Interview with Ben Bernanke Part 1/2
If you think your job is tough, consider Ben Bernanke's. As Chairman of the Federal Reserve, the task of reviving the U.S. economy falls largely on his shoulders. Scott Pelley has the interview.
Interview with Ben Bernanke Part 1/2
Scott Pelley: Aside from the President, he is the most powerful man working to
save the economy but you’ve never seen an interview with Ben
Bernanke. Bernanke is the Chairman of the Board of Governors of
the Federal Reserve System better known as the Fed. The words of
any Fed chairman cause fortunes to rise and fall and so by
tradition, chairman of the Fed do not do interviews. That is until
The Federal Reserve controls the economy by setting interest rates.
But after the crash of 08 Bernanke invoked emergency powers and
with unprecedented aggressiveness, he has thrown a trillion dollars
off the crises. Then Bernanke may be the most important Fed
chairman in history. The question is can he help lead America out
of this deep recession and when?
Mr. Chairman, I’m going to start with the question that everyone
wants me to ask. When does this end?
Ben: It depends a lot on the financial system. The lesson of history is
that you do not get a sustained economic recovery as long as the
financial system is in crisis. Now, we’ve seen some progress on
financial markets absolutely but until we got that stabilized and
working normally, we’re not going to see recovery but we do have
a plan. We’re working on it. I do think that we will get it stabilized
and we’ll see the recession coming to an end probably this year.
We’ll see recovery beginning next year and it will pick-up sting
Scott Pelley: Do you think the recession is going to end this year?
Ben: In a sense that this decline will begin to moderate and will begin
sea-leveling off, it won’t be back to full employment but we will
see. I hope the end of these declines have been so strong in the last
couple of quarters.
Scott Pelley: But, you wouldn’t say at this point that we’re out of the woods?
Ben: No, I think the key issue is the banking system and the financial
Scott Pelley: Unemployment as we said here is about 8.1%, I wonder if you
expect double-digit unemployment?
Ben: Well, it’s hard to forecast exactly where we’re going.
Unemployment is rising. Job losses are still very severe and no
doubt that the unemployment rate is going to go higher than it is.
But I think again that if we do succeed and stabilize in financial
system, it will begin to see a slower pace of decline and eventually
a stabilization that will set the basis for recovery.
Scott Pelley: You seem to be saying that we’re not heading into a new American
Ben: I think we’ve heard of that risk. I think we have gotten past that
and now the problem is to get the thing working properly again.
Scott Pelley: Ben Bernanke, aged 55, has been Chairman of the Federal Reserve
Board since 2006. For our interview, he opened up the Fed
headquarters rarely seen by the public. It’s a monumental building
along the National Mall. Construction started in 1935 in the depths
of the Great Depression.
You know Mr. Chairman, I think the Federal Reserve for most
people is a mystery.
Ben: Well, it’s an institution that people do not hear so much about but
it’s a very important one. It manages monetary policy for the
country. It’s one of the main tools that we have for stabilizing our
economy and keeping prices stable.
Scott Pelley: When was it founded?
Ben: Fed was created by Congress in 1913 and its original purpose was
to deal with financial planning which are what we’re doing right
Scott Pelley: Bernanke’s crises started in 2007 with the mortgage meltdown.
Lenders began to fail. Bernanke cut interest rates repeatedly. In
2008, the Fed stopped the collapse of Bear Stearns by arranging a
sale to another firm but then came the end of Wall Street as we
knew it. Mortgage giants Fannie Mae and Freddie Mac were seized
by the government. On September 14th, Merrill Lynch was sold in
distress and the next day 158-year-old Lehman Brothers failed.
You didn’t rescue Lehman brothers. It set off a worldwide panic
when it went bankrupt and I wonder looking back where do you
think that was a mistake?
Ben: There were many people who said, “Let them fail!” It’s not a
problem. The markets will take care of it and I think I knew better
than that and Lehman proved that you can’t let a large
internationally active firm fail in the middle of financial crisis.
Now, was it a mistake? It wasn’t a mistake for the following
reason. We didn’t have the option. We didn’t have the tools. The
Fed Reserve cannot put capital in to an institution. All we can do is
make loans against collateral.
Scott Pelley: The day after Lehman, Bernanke’s Fed did something astounding.
It loaned $85 billion to a company that wasn’t a bank at all.
American International Group, the global insurance giant that was
also involved in backing risky mortgage investments. Bernanke
says unlike Lehman, the Fed could make the loan base on good
collateral in AIG’s portfolio.
Scott Pelley: There had now been four rescues of AIG for about $160 billion.
Why is that necessary?
Ben: Let me just first say that of all the events and all the things that
we’ve done in the last 18 months, the single one that makes me the
angriest, that gives me the most angst is the intervention of the
AIG. Here was a company that made all kinds of unconsumable
bets. Then, when those bets went wrong, we had a situation where
the failure of that company would have brought down the financial
Scott Pelley: You said it makes you angry. What do you mean by that?
Ben: It makes me angry. I slammed the phone more than a few times on
discussing the AIG. It’s just absolutely I understand why the
American people are angry. It’s absolutely unfair that taxpayer
dollars are going to prop up a company that made these terrible
bets that was operating out of the site regulators but which we have
no choice but to stabilize or else risk enormous impact not just in
the financial system but on the whole US economy.
Scott Pelley: By September, Bernanke and former Treasury Secretary, Hank
Paulson went to Capitol Hill to urge a massive bailout of the
Ben: At that period, I thought we were pretty close to a global financial
Scott Pelley: How much danger was there? How close a call?
Ben: It was very close. It was very close. The Congress passed the bill
that gave Treasury the right to put capital into the bank in the first
week of October. And it was on the second week of October that
the crisis reached its peak. If we don’t have those powers, we could
have a much worse outcome. So it was a very dangerous situation.
Scott Pelley: Was anyone at Capitol Hill skeptical? Did they back and say, “Mr.
Chairman, it’s probably not quite that bad.”
Ben: Well, I do remember one conversation I had when I was addressing
a caucus of Congressmen and a Congressman said to me, “Mr.
Chairman, you know, I’ve talked to bankers in my town. I’m
talking to shopkeepers in my town and they say things are normal.
Nothing is going on. We don’t see any problem.” And I turned to
him and I said, “You will.”
Scott Pelley: That second week of October, the Dow fell 18%, its worst week in
history. In the midst of the crisis Bernanke had freedom to act
immediately. He doesn’t need prior permission from Congress or
the President. While they debated on Capitol Hill, Bernanke cut in
through its rates nearly to zero. Then he used Depression-era
emergency powers to launch dozen rescue programs of his own.
There was support for money market funds, mortgages, short-term
lending to small businesses and support for auto loans, student
loans and small business loans. Commitments of a trillion dollars
doubling the size of the Fed’s balance sheets.
Is that tax money that the Fed is spending?
Ben: It’s not tax money. The banks have accounts with the Fed much
the same way that you have an account in a commercial bank. So
to lend to a bank, we simply use the computer to mark up the size
of the account that they have with the Fed. It’s much more akin
although not exactly the same. But it’s much more akin to printing
money than it is to borrowing.
Scott Pelley: You’ve been printing money?
Ben: Well, effectively and we need to do that because our economy is
very weak and inflation is very low. When the economy begins to
recover, that will be the time that we need to unwind those
programs, raise interest rates, reduce the money supply and make
sure that we have a recovery that does not involve inflation.
Scott Pelley: He’s not kidding about printing money, the Fed issues U.S.
currency. That’s why it says Federal Reserve note on all the bills in
your wallet. This is the Bureau of Engraving and Printing just a
few blocks from Bernanke’s office.
The Fed’s mandate from Congress to put enough money in the
system for maximum employment but not so much that it sets off
inflation. The Fed actually pays of itself and returns billions and
profits to the treasury. In a sense Bernanke has been preparing for
this emergency his whole professional life. He got a Ph.D. in
Economics from MIT. He chaired the Economics Department of
Princeton and his specialty is the Great Depression. He’s among
many economists who now believe that it was the Federal Reserve
itself that helped turned the recession in 1929 into a global
Ben: They made two mistakes basically. One was they left the money
supply contract very sharply. Prices fell, deflation, so monetary
policy was in fact very concretionary, very tight during that period
and the second mistake is they made was they left the banks fail.
They didn’t make any strong effort to prevent the failure thousands
Scott Pelley: Bernanke told us that we were close to a second depression and he
is determined not to let the major banks fail on his watch. One of
the things that I think many people watching this interview don’t
understand. It has wider or multiple bail-outs, four bail-outs of
AIG -three bail-outs of CD group. There is a sense that this is a
Band Aid approach that we’re not getting to the root of the
Ben: Well, part of the issue is that the economy has gotten a good bit
worse. The first part of the crisis was sub-prime and other assets
that were toxic. Now we’re in the second phase which is that the
economy is very weak. So, the economy’s weakness is meant that
some of the initial attempts to stabilize the banks haven’t been
enough and had to do more.
Scott Pelley: You know Mr. Chairman there are so many people outside this
building across this country who say, “To hell with them”. They
made bad debts. The wages of failure on Wall Street should be
Ben: Let me give you an analogy, if I might. If you have a neighbor who
smokes in bed and he’s a risk to everybody and supposed he sets
fire to his house. You might say to yourself, “I’m not going to call
the Fire Department. Let his house burn down. It’s fine with me.”
But then of course, what if your house is made of wood and it is
right next door to his house? What if the whole town is made of
wood? I think we’d all agree that the right thing to do is to put out
that fire first and then say, “What punishment is appropriate?
How should we change the fire code? What needs to be done to
make sure this doesn’t happen in the future? How can we fire-
proof our houses?” That’s where we are now. We have a fire going
on. It’s still burning.
Scott Pelley: It’s still burning. Are all the big banks that you regulate solve it?
Ben: I believe they are, yes. But we are doing a stress test right now.
We’re looking at what the positions of the banks are under a
tougher economic scenario than the one that we currently expect
and what we plan to do is to say, “How much capital would each
bank need to be well-capitalized not just solved but well-
capitalized even in this more adverse scenarios.
Scott Pelley: Are you committing in this interview that you are not going to let
any of these banks fail? That no matter what their balance sheet
actually looks like they are not going to fail.
Ben: They are not going to fail. But, what we can do shouldn’t be
necessary as to wind it down in the safe way.
Scott Pelley: In other words, Bernanke thinks government should stabilize failed
financial companies and take them apart slowly.
Ben: So, for example in the case of the AIG, we’ve prevented the
bankruptcy because of the chaos that we’d create. But, we’re also
demanding that AIG divest itself, sell off its subsidiaries and use
the proceeds to pay back the government.
Scott Pelley: What are the dangers now? What keeps you up at night?
Ben: The biggest risk is that we don’t have the political will. We don’t
have the commitment to solve this problem and then we’ll let it
just continue in which case we can’t count on recovery.
Scott Pelley: The Fed estimates the wealth of American families fell 18% in
2008, the worst since the Great Depression. In the moment,
Bernanke tells us what the first signs of recovery would look like.
Interview with Ben Bernanke Part 1/2
You are looking for a job. It is a long time since dealing with the trappings of the job search process and the uncertainty of where, when, what and how a job offer will come. This begins a review of “must do” behaviors to be mastered in the interview process....
watch Ben 10 Alien Force The Final Battle: Part 1 – Ben 10 Alien Force season 03 episode 19...
watch Ben 10: Alien Force The Final Battle: Part 2 – Ben 10: Alien Force season 3 episode 20...
I recently spoke to the Ben Drew aka Plan B (for the music heads) to talk on his role in Harry Brown, working with Michael Caine and his highly anticipated second album. Ben Drew is brilliant as Noel – one of the reckless youths from Harry Browns`s (Sir Michael Caine) estate, Harry Brown is a retired Marine and a widower who lives alone on a depressed housing estate....
Since late August 2010, the major stock market indexes have rallied sharply higher. The catalyst for the rally was the announcement of QE-2(quantitative easing) by the Ben Bernanke in Jackson Hole, Wyoming. The U.S. Dollar Index has been declining sharply ever since that announcement and the stock markets have inflated higher. Now the Bernank will start holding press conferences after their FOMC announcements....
Both the Asian and European markets rallied along with their respective currencies against the dollar as Federal Reserve Chairman Ben Bernanke was expected to speak to the Senate Banking Committee on Tuesday. Prior to his semi-annual monetary policy testimony, the Euro reached a one-month high against the greenback as the markets expected European Central Banks to hike rates before the Fed....
Ben Bernanke cornering the Bond Market...
Who has more influence on the stock market, the former Fed Chairman Alan Greenspan or current Fed Chief Ben Bernanke? The market has spoken, now you can decide for yourself....
In his talk with a panel in charge of investigating the financial crisis, Ben Bernanke, the current Chairman of the United States Federal Reserve, said that regulators must be prepare to shut down the largest institutions if they threaten to bring down the financial system....
Fed chairman Ben Bernanke said Monday that federal bank regulators would be examining the legalities of mortgage companies in terms of foreclosure procedures....