agency mortgage-backed securities. starting in january, we will be purchasing $75 billion of securities a month, reducing purchases of treasuries and mortgage-backed securities by $5 billion each. it's important to note, though, that even after this reduction we will be still expanding our holdings of longer-term securities at a rapid pace. we will also continue to roll over maturing treasury securities and reinvest principal payments from the federal reserve holdings from agency mortgage-backed securities into agency mortgage-backed securities. our sizable and still increasing holdings will continue to put downward pressure on longer-term interest rates, support mortgage markets and make financial conditions more accommodative which in turn should promote further progress in the labor market and help move inflation back towards the committee's objective of 2. our modst reduction in the -- modest reduction reflects the committee's belief that progress towards its economic objectives will be sustained. if the incoming data broadly

support is the committee's outlook, we will likely reduce the securities purchases in further measured steps at future meetings. of course, continued progress is by no means certain. consequently, future be adjustments to the pace of asset purchases will be deliberate and dependent on incoming information. >> host: so, greg ip of the economist, what does all of that mean to the average american? >> >> guest: well, so take the most basic aspect of that. one of the aims of the bond-buying program was to hold down long-term treasury yields. essentially, when you buy a bond, you push up the price, and that pushes down the interest rate on it, and because mortgage rates are usually linked closely to 3w07bd yield, the more are bought, the more it held down interest rates. over the last eight months as the market became aware the federal reserve pulled back on this program, we saw some rebound in mortgage interest rates. what mr. bernanke hope is the that by gradually continuing the process over the coming year

that there will not be additional upward pressure on mortgage rates, but hopefully there won't be further downward pressure. more important, it's his vote of confidence in the durability of the recovery. the fact that they feel the economy no longer needs this extraordinary continuing additions of support suggests they finally think the moment has come when the expansion has become self-sustaining. >> and that made the markets go up towards the end of last week. >> guest: there's an old saying, the fact that they were going to pull back had been the subject of rumor for weeks. by the time the rumor became fact, all the selling had been done and perhaps some buyers finally came out of the woodwork. >> host: first call for greg ip of the economist, kalamazoo, michigan. good morning. >> caller: good morning. i've been watching you folks for quite a while, and i'd like to know, you talk about the bonds and the things and to get people

to buy them more and get involved more. we've lost enough money out of all this nonsense. you know, i don't quite know how to put it in sentences. but all of the loyal people, you say we've -- not just you, but everybody's saying we have had all these jobs growth. service maybe. you can't make a living on mcdonald's or on pressing clothes or babysitting. you can't do that. >> host: thanks, barbara. of she's touching on many different parts of the economy. speak first about the last thing she mentioned, minimum wage. >> guest: sure. let's talk about the nature of job growth. it is case that we've created roughly seven million jobs since the bottom of the economy back in late 2009, early 2010. and the unemployment rate has

come down from 10% to 7%. so on the surface that sounds like good news, but as the caller was referring to, beneath the surface there are some troubling aspects. one of them is it is the case that we've created jobs in the goods-producing sector, the automobile industry, for example, has added quite a few thousand jobs since the bottom, but those don't p begin to make up for the huge loss of jobs that occurred in the years prior to that, and it is certainly the case that many of the jobs pay low wages, and more generally speaking, the rate of wage growth in the last four or five years hasn't been even enough to cover the inflation they've experienced. real wages have suffered. so that's a long way of saying even though we've made a lot of progress in the last four or five years, it's disappointing relative to historic benchmarks, and we have a long way to go. in particular, getting the job market strong enough that people can begin to get bigger and better wage increases. >> host: let's dig deeper into the numbers. in november the unemployment rates were as follows, adult men

6.7%, adult women, 6.2. teenagers, 20.8%, almost 21% for teenagerrings. whites, 6.2. blacks, 12.5% unemployment. hispanics, 8.7% unemployment. tell us more. >> guest: so the differentials that you're identifying, for example, minorities and young people, have higher unemployment rates than prime age males and whites. those disparities have existed for a very long time. they existed each when the economy was quite strong. those groups did suffer more as the economy worsened, but those have also come in a little bit in the last three or four years. there's something people often talk about which is not just the employment rate, but the underemployment rate. we know that the employment rate doesn't capture the fact that some discouraged people have dropped out of the work force, some people are working part time, so they look at this expanded unemployment rate, and that one's still over 13%. but that, too, has come down quite a few percentage points

since the peak. so even though there's a lot of sort of hidden unhappiness out there because of these differences in the numbers, we believe that that sort of hidden unemployment is also coming down. one of the puzzling things, though, is that a lot of people have dropped out of the labor force. they're not looking for work. that has tended to flatter the unemployment picture, but they're not saying we've given up the job hunt. they seem to have retired, i don't know, gone back to school, perhaps they want to stay home with their children. and, therefore, we do not believe that a lot of these people who kiss appeared -- disappeared are going to ever come back. >> host: let me get a call from duane in marlboro, maryland, just outside of d.c. an independent. hey, duane. >> caller: yes, how are you. thanks for hearing me. >> host: of course. >> caller: appreciate your show. well, i just wanted to touch real quick on the direct emphasis that i don't see put on the, um, americans who have lost

their jobs in the field of finance, in the car industry. i lost my job in finance, company closed down because of we all know why. i actually went back into the car business making $7 an hour, okay? working 60 hours a week with a big hope of a commission one day. when everyone has the internet information on cars now, no money on that. a salary needs to be maybe put in place. and that is, i think, on the borderline of slave labor these days with the pipe dream hope of a 1970s, 1980s payday when the information wasn't out there on how to buy a car. kudos to the information everybody needs to save money, but something needs to be done as well for the employee in that company. so right now i'm totally struggling making not even a third of what i made five years

ago, and the attitudes that i get in the community i'm in is the economy never affected anyone, and why aren't you in a blue collar job? we're not affected. where's the emphasis on that direct point of the person that was in that field that was directly affected? >> host: thanks for calling, duane. >> guest: so the caller is, unfortunately, illustrating something very important which is that even though a lot of jobs have come back, a lot of those jobs are not paying what they did four or five years ago, and people find themselves working very hard for less money than they did five, six years ago. generally speaking, the government support programs we've seen over the last five or six years have not been aimed at specific industries. you could say the bailouts we had for wall street broadly aimed at stabilizing the financial system did save some jobs, but it's certainly not the case that it's coming back to the size it was back in late 2006, 2007. we had a lot of people working to finance mortgages that simply

were not sustainable. we know that now. the same in the auto industry. the big three were too large, it was necessary to cut those jobs back. even now as we cut back stimulus programs, we're looking around for ways to retrain those who are unemployed or underemployed. a car salesman today is dealing with a different type of consumer today when the internet and kelly blue book prices and all that stuff is available to them than seven or eight years ago. that means it's not easy to say specifically how do we reaim our job-creating resources. >> host: and this from november 2013, job gains, job losses by sector. professional and business services gained 35,000 jobs. recently transportation and warehousing, 31,000. health care, 28,000, a continuing big, growing field. manufacturing, 27,000. does that surprise you at all, the manufacturing number? >> guest: it doesn't. but that number jumps around a lot. >> host: and then the construction area, 17,000.

and the federal government,, minus, lost, reduced by 7,000. any other insight you want to give us on these? >> guest: one is that a consistent source of job creation in the last four or five years has been the service sector, in particular education and health care. health care partly because we are an aging society, people are steadily consuming more health care, partly because those are areas where people are less able to cut back when times are tough. manufacturing, as we were discussing, was hit very hard during the recession. it's made steady but not spectacular progress in the last five or six years. it's the construction numbers i find most encouraging because one of the biggest obstacles for our economy to overcome has been the lack of housing as that traditional springboard to faster or growth. usually, when the economy came back, it was led by housing. in this case, housing held it back. the fact that home builders are more and more optimistic that traffic is picking up in model homes, and so forth, more people can get mortgages to buy a home

is very encouraging for the construction industry. government, again, has been a major drag on the economy since the stimulus program expired two or three years ago. it's been a steady subtraction from economic growth since 2011. but in the third quarter for the first time in a number of years, the federal government stopped subtracting from economic growth. that's one reason i'm relatively optimistic. not outrageously, but relatively optimistic that next year will be a better year because we will not have that enormous weight of the federal government around our ankles. >> host: as we take the next call, we take a look at a "wall street journal" article about housing, steadier and sturdier. there's the headline. and we take a call from lawrenceville, georgia, now. it's republican line. hey, ed. >> caller: i think gregory ought to travel around a little bit more and see america. there's a lot of mauls that are doing -- malls that are doing badly. there's a lot of strip malls that are empty.

a whole bunch of businesses are closing and are not reopening, and then yesterday i found out that the poor people who are going to be having to depend on -- they're going to be forced to take medicaid are going to be subject to confiscation of all their properties after they die -- property after they die because it's a welfare. states will have to recoup their money, so they're going to confiscate all the property of all these poor people. they won't even be able to leave an old television to their children. >> host: gregory ip. >> guest: i'm not familiar with what he's talking about, this provision in the medicaid program. but speaking of the estate of retail around the country, caller's absolutely right, there are a lot of pockets of the economy that have not recovered. the retail sector is dealing not just with the overall weakness of consumer demand and consumer confidence, but also the ongoing migration of retail sales from

brick and mortar to the internet. we're still seeing strong growth, albeit not as hectic as it was a few years ago, in on line sales while retail, traditional brick and mortar retail continues to struggle. >> host: doug is on the line from wilmington, north carolina. independent caller. good morning to you, sir. >> caller: good morning. how are you today? >> host: doing well. >> caller: hey, there's so many people out there talking about the federal reserve, i think people are starting to wake up. aside from the puff pieces on "60 minutes," and i'm not exactly sure why your guest is carrying water for the fed, but the american people ought to understand that the founding fathers knew that central banks would grow in this country. thomas jefferson said he believes thatbacking institutions are -- that banking institutions are more dangerous to our liberties than standing armies. he goes on to say if the american people allow private banks to control the economy, the banks and the corporations will go up around and deprive

people of all property until children wake up homeless on the continent their fathers conquered. now, our founding fathers understood 200 years ago how dangerous these institutions are. the american people don't understand that the fed is a private bank. woodrow wilson, when he died, lamented the fact that he allowed the federal reserve to come into being. we had a central bank, the first national bank of the united states, we had a second national bank of the united states. the last one andrew jackson got rid of. i don't understand, first of all, why your guest is carrying the water for the central banks and the federal reserve which is unconstitutional -- >> host: well, let me, let me jump in. you said he's carrying the water. what was it that he said or reported on that got your attention? >> guest: he's not telling the people the truth. he seems to think that this economy is going to get better and clearly if anybody -- even if they don't have any kind of implicit knowledge of economics, they can look at this economy,

and while the federal reserve keeps printing money, that powers the speculative economy. >> host: let me jump in, and before we get a response, got to tell you, greg, there's a little bit of trend on our tweets that are coming in ant the fed. mostly negative. here is just one more, isn't it time to stop the fred from driving the economy? let the private sector take the wheel. government gets out of the way? question mark. go ahead. >> guest: i think what these callers need to recognize is that we tried that. it's ironic that thomas jefferson company complained about what would happen. well, in the absence of a central bank, private banks issued their own currency. periodically, a private bank would fail, everybody would demand their currency back, they couldn't get it, and a panic would sweep the country. so the years without central banks whether it was of the first or second bank of the united states or the federal reserve were frequently subject to panics, the most serious of which was in 1907 which didn't stop until private banks put an

end to it, and the economy had suffered a severe loss in output. so the federal reserve is not perfect, but it seems better than the alternative which is to not have some sort of public institution that can supply newly-created liquidity when everybody else needs safety and wants cash. it is the case the federal reserve has not always done that job adequately. they allowed the great depression, the great inflation of the 1970s to happen. but what we have seen in every country, not just the united states, is that absent some overall public authority to control the issuance of currency, panic happens and inevitably the public will demand a return to that public oversight. the caller is wrong to say the federal reserve is a private bank, that is not true. they have no say in the appointment of the presidents, and the entire monetary policy is controlled by the board of governors of the federal reserve in washington, all of whose governors are appointed by the president and confirmed by the senate. >> host: looks like janet janet yellen will be the next chair.

nomination wasn't quite finished before congress, but they'll take it up in january. what will she be bringing to the table? >> guest: she will be one of the most qualified individuals that's ever been named to this position. she's spent many years on the federal reserve itself, the last three or four at the elbow of ben bernanke, the current chairman, as the fed's vice chairman. so she'll have extraordinary experience, extraordinary ability, and i think at this point in time she will also bring continue knewty. and when the federal reserve is in the process of exiting these very unconventional, experimental programs, that's something that would be very valuable. now, to the extempt that you think the current leadership of the fed has missed something, for example, it's overdoing it with the money printing, that it has not been sufficiently appreciative of the risks it's storing up for the future, well, then janet yellen will have that same blind spot because she's been part and parcel of the leadership that has produced the policy that we have today. >> host: our guest is gregory ip who is u.s. economics editor at

the economist, and he was chief economics correspondent at "the wall street journal" for a number of years, 12 years. educated at carlton university which is in ottawa, ontario, canada. our next call is fromal from detroit. al is a democrat. welcome to the program. al, turn the sound down on your set, if you can. we'll hear you much better. >> caller: thank you. how you doing? >> host: hi, al. doing well, sir. welcome. al, go ahead and turn the sound down on your set. >> caller: okay, i'm sorry. >> host: we'll ask can other folks to do the same. we'll hear you much better. go ahead, al. >> caller: okay. can you explain to the people that most of our businesses went overseas and that's the reason why we don't have any jobs here of any significance that pays a middle class income, because all the jobs that used to pay that are now overseas?

our steel, our textile. we don't make anything, shoes, furniture, everything is gone. and, essentially, that's where our middle class went. and can you explain to them that nixon went to china, and the republican policy was businesses have opportunity in foreign countries, but lower wagings or no wages at all. and that's where our businesses went to. >> host: let's hear from our guest. >> guest: so if you look over the grand sweep of time since the end of the second world war, the size of the manufacturing sector whether we're making cars, shoes or clothing has shrunk overall relative to the rest of the economy. this didn't just happen in the last ten years, it's been going on for a number of decades. the primary driver is because other countries have gotten more productive. it takes far fewer workers or hours to build a car. now at the same time, some of these countries did take jobs

away making textiles, for for example, because they could do it more cheaply. this didn't necessarily subtract from jobs from the united states because the people found other jobs, you know, reading x-rays or teaching early childhood education. now, however, in the last 10 or 15 years it was a very large offshoring movement with a lot of very good paying jobs for china. we believe that has now slowed down significantly for a number of reasons. a lot of the most obvious jobs you could offshore have gone, labor costs in china have gone up, the u.s. dollar is lower. so that seems to have slowed to a trickle, and we're actually seeing reports of companies bringing jobs back. and if you look at the growth of manufactured imports in this country, it's been quite a bit slower than the growth of manufactured exports. so we seem to be making some progress, clawing back some of the global market share that we lost in the years up to -- >> host: the timing of this part of the conversation is interesting. the new york times has a lead story this morning, in case you're interested in a little

bit more of the manufacturing aspect, buying overseas clothing is the headline, u.s. is naughting its own advice. working conditions can be harsh. they say that u.s. is one of the world's biggest clothing buyers, 1.5 billion a year. this country buys at foreign factories, factories overseas. acquiring everything from the royal blue shirts worn by airport security to the olive buttondowns for forest rangers. it goes on and on. even though the administration has called on western buyers to use their purchasing powers to push for improved working conditions in industry after several workplace disasters over the last 13 months, the american government has done little to adjust its own shopping habits. not sure if you had a chance to see that story. >> guest: i glanced at it. it's interesting, the issue you're talking about, i think it was last april when a large factory in bangladesh collapsed killing over 1300 workers, and both the united states and european union tried to do something to improve conditions for workers to enforce their own

labor standards to prevent recurrencesover this. industries that whether it's nike or others who outsource the manufacturing of apparel to factories in bangladesh have been urged to take more seriously some of the codes of conduct meant to prevent this kind of behavior. now, the obama administration has taken a much tougher stance than its predecessors partly because organized labor, a big supporter of the administration be, had been pressing for this type of, these types of demands to be made on bangladesh for a long time. but i think it's important to be realistic here. even if these factories not just in bangladesh or vietnam or china were able to -- or were brought along to come up fully to the expectations in these areas, codes of conduct, labor safety, that wouldn't bring any jobs back to the united states. we're still talking about labor rates in those countries that are far low or than would be committed here in the united states. >> host: tom on the line from littleton, colorado. thanks for waiting, tom.

>> caller: yeah, hi, good morning. >> host: good morning. >> caller: i actually had one comment, but i wanted to follow up on what the guest said about the federal reserve. i'm not particularly against the federal reserve. however, i'm a little bit concerned about how monetary policy is used to be a de facto taxation when they drop interest rates, and, you know, take hundred from people who are on fixed incomes and so forth and redistribute that to people who are trying to get out from under their homes. you know, the fact that that's not directly under the purview of the congress is a little bit concerning. but my main comment was is i just wanted to, you know, wish everybody a happy 100th birthday on the, i guess, the fed and the 16th amendment. a hundred years ago, you know, the country's changed quite a bit, and right now when we talk about economic, you know, fixes, you know, the republicans talk about cut spending and democrats talk about, you know, raising

taxes. but you don't really hear a lot of people talk about the third option, the third option of taking income tax out of the price of our products overseas and adding that to the tax of the products sold within the united states which, of course, would be h.r. 25, the fair tax act of 2013. i'd like to hear the guest's thoughts on that. thank you very much. >> host: thanks, tom. >> guest: i am not familiar with h.r. disease -- h.r., with the bill the caller talked about. a lot of people have talked about the value-added tax because it would be levied on purely domestic production and on imports, so that would be a tax innovation that would help the export competitiveness of the united states and give domestic producers a bit more of a competitive leg up. i do want to touch on one thing the caller talked about which is i hear this a lot about how the federal reserve is basically punishing savers to help

borrowers. the fact of the matter, monetary policy is a very blunt instrument. it cannot pick and choose who it helps and hurts. and when the interest rates are higher, the opposite was happening. so the question to ask is not whether it hurts or helps some people and others, it's whether on net the country's better off, and holding interest rates extremely low creates enough additional demand that it puts people back to work. people back to work earn more money. they can eventually accumulate savings again, so look at that holistically. this policy may hurt some savers in the short term, but over the long term, it helps a majority of the country to get jobs and to save. they may be wrong in the end, but based on the analysis they have now, i think they're probably right. >> host: speaking of legislation before congress went out, they did not extend the unemployment insurance, something we've been talking about a little bit. "wall street journal" has this sort of interactive chart without unemployment extension, which states would be the hard hit.

as the camera pans down, we can see a good chunk of the west coast hardest hit by the lack of congressional action. a little bit in the central here, especially illinois. and then several states back east, looks like pennsylvania and new york and others. want to speak more to the prospects of an extension of this jobless insurance and if it doesn't get extended, does it have an impact on the economy? >> guest: so the administration and patty murray had hoped to include an extension of unemployment insurance benefits in the budget agreement. that was not possible. the republicans have taken a very strong view that there should not be extensions to unemployment insurance. and more important, it would have had a price tag on the order of, i think, about $25 billion that would have even more severely busted through the so-called sequester. spending caps and required offsets somewhere else that they were not able to find. now, we will have more budget with negotiations in the new year, in particular the statutory limit on how much the federal government may borrow will be reached sometime near

the end of february. that, at that point there has to be an agreement by the congress to raise that limit. to the extent that there's going to be any negotiation on that at all, the administration would like to see additional unemployment insurance been fits extended. my own view is that it's probably not going to happen. i think we're now five years into the recovery, and although an economic case could be made that you still want additional purchasing power in the hands of the unemployed, the political system is just not there yet. the resistance on the part of the republicans is too great, and the democrats do not want it badly enough to have a big fight. >> host: one viewer, one tweeter wants to dig in on your comments before on the underemployed. what percentage, what's the percentage of the underemployed out there right now, and who subsidizes them? >> guest: well, there's quite a few ways of measuring this question, but one very broad way of looking at it is that if you look at the population over the age of 16, roughly i want to say it's about 60%, 59-60% of them

are employed. so that means we have 40% who are nonemployed. and the question is why are those people not working. well, a lot of them have retired, older people especially, a lot of them are parents who are staying at home with small children, a lot of them have a disability or some other thing that's keeping them from being able to work, and a lot of them are the officially unemployed. these are people who have, who are looking for work and tell the government when they're asked that they're looking for work. there's a chunk of people as we were talking about earlier that are not officially unemployed but also to not seem to show up in any of these other categories, and we don't really know what's happened to them. so it's probably the case that, for example, some of the people who are officially employed are working part time. they'd like to have longer hours, but they can't find them. but a lot of these other people may have run out of unemployment insurance benefits and applied for disability benefits as almost a form of backup unemployment insurance.

unfortunately, what we know is that once you're on -- if you're applying for disability or receiving disability, you can't work. you're not allowed to work. and so this program actually becomes a big disincentive to get back into the work force. people who enter the disability program, only about 4%, leave it in the next ten years. one of the broader questions the country has to do is to rethink the way it does reemployment programs, retraining programs to get some of these people who we need their skills, their work, their contribution to keep the economy going. and right now there aren't a lot of jobs waiting for them, but over the next 10 or 15 years there will be and we'll find a way to get these unemployed and underemployed back to the job market. >> host: back to the phones to randy in sacramento, california. democrat, welcome. >> caller: yeah. i just wanted to say that i i haven't been working for the past couple of months -- i mean, couple years, and i just started a part-time job. but i tried to apply for the health program, and it said because i haven't filed income

tax that i'm not qualified for any health insurance. and then also i've been a truck driver for 20 years, and going all over the u.s. delivering, you know, all types of produce and you name it all over the u.s., when i get to the warehouse, i'd say all the way up to illinois, even idaho, i get to these huge name brand warehouses, they're generally 99% of the time it's been all illegal mexicans who are working in the warehouses, and there are just one or two white guys who are in charge. but these guys, they don't, you know, they don't, they don't even speak english. you ask them about social security number, they don't understand that. and then the ones who do speak english, they talk about how, you know, we just come here and work, you know? and then we send all of our

money back to mexico. and all of the seasonal jobs for produce and all the food, it's the same thing. they work during the season, and then they go back to mexico, but they still collect unemployment from the u.s. and it's like, you know, the government is not even trying to find out about these people. but i'm telling you, there's a lot of people out there who could have a lot of good jobs if, you know, if they would get the illegals out of there or at least, you know, find out what is it going to be in the u.s. or in mexico? is. >> host: all right, randy. left a lot on the table there. >> guest: sure. this has been a hot button issue for a number of years and, of course, it's at the heart of what we do about reforming immigration in this country. ..undocumented working in this country, especially in agriculture and construction and

the like. those are job some of the people would perhaps be working at if the undocumented were not there. stronglyrom pew suggest the number of undocumented immigrants coming into the united states has drastically declined over the past four or five years. apprehension has stepped up considerably in the last four or five years. the economy has been week in several sectors. mexico's economy has been doing quite well. the economic imperative for people to leave mexico is not a strong as it once was. the birth rate in mexico has plummeted. the average family in mexico is

not much larger than it is in the united states. the pool of people is much smaller than it was before. a lot of the things that have exercised people about this large pool of workers, a lot of those forces will have dissipated. host: we have an e-mail from greg. there is a number of aspects that do not add or subtract money but move it around. a lot of young people will be paying for insurance plans that they perhaps would not have wanted or needed absent this law. the extra profit to subsidize the plan of older and sicker

people. that does not attract or add money in the economy. there were a number of taxes put in place earlier this year designed to help pay for the program. that will take spending power and a ghost to pay for health insurance and health care. it will be kind of a wash. there are some additional effects. people with health insurance might be able to move more easily and not worry about losing a job. some people who used to work when not feel it is as necessary to work if they are just on the borderline. they can now get lower-cost health insurance through obamacare. that could force the labor force to shrink. host: jw, welcome to the

program, an independent. jw, are you there? caller: what would happen to [indiscernible] was a trust fund set up for my father. what would happen today? guest: that sounds like a question of trust and state law. host: let's move on to sharon from texas, republican. ander: hey, good morning merry christmas. thank you. i have a question about the federal reserve. ourre coming to the end of 100 year charter with the federal reserve. i would like to know if we signed another one or not.

a newrstand that this is system with fiat currency. we do not have the money because it is not back light gold and silver. the government has the authority to coin our money without interest, so we are paying the federal reserve interest to print our currency, fiat currency. i hope people will get behind campaign for liberty and rand paul and forcing an audit of the fed. do you know if we are stuck with the federal reserve for another 100 years or so? guest: when the federal reserve was first created, it had a 20 year charter. that charter was repealed to

come up for renewal. -to the point we would be better off with a different currency, i do not believe that theory supports that at all. we had over 100 years experience with the gold standard. we had many severe depressions and panics. when times are good, even at finance system backed by good lens too much. the financial system collapses. whateverially, monetary system you have, one day you'll wish for another one. that was the case when money was backed by gold and silver. for all the mistakes the fed has it is not august for me

that the period we thanks a lot for your time and your insight. >> guest: thank you. >> will continue our look at the federal reserve at this 100th anniversary in just a moment but we wanted to let you know you can find more about the policies and history of the fed as well as briefings by past chairman online in a c-span video archives. go to c-span.org/videolibrary. >> booktv is in prime time all weeweek and all that christmas e and christmas day. we begin tonight at 830 eastern with max boot with "invisible armies." here's a preview. >> the question that i most often asked what the people i've been writing a book on the history of guerrilla warfare is, what's the first guerrilla war. and the answer is, guerrilla

warfare is as old as mankind itself. it's impossible to say when the first guerrilla war took place because that is essentially tribal war. tribal warriors going back to the dawn of mankind. inviting with hit and run tactics. ambushes, attacking enemy villages and fleeing before the main force of the enemy can arise. they don't stand toe to toe and slug it out at the enemy in the ways like we imagine a conventional army should. so in essence, tribal lawyers have been taking part in guerrilla warfare for countless years. i contrast, counterinsurgency warfare and conventional warfare are both relatively recent invention. they were only made possible by the rights of first city state in mesopotamia about 5000 years ago. by definition you could not have a conventional army without a state. so until you states you know conventional armies which had officers and enlisted ranks and

a bureaucracy and logistics and all these other things we associate with conventional armed forces. but guess what? message at the very first city states in mesopotamia they were immediately being attacked by nomads from the persian thailand. essentially guerrillas. and so from the very start organized militaries have always been a lot of their time fighting on conventional irregular warfare. and you know what? those terms don't make a heck of a lot of sense. that's one of the big takeaways i have been doing six years of reading and research for this book. the way we think about this entire subject, it's all messed up. we think that somehow conventional warfare is the norm, that the way you ought to fight as to how these conventional armies slugging it out in the open. but the reality is that has always been the exception. think about them our modern world. what was the last conventional war that we saw? this is a hard question to answer because, in fact, it was

the russian invasion of georgia in 2008 which didn't last very long. and yet all over the world today they are people were dying in war whether it's in afghanistan or syria or congo or columbia or many other countries. all these people are victims that are being ravaged by unconventional warfare. but the term as i said is all because this is, in fact, the norm. we have to adjust our thinking. went to flip our thinking three under 60 degrees and understand it is the dominant face of warfare. always has been, always will be. >> you can watch the entire event and all of booktv in prime time tonight starting at 8:30 p.m. eastern here in c-span2. >> the thing i care about most is to make it more of the museum with more pieces of beautiful things that belong to old president.

the furniture now come and what is dates from 1902. spent why isn't there more antique furniture? i would've thought it would've been collecting this since the beginning of this republic. >> the thing is, thomas jefferson to the most wonderful thing of putting in beautiful furniture, and the sad thing was the war of 1812 when everything was burned. then i had to start piecemeal since then. and every president who came what he didn't like was there, they just have auctions. and then every president could change the decor if you wanted. once president grant had the blue room violate, chester arthur had blue. and finally that was all stopped at the time of the roosevelt in 1902. >> first lady influence and image of season two weeknights at nine on c-span.

spirit what's going on today comes down to two words, and they are not my keywords. fundamental transformation. those are obama's words. and i asked a couple of questions. when you look at the constitution and the power of the president, does the president have the power to fundamental transform america? of course not. and why would you want to fundamentally transform america? that means you don't like america very much, do you? that means you don't like capitalism, private property rights very much. that means you don't like our constitutional system very much. when you keep hearing this fundamental transformation, change is hard, we need more time for change, we need to understand this is a direct attack on our constitutional system. that's what he's talking about. that's what he means. >> sunday january 5, best selling author, lawyer, reagan

administration official and radio personality mark levin we'll take your calls and questions, "in depth," live for three hours starting at noon eastern your booktv's "in depth" first sunday of every month on c-span2. >> and online for december the booktv bookclub want to know what your favorite books were in 2013. throughout the month joi of join other readers to discuss the notable books published this year. go to booktv.org and click on a club to enter the chat room. >> last week, fed chair ben bernanke into this predecessors, alan greenspan and paul volcker, marked the 100 the -- 100th anniversary of the creation of the central bank. this is just over one hour. >> [inaudible conversations]

[inaudible conversations] >> good afternoon. i'm just slacker, president of the federal reserve bank of richmond and they serve as chair of the federal service system sponsoring committee. i'm honored to serve as your

master of ceremonies for this afternoonafternoon's historic e. on behalf of the very federal reserve system's continued coordinating committee, and are simple, i like to welcome you to the commemoration of the 100th anniversary of the federal reserve act and the founding of the federal reserve system. the signing of this act by president woodrow wilson was a culmination of decades of discussion and debate on marriage proposals for banking and currency reform. upon enactment our nation began the process of organizing and opening the board and the reserve bank across the country. on november 16, 1914, the federal reserve system began full-fledged operations. i want to specifically welcome our four children, both current and past. our current and former board members and reserve bank presidents and distinguished members of our centennial advisory council. i welcome as well the board and reserve bank employees watching this ceremony throughout the federal reserve system today.

with approximately 80 of us assembled in the boardroom, this is the largest single gathering of current and former federal reserve senior officials in our history. we will begin our centennial commemoration by providing each of her chairman and opportunity to share with us their thoughts and reflections on her history, and perhaps also some noteworthy moments from their terms as chairman of the board of governors of the federal reserve system. first come is my privilege to introduce paul volcker. he served as chairman of the board of governors from august 79 to august 1987. prior to that he served as the president of the federal reserve bank of new york from august 1975 to august 1979. his leadership was noted for an aggressive and courageous fight to bring inflation under control. please join me in looking former chairman paul volcker. [applause]

>> thank you very much, jeff. and friends of the federal reserve. this is indeed a historic a celebration. it's a wonderful opportunity for people like me to consult with our old friends. old literally last night all friends. and to be asked to leave office program is a special honor. special privilege. now, i have been i'm reminded come been around the federal reserve for some 75 years. it happened that i wrote my senior thesis in college. on how the federal reserve could restore its independence, too many years thereafter. and having completed his thesis, i guess they didn't read the thesis, i got a job at the federal reserve bank of new york. so it all goes back 75 years, and i thought it could claim

primacy of everybody here today, and kelly heard that duty was here. do we day, my old friend and colleague. his presence and his 96 years symbolizes the respect and loyalty is that the fed has demanded among its staff and its officials generally. so i can only claim the distinction of being an earlier living chairman than my two colleagues here. and maybe ben -- [inaudible] but lots happened since i became chairman. a lot has happened to the country, the economy, the financial markets, the federal reserve itself over the 35 years at the three of us have been chairman. and, of course, one reflection of what happened is to simply

look at interest rates over that time. started out for me with interest rates at 20%. we were preoccupied with inflation. chairman bernanke is ready to leave office with interest rates at 0%. on occasion he worries about deflation. alan greenspan had an easy target in between those two. [laughter] he got it just right with the grand modernization on his watch. people don't quite realize. i think it was the greatest sustained rise in stock prices in all of american history, or maybe anybody's history. at the same time we had a record bull market in bonds. boy, wall street and the economy both flourish. of course, the interesting fact is that no one, including no economist, equipped with the most powerful computers could or

did protect the extremes of market behavior. in which we've seen frequently. you know, more troublesome than the return banking crises and economic locations is the fact that they caught us by prize -- surprise. we predicted those demanded a response. the point that i think some applause will talk about today is our response, demanded a response that only an institution equipped with authority and judgment the time to act upon. you know come in any country that role falls a poorly to its central bank. in the united states, of course that means the federal reserve. and as all of you know, this is the 100th anniversary by the federal reserve of the congress was something of a laggard including a central bank in 1913 and 1914 when it became

operative. but broadly speaking i do think after long delays that woodrow wilson and all the other founders did get it broadly right. and then later there was kind of a mr. cross correction when aaron ruggles was chairman who conducted and arranged with congress unnecessary reform. of course, we have the dodd-frank act, and that is newly sponsored for the 21st century. we passed that act and i made much concern and unhappiness during the depths of the crisis and the recession. and what was interesting is the federal reserve emerged with more power, more influenced than it had before. now, i think no one can claim that every year and every circumstance and every crisis affects on its policies is exactly right. of what is beyond debate is that this institution is served the

country will. in doing so it has been able to draw upon professional competence, and that is one basic essential of its work, but much more than that is required. strong action, sometimes testing the limits of its legal authority rested on a sense of integrity. integrity it achieved and maintained over the years. and the sense that he was able to act free of partisan political passions. i mentioned dewey at the start, not just because he's older than i am. in fact, it' is almost as old ae federal reserve itself. [laughter] nor because he happens to be a good friend. but dewey has been away from washington for decades. he's had another life. his presence here reflects a simple fact that for him he is proudest come his most satisfying years have been right here in this building.

he can play a part in an organization that has come to commit and maintain respect over the years. respect to the point that the phrase don't fight the fed has become close to an axiom in the financial marketplace. the simple fact is that companies in the building of our century-old central bank to cut through intellectual and political debate, to act in the public interest, to remain a point of trust is essential. it's essential not only to the strength of our banking system and our financial markets, but i believe to the effect of governance of this country and all its diversity and responsibilities. and i appreciate the invitation to be with you on this great occasion. thank you. [applause]

>> it is also a privilege to introduce alan greenspan. he succeeded chairman volcker serving as chairman from august 1987 to january 2006. as our second longest-serving chairman after william mcchesney martin junior, he had the distinct and being appointed by four different u.s. presidents. during his tenure as the chairman we completed the conquest of inflation and expressed the longest peacetime expansion in history of the u.s. economy. please join me in welcoming chairman alan greenspan. [applause] >> thank you very much, jeff. looking at all that gray hair here, it's very impressive that you all showed up, especially dewey. you know, it is hard to realize that dewey daane was appointed

by john f. kennedy as a member of the federal reserve board. and that tell you something about the continuity and longevity of this institution. i think we're all proud of our experiences with it, and i particularly want to thank dewey, who is an old tennis partner and -- do you want to play? i'm willing. [laughter] like paul and ben i've been given five minutes to reflect on my career at the fed. the dates get more calculated at 16.2 seconds for each year of my tenure. thank you, david. i appreciate that. i chose, therefore, to focus on one incident that while today it's scarcely remembered was particularly riveting, was a particularly riveting challenge that i and the federal market committee faced within two months of my being sworn in to office.

the unprecedented 23% decline in the dow jones industrial average that occurred on black monday october 19, 1987, the largest one day drop ever. today, that market collapse is a distant memory of no ongoing interest. because it had no visible lasting effect on the economy overall. but we did not know that at the time. in fact, the days that followed the crash were truly frightening, certainly to me, and i suspect for much of the federal reserve board, presidents and staff. history suggested that the market crash could be a harbinger of much worse to come. the immediate policy response was a no-brainer. supply the money market with a massive dose of liquidity.

but what would we do as a follow-up should the initial response proved ineffective or inefficient to address the collapse of the capital values of such a magnitude? in the end, much to my surprise, the effects of the crisis was minimal. real gross domestic product in fact grew at a robust 64.5% annual rate during the next six months. but what was clear in retrospect was scarcely evident in the hours and days that followed the crash. many of you who were around in those days cannot forget the fear the crisis provoked. not unexpectedly, the market opening on october the 20th, the day after the crash, was unstable. late in the morning the new york stock exchange had communicated

to us that unless this were forthcoming, the exchange would have to shut down within an hour. i know all too well that shutting down easy to do, but once done, trying to be open would be a real challenge. the closing of the united states -- closing in the united states could have probably broken the back of the financial confidence. fortunately, just prior to the scheduled shutdown, bids did reemerge and the exchange was able to remain open. in the days that followed, despite our best efforts, they were a half dozen near disasters mostly involving the payment system. on wednesday morning,

october 21, goldman sachs is scheduled to make a $700 million payment to the continental illinois bank in chicago, but initially withheld payment ending receipt of expected funds and other sources. goldman thought better of it and the payment was eventually made. had they withheld so large a payment, it would have reasonably set off a disastrous cascade of default. ..

>> the near crisis of 1987 was, in my judgment, the federal reserve operating at its best. at its height new york federal reserve president jerry corrigan communicated our strong belief that banks should keep lending not because the federal government was asking them to, but because it would be this their long-term self-interest. i'm sure that some of the phone calls that must have been made were very tough, indeed. doubtless, for all of you who know jerry, he probably bit off a few ear lobes in the process. [laughter] there were, of course, many key players among governors, presidents and staff whose counsel was indispensable including that of my good friend and mentor, donald cohen,

then-secretary of the federal open market committee who, as you all know, went on to an extraordinary career that is ongoing as we speak. in closing, i wish to express my appreciation to the organizers of this extraordinary event, and i have been around the federal reserve before and after i was chairman, and i've never seen anything like this grouping of people of expertise in virtually every subject matter you can conceive of. i've enjoyed it immensely. i can only hope to be invited back with our -- for our institution's 200th anniversary. [laughter] thank you. [applause] >> it is also very much a privilege to introduce our current chairman, ben bernanke. he succeeded alan greenspan,

becoming chairman on february 1, 2006, and will conclude his service on january 31, 2014. as you all know, chairman bernanke -- himself a leading scholar of the great depression -- led the federal reserve during the most challenging and severe financial crisis our nation has faced since that time. please join me in welcoming chairman ben bernanke. [applause] >> thank you. well, awl and alan have me -- paul and alan have me at a disadvantage. they have a little bit more perspective than i do at this point, as i have a few more weeks to go and a number of tasks that we undertook such as achieving a full recovery in the u.s. economy are still ongoing. but i will offer a few thoughts about the last eight years. the federal reserve's extraordinary response to the financial crisis and the great recession was, in some ways,

nothing new. we did what central banks have done for many years and what they were created to do, we served as a source of liquidity and stability in financial markets and in the broader economy, and we work to foster economic recovery and price stability. however, in another sense what we did was very new it was unprecedented in both scale and scope and made of a -- use of a number of tools. we found that these new tools were necessary if we were to fulfill the classic functions of a central bank in the context of a 21st century economic and financial environment. when the financial system teetered near collapse in 2008 and 2009, we responded as a 9th century -- 19th century essayist had advised. when we did so in an institutional environment that was very different and in many

ways much more complex than the one badgett knew. for example, the recent crisis runs on -- but in 2008 rather than a run on bank depositors, the run occurred in various forms of short-term wholesale funding such as commercial paper and repurchase agreements. moreover, although commercial banks suffered large losses and some came under significant pressure, the crisis hit particularly hard those nonbank institutions most dependent on wholesale funding such as investment banks and securitization vehicles. thus, the fed lent not only to commercial banks, but also to critical nonbank institutions and key financial institutions in markets like the commercial paper market. to minimize the risk of strains abroad feeding back to u.s. dollar funding markets, the fed also coordinated with foreign central banks to create a network of currency swap lines.

beyond the provision of liquidity, the fed worked with other agencies both here and abroad to help restore public confidence in the financial system. notably, we led the development of stress testing of large banking organizations' capital adequacy. the first stress test, 2009, and the public disclosure of the results made it possible for large u.s. banks to once again attract private capital. since 2009 the stress tests and disclosures, together with other regulatory and supervisory actions, have contributed to a doubling in capital held by the largest u.s. financial institutions and the reassumption of more normal -- resumption of more normal flows of credit. the fed has also worked to take the steps necessary to avoid a similar event in the future. as those assembled here well know, the deliberations that led to the founding of the federal reserve were precipitated by a financial panic, the panic of 1907.

the preservation of financial stability was consequently a principal goal of the creators of the new central bank. in response to the panic of 2008, the federal reserve has returned to its roots by restoring financial stability as a central objective alongside the traditional goals of monetary policy. we have refocused our supervision of financial institutions to take a more macroprudential approach. we also more extensively monitored the football system as a -- financial system as a whole and in cooperation with other agencies have put in place a stronger oversight including higher capital and liquidity requirements, tougher supervision and processes for orderly resolution. we've also had to be innovative in finding ways to use monetary policy to help the economy recover from the deep recession that followed the crisis.

providing adequate monetary accommodation has not been a straightforward task because our principal monetary policy tool, the target for the federal funds rate, has been stuck near zero since the end of 2008. consequently, we've had to find other ways to bring monetary policy to bear, notably including tech -- techniques designed to influence longer term interest rates. the fed has purchased longer term securities to put downward pressure on longer term interest rates and to promote a stronger recovery. a significant aspect of finding innovative ways to execute our duties as a central bank in this a new, more complex environment has been the ongoing revolution in communication and transparency. part of that effort has involved formally defining our doles under the mandate for maximum -- given to us by the congress. two years ago we established 2%

as our goal, and we regularly communicate policymakers' views. additionally, our monetary policy has come to rely more heavily on forward guidance. with our short-term policy rate about as low as it can go, we have sought to ease financial conditions further and provide additional impetus by communicating both quantitatively about the likely future path of policy and qualitatively about the likely evolution of our balance sheet. other central banks around the world have met the challenge of current conditions with similar innovations, and i would with be remiss if i did not point out -- especially with paul and alan here -- that the fed's recent communications innovations owe a great deal to developments like the monetary targeting framework devised under chairman volcker and the post-fomc statement and qualitative guidance introduced

under chairman greenspan. in summary, the financial crisis that the fed confronted five years ago was in many ways analogous to the panics central banks have faced for centuries. but at the same time, the crisis and the deep recession that followed occurred in an economic and financial environment that was certainly different and in many ways more complex than in the past. the federal reserve found ways to carry out its traditional central bank functions in that environment, and we are working with other policymakers domestically and internationally to put in place a strengthened regulatory framework that will help preserve stability in the face of the complexity, interconnectedness and innovation of a modern financial system. one of my personal objectives since i became chairman has been to increase the transparency of the fed, to more clearly explain how our policies are intended to work and the thinking behind our decisions. as i already noted, improved communication can help our

policies work better whether through the disclosure of stress test results, by helping the public and the market better understand how monetary policy is likely to evolve. ultimately, however, the most important reason for transparency and clear communication is to help insure the accountability of our independent institution to the american people and their elected representatives. clarity, transparency and accountability help build public confidence in the federal reserve which is essential if it's to be successful in fostering stability and prosperity. thanks for inviting me to this wonderful event. thank you. [applause] >> this occasion marking the centennial of the signing of the federal reserve act calls for a statement formally recording our collective thoughts. certificates recording the statement will be signed by

current and former chairmen, our current board members and reserve bank members. we will sign one certificate for each board -- one certificate each for the board and reserve banks plus one extra for safekeeping. this is the federal reserve, after all. [laughter] the certificates will be framed in the manner shown by the copy on display next to me. each framing will include facsimiles of the first page and the final signature page of the federal reserve act, a medallion featuring the eckings building where we are gathered here today as well as the certificate and the signing page. the certificate reads as follows: in commemoration of the 100th anniversary of the federal reserve act introduced into congress by senator robert owen and representative carter glass and signed into law by president woodrow wilson on december 23, 1913. the federal reserve act established the federal reserve as our nation's central bank. gathering on this 16th day of december, 2013, at the board of

governors of the federal reserve system in the city of washington in the district of columbus be -- the district of columbia, united states of of america, we, the undersigned, commemorate the founding of the federal reserve by the u.s. congress. we acknowledge the service of the federal reserve system employees over the institution's 100-year history, and we express our gratitude for their efforts to support the founders' intent to provide our nation with a safer, more flexible and more stable monetary and financial system. in support of our centennial mission, we ebb courage federal -- encourage federal reserve staff to build on our legacy, to deepen understanding of the central bank's role in promoting economic growth and stability in a global economy, and in doing so, to inspire trust and confidence for the benefit of future generations of americans. the signing will begin on my right with our current chairman, continue with our former chairmen, our vice chairwoman, board members in order of tenure

and then reserve bank presidents beginning with boston and concluding with san francisco. when the signing commences, i will turn the podium over to former vice chairman don kohn who, while we are doing our signing, will share some reflections on our history. in addition, we will be showing two videos. the first will share the story behind the oil painting. this famous painting depicts the signing of the federal reserve act on december 23, 1913. the second will be the world premiere of a commemorative video entitled the fed at 100 created this past year. it features federal reserve employees and alongside some outside commentators speaking in their own words about the critical role the federal reserve has played over the past 100 years and will continue to play in coming years. it's a great pleasure to introduce don kohn who needs no introduction to most of you. of don served as vice chairman of the board of governors from june 23, 2006, to june 23, 2010.

but that was just the capstone of a long career of devoted service to the federal reserve beginning as a financial economist at the federal reserve bank of kansas city in 1970 followed by a move to the board in 1975 where he became director of monetary affairs in 1987 and then governor in 2002. please join me in welcoming don kohn. [applause] >> thank you very much, jeff, and it's a great honor and privilege to be part of this sr. moanny and to pro-- ceremony and to provide a little entertainment while the signing is going on. [laughter] as we gather today to commemorate the 100th anniversary of the federal reserve act and the founding of the federal reserve system, let's recall the history of central banking in the united states and key events and issues leading to the establishment of the federal reserve and some of the changes, legislative changes

that have occurred since that time. well before the federal reserve was created in 1913, the swedish bank was founded in 1668 and the bank of england in 1694. i guess only duy was around -- dewey was around for those -- [laughter] these early national banks evolved over many years in the institutions that we would recognize today as central banks working in the public interest. in the united states, the first attempt at establishing such a national bank came which 1791 -- came in 1791 when president washington signed legislation chartering the bank of the united states head quartered in philadelphia and under the direction of our first secretary of the treasury, alexander hamilton. hamilton believed that a national bank was essential to stabilize and improve our young nation's credit standing to improve handling of the financial business be of the

federal government under the newly-enacted constitution. after hamilton left office in 1795, the new secretary of the treasury, oliver walcott jr., informed congress of the state of the poor government finances -- guess that's not new, is it? walcott advised selling the government shares of stock in the bank which would end the bank's limited role as central bank for the united states. subsequently, in 1831 america's -- 3811 america's first national bank does not receive congressional support needed to continue operating, and its charter expired. five years later in 1816, the u.s. congress again established a national bank creating the second bank of the united states also located in philadelphia with over 25 branches. the primary function of the bank was to extend credit to both government and private interests for the purpose of increasing public works and economic

development as well as to establish a sound and stable national currency. the second bank of the united states, like its predecessor, not act as lender of last resort. subsequently, there was a financial crisis in 1819, and during the presidential election of 1832, efforts to renew the bank's charter put the institution at the center of the national debate. the second bank of the united states failed to secure adequate support in congress to renew its federal charter over the veto of president jackson. it was liquidated in the 1891. after two congressionally-chartered national banks failed to survive their initial charters, the united states lacked the stable currency system and financial panics occurred frequently, typically every decade beginning in the late 1830 bes and mid 1940s and again in the 1850s. in the midst of the civil war,

the national currency act of 1863 revised the national bank act of 1864 was signed into law by president lincoln. legislation provided a mechanism for circulating sound currency with uniform value, required banks to hold cash reserves against both deposits and notes and established the office of the controller currency to grant charters to banks without formal congressional action, thereby creating the dual banking system of national and state-chartered banks. now, following the civil war, financial boom associated with rapid expansion of railroads, docks, factories was followed by a financial panic and economic depression in the 1870s. another recession occurred from 1882 to '85 followed by multiple panics in the 1890s. in 1901 the stock market crashed briefly following speculative attempts to corner the market on northern pacific railroad stock.

1907 new york stock exchange stock values declined dramatically in march following an unsuccessful attempt to corner the market on united copper company stock. as a result, many depositors withdrew funds from banks associated with the unsuccessful corner leading to public panic and large-scale liquidation of call loans, short-term loans used to finance stock market purchases. thousands of banks and businesses closed. jpmorgan and other bankers ultimately stepped in to supply wavering banks with funds to alleviate the panic. p given the weaknesses exposed in america's financial system from the pan you can of 1907 -- panic of 1907, congress passed the bill in may 908 to create -- 1908 to create a national monetary commission and to authorize and fund its use.

the commission is led by rhode island senator nelson also dribbling with an objective of studying the nation's banking system to identify ways to bolster financial stability. in november 1910 senator aldridge invited several prominent members to attend a conference in georgia while meeting under the ruse of a duck-shooting excursion, the financial experts are, in reality, hunting for a way to restructure america's banking system and to eliminate the possibility of future panics. the party includes senator aldridge, assistant secretary of the treasury, jpmorgan and company arter in henry davidson, national citibank president frank vannedderlip, paul warburg and banker's trust executive benjamin strong jr. on january 9, 1912, the national

monetary commission senate's report to congress along with a proposed bill for a national reserve association which becomes known as the aldridge bill. the report and proposed bill draw heavily from discussions started on the island, but congress took no action on the bill. following president woodrow wilson's election in november 1912, legislative efforts began in earnest to fulfill his campaign promise to reform banking law. to press forward with this legislative initiative, president wilson addressed a joint session of congress on the need for pgaing and currency -- banking and currency reform on june 23, 1913. meanwhile, virginia representative carter glass and oklahoma senator robert owen worked closely with wilson to introduce the proposed federal reserve act as house and senate bills on june 26, 1913. tolling passage -- following passage of the house and senate versions of the bill in september and november

respectively, compromise legislation known as the glass-owen bill emerged following multiple votes, amendments and a resulting conference report. the conference report is approved by the house on december 22nd, the senate on december 23rd. and on the 23rd, president wilson signed the federal reserve act into law to provide the nation with a safe, sound, stable banking and financial system. given its timing, the act is quickly referred to as a christmas present for the president by the press. now, with that background, let's review a brief video clip that depicting the signing of the federal reserve act and features one of the pens used by president wilson to sign the act, and that pen is on display at the board for our ceremony today.

♪ ♪ >> as part of the centennial commemoration, you'll see a work of art inspired by the creation of the federal reserve system. this piece is normally on display in the board's research library. the painting, entitled "the signing of the federal reserve act by president woodrow wilson december 23, 1913," depicted president wilson signing the act at the white house. the original painting was created in 1923 for the federal reserve bank of atlanta. while many attended the signing of the act, the painter chose to feature only lindley garrison, secretary of the navy joseph fits daniels, secretary of the interior, franklin lane, postmaster general a.s -- [inaudible] senator robert owen, speaker of the house, champ clark,

secretary of the treasury, william mca do, president woodrow wilson, chairman of the house committee on banking and currency, representative carter glass, congressman oscar w. underwood and secretary of labor, william wilson. two of these men, carter glass and robert owen, were the chief architects of the federal reserve act. owen, a senator from oklahoma, and glass, a congressman from virginia, promoted legislation that would provide for a regional banking system with a government-controlled central board. after months of intense negotiations, compromise legislation was finalized in the form of glass-to went bill. -- owen bill. this bill authorized establishment of the federal reserve system to provide the nation with a safer, more flexible and more stable monetary and financial system. on december 23, 1913, the bill was signed into law by president wilson as the federal reserve act. surrounded by glass and owen,

members of wilson's family, cabinet officers and democratic leaders of congress, the president signed the act. he used this pen along with three others to sign the act. president wilson gave this pen to carter glass. in commemorating the 100th anniversary of the signing of the federal reserve act, we are grateful to the woodrow wilson library in stanton, virginia, for lending the pen that was used for this momentous occasion and to be on display at today's centennial ceremony. >> the signing of the federal reserve act established the federal reserve as our nation's first true central bank, holding a large share of the nation's banking reserves and power to act as lender of last resort. the act established the federal reserve board in washington guided by seven board members, it also provided for up to 12 reserve banks, and there was a 20-year sunset provision on

those banks to represent the regional economic interests and to coordinate oil with the board. the federal reserve bank organization committee was formed this january 1914 at select reserve bank locations, it was composed of the secretary of the treasury, john skelton williams, secretary of agriculture, david houston. on april 2, 1914, after receiving proposals from 37 cities and visiting 18 candidate stays, the committee officially named the locations of 12 federal reserve banks to serve their respective districts. the same ones we have today, boston, new york, philadelphia, cleveland, richmond, atlanta, chicago, st. louis, minneapolis, kansas city, dallas and san francisco. on august 10, 1914, members of the federal reserve board took the oath of office in washington, d.c. with charles

hamlin as the governor serving as the active executive officer. the secretary of the treasury's chairman of the federal reserve board. the board officially opened for business the same day in offices at the u.s. treasury's main building before moving in august 1937 to this building. of may 18, 1914, certificates of incorporation for each federal reserve bank were executed. november 16, 1914, at 10 a.m. each federal reserve bank officially opened for business. the reserve banks opened approximately five months ahead of schedule given the outbreak of war in europe, closure of the stock market in late july financial panic that occurred in august 1914. each reserve bank was able to serve as a lender of last resort and to conduct open market operations. later open market operations were consolidated in the new york fed. by year end 1914, the board

employed 45 permanent staff and eight temporary staff. by year end 1915, the system had 499 employees, 58 of whom were at the board. operational responsibilities grew rapidly along with staffing such that the system has 12,540 employees by year end 1920. federal reserve did not gain a sense of permanence until 1927 when the mcfadden act eliminated the sunset provisions on the reserve bank's 20-year charters. during the great depression, the banking act of 1933 known as glass-steagall not only separated commercial and investment banking, but also created the federal open market committee. initially, the fomc comprised 12 members selected by the reserve banks while the board of governors set regulations governing open market operations they could engage in.

the fopc was reconstructed two years later when president franklin roosevelt signed into law the banking act of 1937. this act essentially created the fomc's structure in its modern form with voting members consisting of the seven members of the board of of governors and five reserve bank presidents. ..

and financial institutions, protect the rights of consumers, promote the stability of the financial system come and contribute to efficient and effective payment system, effects individuals around the world on a daily basis. today, the federal reserve has just over 20,000 employees that come from the first geographical, educational, ethnic backgrounds but all share a common objective, to serve the american people. video entitled the fed at 100 features federal reserve employees along with the outside perspectives on how the work of the federal reserve affects the lives of our people. please join me now in watching this video as we conclude the signing of the centennial commemorative certificates around the table. thank you. ♪ >> the institutions dedicated to the stability, accountability, efficiency. quite honestly, integrity.

i think those principles are timeless. >> i have been extremely impressed by the people at the fed, some of the most competent people i have ever met in any organization. >> there is no institution of governance in the world that is looked at with more respect from both professionalism and its integrity than the united states federal reserve system. >> working in cash operations can research department or checks and you'll all be working for the same goal which is to serve the public. i like that. it inspires me. >> before 1913, we had an economic system that had some nice properties. we very rob -- rapid innovation and growth but also a lot of recessions and financial payment. economy was very volatile and disaffected peoples lies. year-to-year, month-to-month people didn't know what was

coming. >> so, therefore, the federal reserve was established and it has become a bellwether institution for the american public. also for the rest of the world. >> the fed has evolved a lot over its 100 year history. people may not realize that early on we really didn't have such a role in monetary policy. we were much more about financial stability. we had very little role in checks, for example. we were not as involved in supervision. over the years -- figures those have increased. increased. >> the main mission which is set by law as trying to attain the goals of maximum employment, price stability and moderate long-term interest rates, those goals will probably stay the same. but the methods that we used to meet those goals may change. >> they don't learn that quickly but they to learn. so they make mistakes. they made mistakes in 1920 and 21. they learned. and the great depression came and they really learned.

it took them a while. it took them into the '50s and then this revolver came in and he really did put the fed on a great track from the mid 1980s until the 2000s. we had a big crisis that was going on. i suspect what was going to come out of all this is that there will be a lot of learning and a lot of moving forward. >> almost a century now. i think the federal reserve has created a tremendous amount of trust on the part of the american people. >> there's a sense of security i think a stability when they go to a bank into personal banking. we don't really think about if the check is going to clear. we don't think about it the doors will be opened the next day that we go to the bank. >> unless the economy is facing a crisis, what central banks it is hidden from view. >> the federal reserve provides financial services to financial institutions. it provides regulatory

supervisor oversight to commercial banks and bank holding companies. >> then we have the monetary policy function that works to adjust interest rates all with the overall goal of a fdicia the economy is stable, and we maximize employment in the country. >> we breathe our president on the incoming data, what's the forecast and outlook and if there's any special topics to be concerned about. >> the information we get from people in the community, whether business owners, able in academia, bankers, reports from our directors and our advisors. that information has been transmitted to our senior management, and the president will take that information washington. when the federal open market committee meets, and the information ultimately affects monetary policy. >> i think there is a perception that the fomc comes together and

they put on their visors and they make monetary policy in the banking and nothing could be further from the truth. >> in actuality the fed is a grassroots organization, clearly with a strong presence in washington, but with ties to communities and cities all around the country. >> the federal government was set up in the first place with 12 reserve banks around the country illegally to bring together the first points of the around the country to washington. >> so when decisions are made they are not made in isolation. they actually made with input from the american people. >> one of the things we're involved in is making sure that banks have enough money, currency and coins, so they can give the people who hold accounts there. what you're seeing is an operations group that is receiving increasing from our financial institutions, depositing it with the fed. what we'll do this process that currency, make sure it is fit for commerce, good quality and

then when our customers, our financial institutions need that currency back, we will make sure to pay it out. >> the fed's role in payment system directly touches the lives of pretty much every american every day. it is what allows money to move from one place to another. we have dedicated transportation networks, airplanes and trucks that went around the country every day collecting checks and delivering them to the banks in which they were drawn. >> i removed a few years ago we were bundling ashland, putting them in bags, sending some to the airport 40 miles away to catch the plane to the federal reserve 8:00, rain, sleet, shine but it didn't matter but today it's all electronic. >> over 99% of czechs collected in this country are clear to electronically rather than people perform. that is largely due to the federal reserve.

>> community element is important. when you have economists from the fed, really deep knowledge of job creation and economic vitality. then it gives us the ability to really influence the way jobs are created. >> i'm the office over community development department which is the department that does applied research and outreach on community development issues, housing, education, economic development and growth. >> i actually question folks about why they want to be on the fed. i'm not an economist, i'm not a banker, never was a banker. my background is a nonprofit and working with communities directly, and we want to understand how economic policy actually affects people on the street. >> there's lots of people that work on rules and regulations, monitoring the banks to make sure that you are following all of the things they're supposed to be doing so that they run safely and securely. so that's our supervision

function. >> there's not a lot of excitement but it usually when i engage in my day-to-day job i can't forget that even though i'm looking at very specific details or maybe just one fusion, if i don't uphold my responsibility and act with the highest integrity, then that compromises on national level having a safe system. >> the federal reserve is an institution that has been a role in responding to crises for the american economy. think of it, in part, what it set up to do, to help the economy deal with financial panic. spent my worst day was certainly 9/11. i had just gotten out of the world trade center, about 100 feet from the exit when heard the first plane coming. and ran for the safest place onion which was the fed. when the collapse started happening everybody ran down into the vaults inside with the gold and security certificates are stored here the crisis was there anything for me the key

moment came even on 9/11 that afternoon when the fed released a statement that read the federal reserve system is open and operating. the discount when it is available to meet liquidity needs. >> the week after 9/11 and tell things calmed down we make sure that banks had although the liquidity, meaning all of the money that they needed to take your of their customer. we said thanks, you cannot close to we are open. we will take care of whatever you need. >> so the fact that you have institutions that have the capacity and the legal authority to act immediately in times of crisis is a very important thing. >> one of the wisest things congress ever did was in 1913 to create a federal reserve system. i think one of the least wise things it could do would be to abolish it. >> it's fine to talk about ending the fed but the country needs a monetary policy.

the are only a couple of alternatives to ending the fed. one of the most prominent a spoken of is a return to the gold standard. the problem is we know the problems with the gold standard, and they are significant. >> we need to remember the federal reserve exists for a reason. there were panics in the late 19th century that sort of led to the creation of the federal reserve in the first place. >> i couldn't imagine what would've happened had we went to the financial crisis without the ability to conduct monetary policy. >> and if you look back at history, then you realize that having independent central banks, it's a pretty good deal. >> i think this is an institution that should be commemorated, and it's an institution that should be carefully watched. that's the nature of government. that's the nature of the american way. >> i would like to see keep evolving in the direction of being more transparent. and following a rule like being

very transparent mechanism that can be explained to the public. >> sometimes the things you read or hear about the federal reserve just don't sound at all like the place i work. there is no conspiracy. these are just people trying to do the right thing the best way they know how. >> it is just an incredible sense of duty, mission, accountability, responsibility. >> i'm always proud but never as bad as i've been come it super easy to show up to do a good work when people love you but it's much more difficult when you're in the public eye and it's not a positive. everybody showed up and did the same work and actually were willing to say yes, look at us to evaluate us. criticizes. help us get better. so that made me extremely proud to work at the fed. >> we've made some changes over time, but we are still here after 100 years and we're still strong. >> what will the next 100 years look like for the federal

reserve? it's an uncertainty, but if the past is reflection of the future we will be the dynamic organization that is responsive to the needs of society. >> and i think if we can continue to do the job for the next 100 years, the country will be pretty good. [applause] >> as we look to the future, at this point it's my pleasure to introduce chairman bernanke back to deliver some remarks about the federal reserve system in the second century. >> thank you. i've been asked to close the ceremony, marking the 100th anniversary of the signing of the federal reserve act. the law that created the federal reserve by looking ahead to the next century. given the well-known

difficulties that the concept and forecasting -- [laughter] even the next few quarters, i will happily point out one important advantage to making a 100 year forecast is i won't be around to find why they went wrong last night our ability to make forecast is limited at least. nevertheless, i'll venture one prediction that a don't think is too bold, which is this. the values that it has sustained and surf the federal reserve at its best, and permitted to make critical contributions to the economic health of our nation, during the past century will continue to serve it and the nation well in the century ahead. among the fed's most important values is simply the policymaking should be based on dispassionate, objective and fact-based analysis. the ideal we seek in the combination of the researchers intellectual rigor and the ability of the effective policymaker to navigate the messiness of the real world, a world that includes complex institutions and markets,

imperfect and incomplete data, and often unpredictable human behavior. of course, policy analysis and a vision of the highest quality not just happen. they require professionalism and commitment to public service as example five by the generation of staff members have served this institution so well. without the expertise and creativity embodied by the staff, would have been impossible to develop the innovative policies required to meet in the words of the federal reserve act, the unusual and circumstance that we confronted during the recent financial crisis. but there's one thing which was all of us here can agree, it's about the quality of the staff has been a great strength throughout our institutions history. maintaining the quality and commitment of public service will be essential if the fed is to have a successful second century.

dispassionate analysis, expertise and commitment to public service all our values that have served us well. one value that strikes me as having been at least as important as any other has been the federal reserve's willingness doing its finest hours to stand up to political pressure and make tough but necessary decisions. the fight against inflation during paul and balance time in office was critical for the nation's longer-term prosperity and required perseverance in the face of heavy criticism. i keep in my office one of the two by fours mailed to the fed during paul's tenure which communicates some distinct and unfavorable views -- [laughter] of high interest rates and their affect. more recently of course the federal reserve is controversial necessary measures to arrest what was arguably the worst financial crisis in american history. helping to avert what likely would've been a much more severe economic downturn than the great recession that we did experience. we've been able to respond in

emergencies and make difficult choices in part because of our institutional structure. including long-term members of the board of governors and diverse regional representation in our policymaking committee. because of the willingness of policymakers past and present, many of them here, to do whatever was needed in the longer run interests of the economy. as an institution, the federal reserve must continue to be willing to make tough decisions based on objective and empirical analysis and without regard to political pressure. but finally we must also recognize the fed's ability to make and implement such decisions ultimately depends on the public's understanding and acceptance of our actions. or this reason we must continue to emphasize to other essential vouchers. transparency and accountability. we must do all that we can't explain our actions to show how they serve the public interest. that's why we must welcome communication broadly defined.

of course, will continue to talk to economists and market participants, but that's not enough. ultimately the legitimacy of our policies rest on the understanding and support of the broader american public whose interests we are working to serve. the ability of this institution to support a healthy economy, an economy with high levels of employment, low inflation and stable financial system will require our continued efforts to engage in two ways, communication, explaining our action and importantly listening to what our fellow citizens have to say. lightning and by thinking the organizers of this event, in particular all of the past and present policymakers independence for helping us mark this milestone in such a memorable fashion. thank you all so much. [applause] >> as we conclude today's

centennial ceremony, let us continue to reflect on the lessons of the past to deepen understanding of our role in the economy, to devote ourselves to inspiring trust and confidence in the federal reserve system among the american people. thank you to everyone else here in person and those watching across the system for participating in our centennial ceremony today. as we continue to commemorate the federal reserve's centennial would like to thank our advisory council, ma are sponsoring committee, our student committee and are centennial coordinators whose names are listed in the insert in your program today. would also like to thank the many others that are serving on various subcommittees and workgroups not listed have contributed to this and many other centennial initiatives. thank you again for commemorating the centennial of the federal reserve act and the founding of the federal reserve system. [applause] >> members of congress have

returned to the districts of the holidays come and kentucky send rand paul is tweeting about today's 100th anniversary of the federal reserve. he says that policies make you poor and hurt the poor and middle class the most. ridiculous monetary policies increase the cost of goods. you can find more tweets are members of congress at twitter.com/cspan under lease and members of congress. >> according to news reports the white house has extend the official deadline to sign up to the federal health exchange for health care plans that start january 1. people can now enroll through 11:59 p.m. tomorrow. >> today on c-span2, the senate aging committee examines the costs and how to pay for long-term care, follow my testimony from treasury secretary jack lew about the international financial system and economy. more discussion about the economy with a number of experts on the federal reserve.

>> offering services, another set of rules over the air one way to yet another come over the air, another wake of yet another. the marketplace is converged well beyond that. these are 80 year-old contest and we need to move on. >> follow the technological trends that are transforming, the first that i would probably outserve is the dramatic shifts from hardware to software centric systems. the many are able to do more in software rather than proprietary hardware i think the full creativity of software engineering comes into play. >> five years and i once a chance? today we think of it as being linear own remote control. how many of us really watch linear television in real-time?

>> other than for sports activity we can gotten into the time shifting model. now using this device shifting. i may record it on my dvr in my living room but i want to watch it on my tablet when out and about. >> lawmakers, innovators and others on the future of television tonight on "the communicators" at 8 p.m. eastern on c-span2. >> what's going on today comes down to two words, and they are not my keywords. fundamental transformation. those are obama's words. and i asked a couple of questions. when you look at the constitution, the power of the president, does the president have the power to fundamentally transform america? of course not. and why would you want to fundamentally transform america? that means you don't like america very much, do you? that means you don't like capitalism, private property rights very much. that mean you don't like our

constitutional system very much. when you keep getting this fundamental transformation, change is hard, we need more time for change, we need to understand this is a direct attack on our constitutional system. that's what he's talking about. that's what he means. >> sunday january 5, best selling author, lawyer, reagan administration official and radio personality mark levin will take your calls and questions, "in depth," live for three hours starting at noon eastern. booktv's "in depth" the first sunday of every month on c-span2. >> and online for december's booktv bookclub we want to know what your favorite books were in 2013. throughout the month join other readers to discuss the notable books published this year. go to booktv.org and click on bookclub to enter the chat room.

>> an[inaudible conversations] >> good afternoon. long-term care is an issue that has come up repeatedly in many it's an issue that many of us not only have legislative interest in but a personal stake as well. many of us have spoken at prior hearings about caring for our

parents as well as planning for our own futures to alleviate some of the decisions for our children. currently, about twelve million americans have long-term-care needs, and that number is rising rapidly. across the country, middle-class owners are going through the same tough choices on how best to care for elderly parents. medicare and most traditional health insurance plans don't cover long-term-care expenses, and while private long-term-care insurance is available, most people don't have it because they see long-term care as something that they will never need. well, additionally, who's going

to deliver long-term care services? do we have the right workforce? with nursing home costs rising, some families are turning to assisted living facilities or trying to provide care at home. all of these situations raise additional questions and potential challenges. all of us have heard from constituents about the trade-offs they have made to provide care for their loved ones. give you an example. karen from inglewood shared that she is a full-time caregiver for her 79 year old mother who is paralyzed after a stroke. she wrote that every cent i have goes to helping my mother at home.

her mother cannot cook, clean, or even wash herself. i'm sure that many of our colleagues here which share similar stories as well because they are obviously quite common. more than half of the long-term care in this nation is delivered through family caregivers. cbo estimates that the value of such care is roughly $234 billion annually. despite these enormous costs, most americans have done little or nothing to prepare for their future long-term-care needs according to a recent study from the scan foundation.

so, our current system of providing long-term care is unsustainable for both the government and for families. cbo predicts that expenditures for long-term care are likely to increase from 1.3% of gdp to as much as 3.3% by 2050. but as we continue to struggle to find ways to address it, let's don't be naïve to believe that we're going to find a solution in just one hearing. but we need to start. the panel that we have assembled will give us a wide array of ideas for us to debate as we strive to find a bipartisan solution. and so i want to thank our witnesses. i want to thank our bipartisan

co-leader, senator collins, and senator collins, if you would share with us. >> into very much mr. chairman. as you indicated, more than 12 million americans rely on long-term care services and support to perform the routine activities of daily living and to maintain their quality of life and their independence, if possible. i appreciate your calling this hearing to explore options for improving our current long-term care financing and delivery system. as the senate co-chair of the bipartisan congressional task force on alzheimer's disease, i am particularly concerned and

sensitive to the complex care needs of alzheimer's patients and their caregivers. i, therefore, particularly look forward to discussing ways to provide more support to the 62 million family caregivers who, in 2009, provided an estimated $450 billion in uncompensated long-term care, more than double the value of all paid long-term care. long-term care is the major catastrophic health expense faced by older americans today, and these costs will only increase as our nation ages. it is not just that there will soon be a greater number of older americans. it is also that older americans are living longer.