buying the calls. i'm with them. >> pete? >> intel coming out tuesday i like this name for the reasons murphy put out there. >> that does it for us. options action and "money in motion" starting tonight only on cnbc at 5:00 eastern. power begins right now. scott, thank you very much. we've got three hours to go in the trading day and trading week. stocks in the red on fears about china's economy. but we begin with thundershowish breaking news. fed chief ben bernanke set to speak at any moment and then take questions in manhattan. steve liesman is at the big event in new york city and has the headlines. steve. >> thank you very much, tyler. the federal reserve chairman making no comment on monetary policy or the economy. he is delivering or will deliver in the next few minutes a retro spective on the financial crisis. he says for the financial stability must be on par with monetary policy. this is the new montra at the fed in the post-crisis era.

he says dependents on short-term funtding, higher leverage of inadequate risk management helped bring about the financial crisis. why is that important? because those are the things he thinks need to be solved or have been solved in the wake of the crisis. vulnerabilities that underlay the recent crisis must be fully addressed. he's been talking about the need for additional regulations and addressing other vulnerabilities that were not addressed in dodd frank including money markets. seems to be eluding to it right there. he has plenty of blame to go around. the public sector failed to appreciate the building vulnerabilities in the financial system. and the private sector, risk management did not keep pace with emerging technology. been talking about shadow banking system. he says it was a key vulnerability of the financial system. the fed's response he said reflected the best of series of bad options. the crisis he says best understood as a classic financial panic. financial panics are inherently difficult to foresee, which is an interesting comment given the

fed has embarked on some research to see what it could do to kind of figure out if it could see panics and bubbles before they happen. we'll have to wait and see if the question and answer says does yield any commentary on monetary policy or the economy. >> that was going to be my question, steve. i assume he will get questions about the current economy and monetary policy. who, by the way, is in the audience at this event at the princeton club? >> a series of academics and other policimakers who are studying the financial crisis and the reasons for it. i saw former federal reserve governor, alan blinder spoke here as well, former federal reserve vice chairman. tyler, i'm very happy it's the weekend. i have read well over 100 pages of fed speeches this week. nine of the 17 fomc members have spoken. i think the takeaway for the markets here, tyler, is that no qe is imminent but it's on the table if the economy were to weaken. >> steve liesman, thanks very much. we'll check back in with you throughout the hour. let's meantime go over to simon.

>> you know, tyler, there's a perception that during the course of the week they've pushed the idea of qe away. it's one reason why stocks are lower again today after two days of real solid gains. mention that, but even so the dow and s&p on track for worst two-week declines since november. europe's crisis is clearly on the front burner. u.s. consumer sentiment slipping. but well off the worst levels of the day. that's important to say. let's have a look at the individual stocks and see how we're moving taking a pulse of the markets as they like to say on "power lunch." certainly the dollar is stronger on the flight to safety. you see that right the way across the board. conversely the yields on the 2-year -- the yields on the 10-year is below 2%, 1.98%. and also the global concerns of outgrowth are hitting copper. and you can see again that we've taken a little bit of a move further down today. on the midday movers, coinstar is higher after raising both its earnings and its revenue forecast. the stock up almost 8%.

dow chemical also higher after increasing its dividend by 28%. and the power of color this spring, gap having a good day. jaffray reiterating its buy. in fact, it's a top recommendation for that stock and movers higher on the upside. on the downside so far today the financials are being hit today with the regionals in particular having a bit of a major breakdown. you can see suntrust, first horizon and regions financial all lower as things stand at the moment. let's take you live now to the trading floors. we'll kick off with bob pisani at the nyse. bob. >> hello, simon. you're right. it was definitely about europe. we saw this today because the minute that europe ended at 11:30 or europe closed at 11:30 and here we are on the s&p on an intraday basis, you can see we start immediately coming off our lows. it's still a down day, but not nearly as bad as it was about an hour and a half ago. as far as whether this whole decoupling issue is real or not, it's not been a good week for us or for europe. but i want to point out that not

every stock market is moving in tandem. for example, we're down about 1.5% for the week on the s&p 500, but european stocks, well, germany almost down 3%. italy down 5%. and look at china. china was up 2.3%. and australia, a big commodity producer, was flat. so the world is not moving exactly in tandem whether or not decoupling is real or not. elsewhere it's just been an ugly day again for some of the big commodity companies, big energy companies. coal stocks, can this get any worse for coal companies? i mean look at this. they keep dropping. whether you're talking about natural gas switching, whether you're talking about weak exports, a warm winter, it's simply horrible six months for these coal stocks. they're looking for a bottom. they've been cutting production or announcing cutting production for months now. doesn't make a lot of difference. coal stocks versus the s&p 500 and you can see the coal index, but you can see this has been straight down for a number of months here. they have probably underperformed the overall

market in the last six months by 25%. that's just an enormous amount. commodity stocks again not having a very good day as well on these kinds of days when you get concerns about global growth, this is what you typically get. bertha, of course, when you get commodity stocks down, you're also getting usually the commodities themselves on the weak side. >> yeah. and it doesn't help either that we've got a fairly strong dollar today. certainly that's slower than expected china gdp number [ technical difficulties ] a pullback in oil although holding in relatively we do have talks between iran this weekend over iran's nuclear program. an interesting thing to see gasoline which has been on a tear up five straight weeks is platd toeing this week. and at the gas pump we're also seeing relief as well. seven days in a row we've seen prices inching down nationally on the national average. nat gas plumbing new depths today. another new 10-year low although stabilizing right now. and copper closing out here in the pit with its worst week since last december.

we'll have the gold close, tyler, coming up at the bottom of the hour. >> bertha, thank you very much. switch on the "power lunch" power surge and get to the stories driving the day. fears about china's slowing economy rattling investors. the question they're asking, will it be a hard or soft landing for china? our chief international correspondent, michelle caruso-cabrera, making one of her rare appearances here at headquarte headquarters. hey, michelle. >> hey, tyler. if you look at the market reaction initially to china's gdp number, you might think i thought it was going to be a hard landing, it was pretty negative. remember, there were rumors yesterday that chinese gdp growth would be above 9% for the quarter. instead it was 8.1%. let's give you some long-term context on that number. 8.1% looks like a big number. if you go just to the last three months last year grew at 8.9%. one year ago they grew at 9.7%. and look at that number back from 2010. they were growing at nearly 12% in quarter. let's give you a graphic which

shows -- demonstrates this move intuitively. this is the pace of growth of china's gdp. so not the actual size of the gdp because that would be going up. instead this is the pace of the growth. as you can see, it's been a steady decline. i think a lot of people look at that and say so farther engineering a soft landing at this point. what's also crucial about this gdp number that hasn't gotten a lot of attention is there's been an important shift within the data. we have now seen that when it comes to growth, consumption by the chinese population contributed more to gdp growth than investment. not to the overall gdp, just to the growth of gdp. make no mistake this is an economy still dominated by that which you're looking at right now, infrastructure buildout extet ra. they've been working very, very hard to get the population to literally buy more, spend more, et cetera. now, at least two different firms have come out and said they think this is going to be the worst quarter when it comes to growth. that is contrary to what the chinese government predicted for the year. they're talking 7.5%.

so we could see additional slowdown in the next two quarters if the chinese turn out to be right has to be faster. already 8.1% in the first quarter. tyler. >> two quick questions. number one, is the chinese government getting what it wants in terms of inflation, which is one of the things they were very worried about a year, year and a half ago? and number two, where does the chinese economy fit in the overall picture? >> they have shifted their worry now to growth because of the situation in europe and the united states. but they still have issues with inflation when it comes to the food and the poor. another thing to show you just to give you context, remember, china still far below the size of the united states. put a graph up here. u.s. economy 15 trillion, china in about half and topping japan and germany. it's their growth that is so important, right? because we think in the next 20 years maybe they could match us if they continue on the pace they're going right now. >> michelle, thanks very much. >> okay. from the economy to earnings, the earnings season is now in full swing. banking giants jpmorgan and

indeed wells fargo are both coming through with quarterly figures today. both of them beat on the bottom line. take a look at how they're trading. both down over 2%. mary thompson is breaking down the results. she's listening to the conference calls and spoken to senior management. mary. >> hey, simon. as you mentioned both banks reporting better than expected results. jpmorgan a health department thi rebound in banking business and like wells fargo strength in mortgages. that bank's earnings, jpmorgan's that is, $1.31 short. helped as well by continued improvement in credit and low growth in middle market business. a $2.5 billion ad to legal reserves caught a lot of people by surprise. the cfo in an exclusive on cnbc saying it was mostly for mortgage-related issues. >> the $2.5 billion today really reflects in our view based on what we know today a very comprehensive and appropriately conservative view of those exposures.

>> he's not expecting further significant additions to legal reserves of the size this year. depending on circumstances, that could change. as for the economy, the company's ceo jamie dimon saying on the call housing close to a bottom. everyone seems to wish that the recovery was stronger. jpmorgan's san francisco based rival wells fargo 75 cents a share two cents ahead of estimates. along with strength in mortgage, benefitted from a cross of various products and posted highest return on assets in four years. like other banks though, wells is expecting low interest rates to keep pressure on its net interest margin in the coming months. a programming note, our maria bartiromo will speak with wells fargo chief financial officer tim sloan and that's today on "closing bell." >> we have new information on lloyd blankfein's pay ahead of

goldman's earnings next week. how much is he making? what more do we need to learn there? >> well, he's making -- last year this came from the proxy which was filed today he earned over $16 million, which was up from the $14 million he earned last year. we take a look at these numbers compared to some of the other big ceos of banks, jpmorgan's jamie dimon, john stump. two companies more i guess you could say similar in nature. gorman earned around $11 million. i guess no significant surprise although numbers for some people seem a little outstanding i should say, simon. >> to say the least. mary, thank you. >> well, we all know the story now. google delivers decent earnings. but it's the surprise two-for-one stock split investors are really interested in. aimed at control by co-founders. shares right now are lower by

over 3.5%. jon fortt joins us from silicon valley. jon, this power grab, are we going to see more of this in tech? >> quite possibly, julia. just to get back to the stock for a second, it's given up all the week's gains with this 3.7% drop this morning. its biggest selloff since last quarter. and they looked more ho hum the more you dig into it. eps were strong but benefitted from an unusually low tax rate and unusually slow pace of hiring in the quarter. one of the things that has a lot of attention is google's three-class stock structure. they gave themselves voting control. they say they don't want investors to short thinking. allows to award employees with stock. this is probably a sign of things to come. you know who else has founder control arrangements? facebook's mark zuckerberg. linkedin's reed hoffman has a catch of pre-ipo stocks that

will see his voting control increase over time. groupon's similar. and zynga's mark pin kas has strong majority voting power. if yahoo! had total voting control today and one could even argue if steve jobs, steve wozniak had controlled early on, the company's history would have been even messier. >> interesting to see what wall street thinks of mark zuckerberg's total control of facebook. back to google's earnings, what do you think are the main reasons investors might be skiddish? what's the reason for the drop today? >> you have the slowest revenue growth in a couple of years. and at the same time the eps was driven by the best lowest tax rate in two years. then mobile, you know, you've got the click price issue, mobile click prices are half of what you get on desktop. and then finally there's this motorola issue. colin at bgc thinks it will be

negative 8% on operating earnings. and haven't heard from google how they plan to manage that. >> thanks so much. meanwhile, more trouble for the video game industry. sales plummeting 25% in march to $1.1 billion. that's the fourth consecutive monthly decline according to nbd. consoles suffered most and software dropped 25%, and accessories revenue fell 8%. consumers are sifting into subscriptions and digital downloads. npd says this category accounted for an additional $2.5 billion plus in spending in the first quarter. now, it's not apples to apples comparison, but it is clear where consumers' money is going. >> that's where people are playing now. they're playing on their phones. >> ipads, i mean, this is the new handheld gaming device. that means that money's not going to a nintendo or sony. >> the movie business also driven, isn't it, by hits. but they're not a hit? >> there was a hit.

it was an electronic arts game. the thing is it's still a hit-driven business. it's what's happening to the second and third-tier games. those are the ones disappearing. call of duty people will still turn out and wait in line the night before. those are still big events. >> i imagine in march you don't get many releases anyway. for the holiday season, surely. >> the really big games come out in the fall. there was one electronic arts game that was a significant gain, but it's the second and third tier ones that have dropped off. >> nice to have you here this week. >> it's a pleasure to be here. >> to remind you we're keeping a close eye on fed chief ben bernanke speaking right now. we have the text of what he's saying and we brought that to you at the top of the hour. nothing particularly market-moving. however, very shortly probably in about 10 or 12 minutes we'll get to questions and answers. that could reveal further the theme we've had through the week that they seem to be moving away gently from qe or certainly imminent qe.

>> we've saved the biggest for last. >> he's so good at not saying anything substantial about the quantitative easing. it seems like he might do a good job of not bringing us any news. >> he says something. i mean, you can never understand what greenspan said. straight ahead, two big down days, two big up days. china slowing, mixed economic news. what do you do? risk-on, risk-off, katie nixon's turn to pay off. >> see what's moving. utilities, consumer staples, defensive and financials and technologies of course are the sectors that did really well in the first quarter. back in a minute. olar shifts wie the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire.

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welcome back to "power lunch." rick santelli here on the floor of the cme group. while it's been an interesting week. if you look at data today in particular, you know, inflation numbers might have been as expected. but that's still on the warm side. but the number that caught everybody's imagination was the 75 handle on university michigan preliminary april. it wasn't up to expectations, but by historic standards it was a great number, just not as great as many thought it would be. look at an intraday of ten, down about half a dozen basis points which we closed last fritd friday about the same place. the week down about half a

dozen. if you open up to march, you'll see there was a time we spent a lot of time at or below 2%. not recently, but here we are again. the main reason and we'll keep it simple, look at the stock market in spain. look at it since march. wow. you're talking about a stock market grabbing people's attention to the downside. and one of the reasons is the last chart. and this is the yield going back for one year on the 10-year spanish. and you can see it touch 6% today. not only do we have those issues for the weekend, we have istanbul knew le istanbul, knnuclear talks on monday. back to you, tyler. >> rick, thank you very much. stocks slipping today following a weaker than expected gdp report on china or in china or from china. choose your preposition there. how about that? dow on track to end the week lower by 1% in what has been a very volatile trading week. is it risk-on or risk-off right

now? our power player, katie nixon, welcome back. >> thanks, tyler. >> let's talk a little about china. is it doing exactly what you expected it to do? and does today's number change anything in how you all will be managing your portfolios? >> well, we expected a slowdown in china. and certainly the 8.1% print that came in overnight was a little bit less than had been anticipated. but 8.1% is a very strong growth rate. we still expect there to be a soft landing there. and if anything, the 8.1% number that we've seen might precipitate more policy intervention there which would in fact even further support our soft landing scenario. >> speaking of policy intervention shifting gears to here in the u.s., what do you expect to hear from bernanke? we got the headlines from steve liesman, but do you think he'll show his cards at all during the q & a period? >> it will be interesting to hear what he says, but i think he's been very, very consistent on all the commentary he's given

over the last several weeks. he's been quite consistent in that he is a bit skeptical about the u.s. recovery. still sees it as moderate. concerned about housing. very concerned about unemployment. so qe-3 while not imminent is certainly on the table. i think he'll be consistent in that message. >> you might be right, but he as an individual will be consistent. but the effect he has is to zigzag across the markets. he will hint at qe-but fomc in the last two sets of minutes you get a slightly more hawkish view. it's quite possible that the guy could hint again or stress the weakness and hint again at qe and we'll rally into the weekend. >> that's very, very true, simon. i do think that it's interesting to see the differences of opinion on the fomc right now. you have yellen out yesterday really supporting the consistent message of bernanke to the market which is let's keep our eyes on the recovery and qe-3 in

our back pocket. and certainly you have those on the fomc who are doubters and are much more hawkish and who are suggesting strongly that we should be giving a much earlier target date to some exit strategies. >> our great senior producer characterized the open market committee as the open mouth committee this week. i wonder if you think that all of these fed talkers, yakkers, are actually helping us understand better? or could you do with a little less transparency? >> i think transparency is always good, tyler. it's good to know there's a healthy debate going on within the fomc. ultimately bernanke is the decision maker, but it's healthy for us to see the process. i'm a fan of the transparency. >> katie, you're going to stick around and talk more with us when we hear the q & a of fed chairman bernanke's speech. we'll see you later. >> just to take you back and remind you in case you just tuned in. good afternoon. this is "power lunch" and we're waiting for ben bernanke to take

questions on whatever the audience decides. he's spoken about the reasons we've got ourself in such a pickle and blamed the private sector and all the usual stuff. you may find the questions divert him towards the economy. if he stresses the downside risks, the market may take that as an indication that he's veering possibly towards qe. we'll bring those in a few minutes time. >> the entire speech is being streamed right now on cnbc.com. straight ahead, food fight. beef prices are rising. and the bad guys are home on the range. jane wells is working the story for us. jane. >> really, don't you wish you were in l.a. today? anyhow, beef, it's what's for stealing. with beef prices going up and dwindling supplies especially in places like texas, one bad aspect of the old west rides again. americans are always ready to work hard for a better future. since ameriprise financial was founded back in 1894, they've been committed to putting clients first.

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johnson controls rising on this otherwise rather soggy day for stocks at $32.90. it's $1.07 higher, that's about 3.5% after deutsche bank raised its view of johnson. seema mody now three in 30. take it away, seema. >> hey, tyler. another down day for the nasdaq not being helped by shares of apple down by better than 4% for the week. remember apple does account for 22% of the nasdaq 100. switching focus to micron tech, big volume in some of the stock

today. s&p revising their outlook on the stock to negative. lastly, bring your attention to an indian adr listed at the nasdaq. india's largest i.t. firm missed expectations. the ceo saying that the year ahead is looking challenging blaming slow recovery in global markets. julia, back to you. >> seema, thanks so much. beef prices are on the rise. and our own jane wells is braving the elements and on a cattle farm to tell us what's behind it. jane. >> hey, julia. cpi numbers show that in the month of march consumers paid nearly a percentage point more for beef than in february. this is even with pink slime. ranchers getting more for their cows and more of their cows are being stolen. john harvey usually has two cows a year pilfered. he's lost 10% of his herd. most of this new age cattle wrestling is happening in texas. prices up well over $1,000 per

head, sometimes $1,600. a lot of those losses are not insured. including the cows stolen from chris cannon. >> we come to feed in this particular pasture. and the cattle panels behind me been all rearranged. took count of the cattle and found eight calves and nine calves missing. these people, they know cattle, they're brave. when they get brave, they get dangerous. >> my theft reports have gone up 50% just in the last, oh, four months. when you take a cow to the sale barn, you're getting the full value of that cow when you sell it. it's not like stealing a tv in somebody's house or something like that. so anybody that's got any kind of cow sense and is a little bit of a thief knows that they're going to make a lot of profit out of stealing cattle. >> well, i don't have much cow sense, but looking at live

futures last i checked they were down a bit. branding can help, but sometimes these wrestlers get the cows on trucks and out in the middle of the night and across state lines and sell them before the rancher even knows they're gone because you're not out counting your cows every day. >> jane, this is an amazing story. never occurred to me that you can insure cattle. but the big question is these wrestlers, these guys who stole the cattle. have they caught any of them? >> yes. they have. britton tells me in his rejogio he's got two ring leaders. in the old days if you cattle wrestle, you just found the closest tree. now it is a second-degree felony and you could face years in a texas state penitentiary. >> don't you brand your cattle here so you know who they belong to? >> yes, but sometimes brands are not recognized in another county. and, again, you may not know for weeks that your cattle's been

stolen. if you have one of these huge spreads, they were stolen, they were trucked, they were sold, they were butchered. they're gone before you know it. >> jane, thanks so much. and i hope the weather gets better before i come to l.a. next week. >> me too. >> watch your step, jane. >> yes. >> still ahead, on a week loaded with fed speak and economic data, we are waiting for ben bernanke to start taking questions from top economists at the princeton club. we will have that for you live. >> and as we wait for the fed chairman, a wild week in markets wrapping up how the final two hours of trade will go at the trader triple play. always a crowd pleaser back on "power lunch." stay with us.

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on the 10-year. back to you, ty. >> thank you very much. let's move to bertha coombs now at the nymex where the trading is wrapping up. bertha. >> yep. wrapping up here in terms of the gold pits. gold down today. overall take a look across metals and it's that strong dollar that's keeping things lower as simon mentioned on a risk-off day. for the week gold is higher. silver edging and copper, though, the worst performance we've seen on a weekly basis for copper on those concerns about slower growth in china. worst week since mid-december. back to you. >> thank you very much, bertha. it is gearing up to be a huge week next week for earnings and indeed the economy. so how should you position yourself? time now for the trader triple play here on "power lunch." at the nyse matt cheslock and jack bouroudjian. how do you see it?

you've seen it time and time again. >> inflation running at 2.9% as we saw earlier today with cpi and a 10-year at 1.99. people are losing money putting their money in the 10-year. we're going to hear the fed chairman in a couple minutes on the q & a. bottom line is they are force feeding us an expanding balance sheet and debasement of the gre greenback. we have to be exposed. we have to look to be buying. a 3% or 4% pullback is a perfect textbook type. >> looks as if we're very close to the chairman speaking. matt, comment from you. how do you see things moving into the weekend? >> i would agree with jack. now is a good time to add on a pullback. but i think the market is still very hesitant. volume gives me a pause here right now. i'm not so sure that if today's a trend what we're looking for next week on earnings as far as the financials go. that's something i would really look forward to next week. >> and quick comment from joey at the nymex.

what's your play into next week? >> right now we're stuck in this range -- >> forgive me. i have to interrupt you. the fed chairman has started to take this q & a. guys have a great weekend. >> what perhaps is very different this time th800 years wrote about is that you are not just providing liquidity, but you're providing the kind of confidence you mentioned in your talk just now with making it clear to the markets that there will be low interest rates, that is policy rates, for several years and that you are prepared to do various things to keep that liquidity and that support available. so contrasting that with the ad hoc processes that are being attempted in europe. >> well, i didn't get into monetary policy in my remarks. i was focusing on last resort policy. in that respect i think we did

what bajt would have recommended except in a very different institutional context. of course doing that does enhance confidence. but i think that's not new. i think that's something that central banks have tried to do going back to the bank of england who founded in 1694. respect to monetary policy, we've had an additional set of issues relate to the fact that we are also near the zero lower bound created some additional complexities. again, we are of course trying to combine the two parts of our tools, the liquidity provision and monetary policy to help address the economic situation. in that respect, alan mentioned my promise to milton freedman which i never knew was going to be quite so relevant, my view of the great depression was that as

i talked about in lectures i recently gave is that the federal reserve fell short on two dimensions. both on the side of not doing enough to stop a widespread financial crisis. and, secondly, by not doing enough to prevent deflation and tight money. and in that respect we're trying to learn the lesson of the '30s and addressing both of those mistakes. >> i forgot to mention the other ground rule, which this first question adhered to very nicely. the question's about the subject of the lecture as oppose today what the fomc is going to do in a few days. is that alan? >> yes, it is. >> there's a mic coming right there. >> you didn't talk about this, but what happens in the future when some day we have another boom, another asset price

bubble. what does the federal reserve do? >> well, i think the first line of defense has to be regulatory and supervisory. as i said, one of the problems that became apparent was that the financial firms were not able to give a clear and rapid evaluation of their direct and indirect exposures to particular asset classes. what we're trying to do now is to push financial firms to become much better at doing that. and an example is our recent so-called c car, our recent stress test we applied to the same 19 large bank holding companies that were subjected to the stress test in 2009. we want the -- we want financial firms to be able to not only assess the current value of

their portfolio, but they also should be able to understand where they would be under extremely severe scenarios. so hypothetically going back to the housing situation, it would have been better obviously if we had known in 2005 -- i say we, speaking of the world in general or regulators in general, that banks and other brokers and other financial institutions had stress tested themselves against the possibility of house price decline, then we would have understood better what the situation was and could have taken appropriate action. so i think that obviously as i said financial stability is now an equal partner to monetary policy. that means we'll have to do monitoring, we'll have to make sure we understand what's going on in the financial system, look for buildups of leverage and other problems. we have to make sure the financial institutions can evaluate their own exposures. and as supervisors and regulators in the first instance

we want to make sure that firms are in a position where they can tolerate a major shock like the one of the decline in house prices. >> thank you. there's a hand -- is that [ inaudible ] there's a mic right behind you. >> a student of mine at princeton -- sorry? >> identify yourself. >> i teach at princeton. a student of mine just submitted senior thesis and her hypothesis and i quote "actions taken by the fed under chairman greenspan in the '90s led to private sector behavior" and i unquote that you've just described which in turn led to the financial crises. these actions taken by greenspan bypassed congressional approval and democratic process.

can you comment? >> i was really puzzled by the second part because, i mean, the criticism that's been raised has to do with monetary policy. i don't think anybody ever doubted the design that the fed has the authority to do monetary policy. i don't really follow that part at all. on the issue, again, little outside the topic. but i did talk about literature on monetary policy and the housing bubble in my lectures at george washington. and i recognize and i said there it's a very contested topic. people have strongly held views on both sides of the subject. i would say my reading of the research literature including work we've done internally is so far that the evidence that monetary policy was a major source of the housing price increase is pretty weak at this point. and some of the types of evidence that have been induced the timing, the housing bubble began in the late '90s according

to robert shiller and most intense after interest rates were already rising. secondly, international comparisons controlling for interest rate behavior, countries had a wide variety of experiences in terms of housing. there's not a very good correlation between housing bubbles and interest rate policy in various industrial countries. and thirdly, the magnitude of the movements in short-term interest rates in the early 2000s when you translate them into effects of monthly payments or on mortgage rates, they're trivial. that was demonstrated by the paper that was done by seven federal reserve staff that was circulated and which i have based a speech on a few years ago. i think this relates to alan's question as well. i think that given the heavy cost of the crisis, i think the appropriate mental approach is

ago nostism and openness. so i think going forward particularly in situations where interest rates are lower for a period as they are today, we have to be particularly tentative to stmic stability and make sure nothing is happening that gives us pause. looking retro spectively to the housing bubble -- again, the research literature as i read it to this point doesn'spectively housing bubble -- again, the research literature as i read it to this point doesn't put weight on the policy. >> jeff shafer, independent consultant. going back to alan's question. in response you focused very much on the need for stronger basically stationa basically stationery, do you see macro cyclical supervisory

tools, minimum payments and that sort of tool to headoff a problem if it were to arise again? >> that's a very interesting question. and this is not a hypothetical question because the number of countries around the world are using countercyclical tools. as you know a number of asian countries, for example, have used hirer down payments and similar restrictions to try to address what they feel is a bubble in their property prices. another good example, which i find very interesting, mer vin king just at a conference at the board and he was, you know, the bank of england now has a monetary policy council and also a financial policy council. and the financial policy council proposes to parliament a set of countercyclical powers such as varying ltvs and so on. and parliament decides whether or not to approve them. if they're approved, then they

can be applied. so the uk is thinking very seriously about this. the similar ideas in the basel agreement for example there's a possibility of a countercyclical charge that could be used in that context. and of course there are other examples countercyclical reserving by banks and so on. lots of interesting examples out there. i think it's very interesting possibility. we are looking at, you know, the experience of other countries and trying to think about these issues. we're not to the point of, you know, undertaking any of these things yet. but it would certainly be consistent with my answer to alan, which is that when you see a situation in which leverage or other problems are building up that you might want to use regulatory tools to try to restrain that somewhat from a macro perspective.

>> time for one last question. i'm looking to the back, which i can barely see. i see a hand up in the back in the center. that's not where i was going. in the back. put your hand up. there you go. we'll hear from you later, brad. >> thank you. i'm maureen farrell, i'm with cnn. it's been growing a lot and we see firms like so much moving outside of wall street and things moving to firms like kkr and blackstone getting into mid-size lending. do you worry about shadow banking really increasing as with more regulation on wall street? thanks. >> well, there's a lot of attention being paid to shadow banking. i think some of these issues are being addressed. for example, just to pick a few examples, the large free

standing investment banks are now bank holding companies. and under the supervision of the fed. the dodd frank act provides for any other large nonbank financial institution, which is systemically critical to be designated as systemically important and put under the supervision of the fed. in the mortgage business of course under my chairmanship we imposed a whole new set of rules for underwriting which now the consumer financial protection bureau is taking over and is no doubt reviewing as well. there's provisions about that in the dodd frank. in a speech i gave in atlanta earlier this week, i talked about reforms to the triparty repo market and the money market mutual funds that the fed is either undertaking or ccl collaborating with the s.e.c. and others and supporting that. so the first thing to say is that there's quite a bit of

work. i guess the point worth making is that the ability of banks to put investment vehicles off balance sheet has been much reduced by recent decisions by the accounting board. so i think there's been a good bit of progress made to this point in addressing some of the concerns that arose respect to shadow banking we can't be kplas come place entd complacent. the financial stability board, which is the international body of regulators, central bankers and finance ministers is doing a series of studies -- international studies looking at various aspects of the international aspects of the shadow banking system. and that will probably lead to some recommendations that we will all look at as well.

so we're taking the shadow banking issues very seriously. and it follows from the macro perspective. i think before the crisis -- a slight exaggeration but tendency to say my institution got rid of that bad asset. we don't have to worry about it anymore. but maybe it was somewhere else in the system that maybe nobody was looking at. i think now we don't do that. we collectively, the regulators, are trying to take a systemic view and trying to ask what are the vulnerable points in the system that have the potential of creating problems for the broader financial system. so shadow banking is still many issues, but i think progress has been made and we are going to keep our eye closely on that particular ball. >> well, thank you very, very much. >> we leave fed chairman ben bernanke taking questions before an invited audience at the princeton club in new york. let's get more reaction to what

he said. katie nixon is still with us, chief investment officer for private clients at northern trust. katie, for somebody looking to invest your clients' money and of course importantly protect it, what stood out for you in what the chairman had to say? >> well, again, simon, i think chairman bernanke is very, very consistent in the way he characterizes his point of view. we all know that bernanke is a scholar of the depression. and his promise to milton fro d freedman suggests he's going to stick to his word regarding keeping fed fund rates low into 2014. certainly northern trust point of view and always has been that we would take him at his word. he characterizes the great depression as really two recessions with a big fed policy mistake in the middle of it. i think he's very committed not to repeat that mistake. i think the speech was, again, another support to our view that he's going to keep rates low. >> he talked a little there at the end in one of the questions about the shadow banking system

including money market mutual funds which virtually every american has in one account or another, he and the s.e.c. have basically said that there may need to be a different sort of regulatory approach to money market mutual funds. some have called for a mark to market of assets in those funds. how do you feel about that? and do you see a need for that kind of rethought regulatory regime on money market funds? >> well, certainly it's a topic of heated debate across wall street these days. i guess our point of view is that, you know, we leave it to the regulators to decide what the best course of action is there. in the meantime we're going to talk to our clients very intentionally about the role that cash plays in their portfolio. so rather than try to guess what the regulatory requirements will be going forward, we're taking a little bit of a different tact and sitting down with clients and saying let's look at your portfolio, what is the purpose of this cash and maybe there's a

better way to allocate it rather than keep it in money market funds. >> throughout his comments he stressed oversight and regulation and willingness to really jump in and make sure that things don't get out of hand. what do you think that's going to mean in terms of translating into actions? and how doou you think the marks are going to respond? >> clearly there's been oversight and the market's taken it well to this point. interesting when i was listening to his comments, i was applying them mostly to what's going on right now in europe and thinking about his comments restoring confidence to the market and really being a question of, you know, then the private sector and public sector and taking that baton and taking the necessary actions required to maintain that confidence. >> let's talk just very quickly in terms of portfolio management. given what he said, given what the week has fed us, would you be adding risk or subtracting it from your portfolios right now?

>> well, tyler, we've been adding risk to our portfolio. it's a relative value game at this point with such low rates i articulated the rate environment will stay very benign for quite some time here on a relative basis risky assets look like they're going to provide far superior returns to certainly cash or fixed income at this point. >> katie, thanks very much. have a great weekend. thanks for sticking around and analyzing the chairman's remarks. we appreciate it. we'll take a quick break and be back with charts of the day and so much more. they'll live tomor. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪ managing my diabetes togetheris part of my life,

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head into the weekend and the market is beginning to head down again. the fed chairman ben bernanke failed to throw us a bone on qe with his q & a just now partly because the moderator wouldn't let him talk about. >> exactly. he said talk about what he talked about and nothing more. you bet. let's look at natural gas. that's one of the stories of the week as natural gas continues to slide back and now down below $2. that is an important level, a decade low for nat gas. >> great news for consumers. >> yes. >> and pull up the chart for electronic arts down 20% after disappointing video game sales in march. >> we look forward to next week, this will become key,