>> rose: we begin this evening talking about the trans-pacific partnership, a huge trade deal that will have a lot of impact on the global economy if passed by all the nations involved. we talk with patrick foulis, jiayang fan and greg ip. >> the president also is actually key here. i mean, this is really the crown jewel of his international economic agenda. if he is going to leave offices at the end of the eight years and wants to point to something on the international economic front -- >> rose: this is it. -- this is it. this is time to spend economic political capital. >> rose: we conclude with conversation with former fed chairman ben bernanke, his new book is called "the courage to act: a memoir of a crisis and its aftermath." >> it was very scary because lehman failed monday morning. all day long, we were trying to deal with the a.i.g. situation.

tuesday we had a meeting of the federal market committee, the monetary policy committee, and i was on the phone with new york. tim geithner didn't even come to the meeting because he was busy trying to figure out what to do with a.i.g. we were on the phone talking about it and i was almost an hour late for the meeting, breech of poto colonel. i was trying to manage the monetary policy meeting at the same time we were trying to prevent a.i.g. from failing. >> rose: the trans-pacific partnership and ben bernanke, when we continue. >> rose: funding for "charlie rose" has been provided by: american express. >> rose: additional funding provided by: >> and by bloomberg, a provider of multimedia news and information services worldwide.

captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: the largest regional trade accord in history was reached monday, the trans-pacific partnership links the united states, japan and ten other nations in the pacific rim. the agreement covers 40% of the global economy and 800 million consumers. it will address tariffs, environmental standards, labor practices, independent interconk chiewl property. it must be ratified by all parties involved. vote could be next year. jiayang fan, of th "foolproof." pleased to have you hear. how huge is this on the impact

of the global economy? >> good but not great. we've gone through a period where growth has been strong for decades, frowned to a example ae

bilateral relationship with japan, so it is true that japan will eventually have tariffs on its car exports to the united states lowered, but that's over a period of 15 to 30 years. a lot of the people who negotiated this agreement will not be alive when japanese

trucks start entering the united states tariff-free, whereas the u.s. farmers get access to japanese beef, dairy and even rice markets to an extent they never have had before. >> rose: was the fear of china a motivating factor here? >> i think so. i think there's the sense that china has become such a prominent presence in east asia, and that its dominance has been unchecked, so i think this partnership is a way of still asserting u.s. influence, and i think sending that symbolic message. >> rose: the office of the u.s. trade -- changing to the united states -- the office of the u.s. trade representative said that it would end more than 18,000 tariffs that are participating countries have placed on america american expo. 18,000 tariffs. >> well, again, if you look at which economies are biggest and

most protectionist, it's really japan. you know, japan never really opened up. i suspect within the kind of numbers greg mentioned about the economic impact, the biggest gain to the u.s. is probably japan. but some of the other economies involved have quite low tariffs, though a product may be included in the deal, the tariff may not be that big on it. >> rose: go ahead, greg. yes, i would add that this is in some sense a trade agreement that is not like other trade agreements which were about lowering tariffs and renewing quotas. it's more about extending the global rules of the road to other areas like intellectual property and services and that will be a particular benefit to areas where the united states has specialized such as pharmaceutical research, such as things like the digital economy. this agreement is the first i'm aware of that actually bans digital protectionism. you cannot require, for example, facebook to house all its data in another country.

that would be a violation of this agreement. now, for those who don't like this agreement, that's exactly the problem, because this is kind of a giveaway to the people and companies already making out like bandits and does little for the blue collar worker. >> rose: the president made much of the environmental labor standards as an essential part of this, did he not? >> he did, and what was impressive. >> rose: pressure with his own party. >> correct. interesting to see environmental groups actually applauded some of the restrictions on, for example, trade in banned wildlife products. the labor chapter is very significant. i mean, to get some sense of this, vietnam -- which, you know, has mostly government -- will have to prevent independent trade unions as a condition of this agreement. it's hard for me to think offhand of countries that have accepted that type of intrusion into its own sovereignty in the past. it's hard to see china accepting that anytime soon. so i think the administration is

quite right to boast about the standards they have. now, for some democrats, that will not be enough. bernie sanders already said he thinks this is bad for workers. for example, you can't get around the fact that if a company wants to outsource productions in the united states and vietnam, this agreement makes that more attractive. >> rose: beijing was reluctant to comply with a lot of the features including the required rules such as opening up the financial sector. >> right, and i think -- and i think it's also listening to the public. i think the public is of two minds. on the one hand -- >> rose: the public in china? exactly. on the one hand, i think some feel excluded from this agreement and as the dominant nation feels such a major agreement should include their own country. others feel like that china isn't quite ready for these

stringent standards, especially when it comes to intellectual property rights. these are things that china has been struggling with. >> rose: just have to get to a better place before they can agree to this kind of thing? >> exactly. and even if they agree, i think there is the fear perhaps they will be violating certain rules in the agreement and that might make things worse. >> rose: they lo see it as a kind of threat then, don't they? >> they do. >> rose: an effort to contain china? >> an effort to contain china but i think doesn't want to react violently at least publicly beijing officials are saying it is welcoming measure, they're cautious about it, but they don't want to give off the impression that they are nervous or feel somehow threatened by it. but i think there is that sense that the u.s. is asserting itself and it's something that china needs to watch out for. >> rose: it's part of a larger

fabric of the relation between the two countries. these are the countries that are involved in t.p.p. -- u.s., canada, japan, australia, peru, singapore, vietnam. what does this mean for chile in latin america. >> on that list there are sophisticated economies where a lot of it will be about intellectual property right. the other countries, chile, peru, to some degree mexico are more integrated with the u.s. in terms of trade. you highlighted chile. i would actually high light vietnam as the outlier here where it's really an economy that's very now just to china. whether china will want to join is how vietnam gets along with

state-run companies and politically guarded system. they've had a lot of labor unrest there. you've really got that as the example or test case of how far reaching this treaty could go. >> rose: i think the financial times suggested among latin america, mexico stands to benefit most. >> the auto industry concessions in particular which are expected to benefit mexico and make it easier for components to be supplied to u.s. manufacturers. >> rose: greg, how is this playing out in the american politics? you've already mentioned donald trump and bernie sanders. >> we'll, i think it's been clear all along this would be a tough political sell. it's just back in june that the congress passed trade promotion authority which basically alrouse the presidents admit a trade treaty and have it voted up or down but not amend within a range or majority of 218-210 and the democratics, the

president's own party, voted against it. in the senate, t.p.p. passed by a majority, not filibustered. will more drift away? some of the republicans who voted for it voted against it because they're unhappy, for example, drug companies don't have as many rights in terms of protecting their drugs overseas as they hoped. my suspicion is that the republican leadership has a lot of deepen grained commitment to free trade, that they basically like the overall thrust of this agreement even if they disagree with particular provisions and have more to lose than gain by seeing the agreement deseated. i think the president is also actually key here. this is really the crown jewel of his international economic agenda. if he is going to leave offices at the end of the eight years

and wants to point to something on the international economic front, this is it. this is the time to spend some political capital. >> rose: so therefore what will hillary clinton say? >> great question. i mean, when she was secretary of state, she was certainly promoting this both for geopolitical and economic advantages but she's been notably ambivalent in the last few months and i think that reflects -- well, first of all, the legitimate fact that she didn't know what will be in the final text and neither will we for several more weeks, and also she was watching the rise of bernie sanders and the leftward drift of the base of her own party. i honestly don't know where she's going to end up on this. >> rose: so lay out for me the process from here. what happens and how long will it take? >> well, we have a place where congress has a right to review and various estimates have to be produced for the consequences of the economy and then, you know,

i guess the expectation is the politics of the election may make this very difficult indeed and this will eventually reach congress after the elections, at which point the vote will happen. different countries have their own fights about this and canada's election is coming up very soon where this is a contention issue. japan, on the other hand, urbay has made this a very key part of his policy and his efforts to show the japanese public he's standing up to china. so it's a pretty complicated set of things to orchestrate. if i could add, you know, the thing which, outside of america everyone's watching with a mild sense of horror is the election and whether it produce as sort of outbreak of very nationalistic rhetoric and that's been a feature of past presidential elections, but i think there is a sense abroad that this will break new records. i was at a dinner in hong kong

on the day china devalued its currency in august and the business people and bankers there, they weren't sure what they were horrified by most, china's devaluation or the spectacle of donald trump as a sort of ultimate representation of american inward-looking behavior. so i think there is a procedure, but whether the election really spoils things is the big question. >> rose: thank you all very much. >> thank you. >> rose: we'll be right back with ben bernanke, former chairman of the fed. stay with us. >> rose: ben bernanke is here. he was chairman of the federal reserve from 2006 to 2014. he was at the center of the government's response to the financial crisis in 2008. in 2009 "time magazine" named him as its person of the year. today the u.s. economy continues to recover slowly from the great recession. interest rates remain at historically low levels as the fed carefully considers when to

begin raising them. all of this and more is captured in "the courage to act: a memoir of a crisis and its aftermath." i am pleased to have ben bernanke at this table for the first time, welcome. >> glad to be here. >> rose: let me talk about "the courage to act." it actually comes from your wife. >> it was her suggestion. >> rose: you believe it's the essence that in order to respond to a financial crisis, you have to act, you have to act boldly, and you have to know what you're doing. >> that's right. and the poll -- the politics was terrible, a lot of backlash. i dedicated the book really to all the policymakers around the world who refuse to be passive, to attacked the crisis, brought it to an end and set the stage for recovery in the economy. >> rose: mostly central bankers or political leader as well. central bankers, finance ministers and a few political leaders as well. >> rose: not members of congress, though? >> congress was mostly in the

critical mode. >> rose: let's talk about things that gained headlines and then you and going from dillon, south carolina, to harvard and harvard to m.i.t. and m.i.t. to stan prd and at princeton. but the things you have been saying in response to the book have created head lines. number one is the idea that you and hank paulson, then secretary of the treasury, decided to observobstricste as to what youd do at the team of the lehman crisis because you didn't want people to think you didn't have the tools to do what was necessary. >> when lehman failed, the financial system went almost into cardiac arrests. we were very worried about runs on other companies. so for a few days we agreed to be vague about it and deflected questions about that. whether that was the right decision, i don't know, but an

honest choice based on our concern about panic getting worse. >> rose: what were the consequences of that decision, not to really lay it out that you didn't feel like you had the power? >> well, we were kind of in a lose-lose situation. if we explained we didn't have the power, that would have created fear because people would say who's next, what can they do? if we had said given what we didn't explain that we didn't have the power, i think there was a feeling what we had done was arbitrary that we had arbitrarily decided to let lehman fail and save a.i.g., when in fact as i detail in my book in considerable length that the fairly of lehman was something we tried to avoid but could not and didn't have the tools. >> rose: and you didn't have anybody stepping forward to buy them either. >> that's right. so that's how we saved bear stearns in march of 2008 by getting jp morgan to buy them. we thought we could do the same with lehman but could not find a buyer. >> rose: with a guarantee from

the fed. >> with help from the fed, that's right. >> rose: here's the question i don't quite understand because i talked to hank paulson and tim geithner and many others about the books that have been written in the crisis, i don't understand how the fed alone could have saved lehman. >> absolutely not. the only tool we had was lending against good collateral and that basically meant we could save a firm that wasn't liquid, that didn't have cash to meet obligations but fundamentally solvent, had the collateral to support the cash. lehman as the bankruptcy judge years after the fact verified, was known at the time by the nadges institutions looking at its books including potential buyers, lehman was very much in the red, didn't have enough collateral to support lending, under intense run, and we really felt if we had lent money to lehman, we would have basically

facilitated all the other creditors escaping and left the government with a failed firm that couldn't pay back its loans. >> rose: did you anticipate what would happen if lehman went bankrupt? >> well, we tried everything we could to put foam on the runway as tim geithner used to say. á collateral from which we were willing to lend. we knew it was going to be bad and tim explained to the c.e.o.s in wall street. >> rose: a.i.g. came, you had no choice. >> no choice. it was the largest company and would have brought the system down if a.i.g. failed. >> rose: how close did the system come? >> i think it came scarily close. whether or not we could arrange to get the a.i.g. i think the done was a close call. i think if a.i.g. had not been

saved, very good chance the financial system would have gone completely into stasis. even though we were able to arrest the panic and over a period of months bring it to a halt by, say, the spring of 2009, the economy took a very serious blow, in any case, and, of course, we've still not completely recovered from that blow. >> rose: when you rescued a.i.g., you had no control over what they did with the money you poured in there. >> oh, yes, we did. >> rose: and what they did with respect to goldman sachs and some of the others? >> with the money we gave them, they had to meet their obligations. with the basic problem, they said we have $85 billion of collateral calls, margin calls, payments we have to meet this week, we haven't got the cash, lend us the cash against our firm, basically taking the firm as collateral and we can make the payments. after that, we sent people in, you know, just to make sure we understood what was going on

inside the firm and basically we were very much involved in what a.i.g. did after they received the money for sure. >> rose: tell me about the days between lehman and a.i.g. in the context of fear and in the context of what you knew you had to be, what you knew you had to show, the sense of confidence that was important. >> it was very scary because lehman failed monday morning. all at a long we were trying to deal with the a.i.g. situation. tuesday morning we had a meeting of the federal market committee, the monetary policy committee, and i was on the phone with new york. tim geithner didn't come to the meeting because he was busy trying to figure out what to do with a.i.g. and we were on the phone talking about it and i was almost an hour late for the meeting, unheard of, breach of protocol, so i was might manage the monetary policy meeting and we were trying to find a way to

keep a.i.g. from failing. we came u up with a plan, tim ws the leader with input from different advisors. paulson and i took the plan to president bush, saying we had to lend the money or the system would collapse. to his credit, president bush said you do what you have to do, i'll do my best to support you. he sent us over to congress to talk to members of congress to explain what we were going to do. the scariest moment was at that meeting because after we explained why we needed to lend this money, why we had to keep that huge insurance company from collapsing, why we needed to protect our financial system, the congressmen basically said, well, thank you for telling us, very interesting, but don't expect help from us. this is your call, your at the r decision and your responsibility. >> rose: who was at the meeting? speaker of the house, republican leader of the house? >> yes, and leaders basically of

the house financial services and senate banking committee, and the comment i just made was made by majority leader senator reid. >> rose: you said congress was not much of a help because, when you appeared before them, they were more interested almost, it seems you're suggesting, more interested in having themselves ask a tough question than being curious about the answers. >> well, i mean, that's the nature of politics that most of the congressmen are lawyers. they don't really ask questions because they want to know the answer. they generally ask questions to express whatever point of view they have. of course, the bailouts were very unpopular for reasons i completely understand, and the congressmen reflected that unpopularity. >> rose: you've always understood, and i've asked you this before, paulson has been clear in saying i wish i had been able to communicate better, it was hard for me to explain the case. we knew how bad it was and yet we had a hard time saying if we

don't take care of wall street, we will lose main street. >> right. >> rose: why is that so hard to tell people? >> well, i tried. i tried. i went on television a number of times, public television, networks, "60 minutes," spoke around the country, did a series of lectures at universities that were taped and made available. but it's a tough sell. even today people will say the fed helped out its friends on wall street, nobody bailed me out. ace said in the book, whenever i would see a bumper sticker that said where is my bail out, i would cringe because i felt their pain and understood the justice of their concern, you know, why is the government helping wall street, we're helping wall street because if wall street collapses the effects will be felt widely. paulson and i met with the house of the republican caucus just after lehman failed and we were asking them for the so-called

tarp money, the money eventually invested into the capital, the banking system and we were saying exactly this, we were saying if the financial system fails, you will see the consequences. one of the congressmen said to me, i have been talking to all my friends and neighbors in my hometown where i represent and they don't see any problem. their economy is working fine. we don't see any problem. and i said, you will. you absolutely will. of course, i was right on that because it wasn't much longer before the economy went into an almost free fall. >> rose: one of the criticisms is you should have seen this coming. >> mm-hmm. >> rose: you accept that to a degree? >> to a degree i do. you don't want to oversimplify. we understood housing prices were high and could come down. in 2005 i made a presentation to president bush going through an analysis of what might happen if house prices came down and we said there would be a recession probably. we knew sub prime mortgages were

a problem, losses accruing to the adjustable rate, sub prime mortgages. what no one understood was the losses of sub prime mortgages would affect the system and lead to broad-based panic that would almost bring down the entire financial system. that we did not anticipated and what made it so severe. >> rose: there was just not a case of depositors in banks watching their own bank fail, this was something very different and you had a lot of other people who were coming in and part of this? >> conceptually, it was like the bank runs of 100 years ago when depositors would fear for the safety of the bank, they would take out the money, it would fail. for the most part, retail depositors were protected by deposit insurance. you didn't see people lining up on the street to take your money out, but the banks and financial institutions borrowed lots of

money, uninsured, short term from investors and money market funds and other sources of money and had more of that money than insured deposits. so when the fear began to build that some of the financial institutions were at risk, the money began to pull out like a run except it was electronic. >> rose: is that what you call an expediter factor? >> certainly an aggravator of what was happening but it helped because i was an academic, you know, and i studied as an academic, i studied financial panics and the great depression, and i understood from that experience, you know, how they work. but it took a bit of time to understand how the old-fashioned bank run was happening again but was being transposed from the people in the street to the electronic run that we actually saw. >> rose: when you look back, the interesting thing about you as fed chairman is because you had your own academic experience

and had looked at japan and the great depression, but when you came there you looked at what the fed had done and asked how do we prepare for something like this? and did you find guidance in what was already there? >> well, there was some guidance. things had been worked out to some extent since 9/11 because 9/11 besides the tremendous tragedy it was also created a lot of damage in the financial system. a lot of the stock market had to shut down and the plumbing of the financial system was under stress, so when somebody was trying to be more resilient in case there was another attack, the fed had done work understanding the potential risks of the financial system. so we had done some work but, clearly, we had not prepared because it was kind of a failure of imagination, really, because we had not seen, in the united states, we had not seen this kind of crisis since 1929, basically, and there was at least some feeling that, well, maybe this is not something we

need to worry about so much. i personally again because of my background was concerned about it, but obviously, you know, we didn't put enough resources into it, you know, when i first came in in 2006. >> rose: how much would we have been better in recovery if both the stimulus from congress and the stimulus from the fed had been more or had worked better? would it have made the economic recovery more secure and certain? >> i think it would have. we have mostly recovered now. unemployment rate was 10% in 2009. it's now down to 5%, which is about average, about normal. it took us about six years to get there, which is a bit of time, of course. the fed was very aggressive with monetary policy. maybe we could have been more aggressive or moved more quickly but basically we provided the sort of monetary policy support the economy needed. but after the initial fiscal

program in 2009, the congress basically went into a contractionnary mode, the sequestration which cuts spending, other budget cuts. budgetary and fiscal discipline is important but what the congress was doing was overshooting and delivering cuts at a time when the economy needed more help. one of the outcomes and results of that was with fiscal policy not being very helpful, and i would include the state opened local governments as well as the federal government, so much fell on the fed that the fed was really being asked to do in some sense too much, and that to some extent is still the case today. >> rose: i'll come back to that moment. did you use all the tools we had? >> if you go back, we never sent interest rates negative which you -- >> rose: you set them close to zero. >> yes. >> rose: you said in fact you wished you had gone to zero right after lehman rather than watch it happen on its own.

>> i think we made a mistake not cutting rates in the september 2008 meeting which is the day after lehman, basically. the reason which is an explanation and not an excuse, the reason is the meeting was very short and it was quickly after the lehman failure, we hadn't had time to think and reflect on it, but as it was over the next couple of meetings by the end of the year, we had cut rates all the way to zero and more aggressive at the fed than other central banks and other major industrial countries. but we were aggressive on monetary policy. >> rose: describe the relationship between you and paulson and tim geithner. >> well, it was a great relationship where three very different people with different backgrounds. we were quite complimentary. hank is a consummate wall street guy. he was the c.e.o. of goldman sachs. very energetic. you know, he was always on the phone. always moving. >> rose: more of a dealmaker. a dealmaker. so it was very important for us

to be able to understand and relate to what's going on in the markets. i was the academic, much quieter personality, much more analytical, trying to figure out what was underlying the crisis. then tim geithner also very high energy guy had spent his career at the treasury department actually helping the u.s. treasury deal with financial problems around the world. so he had cut his teeth to some extent helping deal with the asian crisis of the 1990s. so he was a crisis fighter from way back. so we had a very diverse set of backgrounds and skills and working together, i think it was a good combination. >> rose: what was the biggest source of disagreement? >> you know, i think we were under so much pressure and controversy externally that, for the most part, we -- you know, we kind of banded together, if you will. i mean, there was this agreement -- tim was urging hank

not to say what he said in the beginning before lehman which was the government was not going to provide support which i believe i discussed in my book was a tactical statement that hank made. >> rose: he didn't want other people thinking they were going to come bail them out. >> yeah, he was hoping and we were all hoping that a buyer or the wall street c.e.o.s would collectively do something themselves to save lehman and leave us out of it. obviously, they would have to incentive to do that, hank, reasoned, if we said in advance, oh, we're ready to bail out lehman. >> rose: was that realistic explanation that they might do that? and why didn't they do that? >> well, i think the expectation was that if, say, bank of america agreed to buy lehman and suppose bank of america said, look, we can't quite make it. we need help on this and need to sell these assets, whatever, in that situation some of the other c.e.o.s would say, for the good of the system, we will participate. but when there was no buyer, the

c.e.o.s would not themselves say, okay, we're going to collectively take on this hit because they were all afraid for their own health at that time and all of them were under pressure as well. >> rose: so who did you lean on for advice, consultation, a person you would call up and say, hear me out, what are hi options here? what am i thinking about doing? am i missing something? >> i had two very good vice chairs in the crisis. one was don cohn in the heat of the crisis. he was a 30-year plus veteran of the fed, sensible, always able to get his advice and input. when he retired janet yellen who is now the chair, of course, and had been the president of the bank of san francisco, she became vice chair and my closest confidant. i also talked to tim geithner, obviously, at the new york fed before he game treasurery

secretary, and i talked to other staff including my public affairs person michelle smith who helped me think about dealing with the proses and the politics and the outside world. >> rose: did you sleep well at night? >> not usually. particularly at the height of the crisis, a lot of very late nights, lost weekends, and it was a very stressful time. >> rose: is this your presentation to people who see another crisis, a financial crisis and say, look, here's the best that i can do to tell you my experience what worked for us and why i believe it worked and what i have learned from facing those tumultuous times? >> yeah, one thing i do in the book is i don't just talk about this event and that event. i do try to create a little bit of an explanation for what happens so people can understand what our thinking was, what we

were looking at when we were making the individual decisions that we made and i hope that will be useful. >> rose: a couple of things about lessons. do you think dodd-frank is the appropriate response in terms of regulations from the lessons of this crisis? >> i think that the combination of dodd-frank, the financial regulatory reform, and the international agreements about bank capital. >> rose: requirements. equirements, exactly. between those, two i think a lot of progress has been made. i wouldn't say every single provision of dodd-frank meets a cost benefit test, for example, but i think the basic structure and the basic goal of the whole reform was to make banks a lot more self-reliant, a lot more capital, particularly big banks face tougher supervision, and give us a -- >> rose: you now have

authority to have rescued lehman? >> wouldn't have been a rescue in the same sense but it would have been a disassembly, if you l. what happened was lehman, when lehman failed, it went into the usual bankruptcy process which was very inefficient, took years to go through, and if you -- if we had the powers then that we would have now, we could do it in a much more expedited way that would perhaps reduce the impact on the rest of the system. >> rose: and the most important lesson you learned personally? >> well, personally, again, i think it's kind of try to, but you need to stand up for your convictions. you know, it was a tough time. >> rose: courage to act. courage to act. i know it was important not only to understand what was happening, but be willing to stand up for it and explain it. one of the things i always said is if you can't explain what you're doing, you shouldn't do it. i tried my best to explain to

congress and the media what we were doing and why we were doing it. didn't always succeed, but i did try to do that. >> rose: what were your doubts? did you ever think, we may not be able to hold this thing together? >> yeah, well the thing about it was the whole crisis was a big chaotic, you know, event, and obviously, you know, we didn't fully anticipate from the beginning how big and how dangerous it was going to be, and when we got to the fall of 2008, we did what we thought was necessary to try to save the system. but we weren't sure it was going to work. when we went to talk to congress in the meeting, they said is this going to work? we said we think. we have not been here before, don't know what other time bombs are buried underneath the surface. and it was a close thing, i think. >> rose: you obviously know that you'll probably never face a time like this again in your

life. >> i will be very grateful if that's the case. >> rose: you would? i'm serious about this. i mean, there are people who like to have power and, to use a sports analogy, who likes to come up with the bases loaded and be behind by three runs and be at bat. >> yes, but this is with the stadium on fire, basically. this is a situation which i wouldn't wish on anybody and i certainly don't want to see it happen again for the american economy either, obviously. there are a lot of tough decisions to be made. still, i no longer make them. i'm now a civilian and i certainly wouldn't want to go through that experience again. >> rose: could it happen again? >> well, the thing about crises is it never happens exactly the same way. i think it would be huberistic to think we have conquered fina7 we haven't. they have been around for hundreds of years. as long as you have a risk of

growing economy you will have risk of financial instability. i think the hope is some of the steps that we're taken after this crisis have made the system stronger so next time the effects will be more modest and will not have as big an effect on the economy. but it's not something you can finish, tie in a bow and put away, you have to be vigilant to make sure the system is good. >> rose: would you do more quantitative easing after the crisis has been reached and had been in a sense on your way the avoiding the worst? >> well, after the crisis, we were trying to help the economy recover and monetary policy and quantitative easing wasn't as much about the crisis itself as helping the economy come back. and we were very worried but even so particularly early on the recovery was slower than we anticipated and we had to do several rounds of quantitative easing as you know. so arguably if we had known that it was going to be a very slow process we might have gone a little faster with the

quawptative easing. but of course, part of what was going on as we were trying to balance various risks. we didn't want to overshoot, either. we didn't want to create an inflation risk or some other problem. so we were trying to, you know, grope our way forward and we took very strong action in march of 2009, we did an enormous quantitative easing program and i think it gave the economy a good shove in the right direction. >> rose: you've also said this -- some individuals should have gone to jail. >> i didn't actually say that. >> rose: what did you say? what i said was -- i raised concerns about the department of justice's prosecution strategy. what the department of justice did is it generally didn't go after individuals, they went affirms and they, you know, firms that were convicted, so to speak, of selling bad mortgages or whatever had to pay very large fines. but my thinking was, you know,

that the corporations, of course, are just legal fictions. they don't really have a morality. any action that is taken that is inappropriate, whether it's strictly illegal or simply unwise, is taken by the individual and, so, i was just saying that, to me, it would have made more sense, instead of penalizing the firms as a whole and the shareholders, it would have made better sense, i think, to try to determine who the individuals were -- >> rose: and prosecuted the individuals rather than the firm. >> as appropriate. we might have found out that some of the cases were just bad judgment rather than criminal. i don't want to prejudge that. but we didn't find out because, again, the effort was made primarily at the level of the corporation rather than pursuing individuals. >> rose: are you surprised no individuals have gone to jail? >> i don't think that's true, actually. i think a number of people and some of the people who rigged markets, for example, have gone

to jail. again,? some cases, it's kind of a grey line between criminal activity and very unwise risk taking which is not strictly criminal. so that was -- so those were judgments the department of justice and the courts would have to make. >> rose: have most of those who have gone to jail have gone for insider trading and things like that? >> well, yeah, they've gone for primarily things like rigging markets, like the libor case, for example. >> rose: today we have inflation. the fed made a decision not to raise interest rates. you obviously have a policy of not second guessing janet yellen, your successor. but tell me when it is appropriate, in your judgment, to raise interest rates and if inflation was at 2% today, would it be an appropriate time to raise interest rates?

>> well, the inflation rate is really central to this because inflation has been quite low and, for good reasons, the fed set a target of inflation for 2% a year which was done when i was chairman and i think it is important the fed reach the target and i think they agree with that. so the judgment they're making is first how strong will the economy be? will the economy continue to be growing at a pace sufficient to keep putting people back to work and to have the economy heating up enough that inflation will move back to target? that's the first question. they will be looking at the data on the u.s. economy and looking at the global economy which i think right now is the major drag on our recovery. >> rose: especially china. china and the other emerging markets which about half the global economy are slow. the i.f.m. just downloaded their forecast for the emerging markets and that's been hurting our exports and hurting the

financial market and a drag on the u.s. economy and they have to makes an assessment whether or not the forward momentum is sufficient to keep aged jobs and the economy will heat up, get higher wages and prices and be able to meet the inflation target. you have to look at that. tats the consideration. in a sense, what's difficult about it is you can't just look out the window. you've got to look at head and try to forecast where the economy is going and it's been very tricky to do that. >> rose: what would you have thought might have been done other than what was done to raise the employment rates to get to 5% faster that be we got to 5%? because my impression is that you were very concerned about that. >> i was indeed very concerned about it. i was concerned, in mar, because with so much long-term unemployment, so many people out of work for six months or more, that those people in particular were losing their skills, losing their connection with the labor force, and they might never come

back. so i thought it was very important to get the unemployment rate down as quickly as possible. one of the problems was, as we discussed earlier, is at that time, while monetary policy was pretty aggressive, fiscal policy after initial activity, the spending cuts and the tax increases caused fiscal policy to be tighter. that meant we had an unbalanced policy mix. that is a very strong monetary support, restrictive fiscal policy, and that meant that the overall policy support for the recovery was not as strong as it could have been and relied too much on monetary policy. >> rose: if you were in charming of tax reform, what would you do? >> i think economists are pretty clear on the basic principles of how you would ideally do tax reforms. so take, for example, corporate taxes, which has been the topic of a lot of discussion in congress. >> rose: and in political campaign. >> and in the political campaign. on the one hand, we have very

high corporate tax rates compared to other countries, but we also have lots of loopholes and exemptions and credits and things of that sort that reduce the taxes that companies pay. so what would probably make the most sense is to get rid of some of the loopholes which allow the tax rate to be reduced and still get the same amount of revenue. on top of that, congress really should address the problem of foreign profits which are right now for the tax incentives to leave your profits overseas and not to bring them back. >> rose: apple is a good example of that. >> apple is a good example of that. >> rose: what do you love about baseball? >> i love a lot of things about baseball. i think it's a beautiful game. it doesn't require you to be 300 pounds. you could be 5'4" if you play baseball. as an economist, this doesn't appeal to everybody, but as an economist i like the fact we have the data to go back to the

1880s. for me, that gives a sense of looking at ted williams' batting numbers, gives me a sense of what kind of hitter he was, though i never saw him play. >> rose: so there is a passion for the numbers in economics and band -- baseball share. >> yes, and understand what the numbers say about what kind of player and team it was and use it to enhance your enjoyment of the game it itself. >> rose: at the time you were exercising your power as the chairman of the fed and the crisis you faced, what personal qualities did you call on? >> you're going to make me praise myself. i tried to be as straightforward as i could. i tried to keep my focus. i tried to be as honest as i could. i tried to stand up, when the situation was tough, i tried to

do what i thought was right and i'm sure i made a lot of mistakes. i'm sure there are plenty of things to criticize but i did my best and i tried to be an honest broker and help use the powers i had to help our economy recover. >> rose: my impression is that you and hank, especially and tim, always thought you had the support of the president. >> yes. >> rose: he said do what's necessary. >> mm-hmm. >> rose: you guys know and understand the economy. >> mm-hmm. >> rose: this is why i want you. >> that was true. that was true really for both president bush and president obama. >> rose: both of them said it. yes, president bush said to me, as i described, you know, you guys are the experts, what you're saying makes sense to me, do what you have to do and i'll support you. likewise, president obama came in, the crisis was a little less severe but we had to deal with a serious recession and, at that point, tim geithner who had been

with me at the fed became the treasury secretary and key advisor to president obama and, generally speaking, president obama was also willing to say, you know, tim, ben, you know, i understand what you're saying, it makes sense to me, you know, i'll support you. we were very grateful for that and very grateful that he supported the independence of the fed as well because, for example, when we were doing quantitative easing, at least lot of complaining from some emerging market companies around the world, and when it happened, when we did the second round of quantitative easing, president obama was on an asia trip and he got a lot of blowback from people saying why are they doing that? he says fed making the choices, i support them and it's not my call, it's their call and he stood up for the feds' right to do what was needed for the american economy. >> rose: you make the point in the book at you chose not to seek another term. >> right. >> rose: you said to the president, eight years is

enough. >> i did. >> rose: you had no interest in -- >> well -- >> rose: -- seeing the economic recovery through? >> well, i was thinking about it that way. one term after four years, i was up for renomination in 2009. at that time, we had just been through the crisis and the recession, and it had been a terrible time, and i said maybe i shouldn't be doing this, maybe i'm the wrong person. maybe i shouldn't ask for reappointment. but then exactly the argument you just made, you know, you can't walk away now. the system still needs a lot of help, the economy is in recession. you know, whatever you can do you need to co. but the way i justified that to myself and my wife was i said this is going to be it, and after this four years, you know, i will go back to private life. that's what i said to president obama, and he understood that. >> rose: you have never had a second thought? you made that decision. at anytime before you left --

>> let me say i'm delighted with janet yellen, my successor, whom i work with closely and she's doing a fine job. >> rose: thank you for coming. thanks for having me. >> rose: ben bernanke, "the courage to act: a memoir of a crisis and its aftermath." thank you for joining us. see you next time. for more about this program and earlier episodes, visit us online at pbs.org and charlierose.com.

captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

the following kqed production was produced in high definition. ♪ calories, calories, calories! >> wow, it rocked my world! >> it just kind of reminded me of boot camp. >> i don't know what you had, but what i had was great. >> it almost felt like country club food to me. >> don't touch. it's hot! >> i gotta tell you, you people are getting me all excited with all these d