alan greenspan. schoumacher:to chaman alan greensp the rules had changed.doubted whether inflation cod be adequately measured in the new econo using current techniques to trace price trends over time. when electricity was developed th was a new econo. when automobiles became prevalent that was a new economy. now we have a new economy that's electronic age. think it has contributed as those earli new economiecontributed, to an increase in productivity. there was a time when economists thought that when thunemployment rate got below 6% -- or 5 1/2 or 5, something like that -- that we would inevitably have inflation. we found out in the 1990s that with aery productive economy don't necessarily get inflation when unemployment drops. schoumacher: productivity was a key factor in keeping inflation down. but another factor wasthe globalization of business. the introduction of market forces frr trade, and widespread deregulion meant that international trade and investment played a much larger role in our economy than before. volcker: japan's been almost flat on its

principally because alan greenspan was a republican and, bill clinton defied a lot of the expectationse and he did reappoint alan greenspan very much in the kind of debate that is going on right now and a lot of us, myself included think that was one of the smartest choices that bill clinton made as president. tracy: we have a lot of other stuff going on too. we have a change of of course in our top economic advisor. we have a continuing resolution fight on the table that there will be debt sealing in november. what of all this, worries you the most? >> you know, i think what worries me the most is a fiscal con tiff is the idea republicans will overplay their hand. i think they have a pretty strong hand right now. i wrote a piece in the "wall street journal" a few weeks ago that the sequester is working. it is bringing down spending for the first time in 50 years. we've seen two straight years of reductions in federal spending in part because of the sequester. i worry that republicans could basically overplay their hand, resurrect barack obama in terms of his opinion, political opinion

the fed didn't offer mortgages to people but alan greenspan certainly whipped up a frenzy when it camet rates for a very long time? >> there is no question public policy played a big role in building excesses and the federal reserve was part of that. we need to focus on before the fact, not just after the fact because we really can't clean this up. liz: do you see a bubble forming right now in any area that can be traced at least to the fed's behavior? >> well i think there is a risk that the froth we've seen in some asset markets and risk spreads is being driven by monetary policy. liz: are you saying housing? are you saying housing? >> housing i think certainly has, low interest rates helped housing come back but i do worry if we try to reflate the economy by creating new bubbles that is not sustainable growth. david: let's talk more specifically what alan greenspan was saying yesterday, which was essential we'll not be paring back on qe, on printing money in order to buy bonds because the economy is not good enough. the economy has not stablized enough. unemployment has not come dow

another book we wanted to ask you about was alan greenspan, former chair of the fed, another book coming out. >> guest: yes, that's right. >> host: what's he writing about this time? >> guest: his book is about risk human nature and the future of forecasting. so in this case greenspan -- who, as you said, is the former chair of the federal reserve -- he examines the history of the fed and the future of economic forecasting. and i think greenspan's book comes at a very interesting time, because at this point president obama is in the midst of picking a new chair of the federal reserve, replacing ben bernanke who had replaced greenspan. and the news had just broken that one of the prime candidates and what many believe president obama's preferred candidate was, larry summers who had been the former president of harvard, and he had also served in the cabinet, he took his name out of the running. and so it remains to be seen who will replace him. there's one key front runner, that's janet yellen, but anyone who's in the running for the ped can probably -- for the fed can probably take some i

here's alan greenspan later explaining why he missed it. >> i was right 70% othe time, but i was wrong 30% of the time. and there are an awful lot of mistakes in 21 years. >> some of those very people who were helping us through the crisis are now going to be advising or helping ben bernanke and the big fed stimulus that we have seen. how do we know they're getting it right this time? if my plumber got it right 70% of the time, i wouldn't hire him again. these are the people telling us how to fix this mess. >> well, first of all, i do agree, they're not doing it completely right. but also we don't face these things very often once every 80, 100 years. there are a lot of things we don't know. there are people who say if you do what i said, if you just say spend a lot more money, if you did a lot, everything would have been fine. if we hadn't let lehman fail, everything would have been fine. we don't know. you certainly want continuity in the leadership. >> we could start by paying regulators as much as your plumber gets paid, you know? that would help. there are a number of things we ca

go so in the case of stocks they like to move them higher because the dow jones according to alan greenspan another federal reserve chairman saying that everything that they do in policy in washington is to make the stock market go higher forget the fact that a vast majority of americans don't own stocks vast majority of americans are on food stamps are not the majority but a huge percentage are on food stamps and. so there's nobody in washington or on wall street who has a food stamp edge fund if there was then the value of the food stamps would double and triple the purchasing power so you'd be getting much more in your food stamp if you had that multi hundred billion dollar food stamp industry being controlled by a hedge fund manager like ben bernanke you but unfortunately the people on food stamps don't have representation so as a hedge fund and not hedge fundamentalists hedge fund been in this has fundamentalists that's a work without representation well actually i might point out that the day after the fed announced it would not taper that it would continue purchasing eighty five bill

but you have to understand the insanity of what alan greenspan said. he said about bringing in lots more foreign workers at the higher level -- the high-tech work earles. he was in favor of more illegal aliens to be a flexible labor force, believe it or not. the architect of a meltdown who provided subprime mortgages for illegal aliens. he said, first, skilled workers and their families form new house holds, they will in necessity move into vacant housing units the current glut of which is depressing the prices of american homes. what we have -- let's bring them in so we can raise the value of houses to help the banking industry. these were homes in foreclosure because americans are unemployed. then he comes up with statement. i want everybody in the university to understand that people mostly go to college to get a better future, get a career. that's why my kids are in college. my oldest boy is an engineer. he said something that blew my mind. he said greatly expanding our quotas for the highly skilled would lower wage premiums of skilled over the les

go so in the case of stocks they like to move them higher because the dow jones according to alan greenspan another federal reserve chairman saying that everything that they do in policy in washington is to make the stock market go higher forget the fact that the vast majority of americans don't own stocks vast majority of americans are on food stamps are not the majority but a huge percentage are on food stamps and. since there's nobody in washington or on wall street who has a food stamp edge fund if there was then the value of the food stamps would double and triple the purchasing power so you'd be getting much more in your food stamp if you had that multi hundred billion dollar food stamp industry being controlled by a hedge fund manager like ben bernanke you but unfortunately the people on food stamps don't have representation so as a hedge fund and not hedge fundamentalists hedge fund and then this it's fundamentalists that's a work without representation well actually i might point out that the day after the fed announced it would not taper that it would continue purchasing eighty fi

we started with paul volcker, we moved to alan greenspan and ben bernanke about to step down. found interesting, volcker was the good guy, right? white knight tamed inflation. you gave him very high marks. you eviscerated alan greenspan, eviscerated him. >> give him credit for a good stuff early in the career and tough run at the end. >> for 30 seconds, relatively 30 seconds. i think it is fair to say bernanke the jury is still out, is that fair? >> my concern bernanke may be pause as moment as hero which i think is rightly deserved in the depths of the crisis, he was the only hero. >> they pumped tons of money. >> he stopped the crisis. >> he is a student of the great depression. >> absolutely. >> you kind of knew he was not going to allow monetary policy to impede something going, getting stock market that was down to six, went up to 15. >> the fed stepped in, stopped the crisis. played an important role. we give him credit for that. i worried about when greenspan retired he was viewed as hero in 2006. only one or two years later that the cracks began surface and people real

. >> you are not holding that against per could gripe of the her, becse alan greenspan was also of thatshe is an excellent judgment. i think you need to look at overall person, background, their judgment. those are kinds of things you look at, i disagree with her on monitor policy -- monetary policy but she would be a good chairman, i did support her? neil: more so than larry summers. >> yes. i commend him for doinghe right thing, he is a bril brillt person. neil: always a class act. sheila bair thank you very much. if there are heroes after the meltdown in dealing with it, this roo woman would be among te acting like adults in ts time. when we come b guy who a fair and balanced pain to those who don't deliver, for tea partier'iers he is practically r patron saint, jim demint is my customers can shop around-- see who does good work and compare costs. it doesn't usually work that way withealth care. but with unitedhealthcare, i get information on quality rated doctors, treatment options and estimates for how much i'll pay. that helps me, and my guys, make better decisions. i don't like g

>> look, i remember when alan greenspan was german -- chairman and i was a dissenter from the people who said that everything he did was wonderful and i found myself being a defender of the fed from a left-right coalition. the fed would have been the logical one to take it away from. greenspan said that we cannot do monetary policy without insight. i hope people will look at this. when aig, which have been the recipient of $165 billion of free money, when they gave large bonuses to people, the pitchforks were out. i was worried that we were going to lose the capacity for coherent government. that is when the fed got demonized. first they gave the money to these people and then they gave some bonuses. chris dodd got in trouble because he had tried to lift them retroactively. the fed was weakened. i think it happened from the reaction. they get little blame for the bailouts. >> do you think the fed has been hurt? >> by? >> by the storm of who should replace ben bernanke. >> it has been accentuated by the fire and storm and unpopularity of the actions we had to take and the fed took. th

>> the fed -- i remember when alan greenspan was chairman, i was kind of a dissenter from the current census that everything he did was wonderful, although he did a very good job. i found myself being a defender of the fed. the moment -- it was the moment when this began to go sour. one reason we couldn't consolidate the authorities of regulation is you couldn't even give power to the fed taken away. they were the ones people would have gotten upset if you took it away. greenspan said we can't do some monetary policy without some insight. here's the moment. when it came out that aig, the recipient of $165 million in what looked like at the time of free money, though since been paid barks when it came out they had given large bonuses to people, the pitch forks were in the street. i feared a it that time we were going to lose a capacity for coherent governor nance. the fed going back. that's when the fed got demonized. the fed -- they gave the money to the people and then they gave all of the bonuses. chris dodd got in trouble because he constitutionally tried to take it away retroactiv

alan greenspan, congress gave him the power.'t until 2007 when i became chairman that we put limits on fannie mae and freddie mac and put strict -- >> congressman, it's one thing to say it's fine, you know, for rentals, multifamily. it's another thing to say you weren't promoting homeownership. you certainly admit you were promoting homeownership, right? >> no. what is your -- no. i was promoting homeownership -- >> mr. frank, as long as you were quoting from "the wall street journal," we have one here from 2005 during a speech you made on the floor. i'm not here to -- you know, we're pointing fingers backwards. i want to look forward. anyway, since you brought it up. a quote from you as part of a speech you were discussing a homeownership bill and you said in there, those of us on our committee in particular will continue to push for homeownership. you know, that's what we're looking at right now. >> yes, for people -- for people who can afford it. and i was also at the same time strongly pushing for limitations on the kind of

under alan greenspan the federal reserve failed woefully, helping lead to this crisis. we want someone who will also take seriously the other mandate of the fed, which is to move up employment. five years after the crisis, we still have millions of people who are unemployed and been unemployed for the longest period of time since records were kept after world war ii. we do not want somebody as part of the deregulatory movement -- >> i knew you were -- it's like you and sheila bair share talking points. she says larry summers was part of the deregulatory kabol and you're making the similar, if not exact date? >> i have a lot of respect for sheila bair. we're of different parties. the fact is larry summers did stand in the way of deregulation of derivatives, which would have been the sensible, right thing to do partially after capital management blew up. he also shepherded through glass/steagall. one thing in glass/steagall, it lightened the hand of regulation. was actually called fed light. i think we need someone who's not been part of the washington/wall street access.

the one that chairs -- well, the one that stands out particularly was alan greenspan, who got to be wellwn, but clearly had very little focus on what he needed to focus on, and that was full employment. his focus was on deregulation and, secondarily, i think keeping inflation in check, and the damage he did with deregulation that markets are self-correcting, for which he later apologized in front of a house committee, i think is particularly significant. but the important thing to me is whomever the president appoints, the questions about keeping attention on full employment and the fed playing a role as a regulator to make sure that these wall street banks, which are getting bigger and bigger, their wealth and power is unprecedented, the banks are again on wall street engaging in risky behavior, calling in many cases, meaning federal taxpayers subsidizing these largest wall street banks. i want a fed chair that's going to go after that and make sure that the banking system is more solid than it's been over the last decade or so. >> you make a great point, which is that under dodd/frank,

. >> reporter: for 19 years the fed was run by the famously inscrutable alan greenspan. >> increaseder discount of those returns. >> reporter: then came ben bernanke, the great recession, chaef money and a more user friendly fed. >> the economic recovery continued at a moderate pace. >> reporter: now the president has to fill those shoes. >> janet. >> thank you, mr. chairman. >> reporter: yellin has degrees from brown and yale, taught at harvard and got tenure at berkeley. her son is an economist, her husband has a nobel prize in economic theory. the 67-year-old has been on the fed for more than a decade. she's been a trail blazer for women in her field. >> at the highest level since central banking there are very few women. >> reporter: she ran the san francisco fed where she was known for standing in the lunch line with office staff and for her work on jobs and wages. she recently said unemployment is not just statistics to me. that's why so many democrats like her. but she's also seen as a pretty safe choice on wall street. what have you heard about her? >> that she's very -- and

alan greenspan he later testified he made a mills take because he didn't think it would go out of controlfrom '95 to 2006, i was in the minority. i was too sanguine, i became persuaded things needed to change. he becomes secretary in 2006. looks like the majority. the first legislation came in 2007 when i was chairman. i don't think the hybrid public shareholder, there's too much tension there. here's the policy debate. some of the free market conservative purists believe just put it out all together. people in the housing business say if you want 30-year fixed rate mortgages to be available, there has to be a government guarantee. the government should not be guaranteeing credit risk. they should be a availability for people to buy some interest rate risk if they're going to commit to 30 years. that's what corker wanted to do. my piece of this -- this is where i wanted to go. i think people have oversold the importance of homeownership. i want to see the important trust fund it outlaws the bad mortgages and we replace that with affordable rental housing. >> do you think the bush and obam

it is important for monetary policy, the sole question of trying to keep the economy going as alan greenspan did, ben bernanke, keeping interest rates low, but it is also powerfully important from a regulatory perspective, particularly with the too big to fail bank. >> reporter: analysts say she is not an issue in. might be looking at roger ferguson. of course there now might be maybe a remote possibility that the president could ask ben bernanke to stay on. declining to comment on whether she would oppose any one but yellen. a strong resonate. good judgment and works by building consensus. lori: thank you. adam: we have janet yellen and kaelin looking like they are the front-runners. so surprisingly enough his very own firm, atomic research is backing yellen, is chief political strategist joins us to explain why she might seem to be the better choice. it has nothing to do with qualifications and a lot to do with public perception. >> it has nothing to do with that at all. i think he would be a great fed chairman. bright, very decent man, not an ideologue. what i wrote and what we said today

but you have got to understand the insanity of what alan greenspan said.t bringing in lots more foreign workers at the higher level, the high-tech workers, and he also was in favor of more illegal aliens to be a flexible labor force, believe it or not. the architect of the meltdown who provided subprime mortgages for illegal aliens. they will of necessity move into vacant housing units, the current glut of which is depressing prices of american homes. so what we have here is let's bring them in so we can raise the value of houses to help the banking industry. these were homes lost to foreclosure because americans are unemployed. but then he comes up with a statement, and i want everybody -- this is a university -- to understand that people mostly go to college to get a better future. to get a career. that's why my kids are in college, or my oldest boy's an engineer. but he said something that blew my mind. he said that greatly expanded our quotas for the highly skilled would lower wage premiums of skilled over the lesser skilled. skill shortages in america

guest: he with the federal vice president under alan greenspan. he has a 40 year history of the federal reserve. that areese qualities fundamental for the future of the fed chairman which is an understanding of expectations and the balance and trade of. host: we are also saying mentioned in the financial times today, roger ferguson, tim geithner and ben bernanke. guest: ben bernanke would be a good choice, but all of these people have in common some affinity towards the federal reserve and experience with the federal reserve. understanding of the economy and how it works. let me just mention that the federal reserve operation is not merely to help banks. it is also for job creation. the idea is that you keep interest late throw, firms income these will start investing in the economy and that will create jobs. that is the idea. the execution and actual success of the idea, is debatable. the fed only has a couple of tools and its toolbox and what it has tried to do is keep a very low interest rates -- rate environment that will lead to job creation

it reminds me a little bit back about eight years ago, a change from alan greenspan and the candidates the choices, and that's my sense today, too. >> what if the president wants to do something bold, looks at bernanke, yellen, and says, i want to take a different course, i'm worried about the wealth gap, and goes with someone out of left field, like a sheila bear. >> i think it will be a great mistake. the fed needs to be the center of stability for the economy. there's got so be some certainty here, so that everybody at the tiller that will keep a steady course. and that will be -- be provided both by yellen and cohn like mark just said. >> mark, you mentioned the sense of calm among fed members. does that extend to even the hawks? i mean, is that what a laggard is saying, looking at the prospects of a yellen chairmanship? >> i would sense in terms of the leadership and their collaborative way of doing business, i would think so. you will still see some dissent among the president, either kansas city or richmond, but i think in general, what we're doing is exactly what steve liesman

year is important or who might be paying attention to this number, listen to former fed chairman alan greenspancember of 2010. he had a piece of advice for cnbc. >> you would kindly get a little less libor on your streamer and more ten year note? >> yes. >> do we go heavy on libor? >> i know what libor is. it very rarely changes. the ten-year note is what it's all about. >> as for the 30-year bond, the yield hasn't topped 4% since early august of 2011. chuck? >> north of the 30-year. you should have bought a lot of them. think about it. >> yep. absolutely. >> that's what we've seen with plans and even ten years. can you imagine being locked in for ten years? >> there are junk bonds that trade at 8%. >> that's like state and local. that is like 30%. >> unbelievable. >> it is unbelievable. if can you find one that is call protection, it can be called away from you. >> 30 years it would be gone. >> yeah. it would be gone by now. >> but i was saying, people didn't want to buy those. they want to buy floating rate paper. >> it's like people that want adjustable rates now. >> the client knows what he

clinton, alan greenspan, they were highly aware of that. '80s that monitored the mortgage market was highly aware of the special hands that were being dealt to the gses and to plead ignorance or think regulation got off skew is just not correct. they were proactively driving this train down the wrong track even though the wrong track didn't have any speed limits on it either. >> barney frank had answers on all that. said the private sector absolutely drove the -- what happened with fannie and freddie. they were just accommodating what the private sector wanted. >> no, no, the private sector was accommodating the mandates of the gses as formed out by mandates for home ownership. >> that's not what they said. >> yeah, of course not. they built the factory to build a sausage and the private sector -- >> you're talking to me friday on this event put on by the group acknowledged that political pressure and political policies played a role in fostering the housing bubble. i don't think he puts it all on the gses, rick. >> they were accommodating.

anyway, maybe we'll make him a master of the market or something too which, you know, alan greenspanl the other awards and then he's got our award above all of them. >>> up next -- thanks, bob diamond for coming on. good to see him. we're going to welcome guest host and political pundit joe watkins. and then, i've got to buy this guy lunch. i owe it to him, but looking forward to it, bob shrum, plus debbie wasserman schultz. >>> futures are down, we broke our five-day losing streak and we may resume it today, you never know. "squawk box" will be right back. >>> we have four days away from a possible government shutdown. and after that, lawmakers will have to deal with the critical issue of the debt ceiling. let's get right to the debate with our guests, bob shrum and joe watkins. also -- i hope you ate your wheaties. you've got shrum and representative debbie wasserman schultz, author of the new book "for the next generation: a wake up call to solving our nation's problems." good morning one and all. >> good morning. >> i'm just going to -- let's get them. i'm maybe a little bit more

alan greenspan now acknowledges that he rejected that authority. said it was an intrusion into the market. he later testified he now believes he made a mistake because he didn't think this would go out of control. from '95 to 2006 i was in the minority. republicans controlled the congress. i was originally too sanguine about freddie mac and fannie mae. i became persuaded things needed to be changed. as hank said in the book, he became treasury secretary in 2006. we became the majority. we began working together. the first legislation reining in fannie mae and freddie mac was in 2007 when i was chairman and chris dodd. in solution i agree very of with him. i don't think the hybrid, public shareholder mission is too much tension there. here is the free policy debate. some of the free market purists believe, pull out all together. people in the housing business say if you want 30-year fixed-rate mortgages to be available there has to be government guaranty. but the government should not be guarantying credit risk. there should be an availability for p