economy in the global economy i mean are we asking too much of the fed right now. the federal reserve should focus on one thing and one thing only which is to maintain a stable dollar european central bank actually has the right idea they have a single mandate now they're not maybe not doing a great job of it but their single mandate is to preserve the value of the euro we have what's called the dual mandate in the united states where the fed is supposed to somehow preserve the value of the dollar but also be an economic manipulator and somehow try to generate more employment and more growth and that's where we get these easy money policies and things like that which of course as we've already discussed don't really work or if they do work they give us inflation which of course is actually a net negative in the long run so the problem is the legal dual mandate isn't that's a problem but the real problem is that the politicians and the central bankers can't resist the temptation to try to artificially goose the economy there's always this pressure to artificially lo

is it going to be the fed, is it going to be the u.s. government, is it going to be central banks from around the world. who is going to fix the mess? >> it has to be all of the above. so the fed is necessary but it's far from sufficient. it needs help from other policy makers. and also it needs the rest of the world to be relatively calm. so the fed can ill afford anotherout burst in the debt crises in europe. so you need all of the above. that's the irony, susie, this is like an or kes tree. you need everybody in the orchestra to be playing to the same music and you need someone to be coordinating this and we're not there yet. >> susie: with the little bit of time left, i do want to ask you about what happened in the markets today in the sense that there was unprecedented buying of short term treasury at a time, after the s&p 500 -- down grade. that's where it should be as we wait for the solution. >> it's unprecedented buying because basically the fed said it's not going to move. so suddenly a two-year treasury bill became almost an o

what will the fed do?e wants to know. >> that's in about 13 minutes or so from now. christine, i also want to ask you, for a little perspective here. a lot of folks yesterday watched the markets thank. watched their retirement accounts basically disappear. can you put this in perspective for us? is it as bad as it looks. >> rrt the stock part of it declined by 5.5% or 6% if you think about the s&p 500. when you look at the s&p, most likely what your stock part of your portfolio, it's down 18% in a couple months. it's been a rough summer. there's the s&p right now. gosh, you know, that's from monday, it was a tough day with pretty consistent selling throughout the day. let's put it in perspective. you are still well above where we were in march 2009. you're 64% above where you were in march 2009. no one says this is a 2008 redux. it's a different situation in the economy. the economy is more healthy than it was then. you know, stock prices yesterday, not even in the top 20 percentagewise of declines. we hav

the fed b.s. politicized this fiscal policy from the obama administration has been for several years edition to which the fed has done quite a bit and has continued to do quite a bit from historically low interest rates kept now for several years august ninth decision to keep them very low those interest rates at least through two thousand and thirteen so the year and a half or so have had normally large and sustained interventions from the bad but we've seen this sort of fiscal policy response be muted it passed and to some extent what we're doing in fiscal policy adjustments to our tax level on our spending is actually contractionary or guaranteed to make the economy smaller and i think would have a political pressure having done a lot of what you can do and having to keep whatever powder he has left dry bernanke in the federal reserve is saying hey why doesn't congress do its job why don't we see the federal government the senate the house and the white house get involved in these economic deba

i suspect, and many of the real experts on the fed say the fed will say they stand ready to do whatevert takes to keep the system strong, that wouldn't be a surprise. that is basically what the g-7 said this weekend. they stand ready to do whatever it takes to keep the economy, you know, keep the economy going in the right direction. since the fed has basically been paused for a couple of months after its second round of big round buying, we look for any kind of signal there might be some other tool in the fed's tool box that maybe we don't know that the fed would have to try to use. so there is also this other kind of a little bit inside baseball, but ben bernanke may want to do one thing but other people at the fed who have a vote too on what happens next for fed policy, so there is also the internal dynamic what is happening what they think should be done in the come i at this point. >> you're saying do whatever it takes. alison kosik, how do we define whatever it takes? >> if wall street has any say on this, you know, wall street is really looking for the fed to do something and par

>> two things, obviously, one is the fed, we saw after the fed announcement at 2:15 the market took a wild ride, it was down 200 points, rallies -- rallies 600 points off the low. you have to consider that monday was the 12 -- 12th day ever for the s&p over the last 100 years so people were looking for bargains at the same time, the combination of bargain hunting and the fact of what the fed said, i think we're down this morning, though, because you think about this, the fed basically said they're going to keep interest rates at historic lows for two more years. if they thought the economy was getting better, would they have said that? i think people realize, sleeping on it, wow, the fed thinks things aren't getting better, why should i own stocks and sell going the rally. >> you don't need the fed to tell thank you economic situation has gotten weark. what's changed fundamentally? globe when you look at the sovereign debt crisis, that hasn't gone away. you look at our problems in the united states, our growth is extremely weak here. just because the fed makes an announcement they're

and they're inside the fed as well as outside the fed. host: oxnard, california.ine for democrats. you're on the "washington journal" with scott lanman of bloomberg news. go ahead. caller: good morning. thank you. mr. bernanke and mr. greenspan mr. volcker, all of these fed chairmen, they use that money as a political tool. because instead of lending money at these ridiculously low rates, they should make those people that have the money borrow from each other. and they should stipulate when they lend out this money that if you're not going to use this money to create jobs in this country, to create and manufacturer things that people need to use, not toys, not games, things that people need, help the average citizen to be able to borrow money at a reasonable interest rate. you got people borrowing money, the average man borrowing money at 18%, 19%. they can't even pay it. they get a credit card and never pay it off. you have the republicans who want to blame everything on obama. obama doesn't have the money. he doesn't control the money. he was elected to preside

>> it depends, of course, on what the fed does. any steps it takes will be some variant of quantitative expansion, so call it qe3, whatever the details. i think the impact will be modest. i think the results of qe2 were modest but positive. but every bit helps when you're in a weak economic situation like now. again, the key will be the interaction with government fiscal policy, any new stimulus measures that come out of the administration and congress, and hopefully better measures by them to convincingly bring the long-term budget deficit under control. >> susie: let's talk about the fiscal side of the equation. what are the chances that we will see government policy-makers and congress come up with their own solution? >> the president and the congress i think are sobered by the market reactions to their recent legislation. it was not greeted with resounding joy by the markets or the domestic public or anybody else. so i think there's a real sense of urgency now for the administration to propose a combination of measures, some ad

is mutiny by the fed. i thought this isn't mutiny. we all know who they are. neal and i know these people. we know where the different groups are. i think, you know, that wasn't as much a surprise to us as it was to some in the financial markets to see actually three dissents. the number was the highest since the early 1990s. 199 or so. i think that's where there was a bit of surprise. the number of dissents they saw. we're in uncharted territory. the fact that within the fed you have some debate about which course you take in this uncharted waters these certainly normal and healthy. i think that's something ben bernanke has embraced and actually encouraged. i think once the markets settled down with that concept they were okay. as much as neal and i watch it and i agree with neal entirely we all know who they are. this was i think a little bit more... it blunted the message a little bit initially. >> woodruff: how does the s&p downgrade look now four days out? >> well, it's amazing. we've seen this remark

fed chair ben bernanke? the man running the federal reserve which is basically the central bank for the country is he conspiring against the united states? so the talk back question this morning, are rick perry's treason activity against the fed out of line? send your comments to facebook.com/american morning. facebook.com/americanmorning. read your comments later this hour. >>> a florida teen's plot to bomb his former high school. this could have turned out to be worse than columbine. that's according to tampa police. it was spoiled and that's a good thing. they arrested jared cano tuesday. he planned to set off several pipe bombs on the first day of class at freedom high school. they found explosive materials inside of his home. also found there, a manifesto outlining a minute-by-minute plan to hunt down two assistant principals, to kill 30 students. the school's principal says this young man was expelled last year for, quote, inappropriate behavior. >> his mother gave police permission to search his place

but the big question is, is the fed, the move by the fed what is needed to start moving the economy in the right direction? let's go now to nbc's kristen welker on the north lawnf of the white house. kristen, thank you for being here. >> thank you. hi there, jonathan. >> what are you hearing from th fed said? >> well, they are not commenting on what the fed said, and they are not commenting on the markets generally, and think are trying to create air of confidence and calm, and you saw that yesterday when the president came out to talk about bipartisan and bi-cameral committee to convene to identify more deficit reductions and you heard him say that, that despite the mo of standard & poor's, the united states is still a aaa country, and the united states trying to create an element of calm right now, and the markets are volatile today as you mentioned, but is certainly better than yesterday. jonathan. >> i am looking at the dow jones down 64 points. earlier today, the president was supposed to meet with treasury secretary tim geithner and tell me what is happening with that meeting? >>

what's your take on what came out of the fed today? >> there's clearly a lot of disagreement at the fed, and ben bernanke has probably purred them as far as he can right now. i think he would like to be more proactive. he would like to cut off the risk of a deeper downturn, something worse happening, but those think we can't do that much. interest rates are almost at zero, and quantitative easing didn't seem to do that much, and we're nervous about inflation. there's a lot of disagreement within the board. so i don't think you can see anything quick happening, nothing big out of the fed. also with all the outside anger about the last round of bond buying. >> susie: so you're right about quantitative easing inside and outside the fed. a lot of people are calling for another round of pumping money into the economy. are you saying that's just not going to work at this stage? >> new york i'm not saying that at all. i think it would be a good idea. i think the balance of risk here is much more towards a very prolonged japan-type downturn wh

you there i guess the problem with the fed doing more on the economy right now q.e. two didn't do anything it looks like for the economy growth was stronger prior to q e two than it was when we came out of it monthly job creation is no better but what we did get during q e two was. asset commodity inflation that actually ends up hurting the economy so there is some serious question about whether. the fed can actually do anything good look if things got really bad again there's no doubt that they had to act but i think in terms of intervening the fed probably feels that it's tools are limited and it doesn't want to go there unless it feels absolutely forced to because it's got blunt instruments that aren't that effective and what about the fact that there are also three dissenters when it comes to this decision by the fed i think does that show you that there's a lot of confusion a lot of loss as to whether they can help it all. yeah that's a pretty that's probably one of the biggest substories which is the fact that you know during the first go round of easing there

wall street ends a wild day with a big rally after the fed makes an historic move. what it means for jobs, the economy and what experts say you should do with your money now. >>> emergency landing. passengers rushed to the hospital. a jet hits severe turbulence. >> out of control. rioting spreads. fires blaze. and police finallylylood the streets of london. as raging mobs do battle with bricks, bottles and bats. >>> cover controversy. michele bachmann lands the cover of "newsweek" but did the magazine try to make the republican candidate look crazy? tonight, charges the picture is sexist. >>> and hot flash. important news tonight for women fighting the symptoms of menopause. the surprising science about what works and what doesn't. >>> good evening. diane is on assignment tonight. and if there ever was a day that highlighted the gulf between wall street and main street, this was it. the dow came roaring back from yesterday's 600-point plunge picking up more than 400 points. after the federal reserve did something it's never done before, promising to keep interest ra

basically, the fed would buy long term treasury bonds, which it has done before. but this time, it would also sell an equal amount of short- term securities. barclay's michael gapen explains. >> so, what it's doing is changing the composition of securities that it holds in favor of long-term securities without changing the overall size of the portfolio. what that will do, is on balance, put downward pressure on longer term rates. >> reporter: here's the twist. the strategy also puts upward pressure on short term rates. fortunately, most economists don't think that's much of a concern this time, because the fed has pledged to keep short term rates low through mid-2013. there are other options the fed chief is likely to spell out, including the possibility of more bond purchases. but u.b.s.'s thomas berner points out the downsides. >> the more assets they buy now, if the economy starts to grow more quickly, and they want to unwind it, the longer it will take to unwind it and the more you have for inflationary risks down the road. >> reporter: bernanke is also expect

the fed wants to stimulate home bying and car bying and other things so this is another way of the federacting with the markets to try to stimulate economic growth. >>shepard: this only took words not trillions of dollars. >>guest: did not take qe3, just a different way of driving yields down and causing people to look at other assets for investments. >>shepard: thank you. i feel better. better today than this time yesterday. it was just a stone. down it went. scary. a texas jury has sentenced the polygamist cult leader and rape effort warren jeffs to life in prison for what they call having sex with underage girls but you cannot have sex with 12-year-old girls, can't do that, that is called rape. i don't care what the government calls it. the victims were described as child brides age 12 and 15 if what jeffs considered "spiritual marriages," and we're told the self-from claimed prophet who speaks to god stood quietly as the decision came down this afternoon and the maximum sentence on both counts. this after a trial in which prosecutors played graphic audio tapes of the 55-year-old ma

most people don't i think read enough fed literature in the general population, why would you, the fed can in a desperate move would guy real goods and services in the economy i have been told by people who know just how the fed works and should we face a 1930s style scenario there is more the fed can do. >> sure, there is. >> there are theoretical limits, but maybe not practical limits. >> thank you, ron. with us now cnbc chief washington correspondent john harwood and steven wiseman editorial director and policy fellow with the peterson substitute for economists. first to you, john, what the market is doing is tying the president's hands. let's talk about the new appointees. we've got nine out of 12 at this moment. i haven't checked as to whether or not we have a message yet from nancy pelosi. we know who nine of the 12 are. what do you see coming from this group. >> reporter: we have not seen nancy pelosi's picks yet. we heard from speaker john boehner who appointed hensarling to be co-chair of the panel along with dave camp and fret upton considered more moderates. different people

there was a kind of interesting fed decision in that it was not unanimous. we had three federal reserve officials dissenting against taking any action and that's an interesting development, because given the sell-off that we saw on wall street, a lot of people thought we would see a unanimous fed decision today, and it was not. it is just an indication of the tension that is ongoing and the debate that is ongoing about how much stimulus this economy needs and whether we should let the market find its own bottom and the economy find its own bottom and so interest rates left unchanged. >> that is expected, sue, as we keep the dow updated up 71 points and you are the expert here and help us to understand if we would see immediate impact on the news that we were ek expecting to hear? >> well, we were expecting to hear it, but some people in the market wanted to hear something more specific from the fed about more accommodation, more stimulus being put into the market. there was that expectation in the market to a certain extent by some factions of the market. so

are by driving up prices of assets including commodities like oil what do you think the role of the fed is in terms of the price of oil well you know by creating liquidity for the banks that does encourage speculation in oil but you know i don't think there is there is that much of an effect what we're really looking at is higher oil prices being driven first of all by higher costs within the industry and second by higher demand in china and other asian countries. what the fed is doing with quantitative easing is it's kind of a desperate measure there is there's some understanding there that. you know the government is kind of the the the last resort for keeping. the economy growing and government spending and borrowing have have have really paid for the recent u.s. recovery but now politically in the u.s. more government borrowing is really impossible you know there's a it's a political orphan neither democrats europe republicans want to claim it so the fed is left with it's very small tool box of solutions and quantitative easing is basically what's what's left on the table it doesn't

probably until 2013 says the fed. how washington made history ahead on business. >>> a live look outside, the sun starting to peek out. a beautiful blue. wednesday, hump day, august 10th, "today in the bay." >> nbc bay area, reporting what matters to you, this is "today in the bay." >>> good morning to you. thanks so much for joining us. it's 6:01 right now. i'm laura garcia-cannon. >> good morning, everybody. i'm john kelly. let's get your day started with a check on the weather and meteorologist christina loren. >> good morning, guys. thick fog especially in marin county, visibility starting to fall. if you are sick of waking up with cloudy, cool conditions at the coast, i've got a warm-up in the forecast. we'll tell you about that coming up. first let's get to you work on time. 6:01. is it getting busy out there, mike? >> it is. it's getting a little better, i guess. a look at the one lane open side, south 101 whipple, full closure southbound side because of an accident involving an overturned truck, emergency crew

and a lot of that volatility came after the fed's decision.e talked to some traders, they say what you ended up seeing was a relief rally that the fed finally acknowledged that the economy is weak. but it's going to go ahead and continue to give the economy support for reinvestments from previous investments. do you know it also says it's going to go ahead and keep interest rates near zero for another two years, that's what really got stocks going today. the bad news, of course, the central bank sharply downgrading its view of the economy for the third time this year. it said growth is considerably slower, but i don't think we needed the fed to tell us that, john. >> and on the point of the fed giving us specific dates through at least mid-2013 of keeping interest rates low, when they have the meetings they usually see for the foreseeable future. how unusual was it, you said it was reassuring for the fed to stretch out its target that far down the road? >> it is unusual for the fed to give a specific time frame, but do you know what, these are

perry's recent comments threatening to treat fed chairman pretty ugly if the fed were to print more moneydiculous and his comments have been criticized by both republicans and democrats. talking about the federal reserve, perry said out right it would be treasonous if chairman ben bernanke tried to use fed policy to stimulate the economy before the election. first of all, the fed chairman is independent, appointed to a term that deliberately does not correspond to the presidential term of office. this particular fed chairman has identified in the past as a republican and was appointed by president bush. and even if he weren't, calling a public official who is doing his job treasonous is beyond the pale and unbecoming of perry. treason is such a specific and explosive charge that the founding fathers actually included it in the u.s. constitution, defining it as waging war against the government or giving aid and comfort to its enemies. the fed, which acts independently of both congress and the white house, to shore up the economy and keep inflexion -- inflation in check hardly qualifies. n

i do think that some in the markets wanted to see the fed act more decisively and go with a quantitative easing of qe-3 to pump more cheap money or long-term money into the economy and the counter pressures you saw to that, and you will see that the dissents, and the planting of the seeds of future inflation and driving down to value of the dollar and all of those things are forces acting on ben bernanke, and signalling that he is going to keep the rates low for an extended period of time through 2013, they are at least signaling the fact that they get the economic outlook has gotten bleaker and left open the possibility they will take more decisive steps down the line. >> let's talk about the political outlook and what is the stance now in washington? because some are calling for congress to come back to work now, and is that what is needed? >> well, i'm not sure what will be accomplished, jonathan, because you know as well as i do the extent of the divisions and the contours of the divisions in the congress. when i have been talking to people within the administration and close to the

>> quantitative easing, where the fed prints money and buys financial assets like bonds. the purpose is to increase demand, designed to get people hording cash back into investing and people and jobs and designed to prevent the debt burden of bad debt overhang that's really suffocating the economy right now. >> that's what's so insidious about this. so far the fed has done two rounds of printing money and the idea is as a sort of extra aide, way of stimulating the economy, outside the mechanisms of the budget and fiscal economy, why is rick perry opposed to that, what's the ideological tradition in which he opposes that? >> when we see the conservative ideology come out of the fed, there are three approaches to it, people looking at the '70s, looking at inflation, looking at hyperinflation instead of realizing we're in a great depression moment. don't underestimate the cynicism of gop operators, especially going into a presidential election, and then there's this third wave of really right-wing conservative, kind of 19th century people who view deflation as a good. people

in a statement, the fed had confirmed what investors had decided. downside risk to the economy have increased. and for the first time, the fed set a target date for interest rates. likely to warrant exceptionally low levels through mid 2013. >> the fed is hoping to encourage investors to come back in and buy stocks, buy corporate bonds. buie things that have some yield left. >> reporter: but for many, like this retired realtor in miami, it will take more than one day to undo the damage. >> what we were looking forward to in our retirement and having these funds, you know, to carry us on, it's just dwindling down. and so, you wonder, where is it going to end? >> cnbc's sue herrera. wall street's gain is providing a boost to stocks in asia and europe. we turn to london for an early look at the markets. cnbc's steve sedgwick live for us there. what happened yesterday, my friend? >> it was quite incredible. as sue was talking there, the magnitude of these moves was stunning. the s&p, which is a broad brush index of the united states, reversed directions

so how did he become so important to this process being the fed chairman? >> well, the federal reserve has an important role to play in the economy. and the reason he is such a lightning rod for the republicans right now is because by making monetary policy easier, by loosening up the monetary policy, he has been accused of financing these big deficits that barack obama has signed off on as president. so bernanke has become sort of the financer in chief, almost, in the eyes of republicans of big deficit spending. the other thing is that republicans are much more worried about inflation now than they are about growth in terms of what the fed should do policywise. in both those areas he's run afoul of republicans and we see a situation where bernanke, who was first appointed by george w. bush and who is himself a republican is coming under a lot more attack from the right than from the left. >> jim, the markets expected, or at least they hoped that bernanke was going to signal that there would be a new form of quantitative easing, some magical formula by whic

the fed speaks today and they stay quite nervous and volatile.ou mentioned the dysfunction in washington, there's a debate over what to do next. here's a bit of the president's view -- >> if congress fails to extend the payroll tax cut and the unemployment insurance benefits that i've called for, it could mean 1 million fewer jobs and half a percent less growth. this is something we can do immediately. something we can do as soon as congress gets back. >> in your view, are those steps more small-ball, short-term steps or are those steps that would get the economy back on a path to sustained long-term growth? >> unfortunately that's more nibbling around the edges. you know, the president created a bipartisan fiscal commission a year and a half ago, simpson and bowles did very serious work, came up with a serious bipartisan package and then he ignored the proposal and then the congress ignored the proposal. if i were to offer the president my humble advice, i would say take the simpson bowles prop sal and take it to the congress and say pass it rig