announcer: from our studios in new york city, this is charlie rose. charlie: the largest regional trade accord was reached on monday. the transpacific partnership links the u.s. to japan and to 10 other nations in the pacific rim. the agreement covers 40% of the global economy, 800 million consumers. it will address tariffs, labor practices, and intellectual property. the deal must still be ratified by all countries involved. congress could vote on it as early as next year. joining me now is juayang fan. she writes on chinese politics and culture for the "new yorker." patrick foulis is the new york bureau chief for "the economist." from washington, from the "wall

street journal," greg ip. he has also written a new book coming out in the next few weeks called "foolproof." what is the significance of this? how huge is this? patrick: the impact is good, but not great. we have gone through a period where global trade has dried up. it has ground to a standstill. the u.s. and its leadership of the global economy, which has been a future sense the world -- the second world war, has been drawn into question. it reasserts american influence over asia. charlie: president obama has been pushing trade as an issue that is part of his legacy. greg: this will be the first trade agreement that has been negotiated on barack obama's watch.

multilateraliggest trade agreement the united states has signed since 1994. given how the public's opinion of free trade has gone downhill, this achievement is a remarkable statement about political will in the face of populous pressure to put up barriers. charlie: who deserves credit? greg: barack obama. he ran centerleft of his own party. i think it also speaks to the will and other countries. -- in other countries. this is a reassertion of u.s. leadership. other countries are willing to accept such intrusions into their sovereignty to be part of the same agreement. charlie: how will china view this? juayang: china has become more

moderate in his position. i think it has come around. it is open to joining. charlie: how are the markets responding? greg: it has not impacted the markets very much. as patrick was saying, it is not a huge deal. an optimistic assessment is that this will add 0.4% to u.s. gdp growth. the symbolism is far more important. for people who were worried that globalization was on its deathbed, when they see people like donald trump and bernie sanders surging as much as they have in the polls, that is not the sort of environment that makes you optimistic that free trade was going to make much headway.

i see the significance as symbolic. every signatory to this agreement has its sacred cows that will be sent to the slaughterhouse. for australia, it is generic drugs. in some sense, you will see in the months ahead, a holding hands together and jumping at the same time. every country gains and loses at the same time. opposition will be very fierce. charlie: what about the united states? greg: the united states did reasonably well. the u.s. entered this agreement having the lowest trade barriers in the world already. to the extent other countries would come down for the u.s. levels, the u.s. was more likely to gain than to lose. if you look at japan, it is true

tariffs onwell have its car exports. but that is 15 to 30 years. a lot of the people who negotiated this agreement will not be alive. u.s. farmers get access to japanese beef, dairy, and rice markets. charlie: was a fear of china a motivating factor? juayang: i think so. there is a sense that china has become such a prominent presence in east asia and that its dominance has been unchecked. this partnership is a way of asserting u.s. influence and sending that symbolic message. charlie: the office of the u.s. trade representative said it

would end more than 18,000 tariffs that participating countries have placed on american exports. patrick: if you look at which economies are the most protectionist, it is japan. japan has never really opened up within the kind of numbers greg mentioned. the biggest gain for the u.s. is probably japan. although a product may be included in the deal -- greg: this is a trade agreement that is not like other trade agreements. it is much more about extending those sorts of global rules of the road. that will be a particular benefit to areas where the

united states has specialized, such as pharmaceutical research, the digital economy. you cannot require facebook to house all its data in another country. for those who don't like this agreement, that is exactly the problem. this is a giveaway to the people and companies already making out like bandits. charlie: the president made much of the environmental and labor standards, did he not? --g: what was impressive environmental groups applauded some of the restrictions on trade in band wildlife products products.wildlife vietnam, which has mostly government subsidies, will have

to have independent trade unions as a condition. it is hard for me to think offhand of countries that have accepted that much intrusion. it is hard to see china accepting that any time soon. the administration is right to post about the standards they have -- boast abouthe standards they have. bernie sanders has already said he thinks this is bad for workers. if a company wants to outsource production from the united states to vietnam, this agreement makes that more attractive. charlie: beijing was reluctant to comply with a lot of the features. juayang: it is also listening to the public. the public is up two minds. -- is of two minds. some feel excluded from this agreement.

others feel like china is not quite ready for the stringent standards, especially when it comes to intellectual property rights. these are things china has been struggling with. if they agree, there is a fear that perhaps they will be violating their own rules in the agreement and that might make things worse. charlie: they do see this as a sort of threat? juayang: i think it does not want to react too violently. they are cautious about it, but they don't want to give off the impression that they are nervous

or feel somehow threatened by it. there is that since that the and is asserting itself china needs to watch out for it. these are the countries involved in the tpp, u.s., mexico,japan, chile, new zealand, singapore, and vietnam. chile,es this mean for for example? list, there are some sophisticated economies. arerest of the countries already more integrated with the u.s. in terms of trade. you highlighted chile. i would highlight vietnam as the

outlier here. a big test of this treaty and whether china will want to join is how vietnam gets on with its state run companies and its closely guarded political system. you really have got that as the example for how far-reaching this treaty could go. for everyone else, it will be quite moderate. charlie: mexico stands to benefit the most? patrick: that is the auto industry concessions, in particular. make it easier for components to be supplied to u.s. manufacturers. me the: layout for process from here. to reviewongress has

and estimates have to be produced. the expectation is the politics of the election may make this difficult indeed. different countries have their own fight about this and canada's election is coming up very soon. abe, has made this a key part of his policy to show he is standing up to china. complicated set of things to orchestrate the thing everyone is watching is the producesand whether it a very nationalistic rhetoric. that thisance abroad

is going to break new records. i was at a dinner in hong kong on the day china devalued its currency in august, and the business people were not sure what they were horrified by both, china's devaluation or the spectacle of donald trump. procedure,re is a but whether the election spoils things is the big question. charlie: thank you very much. we will be right back with ben bernanke. stay with us. ♪

charlie: ben bernanke was chair of the federal reserve from 2006 22014. -- 2006-2014. in 2009, time magazine named him person of the year. interest rates remain at historically low levels. all of this and more is captured in the courage to act. i am pleased to have ben bernanke at the stable. let me talk about -- at this table. believe in order to respond

to a financial crisis, you have to act, act boldly, and you have to know what you are doing. charlie: politics was terrible, a lot of backlash, and i dedicated the book to all of the policymakers around the world who were supposed to be passive and attacked the crisis and brought it to an end. charlie: mostly central bankers or political leaders? not many members of congress. mr. bernanke: congress was mostly, you know, in the critical mode for the most part. charlie: let's talk about some of the headlines and talk about carolinag from south to harvard and from harvard to m.i.t., and to stanford and to princeton.

idea that you and hank kateon decided to opt for -- obstet eight as what you what you could do at the time of the lehman brothers crisis. mr. bernanke: when lehman brothers failed, the financial system when into cardiac arrest -- went into cardiac arrest. we were worried about runs on other countries. for a few days, we agreed to be vague about it. it was an honest choice based on our concern about the panic getting worse. charlie: what were the consequences of that decision? mr. bernanke: we were in a lose-lose situation. if we did not have the power, that would create fear.

-- there was a feeling what we had done was arbitrary. book, thel in my failure of lehman was something we try to avoid, but could not. aig, we were able to avoid. charlie: you had nobody stepping forward to buy them either. mr. bernanke: that is how we saved bear stearns, by getting jpmorgan to buy them. charlie: here is the question i don't quite understand. i talked to hank paulson and tim geithner. i do not understand whether the fed alone could have saved lehman. mr. bernanke: absolutely not.

the only tool we had was lending against good collateral and that meant we could save a firm that was illiquid, but was fundamentally solvent. -- as a bankruptcy judge lehman was very much in the red, did not have enough collateral. we felt that if we had lent money to lehman, we would have facilitated all of the other creditors escaping and left the government with a failed firm. mr. bernanke: did you anticipate what was going to happen if lehman went bankrupt? mr. bernanke: we tried everything we could. we expanded the collateral

against with which we would land. we knew it was going to be bad. i think it was worse than we expected. charlie: aig came and you had no choice. mr. bernanke: it was the world's largest insurance company. on top of the lehman failure, it would have brought the system down. charlie: how close did the system come? mr. bernanke: scarily close. whether or not we could arrange to get the aig thing done was a close call. even though we were able to arrest the panic and bring it to a halt by the spring of 2009, the economy took a very serious blow. we have not completely

recovered. charlie: when you rescued aig, or you had no control over what they did with the money. mr. bernanke: yes, we did. with the money we gave them, they had to meet their obligations. they came to us and said, we have $85 billion of collateral calls, margin calls. lend us the cash against our firm, taking the firm as collateral. people in toe sent make sure we understood what was going on. we were very much involved in what aig did after they received the money. charlie: tell me about the days between lehman and aig in the context of fear and what you , the sensed to show

of confidence. mr. bernanke: it was very scary because lehman failed on monday morning. all day long, we were trying to deal with the aig situation. tuesday, we had a meeting with the monetary policy situation. i was on the phone with new york. we were on the phone talking about it and i was an hour late for the fomc meeting. which is an unheard of breach of protocol. i was trying to manage the monetary policy meeting and to prevent aig from failing. we came up with a plan. tim was the leader. we took the plan to president bush and explain to him that we had to do this very scary thing, lend all this money.

to his credit, he said, do what you have to do and i will do my best to support you. he sent us over to congress. was at that moment meeting. after we explained why we needed to lend this money, why we needed to protect our financial system, the congressman said to us, very interesting, do not expect any help from us. this is your call, your decision, and your responsibility. charlie: who was at the meeting? mr. bernanke: the leaders of the house financial services and senate banking committee. the comment was made by senator reid. charlie: you have said congress was not much of a help. when you appeared before them, they were more interested in

having themselves ask the tough beingons more than curious about the answers. mr. bernanke: they ask questions to express whatever point of view they have. the bailouts were very unpopular. the congressman reflected the unpopularity. charlie: hank paulson has been clear in saying i wish i had been able to communicate better. it was hard for me to explain the case. we had a hard time saying, if we do not care of wall street, we will lose mainstreet. why is that so hard to tell people? mr. bernanke: i tried. i went on public television, 60 minutes, i gave speeches around

the country, i did a series of lectures. it is a tough sell. --n today, people will say nobody bailed me out. whenever i would see a bumper sticker that said, where is my bailout, i would cringe. i felt there pain. why is the government helping wall street? if wall street collapses, the effects will be felt widely. we met with the house republican caucus just after lehman failed and we were asking them for the so-called tarp money. know, if theg, you financial system fails, you will see the consequences. one of the congressman said to me, i've been talking to my friends and neighbors and they

do not see any problem. their economy is working fine. i said, you will. it was not much longer before the economy went into a freefall. charlie: one of the criticisms is that you should have seen this coming. mr. bernanke: we did understand house prices were awfully high. when i was in the white house in 2005, i made a presentation to president bush going through an analysis of what might happen if house prices came down. the subprime mortgages were a problem. we did not understand and what nobody understood is the losses in subprime mortgages would infect the season -- the system and lead to a broad base financial panic. that we did not anticipate and

that is what made it so severe. charlie: this was not just a case of depositors in banks watching their bank fail. this was something different. mr. bernanke: it was like the bank runs of 100 years ago. the depositor would fear for the safety of their bank. now, of course, retail depositors were protected by deposit insurance. electronically, the banks and other institutions borrowed lots of money uninsured, short-term, from institutional investors and money market funds. they had more of that kind of money than they did of insured deposits. when the fear began to build that some of the institutions were at risk, the money began to pull out. charlie: is that what you call

an expediter factor? was an academic and i studied financial panics and the great depression and i understood from that experience how they worked. it took a bit of time to understand how the old-fashioned bank run was happening again, but was being transposed from the people in the street to the electronic run that we saw. charlie: the interesting thing about you as fed chairman, because you had your own academic experience and you look at japan and the great depression, but you looked at what the fed had done and ask, how do we prepare? did you find guidance? mr. bernanke: some guidance. things had been worked out to

some extent since 9/11. 9/11 created a lot of damage in the financial system. experience where everybody was trying to be more resilient, the fed had done some work on understanding the potential risks. we did have some material. clearly, we had not prepared because it was a failure of imagination because we had not seen this kind of crisis since 1929 and there was some feeling that maybe this is not something we should worry about so much. because of my background, i was concerned about it, but we did not put enough resources into it. charlie: how much would we have is bothter in recovery the stimulus from congress and

the stimulus from the fed had been more or had worked better? would it have made the economic recovery more secure? mr. bernanke: we have mostly recovered. unemployment rate is down to 5%, which is about normal. it took us six years to get there, which is a bit of time. the fed was very aggressive with monetary policy. basically, we provided the sort of monetary policy support the economy needed, but after the initial fiscal program in 2009, the congress when it to a contractionary mode, the sequestration, other budget cuts . budgetary discipline is important, but congress was overshooting and delivering cuts at a time when the economy

needed more help. one of the results of that was that with fiscal policy not being helpful, so much fell on the fed, the fed was being asked to do too much. charlie: i will come back to that. did you use all of the tools you had? mr. bernanke: if you go back, we never sent interest rates negative. wishie: you did say you you had gone to zero right after lehman. mr. bernanke: i think we made a mistake not cutting rates at the 2008 meeting in december. the reason was the meeting was very short and it was after the lehman failure and we had not had time to reflect on it. over the next couple of

meetings, we had cut rates all the way to zero and we were much more aggressive than other central banks in other industrial countries. we were aggressive on monetary policy. charlie: describe the relationship between you and hank paulson and tim geithner. mr. bernanke: three very different people with different backgrounds, but quite competent entry. -- complement three. hank is a consummate wall street guy. very energetic, always on the phone. it was important for us to be able to understand what is going on in the markets. i was the academic, a quieter personality, analytical. higheithner, also very energy, had spent his career at

the treasury department helping the u.s. treasury to with financial problems around the world. he had cut his teeth helping deal with the asian crisis of the 1990's. we had a diverse set of backgrounds and skills and working together, it was a good combination. charlie: what was the biggest source of disagreement? mr. bernanke: we were under so much pressure and controversy externally, for the most part, we banded together. tim wass disagreement, urging hank not to say what he said in the beginning, that the government was not going to provide support. i believe it was a tactical statement. -- he was hoping that ceo'sr or the wall street

would collectively do something themselves to save lehman. was that a realistic explanation? mr. bernanke: the expectation was is bank of america had agreed to buy lehman and bank of america said, we cannot quite make it. in that situation, some of the other ceo's would say, we will participate. they were all afraid for their own health. -- who: foodie julian on did you lean on for advice? what are my options?

mr. bernanke: i had two very good vice chairs during the crisis. one was there during the heat of the crisis and he was a 30 year veteran of the fed, a very sensible guy. he was replaced when he retired, janet yellen, who is now the chair, had been the president of the federal bank in san francisco and she became my closest confidant. i also spoke to tim geithner. i talked to other staff, including my public affairs person who helped deal with the press and the politics and the outside world. charlie: did you sleep well at night? mr. bernanke: not usually.

a lot of late nights, lost weekends. charlie: is this your presentation to people who see another crisis and say, here is the best i can do to tell you my experience, what worked for us, and what i have learned from facing those tumultuous times. mr. bernanke: i don't just talk about this event and that event. i do try to create a little bit of an explanation for what happened so people can understand what our thinking was. i hope that will be useful. dodd-frank you think is the appropriate response in terms of regulations from the lessons of this crisis? mr. bernanke: the combination of dodd-frank and the basel three

, betweengreements those two, i think a lot of progress has been made. i would not say every single provision of dodd-frank meets a cost-benefit test. the basic goal of the reform was to make banks a lot more self-reliant, a lot more capital, to make big banks faced tougher supervision and give us the ability to unwind a failing bank. charlie: you now have the authority to have rescued lehman. mr. bernanke: it would have been a disassembly. when lehman failed, it went into the usual bankruptcy process, and it took years to go through. if we had had the power's been

-- if we had the powers then, we could have done it in an expedited way. charlie: the most important lesson you learned personally? personally, it is kind of tried, you need to stand up for your -- kind of trite, but you need to stand up for your convictions. it was important to understand what was happening and be willing to stand up for it and explain it. if you cannot explain what you are doing, you should not do it. i tried my best to explain to congress and the media what we were doing. i did not always succeed. charlie: what were your doubts? mr. bernanke: the thing about ,t, the whole crisis was a big chaotic, you know, event.

obviously, we did not fully anticipate how dangerous it was going to be and when we got to the fall of 2008, we did what we thought was necessary. we were not sure it was going to work. when we went to talk to congress and they said, is this going to work, and we said, we hope it will. we do not know what other timebombs are buried beneath the surface. you probably will never face a time like this in your life. there are people who like to , who likes to come up with the bases loaded.

mr. bernanke: this is with the stadium on fire. this is a situation i would not wish on anybody. a lot of tough decisions to be made still, i no longer make them. i am now a civilian and i would not want to go through that experience again. charlie: could it happen again? mr. bernanke: it never happens exactly the same way. it would be hubristic that we have conquered financial crises forever. as long as you are going to have risk-taking, you will have risk of financial instability. some of the steps taken after this crisis have made the system stronger. it requires -- it is not something you can tie in a borough and put away. -- in a bow and put away.

mr. bernanke: would you do more quantitative easing? -- charlie: would you do more quantitative easing? mr. bernanke: monetary policy and quantitative easing was not so much about the crisis itself as it was helping the economy come back. we were very worried. early on, the recovery was slower than we anticipated and we had to do several rounds. known it if we had would be a slow process, we might have gone a little faster. part of what was going on, we were trying to balance various risks. we did not want to create an inflation risk. we were trying to grope our way forward and we took very strong action in march of 2009.

we did an enormous quantitative easing program. --rlie: you also said this some individuals should have gone to jail. mr. bernanke: i did not actually say that. what i said was, i raised some concerns about the department of justice is prosecution strategy. they did not go after individuals. they went after firms. convicted ofre selling bad mortgages had to pay very large fines. my thinking was, corporations are just legal fictions. any action taken that is an is taken by an individual. to me, it would have made more

sense, instead of penalizing the firm's as a whole and the shareholders, it would make better sense to determine who the individuals were -- charlie: and prosecuted the individuals? mr. bernanke: as appropriate. i do not want to prejudge. primari atwas made the level ofly corporations -- was made primarily at the level of corporations. in some cases, it is a great line between criminal activity and very unwise risk-taking. those are the judgments the department of justice would have to make and the courts would have to make.

gone for things like rigging markets. ♪

charlie: the sarah just made a decision not to raise interest rates. -- the fed just made a decision not to raise interest rates. you have a second -- you have a policy of not too second-guess

janet yellen. when is it appropriate to raise interest rates question mark if inflation was at 2% today, would it be an appropriate time to raise interest rates? mr. bernanke: the inflation rate is central to this. target for set a inflation, 2% a year. it is important the fed reach that target. the judgment they are making is this -- how strong will the economy be? will it grow at a pace sufficient to keep putting people back to work and to have the economy heating up enough that inflation will move back to target? they will be looking at the data on u.s. economy and looking at the global economy, which is the major drag on our recovery. china and the other emerging

markets are slow right now. the imf just downgraded their forecast for the emerging markets. that has been a drag on the u.s. economy and the fed has to make an assessment about whether or not the forward momentum is sufficient that we will keep adding jobs and the economy will begin to heat up and get higher wages and meet the inflation target. that is the consideration. what is difficult, you cannot just look out the window. you have to look ahead and try to forecast. charlie: what would you have thought might have been done other than what was done to raise the employment rates to get to 5%? is you were very concerned about that. mr. bernanke: i was concerned

because with so much long-term unemployment, so many people out of work for six months or more, those people were losing their skills, the connection with the labor force and they might never come back. one of the problems was, as we discussed earlier, when monetary policy was aggressive, fiscal cuts andhe spending the tax increases caused fiscal policy to be tighter. that meant we had an unbalanced policy mix. the overall policy support for the recovery was not as strong and relied too much on monetary policy. charlie: if you were in charge of tax reform, what would you

do? take corporate taxes, which has been a topic of a lot of discussion in congress and the political campaign. we have very high corporate tax rates compared to other companies, that we also have loopholes and exemptions and credits. what would make the most sense is to get rid of some of those loopholes and allow the tax rate to be reduced and still get the same amount of revenue. congress should address the problem of foreign profits. tax incentives to leave your profits overseas. charlie: apple is a perfect example. what do you love about baseball? mr. bernanke: i think it is a beautiful game.

it does not require you to be 300 pounds. you can be 5'4" and still play baseball. as an economist, i like the fact we have the data to go back to the 1880's. that gives a sense of looking at ted williams is batting numbers -- ted williams's batting numbers. charlie: a passion for numbers that economics and baseball share. mr. bernanke: you have to use numbers the right way. you have to understand what the numbers say. time you arehe exercising the power you have as the chairman of the fed, what personal qualities did you call on? mr. bernanke: i tried to be as straightforward as i could.

i tried to keep my focus. i tried to be as honest as i could. i tried to stand up when the situation was tough. i tried to do what i thought was right. i am sure i made a lot of mistakes and there are plenty of things to criticize, but i did my best. i tried to be an honest broker and help use the powers i had to help our economy recover. charlie: my impression is that you and hank and tim always thought you had the support of the president. he said, do what is necessary. mr. bernanke: that was true for both president bush and president obama. president bush said, you guys are the experts. senseou are saying makes

to me. likewise, president obama came in and the crisis was a little less severe. at that point, tim geithner became the treasury secretary and the key economic advisor to the president. generally speaking, president obama was willing to say, i understand what you are saying, it makes sense to me, and i will support you. i am very grateful for that. i am very grateful he supported the independence of the fed. when we were doing quantitative easing, there was a lot of complaining about it from markets around the world. president obama was on and asia trip and he got a lot of blowback. the fed is independent, i support them in doing what they are doing.

it is not my call, it is their call. charlie: you make the point in the book that you chose not to seek another term. you said to the president, eight years is enough. thinkingnke: i was about it after four years. i was up for a renomination in 2009. we had just been through a crisis and recession and i said, maybe i am the wrong person. maybe i should not ask for reappointment. you cannot walk away now, the system needs a lot of help. whatever you can do, you need to do. the way i justified that to myself, this is going to be it. after this four years, i will go

back to private life. that is what i said to president obama and he understood. charlie: not at any time before you left did you say -- mr. bernanke: i am delighted with my successor, janet yellen. i think she is doing a fine job. charlie: thank you for coming. thank you for joining us. see you next time. ♪

♪ >> surprise loss. deutsche bank slums after hours after worse than expected results. hillary rejects the transpacific trade agreement, saying it will not create jobs for america. hold that thought. says the fed should delay a rate rise. ."lcome to "first up i am angie lau. let's check in on markets in asia right now.