exciting game. the fee for world cup -- >> same situation. a competitive world cup and upsets and things like that -- >> look at the groupings. if all the major teams get out --group play, >> we have got to go. thank you so much. thank you both so much. we will be on the market again in 30 minutes. "market makers" is up next. >> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. best buy blues. they price cuts and a new strategy did not help the retailer. holiday sales fell unexpectedly in the stock is down then most in 11 years. >> bernanke last days, what could be his final speech as fed chairman later this morning. plus an interview with a former colleague who was at his side during the financial crisis. worked on who has

everything from the mini-cooper to the bluetooth headset, where the next frontier lies. makers," ont bloomberg television. 10:00 in new york city, i have erik schatzker. >> i am stephanie ruhle, the last day you and i are both here they fear we had to europe. we had to europe. earnings season, the parade continues, goldman sachs and citigroup. as usual.e winner scarlet fu has been keeping tabs. citi had industry's first big mess. 82 senselessly adjusted earnings per share, below the consensus and fell short of lowest estimates. revenues missed the mark, following versus last year and a third quarter. on trading was down 15% versus last year compared with flat at his peers. is losing market share

to peers. guggenheim said citigroup depends more on fixed income currencies, commodities, trading and other money center banks. investment banking was relatively weak, so far, we have been hearing about banks having higher fees because of dealmaking and ipos, at citi it was flat. conference call highlights, what they said was that the business was flat and the fourth quarter, low interest-rate environment was a drag on results. legal costs will remain elevated at citigroup, even after the bank took a $1 billion litigation expense for the fourth quarter. they are not done cutting expenses. is stilliency ratio above target, but that will continue in 2014. >> what about goldman? some traders weeping. what's coming down as

well. as citigroup has a fairly -- fairly reliant on fixed income, goldman's reliance on trading fell. the revenue growth across the board was strong, and spastic -- especially in investing and lending, the part that includes irins and losses in the investments. $2.06 billion in revenue compared with 1.5 billion dollars expected. trading was a strong part of goldman's fourth-quarter, trading in equities and fixed income or higher than analysts had looked for. investment banking fees delivered a big beat. the compensation angle, goldman sachs cut aside the money it set aside for pay as a percentage of revenue to 37%, the second lowest since 1999 when goldman sachs went public. includingnalysts, chris of oppenheimer, saying goldman is managing the cost

side very effectively, to that trading environment out there. seeing that playing out as a delivered a beat in profits. >> we need to figure out what this means for the industry. >> bill cohen is here. books onitten three wall street, stories in "vanity bloombergumns in view. simply in "politico." in the war between wall street and washington, washington won. "goldman sachs, is a shell of its former self. morgan stanley has a side business underwriting stocks and offering merger advice. citigroup and bank of america sold off classic wall street businesses to comply with. frank -- with dodd frank." celebrity his 10

year anniversary of breaking free from the financial industry. >> ben is very smart about politics. guess what? he is wrong about this. >> wrong-o! >> just like you don't want me writing about washington -- >> you don't want him in your backyard? >> he has not educated himself about this. it is a washington perspective. the golden this is age of wall street if you can take advantage of it. goldman is how to take advantage. once jpmorgan get out of its litigation, $22 billion and counting -- >> hold on. >> it is incredibly well-positioned to take advantage of the economy. paid $31jpmorgan just billion? you cannot say this is not a

hit. some level of victory for the government. erik? >> i am inclined to side with bill. i am in between. we had an argument this morning. i am skeptical that it is a golden age for wall street. i look to your point about the folks who think washington won. marketat goldman sachs's cap, they have a market cap of $83 million. at itss down a bit, peak, its market cap was out $100 million. capashington won, market would not be down 17%, it would be down 50%. >> if washington really won, jpmorgan would not be up twice six percent -- up 26%.

improving, they are well-positioned to take advantage of investment banking services, money management, all the things. there cost of capital is close to zero. would you rather be, a goldman sachs pre-ipo partner 12 years ago or goldman sachs -- >> 15. >> or a partner today? >> either today. -- either. it was not bad to be a partner pre-ipo, you got $300 million for your stock. now, when it was pre-ipo, it had a problem with cost of capital, very expensive to get private capital. other firms our public had greater access to capital. there were a lot of reasons they went public, greed being one of them. you can still make 10 million to $20 million being a goldman sachs partner, that is pretty

good, risky not of your own money. >> we rather be steve schwarzman or jamie dimon? who has more money? >> we are slicing -- >> we are not. >> really thin. 0.01%.f the conversation, would you rather be working at goldman sachs where you don't have to risk any of your own capital, get paid $1 million a year or whatever. or a teacher in the new york city schools -- >> the teacher versus goldman sachs are two different things. >> neither person is risking any capital. was 2001, notage today. if you are a high deals trader at goldman sachs today -- >> it will be again. i came into wall street in september 1987, one month later,

the market crash. i saw grown men crying. over.ught it was wall street constantly reinvent itself. there is less competition now. the people who are smarter going to make money -- >> watch out. >> if i am a distressed debt trader today and i have a great idea, do i went to be at blue crest capital, a hedge fund, or at goldman sachs? i don't want to be at goldman, they are going to say give it to a customer because you cannot take risk any more. >> what's your point? >> it was a golden age seven years ago. >> still pretty great. >> both of you might be right. now is not the golden age for credit on the sell side, now the buy side. in the equities business, goldman is hitting it out of the park. >> in the m&a business, you want

to be at goldman sachs. >> or lazard. >> i work at lazard, they probably make more -- a senior m&a guy at goldman sachs makes more. >> you know better than me. street business as and flows, what is hot one year is not hot the next. that is why they have a portfolio business. goldman sachs is going to figure out how to deal with the regulatory environment, they going to start minting money. the return on equity will improve because they're going to cut compensation -- >> i am not saying they're not going to figure it out. with what the department of justice has done, with how much pressure they have on them to regulate -- >> they have done nothing to change the basic business model. >> what are you talking about? they cannot take risk anymore. >> i am not sure about that.

what does the volcker rule really mean? >> you're not seeing a trading desk take risks, the equities division never takes risk. they are no longer in -- >> in the fourth quarter of this last year about goldman sachs posse private equity investment, they were supposed to one point $5 billion, they did over $2 billion. >> they sold off a lot of their private equity and jerry walked out. >> they have a deep bench, they will figure out -- >> figuring it out and the golden age are two different things. >> if i could be a partner at goldman sachs right now, except for the fact that i have been liberated, i would do that. >> give them a call. >> this was fun. >> bloomberg contributing editor, author, columnist bill cohen. >> do we have to move on? best by taking a dive.

shares plummet after the biggest consumer electronics chain had holiday sales fall. you are watching "market makers." plus, we are on apple tv. ♪

>> you are watching "market makers," i am erik schatzker. have a look at shares of best buy. cliff aftera reporting a drop in sales over the holiday season. 26.2%. it's nine months of gains gone into space of a morning. the biggest drop in 11 years, this is against the backdrop of best buy's performance last year, one of the best performers in the s&p 500. michael is the most bearish of all the analysts covering best buy. with us from los angeles. good morning. you have had an underperform, rating, thea sell

data suggests since august 2012. are the chickens coming home to roost? >> i think so. i think my mistake was not creditthe market more for rewarding new management. newman as you came and right after i downgraded. they have done as well as anybody could expect, they have control of things they can control, the cost side of the equation. they cannot stop the onslaught from online competition, they cannot stop price competitiveness, nothing they can do. traffic is down at best buy, you saw that with the holiday comp. traffic will be down next year because amazon is not going away. walmart is not going to concede any market share. i really think that their business is headed for oblivion. you are not going to have

big-box bucks consumer electronics retailers in five years or 10 years. >> all amazon style? amazon, there>> are 1000 internet retailers. if you go to shopping.com and plug in any product best buy sells, you will find it competitively priced online. if you look for accessories, iphone cases or battery packs, they are significantly cheaper online. yes, best buy will match. once you go online, are you really going to print out the ad and asked for a price match? or will you hit order and be done. is affordablen too for traffic on accessories is down. why would you buy a print cartridge at best buy? >> i buy this. >> it is a persuasive thesis. what people are trying to figure out, if you are right and big

electronics stores did not exist five years to 10 years from now and it is "oblivion." what should this company be worth now. analysis,e cash flow explain what -- best buy is trading at $27 a share and is worth $9.6 billion, what should it be worth? income is a fair proxy for pre-cache -- free cash flow, there are a lot of moving parts. net income is a good proxy. they will make about two dollars this year, they have 341 million $680 million in free cash flow. let's just say $500 million. what multiple are you paying for the cash flow that is declining? >> $10 or less? >> so, with the $5 billion

valuation, mid-teens valuation, , i have not revised my model, i think that is reasonable for the foreseeable future. we have to see if cash flow drops to $200 million the next year or management can stabilize it. by $50t only drops million, i don't know what they are going to do. hard to say how many more costs they can cut, we have cut all the fat. we are trimming fat and may be getting muscle and bone, that will make the customer experience not as good and driving a more rapid migration to the internet. >> who do you want to belong? -- to be long? >> i cover amazon with a neutral. no chance amazon loses share. amazon is going to be the world's largest retailer, period.

not just the largest online retailer. they know what they are doing, they're profitable. not profitable enough to justify a phone dollar price -- a $400 price. someday they will be. >> you are such a thoughtful guy. with us hisring vision for big-box electronic retailers. no future. >> not really the best buy. >> your local burger joint may feel the pain from the cold spell. beef prices. we will explain. ♪

>> welcome back to "market makers." last week, it was cold. the polar vortex, color in the

midwest than the south pole. it might be 50 degrees today, there are some lasting effects. alix steel joins us. you think we are still feeling it? >> do you eat beef? boar.k prefers wild >> i eat beef, too. was so cold that cal is used all their energy to stay warm versus growing. all their energy to stay warm versus growing. that adds pressure to the cattle market, the herd is contracting for six straight years, it was too expensive last year to feed house, a can take three years to breed a cow. having not going to be one in the next year, you have to wait three years. production is at 20 year lows. beef prices are moving up. >> if i go out for lunch it is

going to cost me more? dowhat companies actually have the pricing power? restaurants do creative things, they cut cts elsewhere, to smaller portions, instead of your 12 ounce steak, you will get a 10 ounce, that only goes so far. or suggestive selling, don't you like the chicken? >> reminds me of a conversation i had with david chang. he is too expensive. -- beef is too expensive. he said it is too expensive, i am going into pork and duck. people used to think of doug as expensive. $1.05 and of chicken is pound, beef is $3.40. ham, $2.70. we have been seeing a rotation pork andgs like chicken. beef prices are expected to rise

three point five percent this year, putting pressure on companies like mcdonald's and burger king that rely on burgers. >> nobody is going to brooklyn for roasted chicken. >> you could say more promotions. >> i don't think the clientele is so price-sensitive. e more vegetables. -- eat more festivals. -- eat more vegetables. >> eat carrots. has not changed. alix steel with the latest on beef. >> it seems pretty certainly like ben bernanke could be making a valedictory address today. we will hear from the outgoing fed chairman anton about his legacy with somebody who sat beside him during the financial crisis. ♪ hollywood's new a list

player, private equity firms are calling the stocks on movie deals. geeks to chic on "market makers." ♪

>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> love him or hate him, ben bernanke has cojones. anchor ever had as big an impact? he did not see the crisis coming . playbook andthe revolutionized monetary policy and the federal reserve itself. bernanke has two ways his term, delivering what is expected to be his final speech as chairman. randy krasner is a former fed a professor at

the university of chicago. the final chapter has not been written. at this point, what do you think we can say about ben bernanke's legacy? positive viewry of the chairman. as you said, we took a lot of risks in doing things that had not been done. when the fed in the 1930's did not do anything after similar shocks, things i did really badly. we never repeated the great oppression, we had a contraction but nothing like the one third job in gdp, 30% decline on price level and unemployment we had in the 1930's. the chairman gets a lot of credit for that. do we like at your or the bank of japan and perhaps the bank of england to recognize the wisdom of what ben bernanke and other members of the fomc decided they had to do. if there were an alternative to

monetary easing, someone would be trying it? >> we tried 16 different programs. they werert run, important. the asset purchase programs have been helpful in providing support for recovery. maybe not as much as we would hope. it prevented us from getting into a japan-like deflation scenario or even a great depression scenario. they have prevented the tail risk. >> what is going to be the cost? nothing comes for free. do you really believe -- so many people doubt the idea that we can achieve escape velocity and % inflation and the economy growing at 3.5% of the fed can unwind monetary easing and raise interest rates. is that really possible or is that a goldilocks vision of the

future? it is possible. it is never as smooth as one would like. that is the outline of the story. this is unprecedented, where we have been. europe,in the u.s. or the u.k., now japan on an extreme version of quantitative easing. we have been successful in avoiding the tail risk of deflation, that is extremely important. we can see how bad that is, andn in the 1930's -- japan the 1930's. the challenge for janet yellen will make -- will be making the exit as smooth as possible. we have seen inflation reasonably well contained, expectations are well anchored. pressure.of wage that helps a lot in achieving a smooth exit. it will never be as smooth as the story you described.

>> will there be policy differences between bernanke and yellen? >> in the short run i do not see that, i find it unlikely that janet yellen is going to become sayrman of february 1 and that is not what i wanted to do. they get along well and are on the same page, they work closely together to develop the communications policy, the forward guidance. moutn," it isopen not just -- which i call "open mouth," not just open markets. work its will have to get used to a new voice in the short run. i don't think there is a fundamental policy difference at this stage. >> what grade would you give ben? your professor hat on. >> it is a little unfair because i am an interested party, i was there during the crisis and

providing some support. the chairman has done an incredible job, i would give the chairman an a for taking bold been done had not before that the fed did not take in the 1930's. deflation the outcome. some people are concerned that the economy has not taken off as much as we would like. you cannot put all the blame on the central bank, there are other actors. follies in fiscal washington, regulatory snafus, that is not helpful in recovery. what somewhat about people would call the undesirable consequences of the monetary expansion? what we have seen in financial markets. it is a small number of americans or percentage of americans who have significant assets in financial markets. have benefited tremendously. the economy has not gotten

going, look at what we saw on the most recent jobs report, disastrous. there seems to be -- people call it a widening divide. was there any way to avoid that and is there a way to correct it? >> one of the things the fed has been focused on is housing. that probably affects most american families. we have homeownership that is in the order of 65%. , most american households have investment in housing. key source of savings for many households. that took a big hit during the crisis. so many policies have been focused on making sure the housing market did not have a japan-like outcome. tokyo housing prices fell by between 80% and 90% from the peak in the 1980's. we have seen a decline of 1/3 in many areas, but a recovery over

the last year. a lot of that is due to fed policy. the fed has been thinking about many types of asset markets, in particular, housing. >> is there a risk in ben bernanke taking a victory lap? alan greenspan did, and fast-forward people thought that was a mistake. >> the chairman has been very careful in not taking a victory lap. claiming some credit for avoiding deflation. he does deserve that, we did not have a japan outcome or a 1930's outcome. i don't think he is saying everything is fine and i did everything perfectly. he talks about risks going forward, he does talk about the challenges from potential asset price dislocations. thinking about costs and benefits of these policies. it is not -- he religious -- he realizes he has not shot a silver bullet.

he deserves credit for avoiding really bad outcomes that could have been and so far have not been. >> we could liken ben bernanke to a pilot in a plane trying to pull it out of a dive. the passengers are going to give the captain the benefit of the doubt. is it possible that janet yellen could come to regret bernanke's commitment to what you call the open mouth policy, communication and openness at the fed. face challenging times trying to restore balance in a more normal environment. very tough to walk that line publicly. isit is very tough, but she one of the architects of the communications policy. she chaired the subcommittee that really proposed and helps to implement the forward guidance policy. there is a benefit of having the greater transparency and the additional tool of being able to

talk about what you are going to do without having to do a yeah -- do it yet. you can be misinterpreted, we see what happened in may and june when they talk about the possibility they might take a step down. 10010 year rate zoomed up basis points, they have walked that back. there is a better understanding between the markets and the fed of how to talk about this. janet will be finding her own voice, the markets will have to understand that. there will be bumps along the way, it is valuable to have an additional tool. >> thank you for joining us, former fedszner, governor and professor at university of chicago. >> the designer behind everything from bluetooth headsets to running shoes, the founder of the design firm. coming up next on "market

makers." ♪

>> welcome back to "market makers." guess what time it is? the time of year when hollywood honors itself. nominations came out this morning, one of eric's favorite's "american hustle" and "gravity." "gravity" by accident, the movie i went to see was not showing, it was great. >> they both got 10 nominations. looking at the real winners here. "american hustle," "captain you get thesee nominations, there is a business opportunity. the designers con outcome of the marketers, now, they need to tie themselves to the nominees because they can cash in. if you think about how many times of these stars are going

to be photographed, this is when designers cash in. coca-cola, by the water, they went to be in the hands of the stars. 10 years ago, people were not thinking that way. the business opportunities after a morning like this. >> speaking of the business of hollywood, jon erlichman is right down the street from hollywood in los angelesl -- in los angeles. behind-the-scenes winners that are not necessarily the directors or the stars. they are instrumental to film success. of fun storylines, one of the ones we will talk about the most is the one we have been talking about, making allison, the daughter of the oracle billionaire larry ellison. she had a big night at the golden globes. she has got two films in the best picture nominee, "her" and american hustle.

important point about how hollywood is financed. a decade ago, a lot of hedge funds came to town to put money busters,, not big lock not the tiniest films, the ones where it may be there is upside. there are a lot of deep-pocketed players relied upon to make these reward type movies. that is the kind of stuff megan ellison is financing. changed?e terms film financed is traditionally a horrible money trap. even if itt money, is a blockbuster film, it is hard. it usually involve lawsuits, asked on auditors, has it changed? i would say it has -- the cycle continues. investors left town with a bad taste in her mouth. you have got people like megan some interest in going

overseas for some global capital. reliance out of india. -- a lot ofians studios doing deals where they sell the rights of overseas before they make the picture to make it a safer bet. the great thing about the ellison story, her brother is also in this business. he is making big-budget films. >> is the difference that they are investing in one single film but they are getting behind? might lovely, you one deal on the next thing you know -- >> she does a lot. megan ellison, you know her record, jon. thirty."zero dark >> but the investment in a single move a. invest in 10 films or thirty."o dark

is it that she is getting behind one film at a time? >> both models exist. as a wealthy person, megan ellison can pick specific films in need of certain finances, she is not tied to one horse. as erik mentioned. >> before we run out -- that is what i wanted to ask, she was 24 years old when she backed "true film" great whose money is she playing with? take't want to know anything away, isn't all that is money or has she been able to turn herself into a businessman and raise money? not her dad's money, it is her money. >> at 24 years old?

>> at 18 years old, he could have said it is your money. >> is easier than going the traditional route. this is the argument about the silver spoon. she got the money from her dad for nothing. it is a lot easier to make these decisions when it is a no risk proposition because you are not losing somebody else's money. >> it is your money. at the end of the day whether she got it from her father or she earned it, she could lose it. >> i am not taking anything away. i was just curious. >> i would say that putting wellher big films that do is a good strategy to get away from the conversation. >> jon, nicely done. >> i into argumentative. thank you for joining us, oscar morning. next big thing in design.

the so-called on left categories. talking about that with the degner behind some of the best selling products out there. you are looking at one of them. >> you can take your parents' money and blow it. ♪

>> welcome back to "market makers," i am stephanie ruhle. design is front and center for the tech industry. from apple ii wearables. the man behind many of these objects is ian, a designer for soda stream and next-generation home security system. he joins us from san francisco. how important is his eye and technology? -- how important is design and technology? your design driven -- design german products have come

upon us. driven products have come upon us. it is not about the features, it is about how it works in my life. >> i thought that is a function of the technology and the features as opposed to the design? we can enjoyething and appreciate on an aesthetic level, does not matter how good something looks. if it does not work, it does not work. >> there is an older definition of design, just about how it looks and the external. a new definition is that it encompasses all of the aspects -- what technology is in there, of howe, the sequence it works. it brings together the user interface and the physical part of the object. that designoach is

is integrated and every decision being made through the development of a product. >> if the google deal for next reminded us, beautiful design can show up in the oddest pla ces. a thermostat or a smoke detector. where are we going to see design have an impact in the next year or two? >> nest is one of the very first products come a technological products, coming into our homes. there have been many before nest, they were not designed to be something that you would be proud to step on your wall. did ist -- what nest bring a sense of interaction and ease-of-use and a beautiful product. we will see all of these categories, services and products, i call them on left categories -- i call them unloved categories.

>> why? >> you would never have thought of a thermostat to be exciting. really --ple do not it is not a loved category until uber redesigned it. another area i have been focusing on is keys. how people get into their homes. i only hear one thing, i hate keys. that is what they tell us. i have been working, started a new company called august, a smart lock that allows you in and out of your house without touching anything. it senses your presence by sensing your phone. a the way you can get into car without having to insert a key into the lock, you have a fob in your pocket.

>> exactly. in this case, it is magical. if you want other people to enter your home, if you have friends that had just arrived in town or if you want an ongoing relationship with a cleaning person or a home service to come in at certain times of the day, you sadly send them a virtual key via text or e-mail. >> is there a natural limit to the internet of things? guy is thethis limit. we are at the very beginning. jawbonears ago, launched the upband. we are very much in the infancy. those products do great things, they help manage health, they help their homes. all of those products are going to become integrated. >> yves, sorry to cut you off. yves behar.

♪

>> live from bloomberg headquarters in new york, this "market makers." bernanke, goodbye. he leaves the fed. the central bank chairman making what could be his last public appearance in office. >> in doing so, he may outline challenges janet yellen faces as it all starts in a few minutes from now. >> welcome back. >> let's talk about ben bernanke. he is preparing to take the stage in washington. he could be his final public

appearance as fed chairman. is standing by. we are wondering what kind of tone he is expected to take care it is it going to be a valedictory address? >> we will have to wait to see. it is not prepared. a lot of focus on the bernanke legacy. i wanted to get insight. senior fellow at the brookings institution. good to see you and thank you for the time. you look at the bernanke years, what is the legacy he leaves behind in your view? of havinges a legacy coped well with the worst

financial crisis of any of our lifetimes. that is a considerable achievement. he did not anticipate this. we can say he foresaw this and headed it off. he did not do that. timee was in charge at the the financial world fell apart. they had to improvise and do everything they could think of to keep the world banking system from collapsing and he did it and that is a considerable achievement. >> and do we have to look at the reality of where the economy is today? the struggle we had coming into the financial crisis? we are not where he hoped we would be at this point. >> we are not where anybody hoped we would be at this point. but we had a very severe financial crisis and we know it makes it hard to combat. the fed did everything it could.

one might criticize fiscal authorities. not doing enough or in a timely manner. say the think one could fact the cover he has been slower than some people hope, and some people were very unrealistic, is the fault of the fed. >> what about the situation heelys behind? to take over at the end of the month? what are your concerns about her challenges going forward, her biggest challenge, perhaps? >> most people would say she has got to manage the taper and withdrawing from the very considerable stimulus, the bond buying. i am confident she can do that and i think that is the least of her worries at the moment. the big challenges are in the regulatory territory. it does not get its high marks it should.ars as

the regulatory system fails and that is how we got the crisis. we are now working with new legislation and authority, but still a rather fragmented financial regulatory system. that will be the challenge for the new chairman. >> she might have a tough choice in her first few meetings as chairman on the question of whether or not to continue tapering the bond. we just got that the fed should not continue tapering? not think the jobs report, dismal, i do not think it should be taken too seriously. really not typical of the rest of the information we are getting in the economy. it is not roaring ahead but it solid track.n the taper is appropriate.

start doing it but do it small and that seems to be what is happening. >> joining us on bloomberg ahead of ben bernanke, what could be his final appearance on stage. his last public appearance in washington. we send it back to you guys. >> peter, stay with us. we will continue the conversation. the man who gives us the real deal, michael mckee give -- joins us. >> it will be interesting. if it were a speech, you would expect a look at -- a look back. he wrote the very well received book in 2010. about the mistake central bankers made that led up to the suppression. he knows a lot -- the depression. he knows a lot. he could pose interesting

questions. >> i hope he does because we would like to learn a little more about the things that went through his mind and how he thinks they will play out in the future. we talked to randy, the former fed government -- governor now. peter got similar thoughts. should people be careful about too much praise on ben bernanke right now? the last chapter of the book has not been written. on monetary policy. >> it is not. you could praise ben bernanke. he did not go to the sidelines. the future, more in particularly when we get through the exit process. i will be the big question. can they get out of it as easily as into it? history is already judging negatively for misjudging the economy. it will be a next legacy.

a guy who came to office with no public experience at -- except as a member of the public school board, he rose to the occasion. >> being a member of a school board, board chair of a lower score is how she knew she had a future in diplomacy. what do you think lawmakers, when they look back, what do you think the response will be? >> the verdict is mixed. if you go to capitol hill now, you will get a host of people complementary to ben bernanke for making tough decisions at a time of crisis. him for that. play of republicans fault him. quantitative easing is not popular on capitol hill among republicans, especially. the fed will have to live with that. it will be a harder road for janet yellen because of that.

as eric suggested, half the chapter and half the book has not been written yet. to say to a lot of folks, i proved you wrong and we could steer through the exit, but we do not know that yet. >> sit tight. peter cook in d.c.. for theaiting conference to begin at the brookings institution. we will bring in the news eight, the top stories from around the world. selling its clinical diagnostics unit, about $4.1 billion. they make diagnostically -- equipment to test lead for everything from cholesterol to fertility hormones. leon has agreed to by the parent of chucky cheese, the restaurant ofin that has been the site

countless children's birthday parties. cec entertainment operates 500 77 chucky cheese's. theany was founded by founder of the videogame maker atari. shares are plunging. stock is down as much as 31%. is the biggest consumer electronic retailer and it says during the holiday time, sales in america fell unexpectedly. investors had been bullish on the chances of a tote -- turnaround. the stock more than tripled and was one of the best performers in the s&p 500. >> have you ever been to an -- a chucky cheese? >> no, but i have been to best buy. >> best buy is better. >> i have watched. >> a better idea. we are waiting to hear from ben bernanke two weeks before he leaves the fed. about the speaking

past and present and future. we will have more on that when we come back. ♪

>> today may be the last time we hear from ben bernanke as fed chairman. mike mckee is with us. we are talking about ben bernanke's legacy. something that peter cook said

just moments ago made me wonder, the commitment to open communication ben bernanke brought to the fed is something janet yellen shares. he was talking about lawmakers and how they view the fed. have they created an opening for lawmakers? or yell and has to hold regular press conferences? used to hear just twice a year from him. >> it has been a work in progress with the first release of what their decision was. they did not used to announce it. we have gone to the point we have had press conferences and there is a good chance they go to a press conference at every meeting. so much communication now. a work in progress to work out exactly what is important with all that comes out. you talk to fed people and they say they feel better about it. they're not hiding anything from the public. it is not mysterious. we may have different opinions, but at least you know what their feelings are and opinions are.

did -- it is not a group of powerful people pulling spring that are not visible. >> sometimes, there is too much medication and they need to have their privacy to make decisions. >> that is why you will never see meetings on television. they do not want to bring up the release of the transcripts either. >> let me start with that. you have said the playbook you relied on, essentially given by 1860's,h economist in and his victim was that in a financial crisis, the central bank should lend unlimited amounts to solvent institutions against good collateral at a penalty rate. in practice was that role in guiding you?

>> it was excellent advice, used atcentral banks going back least since the 1700's. a market or a financial system short of liquidity and there is a lack of confidence and a panic, then the central bank is the last resort that can provide the cash and andidity to calm the panic make sure depositors and other short-term lenders are able to get their money. in the conduct of the crisis in 2008, the main difference was the financial system we have today looked very different in the details, if not in its conceptual structure, from what walter saw in the 19th century.

the challenge for us at the fed was to adapt to the advice to the concept of the modern financial system. instead of having retail depositors standing in line out the doors, the case in the 1907 panic of the united states, we instead had runs by wholesale short-term lenders, like repo lenders or commercial or -- commercial lenders. to find ways to essentially provide liquidity to stop those. it was a different institutional context. was much an approach that entirely consistent with recommendations. >> you also, rather than lending only in constitutions, you intervened in markets. is there a similarly pithy get to, a bernanke role, that you

could come up with about when the fed should intervene in markets and when it should not? >> if we are talking about the crisis time, all the interventions we did fit under the batch of padding, for example. facility weal paper set up was designed essentially to prevent a run on this particular form of financing. it was a different institutional structure but again essentially applied in the same institutional context. othere done interventions, if you will, with our asset purchase program. i would call that the monetary policy part of our response. while analogies between it's a wonderful life and people noting on the thrift, are

always immediately obvious, there was in fact a very close parallel in the whole response. ofthe crisis began in august 2007. when there was actually a problem with the money market fund run. if you trace through it, it the spring ofl 2009. it was a long time. major interventions, despite talk, you still had a run on citibank and bank of america. why did it take it so long to get under control? >> it was not a continuous crisis of equal intensity. of 2007, we were seeing a lot of stress in the markets. it was not obvious whether this would be the start of something

bigger or whether it was something more comfortable to some of the disruptions we see in the 1990's around the russian crisis. there was a critical point that occurred in march 2008 with the .ear stearns episode that was a time of very intense stress in the repo markets and other parts of financial markets. after bear stearns, financial conditions, fairly notably for a while. alert.in very banksain with investment over the summer. complacent about the prices -- crisis being over but conditions were more stable for a number of months. there is at least some hope given that the bush administration was undertaking a fiscal expansionary policy.

there is some hope things might calm. intense phase began , into theakeover conservative ship of fannie and freddie in early september 2008. .t follows a very intense time fromery intense time december 1 to the latter part of the year, that was the time of greatest stress and risk. the combination of our lending the injection of government capital, the fiscal aspect of that, brought the crisis down considerably by the end of the year. in the dash into the next year, we were working to stabilize the

system with stress testing and addressing concerns of specific institutions with our monetary policy and the like. i do not think it is fair to characterize the crisis as being something continuous for a year and a half. times of ebbswere and flows. the most intense, in it -- in september and october, we actually got that under control with ably quickly combination of the fed's fiscalty, the tarp, the injection, plus actions by other agencies. >> hank describes having sleepless nights at that time, agonizing he would go down in history with her been -- herbert hoover in this episode. described younce as the buddha of central banks, which implies a certain level of and light and the attachment. [laughter] did you have sleepless nights?

>> absolutely. think, toature, i focus on the problem. i was so absorbed in what was happening, in trying to find response to it, that i was not really in that reflective mode. like, you are mostly involved in trying to avoid going off the bridge. you later say, oh my god. [laughter] crisis, there were very intense times, during the september and october 2008 time, not only were we trying to address the crisis, we were trying to a deal -- to deal with the. this was a global crisis. trying tonstantly keep the world uninformed -- informed about what was happening. it was very intense.

again, i was focused on the task. your partnership with secretary geithner was central to solving the crisis. what a unitedle front you have presented. you had different backgrounds and different personalities and he represented different arms of government. to some degree, there is a natural tension the central bank does liquidity, the treasury but thevency, distinction is not always clear. were there any agreements? >> first of all, you are right. .e had very strong partnership people withrent different backgrounds. we are complementary in various

different ways. thell recognized seriousness of the situation or the need for cooperation and the treasured -- treasury and fed. was the overwhelming imperative to try to solve the problem. where we werents trying to address the financial condition of aig or other politically difficult problems. there was a discussion about whether or not the fed or the treasury should take the lead on that particular area. in the end, paulson in particular, who, during the heat of the 2008 crisis, was the person most exposed to political winds, because he had to go to congress and so on. in the end, he always did what had to be done. we workede reason

together. the combination of our complementary backgrounds and and the fact we shared a common purpose. there are many people in the world. economists among them, who thought it is perfectly safe to let financial companies go down. even jack sis, -- jackson, the three of us, were all in agreement that was not a wise thing to do when we were committed to do that. interventions with large, failing firms, are part of the story that gets the most attention and the most controversial, much of the good work done was under the radar and had to do with our actions to try to stabilize key financial markets like money market funds and the commercial paper market, the asset our work toarket,

strengthen the banking system and so on with foreign partners to do currencies off with 14 other thanks. there was a whole range we did that did not involve other interventions, less visible -- much visible, but probably occupied her time and were at least as important. >> in david's book, there was a scene where he used pushing secretary paulson going to congress. if the treasury had gone to congress to get the money earlier, could we have avoided lehman? >> no. even with the stock market it took two the votes of the house of representatives

to get the tarp approved, i remember a senator tell me when we were trying to go around and explain to the congressman why we needed the tarp and why it was critical to the stability of the american economy, and he myd, my calls on this for constituents is 50-50. no.no, and 50% hell [laughter] it was a very unpopular policy. one of the most successful government policies ever, nevertheless, one of the most unpopular. gotten a we could have tarp type program. before, it was coming -- becoming evident how bad the situation would be. that was the catch-22 we were in. point clear to me at that that the ad hoc interventions on which we had relied, given we , had reachedrk

their limit and we had no choice but to involve congress. it was very clear about that. >> let me talk about the political backlash. frank,he impression dodd while giving the fed more power to prevent a crisis, limits the .bility are you worried about what the onsequences of that are? >> we were supportive of those changes and are totally comfortable. what we're are talking about is the 13 provisions which allow to allow individual partnerships and corporations. unusual circumstances. we used those tools for the first time since the great to support the

collective effort of the government. to prevent the collapse of critical firms. instead of doing broadband -- key markets as we described before. the interventions for firms, again, happened because there was no framework and nothing but the standard bankruptcy code. the -- the trouble with that in this context is what bankruptcy does is first and foremost defense creditors. there is no recognition that you actually have to worry about the stability of the financial system. in any case, we did not have anything like that in 2008. title created act an -- a liquidation authority, which provided much more and flexible approach

to addressing a failing critical firm in the middle of a crisis. we do not need that anymore. we did tools now, which not have, to address individual firms. at the same time, the rules in permit, and we just wrote the regulation for this, they do permit a broad- so that ourm actions with regard to commercial paper or asset back securities or other markets we provided liquidity to, presumably, would still be legitimate and legal, as would the primary dealer facility, open to all primary dealers. did, wouldngs we still be possible, although we have to give the treasury

secretary permission now. we are perfectly happy there are aternative ways to deal with failing firm, that the fed does not have to intervene the way we did in 2008. we heard this morning talking about the whole political environment. about the political backlash and the fed and consequences and how future fed decision makers will be able to respond. >> it was not really a surprise. you think about the 1930's. we had exactly the same kind of reaction. it was much more intense. >> they did the wrong thing and they did the right thing.

head -- it'spt it head down. general,nment in serious thoughts about the revolution. roosevelt, what he argued is that they were about saving capital. to the report. all of that happened before. the only thing, one common i would make is the alternative of doing what the fed -- the fed was created and its independence ad ability to act quickly is

key feature of what the fed is about. not done that and financial system had imploded and it pledges eat -- into even a deeper depression, the reaction would have been pretty bad, as well. we are stuck one way or the other. i hope they do the right thing. there has been pushed back. we hope as the economy improves and aswe tell our story more information comes out about why we did and so on, that appreciate and understand that what we did was necessary and in the interest of was aoader public and main street set of actions helping the average american. passes, that becomes

clearer. said, the reason the ,ed can be dependent independent or short run pressures. the pressures are the way -- not the right thing for the economy. >> let's move to monetary policy. you had a playbook for how to deal with the financial crisis. the monetary policy post the financial crisis, we heard from was veryiams, this little bit of theory, some of which you help avella. really operating the

blind. the unconditional monetary policy. are you confident it would work or whatever you look for going into it. >> the other way about forward guidance. >> it is an exaggeration to say this was all unprecedented. we had the case of japan. we had those experiences. we learned some things in the 1930's and so on. i think of qe as being a basic principle, which is that, these are some of the ideas friedman

talked about, which is the way you can stimulate the economy is by swapping illiquid assets for less liquid assets. that is what the operation is. on the side of forward guidance, etc., people like michael and paul and others talk about those issues and how that would work. we were relying on research. monetary policy in general is an extraordinary example of how thinking within a policy institution and in the academic world can mutually madeit each other, and we use of the ideas we got from academia. also, ideas that came from our own experiments. the basic problem was that short-term interest rates was

affectionately -- effectively zero. any analysis would suggest that economic monetary support to achieve a sufficiently robust recovery. we needed additional stimulus. these were the two methods that we came to. think they both have been helpful and we learned a lot. i would disagree these are completely novel ideas. a number of different central banks have included different forms and reserve talk before the crisis about considerable time and those kinds of things as well. what we were doing is trying to build on what others had already done. >> qe was much more controversial than the lender of last resort things you did.

you had to deal with a fair number of skeptics. you persuade so many people to go along with it? >> i am not sure i would agree with you on which one was more controversial. they both had elements of controversy. we were looking for additional measures we could take to nation anditional, help stabilize financial markets. the biggest measures we took were in late 2008 and march 2009. the beginning of that program was broadly supported and it was that the intervention would both provide very much needed monetary policies for and would liquidity of markets

in general, still under great stress at the time. the beginning of it was wrongly supported. that, it gave us the opportunity to see what the effects were and do analysis and so on. staff and a pretty large literature out there, i think john's bibliography had some of that in their thomas has suggested it has been supported. a number of folks who have voted against it or in critical of it,

have, in some cases, argued that perhaps it was not needed or something like that. i do not think a large number of people on the committee feel it is inherently not effective. know what the benefits are. they lower long-term rates and mortgage rates. what are the costs you worry >> i think some of the costs people talk about are not really costs. i will mention a couple. costs that gets talked about will be inflationary. while, of course, it is always possible for the fed to raise rates too late or too early and we have plenty of tools now at this point. we developed all the tools we need to manage interest rates

and tighten monetary policy him even if the balance sheets stays where it is or gets bigger. because we can do that, it means we can run monetary policy the and avoid risks of undue inflation and other problems. i do not think that is a concern. have been saying for the last five years that we are on the brink of hyperinflation, i would point them to this morning's cpi number and suggest inflation is not really a significant risk of the policy. another concern people have talked about is the idea the fed whichtake capital losses, is not impossible. i would say from a social point notiew, we have already only healthy economy, but we

held the fiscal situation significantly with hundreds of billion dollars in the treasury. that does not even take into account the benefits for the stronger economy. that risk is not a true social economic risk. it is a public relations risk for the fed. a serious economic risk. risk my colleagues pointed to his various aspects of financial stability. concern for any kind of monetary policy that after a time, there may be some reaching for yield or ms. valuation of assets. given that -- given what happened five years ago, it is sensitive to that risk. that is for different kinds of monetary policy. premiumsfor -- on term

to a significant extent. we have less knowledge and information about how they are determined. , additionalimited concern of volatility associated with the management of qe. there is certainly risk there. been not to has does port monetary destitute notort monetary policy -- to distort monetary policy. if it leads to a weaker economy and bad credit outcomes, etc., is also a financial stability risk. to basic approach has been rely on supervision and regulation and monitoring and financial policies and a whole set of tools we have and are developing to try to avoid potential problems.

we also look very carefully at the implications of any potential kind of financial imbalance. for example, is the asset class supported heavily by leverage, which would mean a sharp job would lead to other types of problems. we look at that and we greatly increased our ability to analyze the situations. dress financial instability concerns through supervision regulation and other microeconomic tools. it is something i think of the various cost. it is the only one i find credible. it is the one we spent the most tryinginking about and to make sure we can address it the best we can. >> for the moment, you're not

worried about too much in financial markets. >> it is always bad luck to make any forecasts about any particular market. [laughter] the markets currently seem to be broadly within the metrics of market evaluation, it seems to be different ranges. the financial institutions are well capitalized. and we haveing this developed a tremendous capacity for doing that. thinks point, we do not -- and i do think i can speak for my colleague on this, we do nothing financial stability point,s should, at this foract from the need monetary policy can't debt accommodation, which we continue to provide. >> the last question before we turn it over to the audience.

crisis done long-lasting damage to the economy and what are the channels you really worry about? >> an excellent question i do not think we will know the answer for a while. i know first there has been a benefit, which is that we have reformation of the financial regulatory system. and financial markets. that will provide greater stability. a credit provision in the future. there is that benefit. there is a very expensive game. there are ways in which the on thecould have effects of the economy.

one is the effect of long-term unemployment on labor supply. there has been declines in labor force participation. part of which is certainly due to ongoing trends in place before the crisis. due to which might be the depth of the recession itself. the availableect later -- labors are private -- labor supply going forward and has direct effect on those who are unemployed and have families. that is a concern. it is a motivation for being aggressive with monetary policy, to try to prevent those kinds of effects from taking hold. of perhaps more longer-lasting effect has to do with productivity gains. we have seen a slow increase in productivity recently. do not understand why.

some of it may be low demand. that the financial crisis has led to slower pace of innovation, slower pace of firm formation, less capital investment, which in turn has led to a less rapid haze of innovation. with is interesting work alexander field, who has written the 19th 30's is a time of great innovation. in thenot show up productivity statistics because with the economy in depression, there were not markets make innovations commercial. something similar may have happened to some extent here. said, these are important effects. of them are truly permanent. they essentially, the economy to the growth path

it was on prior to the crisis or something close to that. these are long-lasting and very but is potential effects do not think they are serious or permanent. qwest we will turn to some questions very class a couple minutes for questions. i want to ask if there are any people on the pana -- panel this morning who want to ask a question. do you want to stand up and wait for the mike and tell us who you are? let's try to keep the questions to 140 word characters. [laughter] >> talk about the role of the president. during the great depression, we firesidelin roosevelt chat, making some sense and comfort out of the chaos. my sense that in 2008, is the american people, main street and wall street, there is still a great year of confusion and we are paying the

consequences today. >> a big challenge to explain what was going on. at the federal reserve, we tried to do it and did not always exceed. i give president bush a lot of credit. he gave a lot of of leeway to do what we thought was right. he supported us throughout the process. i remember him going on television and giving a speech about the tarp, which must've been very difficult for him given the cost of that from the political side. it was difficult. communication was a challenge throughout the process. i would not put it on the president or anyone else. all of us involved in the role and ag had a

responsibility to explain as best we could. this was a time at which, i came to the fed and was interested in the transparency of the fed. my vote -- my motivations were making monetary policy more predictable and accountable. transparency was very helpful on other dimensions as well. in particular, i tried where i could. story, not just to markets and other economists, but to a mainstream type of audience on television or town halls. it was very challenging to do that. we had other things to do as well. if you look around the world, there are populist reactions in most countries where there were serious financial crises.

not completelyy avoidable. what we have to do to explain why we did it, try to win back the confidence of the public and that is an important objective for all of us around the world. >> the gentleman in the blue shirt. >> thanks. i write the mitchell report. i would like to ask a question that broadens from that question. --t is, you have been in and a remarkable place during a remarkable time. you are a great student of history. what i'm interested in knowing is whether this experience has caused you to think in different terms about the strengths and of our political system. think thelar, how you

system, at-large, the executive branch, the congress, the people, whether it gave you a different perspective, a stronger perspective, a more questionable perspective, on how well american governance is working at this point in the 21st century. >> a yes or no question. >> there are two separate questions there. one has to do with the structure of the american government, as given to us by the constitution of the of the evolution government since then. then there is the question of our current political situation in terms of the mix of views and currently on the hill in particular. in terms of the former, without

making a judgment at all, and i'm not qualified about overall legal systems to make a judgment, one thing that struck was theg the crisis governments that had more parliamentary type systems were better able to respond quickly to a financial crisis. it was envisioned in the constitution that the president might have to act quickly to respond to a military or some kind of foreign relations crisis . that is why the president has a lot of flexibility to take action in the event of a military attack. ultimately going to congress to get ratification. crisis, the british, for example, very quickly put together a plan to a dress their banking problems because in this particular case, they had a

government which controlled the legislature and was able to respond quickly. i turned out to be a problem -- that turned out to be a problem during the crisis. actions hadalleged --ed to set of frameworks >> a relaxed ben bernanke. >> he is going to disney world. michael, you have followed ben bernanke's career since well before here that being the fed chairman. what did you see in that conversation he was having? >> nothing new, except he is more relaxed. he looks better than he did at the height of crisis. they had to take action to stabilize the financial system. a lot of people did not realize how bad it was. q we got a lot of attention, whether or not it works. he says it does. impose inflation risks. we asked him whether financial crisis did acting damage to the

economy. maybe we did not innovate as much or grow as much. that will be a price we had to pay down the road. monetary crisis making policy, to try to keep a car from going off a bridge. it is only afterwards -- >> thank you for giving us the real deal. as for eric and i, we will say goodbye for the week. the next time you will see the two of us is tuesday. we will be influential in world economic forum. todayl also bid farewell to our own producer, samantha miller here it is a golden age for wall street and she is headed to the street. thank you. goodbye. i love you and miss you. now eric is my new number one. >> i revel in the glory. >> 56 past the hour. we are taking you on the market. julie hyman has more. my number one.e

>> i wonder where i rank and all of this. time is short. let's get trade it -- straight into derivatives. sally mayes reporting its earnings. , we do not have much time, so let's get straight to your strategy. it is not tied to earnings tonight. a longer-term trade. >> july, 29th. six months from now. this is a low volatility stock. another $.40. scenario 41, case which is pretty good. i would like to put this on for six months. three earnings on this. tonight and then april and then july. also, others going out as far back as july. the company has announced plans to split. that is going to unlock value in the shares. to belit is likely

consummated by july. >> very quickly, education, loan market. it looks strong. sallie mae is a big part of that. >> headlines about how student loans are affecting us. is pretty itself strong. sallie mae has good portfolio and private education loans, they are average height of 75. 90% cosigners. all pretty good. >> very good. thank you so much. we will be on the markets again in 30 minutes. ♪

weak tiesh money," together the best stories, areas, and video in business news. here is what we have. in company, sale at best buy. shares plunge on a rough holiday season. in career, the man behind do good tom'ss shoes. in nation, the magic touch. to its dream team of pitchman. our casino segment. artificial intelnc