>> woodruff: good evening, i'm judy woodruff. gwen ifill is on assignment. on the newshour tonight: >> if we're going to unite and be strong, we need a new face to help do that. >> woodruff: a house divided. republicans scramble to find a new leader after kevin mccarthy drops out of the race to replace john boehner as speaker of the house of representatives. also ahead this thursday: attorney general loretta lynch tells gwen the department of justice needs to start keeping records on police shootings. >> we find it unacceptable that we don't have national consistent data, about not just excessive force, but officer- involved deaths, officer- involved shootings. >> woodruff: and, the former chairman of the federal reserve bank, ben bernanke, opens up

about his new book, the global financial meltdown seven years ago, and who should have taken the fall. >> corporations are legal fictions. they don't themselves take legal or illegal actions, it's individuals who make those decisions and i would have preferred to have seen the strategy to determine who and what individuals were responsible. >> woodruff: all that and more on tonight's pbs newshour. >> major funding for the pbs newshour has been provided by: >> bnsf. >> and by the alfred p. sloan foundation. supporting science, technology, and improved economic performance and financial literacy in the 21st century.

>> support also comes from >> carnegie corporation of new york. supporting innovations in education, democratic engagement, and the advancement of international peace and security. at carnegie.org. >> this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> woodruff: the political bombshell burst at the u.s. capitol, just after midday. house majority leader kevin mccarthy abruptly withdrew from the race for speaker, a contest he had once been favored to win. political director lisa desjardins has spent the day at the capitol, and she begins our reporting.

>> i think i shocked some of you, huh? >> reporter: with that understatement, kevin mccarthy shook the corridors of congress today. house republicans had gathered to choose their nominee for speaker when the majority leader stunned them. he said later the party is simply too divided. >> i think there's something to be said, for us to unite we probably need a fresh face. i'll stay on a majority leader, but the one thing i've found talking with everybody if we're going to unite and be strong we need a new face to help do that. >> reporter: the news set off a scramble in the hallways. the five-term california congressman was the frontrunner for speaker, but seemed to be short the 218 votes needed in a full house vote. >> reporter: mccarthy ran afoul of the same conservatives, the house freedom caucus, who helped push out speaker john boehner. yesterday, the group's roughly 40 members endorsed daniel webster of florida. congressman tim huelskamp of kansas is a freedom caucus member. >> clearly the establishment

lost today. 80% of americans-- republicans wanted to get a new speaker and so that's what's going to happen. k street's got to be shaking now. they've lost two speakers in two weeks. >> reporter: the decision leaves an already fractious house republican party even deeper in disarray. utah congressman jason chaffetz is also in the speaker's race. >> i really do believe it's time for a fresh start. that was the whole genesis for my campaign. but we need to have a lot more family discussion, because we need to find somebody that our whole body can unite behind and do what we were elected to do. >> reporter: some centrist republicans who'd backed boehner and then mccarthy, now say finding the next speaker may even require reaching across the aisle to secure democratic votes. >> woodruff: and lisa is on capitol hill with the latest. >> woodruff: lisa is on capitol hill now with the latest. what a day. what are you hearing about how this all gets resolved? >> well, the next thing everyone

set your watches, 9:00 a.m. house republicans are set to meet again tomorrow. a new name is emerging tonight, paul ryan, republican of wisconsin, chairman of the house ways and means committee. there is tremendous pressure on him tonight including perhaps from speaker boehner's house to get into the race. so far, he has not done that. but in talking to conservative and moderate forces in the republican party, it's thought he might be able to be the only house republican to get the votes to be speaker. if ryan doesn't do it, perhaps speaker boehner stays on the job. then plan c, where we are, there is talk of perhaps nominate ago carcaretaker speaker who does te job short term until the next speaker is elected. then there is truck of perhaps getting someone outside of

congress to come in as a caretaker speaker. some are musing about mitt romney. i don't know if that's feasible. but seems it's romney's runningmate paul ryan who's getting the attention. >> woodruff: sounds like something from a hollywood movie. lisa desjardins. thank you. we'll explore the political dynamics of what happened today, and what comes next, after the news summary. on another front, members of congress went after volkswagen today over the way it rigged diesel models to cheat on emissions tests. statements at a house hearing ranged from fury, to apology. william brangham has the story. >> brangham: the opening statements were full of indignation from both sides of the aisle. >> v.w. has betrayed a nation, a nation of regulators, loyalists, suppliers and innocent customers. >> the american people, the e.p.a. and their counterparts around the world have been defrauded by volkswagen. >> brangham: michael horn, the auto-maker's top u.s. executive, answered with a corporate mea- culpa.

>> on behalf of our company and my colleagues in germany and me personally, i would like to offer a sincere apology, sincere apology for volkswagen's use of a software program that served to defeat the emissions testing regime. >> brangham: horn also said he believes there was never a corporate decision to cheat. >> to my best knowledge today the corporation in no board meeting, no supervisor report meeting has authorized this. but this was a couple of software engineers who put this in for whatever reasons. >> brangham: but republican chris collins of new york was having none of that. >> v.w.'s trying to get the united states of america to believe these are a couple rogue engineers? i categorically reject that. either your entire organization is incompetent when it comes to trying to come up with intellectual property-- and i don't believe that for a second-- or they are complicit at the highest levels in a massive cover-up that continues today.

>> brangham: horn was also challenged over v.w.'s plans to fix the estimated 500,000 affected vehicles in the u.s. he suggested it could take one to two years, and said the fixes might affect engine performance, but not fuel efficiency. new york democrat paul tonko complained that's cold comfort to v.w. owners. >> people in my district purchased a car believing it will be a clean and environmentally friendly choice. these vehicles, which i'm sure was a selling point, has certainly been destroyed. >> brangham: for now, volkswagen has stopped selling the affected models and has withdrawn applications to certify that the company's 2016 versions meet u.s. standards. >> woodruff: the volkswagen c.e.o. also said the auto maker will compensate u.s. dealers for any losses they incur. russia fired more cruise missiles into syria today, and said they hit islamic state targets. the russian military released new video of the strikes, and it denied u.s. reports that several missiles crashed in iran.

meanwhile, in brussels, at a nato meeting, u.s. defense secretary ashton carter complained moscow is acting recklessly, in a variety of ways. >> they've shot cruise missiles from a ship in caspian sea without warning. they've come within just a few miles of one of our unmanned aerial vehicles. they have initiated a joint ground offensive with the syrian regime, shattering the facade they are there to fight isil. >> woodruff: at the nato meeting, turkey called russia's buildup in syria unacceptable, and nato agreed to send troops to defend turkey, if asked. the european union moved today toward a tougher approach to its migrant crisis. e.u. interior ministers agreed on stepped-up deportations of those who don't quality for asylum. they also discussed creating a new force to police europe's external borders. we'll hear how sweden is coping with the influx later in the program. the american commander in

afghanistan has told congress that most taliban militants are open to making peace with the afghan government. army general john campbell offered that assessment today at a hearing of the house armed services committee. >> woodruff: current plans call for withdrawing all but about 1,000 u.s. troops from afghanistan by year's end. campbell warned that would limit any capability to train afghan forces, but he declined to say what he's recommending to the president. the stampede at last month's muslim pilgrimage to mecca may have killed far more people than saudi arabia has acknowledged. the associated press reports data from 18 countries shows more than 1,360 dead. the saudis have maintained the official toll is 769. the head of soccer's international governing body will face a 90-day suspension. fifa imposed that penalty today

on longtime president sepp blatter. he is at the center of a corruption probe and had already planned to step down next february. michael plantini, head of european soccer's governing group, was also suspended. an investigative journalist and author from belarus has won this year's nobel prize for literature. svetlana alexievich was honored for her portrayal of life in the former soviet union, including world war two, the soviet invasion of afghanistan and the chernobyl nuclear disaster. alexievich learned of her selection today in minsk, the capital of belarussia. >> ( translated ): this is not only a prize for me, but a prize - i think - as a whole for our culture, for our small country, which all the time, throughout its history and now as well, has been between some millstones. it always has been pressed from all sides. >> woodruff: alexievich is only

the 14th woman to win the literature award since 1901. wall street kept up its week- long advance today, as oil prices rose again. the dow jones industrial average gained 138 points to close at 17,050. the nasdaq rose 19 points, and the s&p 500 added 17. and, renowned cajun chef paul prudhomme has died. he achieved national, then global, fame in the 1980s and popularized spicy louisiana cuisine, including gumbo and jambalaya. at one point, his k-paul's louisiana kitchen was the most popular restaurant in new orleans. paul prudhomme was 75 years old. still to come on the newshour: more on kevin mccarthy's decision to bow out of the race for speaker of the u.s. house. gwen's conversation with attorney general, loretta lynch. ben bernanke on who should have taken the fall for the financial crisis. and much more.

>> woodruff: we take a deeper look now at today's surprise shake-up on capitol hill with former republican house member vin weber of minnesota and washington post reporter mike debonis. gentlemen, welcome. mike debonis, to you first. anything to add about why kevin mccarthy pulled out? >> really, right now, you know, it was a matter of pure politics within the house republican conference. it became clear that his path to the speakership was going to be very narrow and that his ascending to that post would do little if anything to solve the internal problems and the divides within the conference. he said it himself in his press

conference earlier today when he today before the microphone, he said we need a fresh face. the question is he was the fresh face to have the republican for at least the last five years. he was one of the young guns in a class with peoplereich eric cantor and paul ryan. eric cantor was kicked unceremoniously out of congress last year by tea party challenges and now people are looking to paul ryan. so who is going to step up in the next generation? that's what we're looking at now. >> woodruff: it is the case. he was the fresh face. something changed in the last 12, 24 hours. >> well, something changed. i think the main thing as we talked about is the fact they didn't -- kevin could have won the nomination of our caucus. we were nominate ago candidate, not choosing a speaker. >> woodruff: right. the question then proceeded to the full house of representatives, would he get the majority necessary to be elected speaker. he wasn't sure he could get to

the majority to be elected speaker and, most important, there was no plan b. if he failed to get to the majority, who would be on the next ballot? would they go outside the congress? try to call a coalition of the democrats? there is no plan b and would have resulted in chaos so they decided to put it off. >> woodruff: it was an issue with the most conservative members, the so-called freedom caucus, those are the votes he needed and were not sure. >> that's true. the only addition i would put on that is we've redefined what it means to be conservative, there are not big ideological, issue-oriented differences between those folks and the "establishment." it's about strategy, tactics, are we willing to shut down the government, going to confront the president more directly? you think about battles in the past, the democrats in the

'70s over the cement war, tax cuts, those are big philosophical issues. there is one philosophical divide in the republican party now, the frustration in their inability to change things with barack obama opened the white house. >> woodruff: how do they get around that, mike debonis? you mentioned speaker john boehner is trying to get paul ryan to run. how do they get around it if it's not about strategy or philosophy? >> they're looking at this hail mary pass and hoping that paul ryan agrees, under immense pressure from all sides of his party, to come in and bring everybody together and move forward. paul ryan, his refusal citing his young family and desire to stay as ways and means chairman, it's hard to see what happens next. you know, one of the possibilities is that, you know, john boehner is basically forced to stay on the post because there is nobody willing to replace him. there has been talk of some sort

of caretaker speaker, a man who perhaps is retiring, or is in his or her twilight years. their service in congress who can -- there are servants in congress who can come in and do that. but the same people who aren't excited about kevin mccarthy aren't going to be excited by somebody like john klein or tom coal or somebody like that coming in and playing that role. so it's hard to see how this ends. >> woodruff: vin weber, can you imagine something like that, somebody from the outside coming in? >> it's highly unlikely. it's never happened. the message from john klein is different, he's a sitting member of congress, announced he's not going to run again, so it would allow us to have a respected man in the speaker's chair for the next year or so while they sorted all this out. i still think it's unlikely. i think they will find somebody to be elected speaker, but it's an unusual time. paul ryan seems to be the one

person that could unite the conference. i know him well. he's been a close friend for over 20 years. he doesn't want to do it for all the best reasons. he wants to be chairman of the ways and means community and all other sorts of issues he cares about. in his mind, it's giving up something very, very important, and people who appeal to him based on his own self interest and ambitions are singing the wrong tune for paul ryan, that's not why he would do this. >> woodruff: he would do it why is this. >> if he is convinced that the institution of the house of representatives, the republican and ultimately the country are hurting by the chaos in the house and he's the only person who can mend the fences. >> woodruff: vin weber, broaden this out, what does this say about the health of the future and the republican party? >> the party is in a certain degree of chaos now and there is a similar later between what we see in the presidential nominating process and what we see going on in the house of representatives today. i think it extends beyond the

republican party, the broader electorate. people are angry, not happy with the status quo. they want to change but they're not sure what the change should be. that's what i see in the house of representatives. it's what i see in the donald trump candidacy who has all sorts of people that are angry and wanting to go in a different direction, but trump s, no disrespect to him, but he doesn't identify any clear direction of the country, he's just got a series of attitudes. that reflects where the country is now. let me make one more point. at the moment, it's not good for the republicans, it's chaos in the house and unpredictability in the presidential race, but the notion the country is mad about the status quo and direction we're headed ultimately isn't good for the democrats either. they have the white house. they are the status quo. >> woodruff: well, it certainly is a day that's left everybody stunned. >> it's a day unprecedented, least in my lifetime. >> woodruff: vin weber, former member of congress, thanks for joining us. mike debonis from "the washington post."

we thank you both. >> thank you. >> woodruff: loretta lynch is the country's top law enforcement official. she faces a spike in violent crime in several major u.s. cities and police-involved shootings, sparking a national outcry for more accountability and transparency. gwen sat down with the attorney general at the justice department earlier today to discuss the federal government's role in addressing all this. >> ifill: madam attorney general, thanks so much for talking with us. >> thank you for having me. >> ifill: this whole question of violent crimes, you have been meeting with committees around the country, here in washington as well, and talk to you about the degree to which a lot of cities say that violent homosides, crimes have spiked in their communities, yet your own

f.b.i. statistic show a slight decline. how do you square fees two things? >> well, i think the issue of the day really is how do we protect the american people. certainly crime overall is down and in many of our major cities crime is down. but in some neighborhoods, we have seen a rise in certain types of violent crime. a matter of great concern for us at the department. i directed my u.s. attorneys to meet with their local counterparts, people only ground, to talk about the causes of the crime, the nature of the crime, what were they seeing. >> ifill: i feel like we've had a lot of conversations about this, in the end, i'm not sure which is true, is it getting worse or better? >> i think it depends on how you're impact bid crime but certainly the loss of life diminishes all of us. so whether you're in a neighborhood that has the rising numbers or not, if someone in your city, one of your neighbors, your fellow americans are feeling this, then it really

is impacting all of us and it is a matter of concern for the department. >> ifill: you've suspend spent a lot of time on this and how it's affected particularly in police-involved shootings. it's been said the department has not been keeping records on the number of police-involved shootings. why is it the justice department hasn't been on top of that? >> it's a serious issue. we find it unacceptable we don't have national, consistent data about not just excessive force but officer-involved deaths and shootings. this information is important because with it we can pinpoint trends, we can lookout how situations devolve from a standard interaction into one that's less positive or perhaps fatal and we can provide assistance and guidance to police and communities. we actually do mandate a lot of this. when the department of justice enters into a consent decree

with the police department or when we work with departments as part of the collaborative reform process, we require that type of data, but it's not consistent. every department handles data in different ways, records data in different ways. we've said it's important, vital, unacceptable we don't have it and we're going further now. >> ifill: i want to talk to you about whether you think we're coming as society or government to some sort of agreement on the concerns about criminal justice reform and mass incarceration. i'm sure you read the long long story ta-nehisi coates wrote. are we reaching an agreement on the solutions? >> i think we're at a unique time in american history and dialogue where we had a bipartisan moment, a recognition in which the way we have been trying to keep people safe has,

in some situation, had the opposite impact. it's had collateral consequences of removing young men of color from their communities at a time when they need to be there and the communities need them most. office prosecutor in the '90s and i remember the days of violence in the gun trade and concern people had when they were passing the strict mandatory minimum laws. at the time, that was the thinking that this is the way in which we can protect people, and we've seen the results of that. we've seen that when we lock up non-violent drug offenders, particularly those struggling with addiction, that it doesn't really affect the safety of the community but has a devastating impact of the lives of those young people. >> ifill: you suggested beginning releasing 6,000 prisoners that have been held, you believe, too long. that's a drop in the bucket against the 2.2 million held in federal and local jails and prisons. how do you expand on that?

>> well, the sentencing reform efforts on the hill i think are very encouraging. the senate came out with a bill just last week. i believe the house is announcing their bill today. we look forward to reviewing those and working with both houses to make them not only effective but productive in a way that keeps our communities safe and also gives people a chance at rebuilding their lives because that can be done. i think this debate and this discussion is important. when we talk about not just people coming out on early release, and those individuals coming out soon are being released because of sentencing commission has tried to essentially ameliorate the harsh impact of the stricter crack laws relative to the cocaine laws, and that change was accepted and, after judicial review, a number of inmates will have their sentences reduced. >> ifill: how does that take into account two-thirds of the people released end back in jail years later? >> that is the next part of the conversation and, frankly, just

as vital and important a part as how we deal with the sentences at the front end. providing the support and a way for people to reintegrate back into their communities is key. we also work with the federal reentry counsel which is -- council which is a multi-agency task force across government to look at barriers to reintegration. housing is a major concern for those coming out of our criminal justice system. the ability simply to go home. what so many of us take for granted at the end of the day is a challenge when you are incarcerated. we're liking at making sure the rules are consistent. that people who are eligible to return particularly to public housing are able to do so so families can come together again. >> ifill: since you have been attorney general, probably pre-dated your ser virks we have been in conversations about criminal justice and incarceration and it all ties in with race and about

police-involved shootings. are we turning the corner on those conversation or stuck in the corner especially when race becomes a common thread? >> i think we're in the middle of a conversation, a conversation that i think we should look at as an opportunity. than opportunity for many people in this country to have a discussion about race, about considering justice, about the world of government in general, and i think we have to broaden the discussion, not just around issues of race and policing but race and society in communities that don't have the educational support, the economic support, the healthcare support to give residents, particularly young people, opportunity to break that cycle. i tell you one of the most exciting things that happens is when you go to an institution and you're talking about reentry programs with young men who are incarcerated there, and they talk about the fact that if they are able to get an education while they are incarcerated, they feel they can break a cycle and release their children from

a path that they were on that maybe they followed their own parents down as well. so we're looking at this in a larger sense, and my hope is that this conversation can be larger and that it can really just inspire all of us. >> ifill: attorney general loretta lynch, thank you very much for joining us. >> thank you. >> woodruff: stay with us, coming up on the newshour. former fed chairman ben bernanke on who is to blame for the financial crisis seven years ago. plus, new online tools to understand inequality. but first, sweden has received more refugees per capita than any other european country, and the government is proud of its open door policy. but as special correspondent malcolm brabant reports from sweden, the country's generosity has left it struggling to cope with an influx that's far

greater than anticipated. 20-year-old student abbad found sanctuary in the historic town away from syria where his home and much to have city has been destroyed. sweden's offer of granting asylum to all syrian refugees was irresistible. >> i'm very happy to be here where i'm treated with respect to human life. it's very happy to be here. >> we first encountered abbott last month in the turkish city where smugglers arranged passage to europe. he met a trafficker who promised to get him to greece. >> it might be my best day or my salvation day. >> thankfully it was his salvation day but for hundreds

of others such deals death sentences. his journey from sweden to lebanon took 17 day, cost $2,500. sailed from tripo lee to turkey and traveled with people smuggling people from syria to the aegean sea, to the greek island of lesbos, a ferry to athens, a bus to the macedonian border. all the way his path and that of tens of thousands of others was facilitated by the u.n. refugee agency through border crossings in serbia, croatia, hungary and austria. eventually reached bavaria where he was told by the germ nls he could apply for asylum or carry on. he continued north to hamburg and the bored of sasnits, took a ship to bypass denmark and landed in southern sweden and began the process of claiming

asylum. the most perilous part of the trip was the crossing to lesbos. the legal ferry takes just under 1 hour and costs $30. abad paid $1,200 for a crowded inflatable. his engine broke down and started to leak. >> under the engine, was a hole and water was getting in the boat. you can imagine how a woman can scream and how children can scream from fright. we thought we were going to die. happily, the boat made it to the shore. i don't want to go through this suffering again. i don't wish it for anyone, even my enemy. but there is no other way. i had to take this way to get here. >> reporter: he promises to give something back to the country which has taken the moral high ground over europe's

migration crisis but struggling to quoap. >> 398399, very big family. many people! that's perfect. >> reporter: this is in sweden's second city, straining at the the seams as rvgz and migrants seize the opportunity for a new life. the numbers coming into sweden far exceed those anticipated by the government. the latest figures today show that in the past seven days, there have been 8,300 people who have applied for asylum. during the course of a whole month, that amounts to more than 30,000 people. over three months, it equates to 1% of the whole swedish population. the head of the migration board says we're coming to the end of the road. sweden regards itself as the humanitarian conscience of the world and there is genuine pride that the country is trying to

provide the new comessers with a soft landing. but the sheer volume of asylum seekers has taken the nation by surprise. >> we work 8:30 a.m. to 10:30 p.m. seven days a week. >> reporter: an increase in numbers or dying down? >> an increase. it's more and more every day. last week we had 360. it's more and more. >> reporter: how do you anticipate it will grow? >> i think it will get higher for a couple of weeks. they will seek protection because of the weather situation in southern europe. >> reporter: a 22-year-old videographer from iraq is one of the newest arrivals, spent time in mosul occupied by the islamic state and recently escaped from kidnappers and asked not to be identified. >> i am grateful for the swedish

people and for the government because they are opening their doors for us because we don't have money, we don't have a home, we don't have a place to go. so we are so grateful for them. >> reporter: in a small port town with links to germany, the local council is struggling to accommodate a snurnlg unaccompanied minors mainly boys aged under 18 from afghanistan. afghanistan. in the past week, the town has taken in almost a 2% increase in the town's population. >> it was another world before. before, we had, like, two new kids every week, and we thought that was a lot. we thought that's lots of

pressure. now there are 100 a day. so we have some new perspective on this. >> reporter: her deputy is having to be inventive to try to find enough places to accommodate tun accompanied minors. >> people are work on getting properties and new housing. they're looking at every single housing in the city -- the abandoned offices, like this museum. we're staying away from school and gymnasiums because we don't want to disrupt the regular activities, but we're really looking around. >> reporter: sweden's third city is seeing the biggest influx. this is a magnet for newcomers because the city has a large migrant population already and the council is trying to find shelter for 1,000 unaccompanied minors and competing with the

migration board to find accommodation. economist regally from iranian kurdistan is highly critical of the social democrat government's open-door policy. >> i think it's quite disastrous and especially if it continues. if it continues, it is an irreversible social experiment that no one has ever attempted and there is a palpable sense of crisis but there is really almost no idea or vision about how this can be solved. they're postponing it to the future and temporarily are using, i would argue, politically correct spin to calm the public. >> reporter: sweden's immigration minister was not available for interview this week but i spoke to him just over a month ago. what do you say to those people who think your open-door policy is naive? >> i say that this is -- we are not suffering from one of the worst humanitarian crises in our

time, seeing the people fleeing from syria over 12 million people from the war, and if you say like that, if you put it like that, just turn on your television set and see for yourself what these people are fleeing from. we as a country have an obligation to help. >> reporter: the government has acknowledged that sweden will have to implement extraordinary measures. it forecasts a difficult autumn, although it insists the country can cope. abad has a message for worried swedes. >> i hope to one day see you when the war is over, everybody is hoping to go back to syria when the war is over. >> reporter: abad hopes to be an asset to sweden but amongst the growing number of skeptics, there is a feeling many of his fellow newcomers will be a drain on society. malcolm brabant, prbs pbs

"newshour" in sweden. >> woodruff: he took on perhaps the most important job in the financial world, a year before a global economic collapse. former federal reserve chairman ben bernanke reflects in a book, the courage to act, a memoir of crisis and it's aftermath. welcome. >> thank you for invite meg. >> woodruff: you write in the remarkable book that takes us inside your life and inside the fed where we don't hear about very often, that if you and your colleagues had not acted as you did in 2008, that we could have seen something like 192 1929 ag. do you really believe that might have happened? >> nobody can know for sure but as an academic, i studied the great depression and how financial panics affect the economy and i was very concerned

about that, you know, even before lehman brothers, even before the financial panic hit its peak. but after lehman brothers, when the financial panic accelerated, we saw a tremendous dropoff in the economy as sharp as the beginning of the great depression, so i really believe that it would have been very serious and protracted downturn if the financial crisis had not been arrested. >> woodruff: so in the title is "the courageo act." one question is did you and your colleagues really va choice? if things were falling apart, what else could you have done. >> title refers to policymakers around the world. it was high-stakes decision information an uncertain and politically difficult environment and policymakers could have been passive. that's what some commentators were urging that we should just step back and let the market take care of it, so it was very difficult to do that and i'm

glad to have been part of a fed and treasury team that took the action that was needed. >> woodruff: one of the goals of what happened was to make sure there would no longer be this concept of too big to fail, but a lot of people look at this today and say the banks have just gotten big, big, bigger in the ensuing seven years and the sort of cynical view is, look, if one of these big banks went under, the government would have to bail them out again. is that really where we are again? >> too big to fail remains an issue but we're making progress, i think. first of all, with the post crisis reforms, banks have to hold a lot more capital. they hold more equity than before the crisis, so it would take a lot more to put a big bank on the verge of failure. that's the first thing. second thing, the big banks are under much tighter supervision now and watched more carefully than they were. finally, dodd-frank gave the regulators the power, the tools

to dissemble a big bank or a big financial institution in a way that didn't bring down the rest of the financial system, and we're already seeing that some of the big banks are -- their credit ratings are being reduced because the credit rating agencies say they can no longer count on government help. i wouldn't say the problem is solved by any means but it's very much in the -- under the radar and it's being paid attention to and progress is being made there. >> a lot of conversation this week, ben bernanke, about whether financial executives should have gone to jail, owive asked about it, what do you think? >> well, what i was saying there is i was making the comment on the department of justice strategy. the fed is not an enforcement agency. the department of justice, the strategy they followed initially was to go after institutions and penalize the big banks billions of dollars for their misbehavior and my rakes to that was that, you know, corporations are legal

fictions, they don't themselves take legal or illegal actions, it's the individuals who make those decisions and i would have preferred to have seen the strategy to go and determine what individuals were responsible, and then we would have found out more, i think, and been more accountable that way. >> woodruff: but that was donate. do you believe you know who should have been held responsible, the individuals? >> no, i don't. at least be vsmghtd we saw cases where people have gone to jail for market rigging and other kinds of blatant things, but it's a fine line in finance between being reckless and irresponsible and breaking the law, and i think those situations need to be investigated. >> woodruff: aside from the executives at the big banks, just in terms of ordinary americans, people who go about their daily lives, you hear so much conversation today about how, yes, the economy is growing again, yes, it's come back, in many ways we measure, but still people express a feeling of anxiety, of worry that the

economy hasn't taken off, it hasn't soared the way it did before. what do you say to people who are out there and still feeling very insecure? >> well, one of the issues is that the economy isn't serving the whole public, the whole population equally. i mean, obviously, a lot of the benefit of the growth and recovery has gone to the more upper-income class, and that was, in some sense, predictable because we have been seeing greater inequality across the population for, now, 35 years, at least. it's a very long-term trend. it's a very difficult trend to correct. i don't think it has much to do with the fed or financial crisis. it's just a very long-term friend that arises from globalization, technical change, insufficient skills. so it's understandable. i mean, i understand exactly what the concern, i-- the concen is but it's not something the fed had much control over. >> woodruff: the last thing i want to ask you about is congress.

you refer in the book to dealing with members of congress being frofrustrated, in many case, because they were telling you behind the scenes they were supportive, in public weren't able to do that. the frustration in ideology, today we see house republicans not agreeing on leadership. how do you see the congress and is this sense of ideology, in your view, going to stand in the way of what's in the best interest of the country, whether far left or far right? >> yeah, i think it could. ideology leads to talking points and alegions, and that, in turn, kind of blocks out subtle discussions of complicated issues. it blocks out cooperation across the aisle, working together to solve problems. i'm hopeful that, you know, as we move forward that more politicians will look to the center and look to try to work across the aisle to address some of the real serious issues, including the one of inequality that you raised. >> woodruff: what do you think

the cost of this is? >> our political system is paralyzed and some important steps that can make our economy more stronger, efficient and equitable will not get taken or at least for a while. >> woodruff: and the consequence of that is things don't get done? >> it's a little bit self-reinforcing because if these things don't get done, then the public becomes even more disillusioned and that feeds back into extreme and partisan politics. >> woodruff: well, ben bernanke, there is much more to talk to you about. the book is really a remarkable one, looking at your life and your experiences at the fed. it's the courage to act, a memoir of a crisis and its aftermath, ben bernanke, we thank you. >> thank you. >> woodruff: as we just heard from ben bernanke, one of the central concerns people bring up about the economy is inequality and lack of social mobility. our economics correspondent,

paul solman, has long been reporting on those issues. and tonight, he explores the role of behavior in all of this, part of our weekly series, "making sense," which airs every thursday on the newshour. >> paul: so how does this game work? >> so in front of you now you have a tablet. >> paul: akihiro nishi is prepping me to play an economic inequality game at yale university's human nature lab. in the game, each player is at the center of a small group within the larger community. and in each round of the game, without knowing what the others are doing, we choose either to "cooperate"-- that is, donate 50 units, which automatically double, to each of the others in our group-- or to "defect" and not donate to anyone, just take from those who cooperate. ♪all day, all week... >> paul: the game is designed to explore the human behaviors that fuel economic inequality, a hot political issue for several years now, which senator bernie

sanders has made the centerpiece of his presidential campaign. as he told judy woodruff in may: >> 99% of all new income is going to the top 1%. the top one-tenth of 1% owns almost as much wealth as the bottom 90%. that is immoral and unsustainable. >> paul: back in the human nature lab, it was time to recruit players online. >> if you'll look behind you for a moment, you'll see now the job is actually posted, and all these people are joining from all over the world. >> paul: so i have 200. >> right. >> paul: in the game, we'd each been assigned a certain amount of "wealth." the distribution mimicked the degree of inequality in the u.s. >> paul: and i have four other players with 200 and i have one player with 1,150. uh, where'd this guy come from, silicon valley? >> maybe. >> paul: so, round one, first decision: give each fellow player 50 of my units so they

get 100, and hope that they do the same for me, or "defect:" keep my cash and rake it in from any who chose to share. so i just go like that, right? i cooperated. there we go. risky, since with 5 fellow 50 units apiece cost me 250 and put me 50 in the hole. so did my neighbors cooperate? come on, guys. >> let's see. >> paul: oh look! so three of them came back, so i'm up to 250. somewhat subverting my faith in human kindness, however, two players had defected, including the fat cat, who'd started out at 1,150 and now had 1,550. thus the gap between fat cat and the rest had grown, reflecting the trend outside this room that we've been covering for years now. >> paul: laid-off middle manager denise barrant was losing her home in foreclosure, a case study in downward mobility. >> the top 1% is living well, and they don't get it. they don't get what is happening

to this country and i feel like we're creating a third world country subculture within this country. >> paul: at the human nature lab, nick christakis studies inequality and the key questions it raises. >> does inequality retard economic growth? does it affect whether we connect to other people? >> paul: how happy we are. >> or how happy we are or how healthy we are. >> paul: and there's plenty of evidence that extreme inequality affects all these things negatively. as berkeley psychologist dacher keltner told us: >> no matter how you look at it, the effects of inequality are pernicious upon things like bullying on school playgrounds, the quality of your physical health, how you handle disease. >> paul: that's for those below. under keltner's aegis, post-doc fellow paul piff ran a rafter of peer-reviewed studies on those atop the economy. turns out people with fancier cars were more likely to run crosswalks where pedestrians waited. the more money they had, the more people helped themselves to candy meant for children, cheated in a game of chance,

even spent more time primping in a mirror. >> i ran a study where i asked thousands of people to tell me is it moral to step on another person to get ahead? my wealthiest participants were way more likely to believe that greed and self interest is a moral and good thing. >> paul: this guy, i'm definitely cutting him. no wonder, then, that when given the choice at the end of each round whether to keep or cut ties with a few other players, i was eager to banish rich defectors. he's got 3,600 and i am resentful of people who have a lot of money and aren't willing to share, that's for sure. meanwhile, i was sticking to my default strategy, in this game as in life... i'm gonna say yes, i cooperate again. ...cooperation. and ever so encouragingly, winning converts to the high road. ah, look at that. i'm up to 750 now and everybody is a cooperator. >> paul: this is fantastic, now we're all getting wealthy.

i'm actually one of the wealth-- well no, not really. >> no, still around the bottom. >> paul: all right, you don't have to-- don't rub it in, akihiro. but rub it in he and professor christakis did, because the first major finding after running the game hundreds of times? >> the poor stayed poor and the rich stayed rich. >> paul: but it's not as if the game's less-well-off aren't trying, like i was. >> the poor people are generally trying to cooperate and are trying to invest in their neighbors to acquire wealth themselves. >> paul: and that's as in the real world. that is, poor people do give more as a percentage of their wealth to other people right? >> yes. that's correct. >> paul: maybe because of a greater need for empathy, as documented by this berkeley study gauging response to a sad hospital video. >> i'm 12 years old and i have neuroblastoma and i have been fighting it for seven years. >> paul: lower income subjects not only reported more compassion; their vital signs indicated they really meant it.

compassion-- and its corollary, cooperation-- is a coping strategy, says psychologist rudy mendoza denton, because without wealth, what can poor people count on? >> their friends, their family, their community. >> paul: and back in the lab, my cooperation strategy seemed to be working wonders. everybody's cooperating with me. i'm up to 1,650! but if you always cooperate, you're liable to be a sitting duck. oh, look at that. >> what happened? >> paul: four of them defected. moreover, i am noticing something disturbing, which is that the defectors all have more money than the cooperators. >> right, including you. >> paul: and thus the experiment's second major finding: >> it was not inequality per se that was so bad for society, but the visibility that was a problem. visibility encouraged the rich to take advantage of their neighbors and created a kind of exploitation scenario.

>> paul: but in some versions of this game, players didn't know how much others had. >> so in the societies in which we concealed individual wealth, those societies were wealthier in the end, more cooperative and more friendly. >> paul: and so, if visibility of wealth makes the rich more aggressive, exacerbating inequality, the policy implications with regard to, say, executive pay, seem, in the end, pretty ironic. >> what it suggests is that in firms where everyone makes about the same amount of money, you should open it up and make pay very transparent. increase visibility, that will increase cooperation between people, increase economic growth our experiments would suggest, and increase social connections. conversely, if there's high levels of inequality and the ceo makes five hundred times what a line worker earns, >> paul: hide it. >> hide it. if you make it visible, it has the opposite effect. >> paul: this is economics

correspondent paul solman, reporting, somewhat dejectedly, from new haven, connecticut. >> woodruff: on the newshour online: a new program in albuquerque, new mexico, is helping low wage workers by providing mentoring and tutoring for their children. it's part of a city-wide effort to improve graduation rates, and it seems to be working. read about that from our partners at the hechinger report. and today is national poetry day, so we asked you to tweet us a haiku. we gathered several of those, including newshour-themed haikus, which you can read on our home page. all that and more is on our web site, pbs.org/newshour. >> woodruff: tune in later tonight, on "charlie rose": republican presidential candidate ben carson. and that's the newshour for tonight. i'm judy woodruff. join us online and again here tomorrow evening with mark shields and david brooks.

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