers and authorities that a resolution authority must possess, and how jurisdictions can facilitate cross-border cooperation in resolutions of significant financial institutions. The Key Attributes provide guidelines for how jurisdictions should develop recovery and resolution plans for specific institutions and for assessing the resolvability of their institutions.  This new international standard also sets forth the elements that countries should include in their resolution regimes while avoiding severe systemic consequences or taxpayer loss.

Therefore, much progress has already been made and even more will be completed by the end of this year: cross-border crisis management groups for the largest firms have been established, additional cross-border cooperation agreements will be put in place, and recovery and resolution plans are being developed.

Derivatives
The crisis also showed that we did not have a sufficient understanding of derivatives, which are an important means of interconnection between firms.  The flaws attendant to this area of financial transactions were many: poor access to useful data such that, at critical times, neither supervisors nor counterparties knew who owed what to whom; poor risk management such that firms were not able to satisfy their contractual obligations with respect to collateral; and a generally fragmented and opaque market. It is common ground that the lack of oversight in the derivatives markets exacerbated the financial crisis.
The Dodd-Frank Act creates a comprehensive framework of regulation for the OTC derivatives markets.  The elements of this framework include regulation of dealers, mandatory clearing, trading, and transparency.  The framework established under the Dodd-Frank Act is consistent with that of the G-20.  The CFTC and SEC are well into their rule-making process.  Once again, the United States and the EU have closely cooperated in this area, and have adopted parallel approaches to important issues such as central clearing, trading platforms, and reporting to trade repositories.

While the reforms set forth a framework for on-exchange-traded derivatives, it is also important for us to make progress on establishing a global regime for margin for bespoke, un-cleared derivatives transactions.  Both the United States and the EU support international work on global margin standards for trades that are not cleared through a central counterparty. Margin requirements are critical to promoting the safety and soundness of the dealers, and thereby lower risk in the financial system.
While we have made some progress, there is still much work to be done on derivatives, including completing the implementation efforts and meeting agreed G-20 timetables.

Insurance
Finally, I would like to turn to insurance regulation.  Important strides have been made in this area. The Dodd-Frank Act created and placed within the Treasury Department the Federal Insurance Office (FIO). While FIO is not a regulator, it has broad responsibilities to monitor all aspects of the insurance industry and is the first federal office in this sector. Among its duties, FIO is charged with coordinating federal efforts and developing federal policy on prudential aspects of international insurance matters, including representing the United States in the International Association of Insurance Supervisors, or IAIS. Notably, FIO recently joined the Executive Committee of the IAIS.

FIO’s establishment coincides with the rapid internationalization of the insurance sector and work ongoing in various international regulatory bodies that will affect U.S.-based companies operating around the world. FIO’s international priorities include the IAIS initiative to create a common framework for the supervision of internationally active insurance groups, or ComFrame. FIO is also engaged in the IAIS work stream to develop a methodology that will identify globally significant insurance institutions, an assignment given to the IAIS by the Financial Stability Board. Finally, FIO is leading an insurance dialogue between the United States and the EU that aims to establish a platform for insurers based on both sides of the Atlantic to compete fairly and on a level playing field.

Conclusion
We must continue to work with our partners in the G-20 and the Financial Stability Board to ensure a consistent international financial reform agenda.  It is not enough to mitigate risk within the United States.  Reform must be global in nature.

But, financial reform cannot just respond to events of the past.  It must be forward-looking and it must help lay the foundations for sustainable growth.  Financial reform, embodied by responsible and robust regulation, is critical to establishing and maintaining confidence.  Confidence is critical for long-term financial stability and growth.
Our past experience confirms our current judgment.  In the decades following the Great Depression, the United States set the highest standards for disclosure and investor protection, the strongest protections for depositors, and sophisticated market rules. We did not lower our standards even when others might have.  Financial regulation became a source of strength for our financial system and led to a period of significant growth and prosperity.

Today, as our predecessors did in the wake of the Great Depression, we also have the opportunity to restore trust in the global financial system through a smart regulatory framework that could support sustainable economic expansion.
Thank you.