>> rose: welcome to the program. we begin this evening with a former chairman of the federal reserve, paul volcker. he made a speech yesterday in which he said he need to have more emphasis on governance. making the country's government work. >> theys will served a purpose of delays and obscuring. they serve a purpose, like you really got this wrong and maybe change it around a little bit. but these days, of course, it is really something that all the congressional people, the only ones they talk about is their campaign expenditures. and they're very big. and that gives a lobbyist a big leverage that they never had before. they can wink and nod and you know, we know congress, me and you, got a big campaign problem. we are conscious of that, that's all you have to say. and it's really a corrupt thing. >> we continue this evening looking at how government might work with former senator chris dodd, former

congressman barney frank and journalist robert kaiser. they talk about how the dodd frank bill was passed in the congress. we had to put together a product to instore confidence, trust in the financial system without which nothing of this would work. if you don't restore the basic elements, the economy doesn't function. and so it was critical that be done. i think we did a great deal of that with us this, and time will tell, obviously, whether or not these provisions work. we think they will. >> paul volcker, chris dodd, barney frank and robert kaiser when we continue. funding for charlie rose was provided by the following:.

>> additional funding provided by these funders captioning sponsored by rose communications from our studios in new york city, this is charlie rose. paul volcker is here. he was the chairman of the federal reserve of the united states from 1979 to 1987. s ahead of the central bank he raised interest rates and he beat inflation. more recently volcker has been associated with banking

reform. he gave his name to the volcker rule, a section of the dodd frank act which prohibits banks speculating with depositors money. yet three years after those regulations were signed into law only parts have been implemented. volcker's next project aims to close the gap between policy and action. he is launching something he calls the volcker alliance. it is a foundation which will look closely at the nuts and bolts of goff en -- dferb gopherance. i'm pleased to have him back at this table, thank you. >> thank you, i'm delighted to be here. you got it very accurately that is the sense of this thing. >> rose: fill in the blanks for me. >> everybody's got big ideas about what is going on. we have all the ideaological disputes and everything else in government. >> rose: right. >> but as i'm sure you are there big lack of confidence and trust from government. not only true in the united states but particularly true ined united states and part of this, i make to claim it's more than part, is a feeling that the government isn't doing as well as it should do in implements

policis. everybody's got big policy ideas. but half the time you don't know how to implement them. you think you know but it's not working very well. so this idea is to get something we used to call public administration. it's a bad word. people think it's dull, irrelevant. it's not earl, in my view. >> obama health care is an example of that? >> well, probably. but health care is so complicated, it's not high on my list simply because-- . >> rose: fair enough. >> enough other people are worried about that. >> rose: exactly but it is at the cutting edge of today's conversation. implementing legislation. >> absolutely it is a striking example. it's tig big for-- . >> rose: me too. >> rose: give me an example of what volcker alliance initiative intends to do? >> well, we will respond in part to what other people want to do. it's interesting to us. we're not going to be entirely self-sufficient. we have support. we'll look for projects that attract interest on somebody,

in many cases, willing to finance. but i can give you a whole list of things. we just did this thing on state and local, dick and i, and ran a lot of problems. it's hard to understand, most states ballot sheets and income statements, they've got them all mixed up. they don't follow any-- maybe they have some-- it's not all apparent. they don't follow a standard format of accounting the way a business is supposed to. can something be done there to help clarify the finances of state and local governments. now if you want to-- particularly state. if you want to make a big issue, what about the relationship between states and the federal government. >> rose: right. >> there are a lot of interconnections, are they working well, are they working effectively. does it really work when the federal government is financing a lot of infrastructure but the states are carrying it out. is that the way to do things? do we know -- >> let me understand what the alliance is going to do. it's going to study these problems and make solutions,

recommend solutions. >> yes, in some cases, yes, we will definitely recommend solutions. the alliance part comes from the fact, we're going to be a very small organization. we hope to be a catalyst. there are a lot of schools of public administration and other things that are theoretically interested in this. by and large, i don't think their moral is very high. they haven't got the attention they need. and i can give you all kinds of examples. but we hope to ally ourselves with some other distinguished institutions that share the goal. and on particular projects we will work coop rattively with those institutions. >> may i recommend one thing. >> makes sense. >> well, i hope so. it is work on the interface between citizens and their government. >> yes. in good part, yes. >> i means that's really a problem. >> well that is -- >> people are-- they go crazy. >> well, i understand that. and that's partly, part of the problem that we see.

that this kind of thing is just neglected. and there must be better ways for all those government services to have to interact with people. they being handled in an efficient way or not. >> so let me talk is about dodd frank. who would have believed that it would not yet-- why is that, that say different problem. >> well, it is the same problem. >> rose: yes. >> we have five or six agencies that have some responsibility for regulating banks and other financial institution one way or another. >> right. >> and they get in each other away. they all have their own mandates. they all have their own turf to defend. and you tell them you go out and agree on a regulation on the volcker rule or something else. and it's a recipe for inter missable delay, confusion, slowing down, lobbyists have five different avenues that they can do to try to

influence a thing. so i got-- you got what. >> i say i get almost hysterical. >> rose: you should. >> but you know it's overlapping. it's not productive. it's just-- to conflicts of interest. >> rose: and it's at the heart of the cynicism about government. >> look, if we pass a law it's got some complicate complicated-- complications but it shouldn't take three years to make a regulation however complicated it is. maybe some day they will come out with a regulation. i hope so. >> you talk about the influence of the lobbyists f you look at the legislation there are hundreds of pages of questions that were put in by lobbyists. >> that's correct. if you look at the initial regulation they made. and part of that, lobbyists serve a purpose but they also served a purpose of delaying and obscuring. and they serve a purpose like you really got this wrong and maybe change it around a little bit. but these days, of course, it is really something that

all the congressional people, and that feeds through, all they want to talk about is their campaign expenditures an they're very big. and that gives a lobbyist a big leverage they never had before. they wink and nod, we know congress, got a big campaign problem and we are conscious of that. that's all you have to say. >> right. >> and it's really a corrupt thing. i have a cotation, i didn't bring along with me, you by the next goldman sachs guy who is a congressmanment he says this is awful, it's corrupt, it gives rise to conflict of interests and there is nothing we can do about it. now campaign reform is forebig issue. that's not issue i think for this new institute. but it is, as you know, a big issue. people work on it. supreme court has a voice in it. doesn't seem to work very well. but you know, something. >> okay. you made a speech today. >> yeah. >> what did you tell them? >> we got into this business of too many competing regulators.

>> too many. you think they ought to be reduced dramatically the number of people who have regulatory authority. >> i mean i think maybe we need more than one, i think. maybe we need more than two for different angles. we certainly don't mean more than three. >> certainly not five or six. >> an you could put it all with the federal reserve and i think that's too much. >> so he talked about that. >> we talked about that. also talked about in terms of monetary policy. >> rose: yes, that's what mi coming to. >> well, i wasn't talking in terms of what they are going to do tomorrow or what the market is going to do. >> rose: i wouldn't ask you that, i'm not even sure you know. >> i don't. you're exactly right. and i don't like-- people say i don't want to do it because i know. the fact is i don't want to talk about it because i don't know. >> rose: exactly right. i know you well enough to know tham. but let's talk about the federal reserve today. >> right. >> rose: go ahead. >> well, the federal reserve is obviously doing things that are beyond imagination. >> rose: yeah. >> innocent guys like i used to be involved in it. the they are very frustrated

with the performance and they want to boost the economy. now one thing i was talking about today, i understand all that. but don't lose sight of your major mission has to be price stability. >> rose: right. >> and if you lose that. >> rose: controlling inflation is another way of expressing that. >> exactly. controlling inflation. not permitting inflation to get started again. if you fail in that project, are you going to fail in other projects. >> rose: can't you do both at the same time. can't you monitor inflation and at the same time take actions that will stimulate the economy and therefore stimulate the economy, will you reduce unemployment, therefore you have done a good deed. >> that is fine. if you go in there and you're fully credible and you have a good record on price stability and attacking inflation, then you have got 9 freedom of action to liberalize policy without scaring everybody that you are going to have inflation. >> inflation has been kept on really -- >> we have no problem with inflation right now. >> right now. but-- right now that's true.

but there are people that say, which i-- against of course, the way to deal with the economic problem is have a little inflation. and that, i think s -- a very dangerous role. it's been-- let's have a little more inflation that will pump the economy, people will go out and invest. that's not enough, we'll have a little more. >> rose: so people -- >> the as soon as we get the 4 or 5% inflation, then we'll pull it back, you know. it ain't that simple. >> rose: do you approve of how they have monitored the money supply? >> well, they don't really monitor the money supply any more. they are just pouring out a lot of liquidity which is not showing up in the traditional money supply. which is why it's not sign flationary at the moment. the banks are sitting on a lot of, to be technical, sitting on a lot of excess reserves. if they began-- . >> rose: sitting on a lot of excess reserves. >> they're not spending the money. they're not spending the cash that they have. >> rose: beyond their own capital requirements. >> well, they have to have their capital requirements

anyway. but they're just-- they have access to a lot of cash that they are not lending out. >> rose: right, why not? >> well, that's the conundrum. so the federal reserve says well keep supplying more and more and more, and hope that he eventually they'll lend some out. but they would say we don't see the profitable opportunities for lending safely. and therefore-- . >> rose: wouldn't this economy benefit from the fact that banks were lending money to entrepreneurs and people that they want to create businesses. >> we're perfectly willing but we have to have the demand for a good loan. so you know, there's a supply and a demand. >> rose: and lz the word good is ambiguous. >> there's plenty of liquid money around. the federal reserve is pouring it out. >> rose: so you think they've got too far. >> well, i-- . >> rose: you do. >> -- why dow hem and haw. >> they're going too far, if you maintain it for too long, that's the question. the question is maintaining it for too long. >> that's what judgement is about. >> that is what judgement is about. and that's what i say and that is a difficult thing.

and they got to have the back loan-- backbone and ability to do it in time. that was what the whole speech was about. >> they have to have the back loan and the ability to do it in time. >> in time. >> rose: and the time has come. >> no. i don't think the time has necessarily come. they're debating that now obviously. >> i know. >> so that's a good debate. i like to see some debate. they should be alert that debate tells me, you know, they've got it on their-- . >> rose: okay, frame the debate for me. >> the debate is some peopl people-- well, some people just say continue to pour out the money until-- . >> rose: to stimulate the economy so unemployment will go down. >> so unemployment goes down, and there's nothing to worry about. >> inflation not a problem. >> inflation not a problem at the moment there may be some speculation here and there but we keep it under control. the other side says look, we're not having much impact on the economy. we may have a lot of speculation. we may create a lot of imbalances for the future as we did five or six years ago. we don't want to repeat that

experience. so be careful. that's the debate they're having. now the further debate, some people are saying, fortunately me, or a person or two in the federal reserve, are basically not saying let's deliberately have some inflation. now i'm not sure they are capable of doing that right now if they wanted to. but that's what-- . >> rose: what do they think that will achieve. >> that will say oh, people think price has gone up so we'll go out, rush out and invest today. so we can get the stuff cheap. >> ah. >> and charlie rose can go buy-- a television set now and pep up the economy because he thinks things will be more expensive next year. no i think is kind of ridiculous. but that's-- the problem is if it works in the short run t will work against new the long run. >> rose: federal reserve, ben bernanke said in congressional testimony earlier this month, quote f we see continued improvement, we have confidence that it is going to be sustained, then we could end in the next few meetings, we could take a step down in our pace

of purchases. >> nice, cautious, reasonable. >> rose: you like that. >> federal reserve city pend. >> rose: you like that. you could see yourself saying that. >> yeah, coy. >> rose: so what is your criticism of the federal reserve today? >> who said i'm criticizing them. well, i do criticize one thing because i think it's confusing. i'm not sure it affects their policy but i think confuse the public and the market. >> rose: yeah. >> they keep saying we have a dual pan date. >> rose: exactly. >> price stability on one hand and creating a strong economy on the other. >> and it implies that you can buy prosperity by inflation. it's a trade-off. you ought to make the trade-off and have a little inflation. i think you know, nobel prizes have been wantsch pointing out that as a force, false illusion, you try that, it's to the going to work. you have both the inflation and the unemployment which to some degree is what we had in 1970. >> rose: what we call the volcker warning.

>> yes. absolutely, yes. >> rose: is the fed's balance sheet too big? >> well, what is it, 3.4. >> it's too big for many respects. now you know, you have to reason-- the federal reserve right now to put it crudely is not operating as a central bank. it's operating as a big financial intermediary. it's buying mortgages, buying long-term debt, financing it very short term. >> rose: right. >> that's what financial intermediaries do and it's going up towards 3.5 trillion. i never heard of trillions of dollars before. 3.5 trillion, moving toward 4. that's the biggest institution in the world. it's got the great advantage that it creates its own liabilities. no banks out there get deposits from the public. the federal reserve can create their own liabilities. and that's these funds, now liquid funds that the banks have. now they're doing this in kind of frustration to try

to get the housing market going. which it is. >> rose: it's going. for goodness stakes look at the recent reports. >> it's beginning to go. i don't know how much. the mortgage rates are low anyway and they made them still lower. now what marginal impact that had, nobody quite knows but it's in that direction. but we really don't want the central bank over a period of time to get in trouble if they're helping the mortgage-- residential mortgage market today, and student loan market tomorrow, and business loan market some other time, and small businesses need some help. that's the federal reserve buys more business small loans. >> rose: too much meddling, you think? >> those are political decisions. they will not remain independent. >> rose: but this is the age of the central banker. everywhere. every problem you, think, people are looking to the central bank to figure it out. think of the euro crisis. >> i hope it's not. >> rose: who are they looking to figure it out. >> now the euro crisis, they

had this very independent central bank. and mr. -- said a year or two ago. we have a problem. whatever it takes, we'll hold it together. which means that he is presumably ready to do what the federal reserve is doing here. >> rose: right. >> and-- now he said whatever it takes provided-- . >> rose: he's been applauded for that, you know that. >> oh, yes. and es calmed the situation am but he does say whatever it takes provided those borrowers behave. that's what the argument is about. money is available if -- >> if you show a little use ter knit your step. >> absolutely. >> that's what the whole argument is about. providing money, the german and central bank says if you follow these policies it that you label austerity. >> rose: is it fair to characterize your opinion that you want to see a more orthodox central bank approach. >> i would like to see a more orthodox central bank in the future. >> does that have more to do with dual role or something else?

>> no, just-- they ought to be properly modest that they are there for the purpose of providing ample liquidity and dealing with inflation. they shouldn't be entering into a whole bunch of markets. >> most people applaud what mr. bernanke and mr. paulson and mr. quitener did, most people. dow count yourself among them? >> in which the federal reserve was guaranteeing the jpmorgan's acquisition of bear stearns. >> look, that's a different situation. >> i understand but it's a-- it's the same federal reserve. >> look, that's an emergency action that has by its nature a time limit. i mean you know, they're not going to go in, rescue a particular institutions or help to bolster -- >> do you think bernanke has been a wise central bank chief? >> why do you ask me questions what can i say about-- he's the founder, always. >> well, i think, you're an independent force. people look to you to offer some judgement.

>> well. >> you're the great paul volcker. >> i maybe but -- >> its legendary paul volcker. >> whatever i am i'm to the going to make judgements about other people. >> rose: the giant of central bankdom, that is what you are. >> but mr. bernanke after he has left office, then we can judge. >> rose: that sounds to me like you have reservations. >> he has responded to the most difficult situation he could have. >> rose: your enthusiasm is not 100 percent. >> well, the trouble with-- the trouble is how de get in this problem in the first place. >> rose: yes. >> that's, you know, that's the issue. it's not what has done now to rescue things. the longer he is in that office, the better he is. i really think so. >> he gets more confidence. so-- self-confidence and he's respected. he's very respected. >> rose: would you like to see him reappointed. >> i think that would be a reasonable choice. i don't know whether he wants to be. >> rose: what is your relationship with the president today? >> none. >> rose: well, you were there. you gave him a certain -- >> well no, a couple of

years ago i had a relationship. >> rose: it wasn't a couple of years ago, no you, in 2008 when he was running. >> well, that was four-- i mean i haven't-- it's been a couple of years, more than a couple of years since i have had a relationship. >> rose: that's right. he doesn't call on paul volcker any more. >> the telephone hasn't been ringing, nope. >> rose: what did you say to him to make him stop calling? he didn't like what you were advising. >> you know, all these stories i read about him in the paper, he doesn't like to call people. >> rose: and they say what doesn't like to hear. you think that's it. >> no, no, no. it's just that he's got his own advisors. i'm not bothered by that in the least. i don't have to take responsibility for anything. >> rose: so where do you think the economic recovery is i mean we look at, there seems to be a certain kind of consumer confidence. >> well, it's coming along. but it's still kind of-- i woon say it in the run any more but it is still a kind of slog.

it's-- you know, it's kind of just kind of the sad story is it's probably progressing at kind of a normal rate of speed for this economy but from a whole and it is estimate struggling to get out of the whole so, to speakment but we're doing better than almost every other developed country so-- . >> rose: without would have imagined. >> we shouldn't be complaining all that much. i think it is a tribute to the federal reserve in part. >> yeah. >> he hasn't had much help from good policies in other directions. >> rose: like what? >> fiscal policies, for instance. >> rose: sure. you mean what is happening in the congress. >> what worries me about the federal reserve, is the criticism about the federal reserve. the implication, being asked to do things they can't do. we've got some big imbalances in the economy. we lost a lot of manufacturing. a lot of manufacturing employment. that's not going to come back because the federal reserve is carrying out quantitative easing in a hurry. we've got to balance the payments problem. >> right. >> you know, new york, it always strikes me new york is doing fine.

it wasn't much affected by the coo great crisis, a lot of terms are in trouble. we have tourist industry, entertainment, fairly low rate of unemployment. you go 200 miles upstate, they have very serious economic difficulties because they were manufacturing centers. rochester, buffalo, schenectady, there's no magic solution from the federal reserve. >> rose: but there is no question we are in an economic recovery. >> yes. >> rose: and what could-- what could screw it up. >> oh a lot of things could screw it up in the short run. i hope nothing too short run. europe is still not stable. >> rose: right. >> the situation. >> rose: something happened on the oil front so the oil prices have sky rock oated because of international -- >> that's always true but the basic outlook is much better, of course. and if this went on too long, it's a matter of judgement. if these-- we provide a few

new bubbles of our own with this extremely easy money, it's something we have to look at. i don't think it's beyond redemption but we have to keep looking at it. >> finally this. when do you think we'll get at fixing our tax code and --. >> nass's crazy. >> we've got all this controversy now about the irs anyway. >> look, we node a big revision in corporate tax code. and i got my own ideas. but they all have to involve a big reduction in the nominal tax rate which most companies don't pay anyway. but i personally think we've put too much of a weight on the income tax. >> right. >> and we ought to really think about something, consumption tax is a good idea. now people don't like it, for obvious reasons but we do have a risk of big global warming. and if carbon is part of that. >> so tax on carbon tax. >> it makes all kinds of sense to me. raises revenue. >> tom friedman is preaching

that every other column. >> he's slow in the game. i've been preaching even longer than that. >> so we need to take a hard look. >> we need to take a hard look at government where we started this conversation. >> so that's part of government, right. >> sure it's part of government. but i mean we're not talking, we don't dedicate ourselves to tax policy or any other policy. but if you have a tax policy it ought to be a workable tax policy. and that does get how the irs"qtn֍s i don't have anything against the irs. i don't know what this is all about. but it's important we have an honest tax system that is free of political taint. that is the kind of thing we're concerned about. >> that's what the debate is about now. >> well, that's-- you know, it's one little sideshow. >> but it's a serious sideshow. >> everybody wants -- >> use its taxing power to -- >> that's right. now but that's-- try to get the facts straight before-- they ought to have an investigation and see what it was.

but everybody talks about we want more infrastructure. i say so. slight change in tax, infrastructure, infrastructure, that's great. we should have better infrastructure. have we got the systems in place to provide any assurance that money provided for infrastructure is really going go to necessary intrastructure. >> it bring me back to the volcker alliance. >> that is where i have been trying to bring you back. >> okay. thank you, great to you have here. good to see you,. >> great to see you again. >> healthy, working out? >> i work out occasionally. >> rose: you can't let up. >> i'm not as young as charlie rose you are. thank you. great to see you. >> thank you for having me. >> rose: back in a moment. stay with us. president obama signed the dodds frank wall street reform and consumer protection act into law on july 21 rtion, 2010. the law responds to the 20 o 08 financial crisis, has been called the most

significant overhaul of financial regulation since the great depression. but the bill's path to law was not easy. in a new book "washington post" journalist robert kaiser tells the insider story of the dodd frank bill's tumultuous path to the president's desk. the book is called act of congress. how america's essential institution works and how it doesn't. joining me now is the book's author robert kaiser, also joining me the two men who were at the centre of the financial regulatory reform, they are chris dodd former senator from connecticut and former chair of the senate banking committee, and barney frank, former congressman from massachusetts and former chair of the house financial services committee. i am fleesd have all of them here at this table. so what was it, and what are you trying to accomplish with this book and this story of legislation? >> you know, as you know, charlie, i have been around washington for a long time. 50 years at the "washington post". its spent a lot of time on capitol hill. always intrigued by it. was the post reporter in the senate for a few years.

in the '70s. i wanted to explain the culture and the workings of this institution. which really hasn't been done very well in the modern era. so i persuaded these guys to let me inside. >> rose: early on. >> at the beginning, before it started. barney started with a phone call to me saying you want to write a book about this stuff. >> rose: yeah. >> we started talking. we worked this out. and with enormous generosity, they both agreed to talk to me regularly throughout. and they allowed their staff to talk to me regularly throughout. >> rose: what were you suggesting, barney? >> that been write a book about how we were going to respond to the financial crisis. and i will tell you, i had an you will ter yae-- ulterior motsive. my view is that we, the congress as a whole, obviously particularly us, are better than people think. and i thought this was going to be a chance for to us show that the country slunt be quite as discouraged byabout the way demos-- democracy works. but i also knew this was going to be histor eck.

it's going to be like the new deal, like the 20s century. you point out there have been three great times in which the country -- >> you borrow tdz from him and put in the book. >> the first was around the time of teddy roosevelt, fdr, sec and now this. >> three in a row, government having to catch up to business innovation with regulation and listening to the businesses predict the end of the economy because we tried to do so. >> rose: this is a question right down the middle, chris. how do you think the dodd frank bill turned out in terms of what it could have been? >> i think probably better than you might have expected. i've always taken some issue when people-- columnists will tell us we didn't do enough. or we went too far. we had to put together a product here, to restore confidence, optimism, trust in a financial system without which none of this would work. you pass all the regulations you want of laws, if you don't restore those basic elements, the economy

doesn't function. and so it was critical that be done. i think we did a great deal of that wit this. and time will tell, obviously whether or not these provisions work. we think they will. on two big too fail, on oversight, on consumer protection bureau, transparency and the derivatives market. things like the requiring people with governance issues. i had to produce 60% of the united states senate votes to passment you had lobbyists, 2000 or more, running all over capitol hill trying to kill this bill every way they could. >> rose: primarily for financial tuesdays. >> oh yeah, primarily so. and you had to listen to them as well. these were not all bad people. they very good points to make. made significant contributions in my view. barney and i don't have this notion that this is-- ought to be a majority, good lobbyists are valuable in a process like this. >> rose: do they have too much power. >> well, some do. but members of congress have to make judgements. if people come in and can't

be honest with you, or are deceitful, you have to-- you never let them back in the office again. those that come in, make a case and have good information can make a good contribution. >> i think unwith of the thingsed, the greatest power doesn't come from the most money. and by the time we got to the bill, the large financial institutions weren't very popular. nobody wanted to hang out with bank of america, citicorp, or jpmorgan chase. now the political climate has shifted to other issues. that's when they thrive. they thrive when there is no attention on them. the more people talk about benghazi or immigration or anything else, the better they can do. but the people we could not be, they're a natural grass root networks in america. chris and i both lost. we wanted to cover auto dealers in the consumer bureau. >> right. >> but they are auto dealers in every district and they're in the rotary and they sponsor little league, hey, how are you. we lost. the community banks. the community banks which are in everybody's district

have much more power than the large financial institutions. and those are the things we had to accommodate as we try to move forward. >> rose: this may seem like a simple question but in the end it's more about politics and policy. >> no. it is policy modified by politics. chris and i both-- look, it's probably when are you a chairman. are you in the leadership. it's kind of a deal that i made. the other members defer to you a little bit f you will take some of the heat off of them. and what chris and i were frankly not very much concerned about the-- chris had decided he wasn't going to run again for much of the time when he was working on it i thought is with going to run again and have an easy race, i was wrong but i didn't know that so it doesn't affect me. we came up with the policy questions with the help of a lot of very smart people and then the politics is what we had to put it through to get it done. >> but you and your audience can understand that these guys are not typical. in congress today, politics is more important than policy. that's why we have this constant partisan warfare going on.

these two are members of the old school. >> rose: i'll ask you this and i wouldn't ask him because you wrote the book. do you believe that we would have had the legislation we achieved or 9 congress achieved without these two guys. >> absolutely not. >> rose: why, exactly. >> bre both extraordinary in their own ways. and they worked this problem with absolute determination, dedication. they had the respect of their colleagues. it's one. main theys-- they cease of the book is it wouldn't have happened without them. wouldn't have happened wro the crash. the crash created the fear and its need to act. >> the normal police call process is discouraging. because people are busy doing other things. what happened was-- what's relevant here is we passed a bill in the house. the normal rule is because chris had to get 60 senators and 60 snorx it's an outrage to filibuster in my judge. i know people say it's the tradition in the senate. when i hear people talk about filibuster, tradition

in the senate i remember what winston churchill said to the admirals when he was first admiral, he said you can't did that because of the tradition of the royal navy. he said at that time decision of the royal navy are sum, sodomy and the lash. and i will put the filibuster somewhere near there. but what happened, ordinarily in the senate things get kind of slowed down. but chris was able to produce a tougher bill than we had in many ways because as health care got sign mood law and passed off the front pages and off the newscast, the public gotten gauged so it was-- chris and i worked very hard an we're good. but there was an engagement by the public that gave us the leverage. >> rose: let me just say too, i had a little disagreement with be above. i really appreciate what he did, by the way, barney and ri not-- we like bob, we have known each other and i is a damn good reporter. as much as he liked us and we got along, he want doing us a favor. so it is a rather precarious ini have-- invitation,

because this might not have worked at all. >> i wouldn't have let him in on anything i wanted to keep secret. >> i found out anyway. >> one of the points of difference, the bill is named for us. the night about 4 in the morning when a congressman made the motion to call this the frank dodd bill, barney looked up and said you can't do that, they will think it's one guy frank dodd. >> very smart. >> and both bodies, and i can speak more specifically about its senate, there was a tremendous amount of member involvement in this from-- what i did was i did something senator kennedy told me to do ep. when he got sick i had done the health-care bill and the banking bill it they are complex bills. you need do it i literally asked members, democrats and republicans on the committee to take responsibility for major jurisdictional areas. so i asked mark warner to work with bob corcoran too big to fail. i asked jack reid to work with judd greg of new hampshire on the derivative section. chuck schumer was working

with mike currento on governance issues, dick shelby on the consumer protection stuff. i got people involved. and people made significant contributions. now they didn't vote forth bill many of them in the end but they made significant substantive contribution contributions-- contributions which are part of the bill. the shell bee dodd amendment is too big to fail that is richard shell beau's work, helping put that together on the floor of the senate. >> it did not stop him and other republicans, however, from demonizing it. >> rose: from the get-go. >> there was a difference. because i-- the republicans in the house were weren't going cooperate. so i did have a lot of obviously working with the members. and you know, i was once asked if i was worried because opposed nancy pelosi on something and she is going to be mad at me. i said no i'm a chairman of the committee. i said i'm not afraid of my leader. i'm afraid of my followers. hi all these members on the committee. so i spent a good deal of my time. it's not a one way week. >> due think john boehner could say that as well. >> even more so he doesn't have any followers.

>> rose: what's the white house involvement in all this, in terms of the dodds frank legislation within the modern age, the white house proposes and congress disposes. and it happened here. the white house wrote a bill, barney modified it. then chris pod find it a little. but it was essentially the administration's framework. >> rose: how much of it did you change from the original. >> i would say, differ with bob's history, we, chris and i and the members of our committees had much more input into this than in any piece of legislation during the new deal except maybe the wagner act. because you look at the securities exchange act. all the financial regulations, tommy cork ran an ben couldhen were writing it down and sending it in. so -- >> it is also 30 pages long. >> right. and by the way, had no specifics in them. people say you have too much for the regulators, we criticized one because the bill is too long. and two because they were too short. because they didn't have enough specificity. but i-- there were some things which were very

different when we did them. we had a general agreement. you can go back to hank paulson. some of this just logic dictated. and some of what we z you know, you go back to sea paulson talk about. >> the the emergency made it possible to do it. >> the administration disagreed with a lot of things. for instance we thought sheila baird did a pretty good job and have done a good job with the f.d.i.c. giving them resolution authority, no oversight committee. >> see there's a story. >> well, i said-- . >> rose: the -- say we're ready to fire her. >> no, but it isn't bipartisan. there was a little best-- paulson didn't like her, bernanke. >> yound and i both called the president and the white house after initiation of the administration and said you ought to keep sheila baird. >> i said they look like a bunch of 12-year-olds in the tree house say nothing girls allowed.

and she was very good. >> we listened to her a lot and she had a major impact. >> she is influential. >> very important. >> by the way she is a republican, a bob dole republican employee, and george w. bush appointee. the republicans who repudiated all this, ben bernanke, bush appointee, sheila bare, a bush appointee there was a gate deal of genuine bipartisanship in this everywhere except for the members of congress. >> rose: while we are talking about there, elizabeth warren, senator for massachusetts now what about her. >> she played a really important role. she came up with this idea for a consumer agency which, and she persuaded barney to embrace it. and chris had been talking about if himself for a long time. >> rose: you were adamant about did. >> i thought it was critical. to me i thought in the very beginning. barney and i-- there weren't a lot of meetings at the white house, there were a handful, less than a handful. but i thought from the very beginning this all had to be more of a bottom up approach. you had to restore

confidence among the consumers of financial products. and so to me the idea that there wasn't a place where if you get a bad mortgage or a bad lonesome place, other than going to court, which are you not going to likely prevail given the revenues or resources of the opposing sides, you needed to have a placement i can get a lawn mower fixed through the consumer product safety commission but i can't get a mortgage fixed anyplace. we have already proved the value just in the last three years even though they are objecting to this very eminent person. >> when the republicans took over, about once a month they would have an oversight hearing to complain there was no oversight. but it was an oversight hearing. but what was striking is today, even today, years after it was stabbed, the complaint is we don't like the structure of this. we think it should be subject to appropriation. they have not brought forward one substantive objection to any policy that that agency did. but one of the things about elizabeth warren. she was very important because one of the problems we had, yes, we had right wing obstructionism, but we also had some, i don't know

wa, did-- something about leftism an infantile disorder, 1 inch pamphlets. and elizabeth warren was very sensible. and on a number of occasions she helped us deal with those people who question had some sensible compromises to make. >> did you tell not nominate her. >> i was for nominating her. i told the president in february of 2011, you should nominate elizabeth to head the consumer bureau. win-win, either she will get confirmed or they will make her a hero and she will come and win the senate seat. >> rose: okay, then there is the volcker rule. has not yet been -- >> it's complex. >> rose: how many years. >> three. >> rose: is this typical. >> well, there are a lot of-- a lot of good things have happened. and barney the other day did it well. if you look at what the consumer protection bureau has done, what the oversight board has done, if you even look what the banking

regulators have done a lot of very positive things. >> no more bad subprime rules. volcker rule, risk retention, two areas where the inner agency stuff is different because you have market regulators and banking regulators. and a lot of them market regulators don't have people out actually examining institutions. so it doesn't line up as well as it should. >> chris wanted to try and rationalize it. si did too in principles. we have a lot. but here's the problem. the regulators serve a representative function. now there is no way in the world if you started from scratch you would have a separate securities and exchange commission and commodities trade, we have these two commissions that share derivatives. but one grew out of the financial industry. the other grher grew out of the agriculture industry. you will have shades of rebellion if you try to merge the two. and then you havection structures. there were five commissioners on one, five on the other. we tried to, politically, chris wanted to transfer some of the regulatory

authority over to the community banks. but they didn't want to be in with the big banks. so to get the substance we wanted, we had to kind of pass on-- procedure but the volcker ruling i will predict by the end of this year there will be a good volume ter rule in place. >> and the international implications in this as well. too, which also are important. one of the things that i didn't ever-- i never really talked about because i think if we had it would have probably generated some unwarranted concerns about this. >> in april of 2008 the g-20 came out with about 20 proposals dealing with banking regulation. something both of us felt strongly b what they ought to lead in the united states in this issue. we have to have some say in the country given how important we are in this country. and secondly the ability to harmonize rules. and so we kept in mind the g-20 recommendations. not to the letter at all but to the extent on capitol, for instance, on overside, even consumer protection. you're getting alot of cooperation, in europe particularly in here. and that to me was very,

very important. you don't have a race to the bottom as all of us have been through where the institutions come to you every year and say if you don't deregulate, we're going to be in london to then you find out they're saying the same thing in people to london, they will race to new york. so to try to harmonize was extremely important. the volcker rule does require harmonization. >> i spent more time with foreign leaders on this issue than in my previous-- i think we did a pretty good job. by the way on a couple of occasion we helped move each other up. >> you dhi big financial institutions in new york, locale -- especially care pore about consumer protection or the volcker rule in terms of being able to watt ter down. >> volcker. >> for sure no question. >> okay, all right, fine. >> it may fate. you know, one of the things these guys don't get credit for is it's fun to see how it happened. the big banks as barney said earlier, were so unpopular, they really had no clout in the end. >> is that right. >> and provision of this bill have cost the big banks billions of dollars a year

in profit, particularly from derivatives but other places too. and nobody says so. nobody acknowledges it. the big banks are the ones. >> that's where the lobbying -- >> no impact in terms of being able to withstand some things that would have been detrimental to them. >> the community banks, the credit unions, votes beat money in this case. money usually beats-- money usually dominates in american politics. the voters aren't paying attention this is one of those cases where the voters got terribly energized. not terribly, very energized and then they could-- but i appreciate bob saying that. >> can't find who was in charge of the community bankers association, came and said look, this is going to happen. how can we work in a positive and constructive way. >> the book is how barney made a secret deal. everyone reported until this book. to get the community bankers to remain neutral on the consumer agency. >> by the way, he found out from camp --

>> we took away the supervisor function. >> one of the sort of myths, one of the stories is always has to be that you know, that consumer regulation was-- i mean that financial regulation did not achieve all that might have been reasonable man might have thought was necessary because of the power of financial institutions. and they looked at the number of lobbies they had, which was far exceeded those operating in the quote public interest. >> the fact is, and i understand that they may-- you know, they flip. there is a species of critic who will never be satisfied by anything public officials do. and they spent a lot of time until fairly reasonable, until the bill got passed and a little bit afterwards saying the bill was weak, it had no teeth. now they are complaining that the teeth of the bill are being pulled. somehow the bill quietly acquired teeth without passing go. because they went from saying it was no good. the point is that those are the-- it's the big banks who are now doing lobbying and they may have some impact

now in this situation. >> one big question is too big to fail, is it still in or out. >> in. >> in. >> in. >> let me, we just were talking about this. the great mistake of this. first of all, the federal reserve used the power under a certain act to bail out aig on its own. we rescinded that. that power literally no longer exists from what the fed did with aig. secondly what we said is this. some institutions are so big that if they fail and can't pay any of their debts t could cause problems elsewhere. so in this case, they first place, the institutions put out a business. we do our death panels, big banks, not all ladies. the business, they put out a business. second the treasury may then working with the f.d.i.c. pay some of the debts but anything that is paid out comes back from other banks. now what you'll have is some of the critics, you know there are a species of people, many of them on the left who i describe them as people who luxor yate in the purity of their irs.

they were of no use in et going the bill passed. they are just determined to be critical, so now their argument is oh well, it is true that if a big bank is in trouble, your law says put it to death. and then deal with the debts but you recover them from others. but they say, in "the new york times" today, if one bank fails, they'll all be failing. that's not true. in 2008 lehman brothers failed, jpmorgan chase was strong. citicorp was weak, wells fargo was strong. so their argument is yes, they now have to concede the black letter of the law says there is no too big to fail. they fail and you deal with the consequences. but, and the other argument is well there would be such political pleasure that you bail out the banks. i don't know what universe they live in to get to that. >> number one, there is-- seems to be a conscientious that bernanke and paulson and geithner during the bush administration and then later geithner's treasury and paulson left and

bernanke is still at the fed. did a very good job in responding to the financial emergency. >> well, i was. there were hearings in the senate. jim bunting and jack reid in 2006 had hearings on the residential mortgage issue. hi 90 hearings in 2007 or in formal meetings. even after bear stearns fails on st. patrick's day weekend in march of '08 t wasn't until the fall of '08 that you finally got action. and it was way overdue. had there been more aggressive action and i say this respectfully, of the secretary of the treasury in '07, an even '08 when the warning signs were there, this would have been a problem. but i think you could have put a tourniquet on it and it would never have been as big as problem. ben bernanke was knew to the job. each passing day got better and better at this and ultimately played a critical role. tim geithner was very, very valuable. neil was tremendous out of the treasury.

rahm emmanuel at the white house was very, very important, very helpful to us as well. so there were very positive elements that made significant contributions. the tarp debate is an important conversation in the context 6 all of this. bob said something very accurate early on in this conversation. barney and coy never have passed this bill in 2006 and 2007. and you couldn't pass it today. the window opened up when it did. and after tarp it was clear that you couldn't leave the truck sewer and architecture in place. so we needed to act. and that's why this all came together in a fortuitous way. i had never been chairman of a committee in 28 years and bob likes to point out. >> we'll look back at tarp and consider it -- >> it was a very important decision and the right decision to make and i will go to my brave believe flag. >> i will characterize it, it will go down in history as the most wildly unpopular, highly successful programs in american history. >> wildly unpopular, and

very successful, including by the way, that was the money and initiative, keeping general motors and chrysler in business, an its american automobile business is now thriving under its objections of those trying to stop it we worked with george bush and one other point, george bush got more support from the democrats in congress in the political election year of 2008 than he got from his own republican presidential candidate john mccain and the republicans in the house. >> that is why the cooperation with other members really was born of that we never would have gotten the tarp bill done had i not had a partner in judge gregg and bob bennett, as well bob corker. >> but they were great. bob ben set a pretty conservative republican. >> the point is -- >> moderate used to me they were liberal on some issues. moderate republican today means they're not nuts. >> rose: that's your

definition. >> absolutely. >> rose: okay, so one last question. are you both out of there, running the motion picture association, you're writing books and lecturing and all of that. >> hoping for a movey. >> barney frank story is one are you promoting. >> or the book. >> people look at congress today and they say it's dysfunctional. can it be fixed? >> yeah. somengs, again, this could be a whole separate show but to me the biggest, i have often been asked what the last thing you do, redistricting because it is out of that process people become governors and senators. and you don't have to listen minority voices in your district. it's going to be very difficult to get you to recognize the importance of compromise. and it's a legislative body, no one has ever run for the office by saying i'm one great compromiser. and yet the kill set is nis if you are going to achieve anything this that institution. so to me that's where you have to begin money, of course, is dreadful. lacking, i can't even

imagine how you do it today, what i had to raise, my five senate races people now raise as a total amount. in a single campaign. what i had to raise in five races, it's huge. >> i, chris and pri both great, i was a great money raiser because i raise an enormous amount of money for me and enormous amount of money nor my opponent so i get credit for double fund raise. hi nobody run against me that got a lot of money. but i say this, the dysfunction i think is more partisan and polit karbltion i think was the fact that the republican party went so far to the right. and my argue is this. 2008, one month before president's election, two months before presidential election, george bush comes to chris and me through harry reid and nancy pelosi, says we are in terrible trouble. he got total and perfect cooperation and effective option. then barack obama becomes president, we have have a majority. we passed health care, financial reform. i notice now the papers are giving credit to a bill that was passed by called facta which was a bill that was passed in the democratic congress then, to pan date

that banks share tax information with us. that is one of the reasons why the swiss and austrians are now coming through. what happened was the republicans dominated by a a very right wing faction took over the house and that's when things broke down, up until then, there was function. >> rose: thank you. >> read the book and you learn how bad it is, however. it's a mess. and if it weren't for these guys and the staff that work for them, we haven't talked enough about these remarkable women that they both had that made this bill happen, really. the staff did huge amount of the work, made the thing a success. >> and some guys too. >> and some guys. but two women particularly. >> rose: thank you kbob. >> thank you very much. >> rose: great to see you. >> pleasure. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

>> announcer: the following kqed production was produced in high-definition. >> the beef torta was out of this world. >> i actually don't discriminate against pizza. >> this is a temple to where we eat. >> sort of like a meat -- >> we couldn't see it, and we couldn't hear it. >> like, "whoa! i'm actually in san francisco?" >> this is amazing! [ laughter ]