as you know the federal reserve is a relatively recent institution in. erica i say i mean it's the past hundred years in between friends and between what is a hundred years it was founded in one thousand nine hundred eighteen having been inaccurate in one thousand and thirteen so from the dawn of the constitutional history of america seventeen eighty nine to nineteen thirteen with some exceptions having to do with the earlier. variants on central banking in this country it was without a central bank and so what how do we fix interest rates where there was a supply of credit or savings and the demand for credit and savings. and the marketplace tended to the setting of interest rates rather well the period one thousand nine hundred to one hundred thirteen for example in the authority of the terrific and universally esteemed financial economist charles good heart was perhaps the most successful and one of the most successful periods in american finance interest rates were stable bank failures few. i think the earnings strong nothing like the systemic collap

this is what is commonly referred to as the fed's dual mandate, and the federal reserve's announcementonetary policy further is consistent with that dual mandate. the federal open market committee said it will purchase $400 billion of long-term treasury securities and pay for those securities by selling an equal amount of shorter term government debt. in this so-called operation twist, the fed is not expanding its portfolio but shifting its competition so the average maturity of its holdings is longer. the goal is to bring long-term interest rates further, reducing borrowing costs for businesses and consumers, sparking additional economic activity and ultimately boosting employment. the fed afffirmed it will pay close attention to inflation and inflation expectations. some in washington have called on the fed, to, quote, resist further extraordinary intervention in the u.s. economy, unquote. arguing that action by the fed could further harm the u.s. economy. i disagree. with so many americans out of work and with g.d.p. growth having slowed to less than half of 1%, first half of this y

funds from the us federal reserve they were keeping it afloat in two thousand and eight well folks i've got to hit you about a little legerdemain of grammar and syntax and word usage the word assets in this case refers to debt so whenever you see in the paper that she has got one hundred eighteen billion dollars in assets now about it's assets for the bankers because it's debt that they're collecting rent from you in the form of austerity measures but it's not an asset in the sense that it's worth anything it's debt pulled out of their strange thing that has an interest bearing coupon that you've got to pay for through austerity measures yes it's an asset for them but it's a pain for you now the reason why the u.s. federal reserve was propping up debts here for so long is that dexie is crucial they say to the municipal bond market so it holds the assets of many municipal bonds including new york city on its books look the pirates off the somali coast are critical for the economy of somalia that's true if you remove the pirates the economy in somalia would collapse. that's tru

the federal reserve lots that to happen. -- the federal reserve left that to happen.ead time, but in 1970, that turns into a roaring inflation. by the end of the 1970's, our financial system is under severe stress. the total reserve steps in, drive the prime rate to 21%. they have been doing it for 70 years and suddenly they're paying 16% interest. not a good formula. the few that may get to that crisis, they get some help from the regulators. the fslic cost the taxpayer $300 billion. they had to go work for the fdic. none of them ever got fired. the regulators of the savings- and-loan industry encouraged to hedge their home mortgage portfolio. here is the dilemma. you cannot have lunch a home mortgage. when interest rates started to fall, they prepaid their mortgage. the regulators decided that you could not make money in home mortgages. they forced the savings and loans to get into the commercial real-estate lending business. shopping centers, office buildings, commercial property. they helped create a commercial real-estate bubble that burst in the early 1990's. on

venture a limited federal reserve just because a central bank goes so many useful functions and it them in the biggest when it's liquidity function this central bank is there to allow the money supply to expand its line is we have a system where banks create our money basically all of our money is created by banks in the form of loans except for coins which are the only in issued by the government and banks are always want more money back and they put out there in other words they create their principal but they don't create the interest necessary to pay off their loans you have to have an expanding money supply or somebody is going to go bankrupt which is what's happening in the e.u. because they don't allow their central banks to actually create money oh just kind of looking at this banking model for a second because we've talked about this before and you've talked about the existence of paper money our fear of money is ok given that it's very very is controlled the supply of money is controlled. versus let's say a gold standard that would be more or less imply however as you'

i am in front of the federal reserve building on market street. can see some of the protesters out here. these protesters have occupied san francisco for about a week. 30-40 of them out here. many stay overnight. some joined the processors after the sun comes up. most of them are against the corporations and what they are saying, the 1% hurting the 99%. for the most part, they say that they will remain out here. you talk about the wall street protests, these are in support of that protest. it has been quiet out here. if there are barricades set up to make sure they do not try to get into the federal reserve building. yesterday, protesters attempted to set up a permanent encampment with tents, but other than that it has been pretty quiet. >> there are also protest going on in san jose and there could be a showdown at the san jose city hall. we are keeping our eyes on that because of this occupy movement. craig skalar tells us, the city does not want demonstrators pitching tents overnight any longer. if >> you can see the occupy san jose tens on cit

the federal reserve was created in 1913 to address financial panics. but also to raise around the world for 300 years, the way that we do that is provide a backstop liquidity during panics when financial institutions lose their funding. it is very much in the interest of the broader economy and the average person that we prevent the collapse of the financial system. it is not our role and we do not have the authority to make general loans to the general public. >> but you do have the authority, and some argue with you should have it, to do with unemployment. why are you not doing for small businesses what you did to the large financial institutions chris forward >> we are discussing unemployment and then discuss the steps to ease monetary policy, which is our main tool. to get to provide low-interest loans the way that you provided to large institutions around the world? >> i do not think that that is our role and i'm sure we do not have the authority to do that. >> representative campbell. >> thank you, mr. chairman. all like to follow on what vice- c

>> thank you. >> on april 13, the federal reserve board and the federal insurance corp. issued a joint report summarizing results of a horizontal review. you found critical weaknesses. foreclosure documents and oversight and monitoring of third-party vendors which resulted in unsafe and unsound violations. simultaneously, it you entered into a consent orders with these third-party service providers third-party service providers which required

they just assume that the federal reserve knows what's best. they note the interest rates should be and yet in free-market economics, we have come to understand that prices are key. the price of a product tells the businessman and the consumer what to do. if the price is too high, the consumer does not buy. then the businessman knows what to do. without that, socialism is destined to fail. this is what a free market economist predicted in 1929. he predicted the fault of the communist system before it was really at its best level. it was yet to come. socialism was explained to never work and it didn't work and we have seen the failure of it. the only question now is whether interventionism which is what we have today, how long it will last. money is one half of every single transaction. yet we don't question the fact that a couple of individuals secretly, 12 people get together and say i wonder what the money supply should be this way. there is a crisis going on. , let's double the money supply. let's decide who gets the belt out. the little peo

the federal reserve market committee released the minutes from the meeting in september. they showed policymakers considered even more quantitative easing with a third round of bond purchases, although they did stop short of doing it. the minutes also showed members' favorite steps to increase the feds' transparency. hedge funds founder raj rajada wrrks at was sentenced to ten years for insider trading. a professor at the university of chicago's booth school of business has a singular insight into how the fed works, what it does and what it can do. he joins me right now. welcome to the program. >> good to be here. >> federal reserve chairman ben bernanke recently called the unemployment rate a national crisis. has the fed run out of things to do? >> i think it's very important to make a distinction between what the fed can and cannot do. people talk about whether it's run out of ammunition or not. it's always had ammunition to affect inflation rate, affect deflation and affect interest rates. that's what they've done to try to lower the short rate and also lower the long

doesn't you have to understand this morning who in your view which has understand the federal reserve was established who milk banks money that is their goal with a view is they increase the money supply but outstrips the amount of savings that bailed the loan so they do it is they increase in counterfeiting your currency they drop interest rates or now when you go to the bank you money you're saving in the bank you get almost nothing yet what they're also doing when they create and counterfeit money is creating inflation so long term interest rates rise short term interest rates are new look to lower that. sure you'll curb or you'll spread that's where your banks make money so they have increasing margin and a lot more money to loan out and they end power and bankrupt the middle class you know when real incomes for your discretionary purchasing power drops and take into the extreme guess what the middle class can only afford the basic necessities they don't have any discretionary purchasing power and that means the economy thought there's and the g.d.p. drugs and unemployment rates a

the federal reserve meets tomorrow. what can we expect tomorrow? more importantly what can we expect out of the fed in the new year to revive the economy. >> i i don't think the federal reserve will do anything tomorrow. it has done things over the last couple of meetings that they won't adjust rates until 2013 and widing long term securities to bring down long term interest rates. i don't expect anything tomorrow. if the economy tends to weaken next year we will get quantitative easing. i don't expect it but wouldn't rule it out. the economy isn't home free yet. >> susie: alright.another impore are watching this week is the october jobs report. that comes out on friday. what do you expect from that? also as we talked about at the beginning of the conversation 1.4 million jobs to be created in the new year. how much is that going to help, how much jobs do we need to create to really boost the economy. >> good wh question. i think we will create a hundred thousand jobs in october. that's the key number on friday. for context we need 125 to 1,250,000

the not so subtle point-- the federal reserve can't do it all. darren gersh, "nightly business report," washington. >> susie: stocks mount a late- day turnaround on fresh hopes europe can shore up its banks. the dow rose 153 points, rebounding from a loss of 200 points earlier in the session. the nasdaq added 69 points, or 3%, and the s&p 500 gained 24, despite dipping into bear market territory earlier in the day. >> tom: still ahead-- we go "beyond the scoreboard" with the owner of the miami dolphins. we ask steve ross about the business of football and repairing the economy. >> susie: kraft foods is going on a diet. the company is cutting the fat in its mac and cheese and putting more fiber in wheat thins. chairman and c.e.o. irene rosenfeld is trying to whip kraft into shape before its grocery and snack businesses separate next year. she talked to diane eastabrook about the challenges of building a healthier business in an unhealthy economy. >> taking a recess from the executive suite, kraft chairman and c.e.o. irene rosenfeld plays with stud

will tran is live at the federal reserve building with more on this story. well >> we are one hour away from the march at the federal building. right now it is pretty quiet. people are upset about corporate greed, the claim that 1 percent of the wealth is controlling 99% of the citizens in america. they are breaking the law according to the city up san francisco because they do not have a permit. so far police officers are not doing anything once the march begins who knows what will happen. we are going to get reaction from them as to why they are continuing to do this. >>justine: this afternoon occupy walnut creek will take over the downtown area. it plans a protest in front of the bank of america on main street. >>mark: doubt futures continued to rise ahead of the opening bell. worries about european debt could weigh on the market. it looks like we are off to a better start than yesterday after one of the quietest days in months with the dow closing down 17 points. investigators were spending hours waiting to see what would happen in slovakia. they wound up

lives or how about checkbook diplomacy which seems to be paying off for some other countries also federal reserve officials are out talking about more bed stimulus aimed at helping the lousy mortgage market the idea is to help struggling americans refinance or buy new homes good who is this really help underwater u.s. taxpayers or the investors all over the world who bet on their bad mortgages and it is day thirty five of the occupy wall street what is next for the movement well we don't know but we told you about who's capitalizing it first we heard batman the movie was possibly filming there is a comedy park and now it appears m.t.v. is recruiting from the movement for their next real world reality show we'll talk about that later in the show let's get right to the capital account. all right so as i just said u.s. president brought obama announced today he's pulling all u.s. troops out of iraq or he promised to at least by the end of the year and said the u.s. will build new time of trade and commerce with the country among other things but the cost of doing business in the u.s. via war three t

they allow them to bar dollars from the federal reserve. they can exchange euros for there to currencies. a central bank worked to contain episodes of financial instability. recent events have shown the importance of diffusing threats to financial stability before they can inflict damage on the financial system and the economy. it illustrated the sombanks. among these benefits are the information sharing between supervisors and the suppliers. the ability to avoid substantial overlap in making a financial stability policy. it is about economic and financial conditions. appreciation of these benefits can lead to larger roles. the bank of england received expanded powers and responsibilities for financial responsibility. it will identify risks. the newly created risk borne includes the governors of the european central banks. in united states, the federal reserve has room oriented the supervisory operations to incorporate a broader system in focus. it has been assigned new responsibilities including the supervisory authority over institutions

the federal reserve's recent announcement that it will ease monetary policy further is consistent with that dual mandate. the federal open market committee said it will purchase $400 billion of long-term treasury securities and pay for those securities by selling in equal amount of shorter term government debt. in the so-called operation twist, the fed is not expanding its portfolio but shifting its composition so that the average maturity of its holdings is longer. the goal of the fed's actions to bring down long-term interest rates further reducing borrowing costs for businesses and consumers, sparking additional economic activity and ultimately boosting employment. the fed also affirmed that it will continue to pay close attention to inflation and inflation expectations. some in washington have called on the fed to quote resist further extraordinary intervention in the u.s. economy, unquote, arguing that action by the fed could further harm the u.s. economy. i disagree. with so many americans out of work and with gdp growth having shown -- having slowed through less than half of 1%

they are expected to start around 7:00 this morning at the federal reserve building on market. expect street closures. we'll follow it for the morning commute. we'll let you know what's going on there. in the meantime for now, heading into san francisco, it is really quiet. there are still no metering lights at the bay bridge so you are looking good all across the upper deck. there is no sign of any slowing on any sensors anywhere and there was some overnight roadwork on the upper deck, that's been picked up, as well. and on the lower deck. westbound 92, 13 or 14 minutes between hayward and the peninsula. eastbound 4 a full freeway closure, should be pick up the cones shortly by 5:30 when the detour signs are expected to be removed. westbound highway 4 looks great through pittsburg, concord towards 242. there is no delay at all this morning. and for mass transit riders, great news here. systemwide bart is on time. bart, ace, muni and caltrain and your ferries all are on schedule. remember kcbs once you do hit the roads. they're our radio partners. and you can find them at 740-a

well and others, over the federal reserve. i did file legislation last april to change the structure of the federal reserve open market committee which votes to set interest rates and it now consists of the seven appointees to the federal reserve board of governors who are appointed by the president and confirmed by the senate. people selected in that democratic way. but with 14-year terms to guarantee some independent -- independence, so they are presidentialy pointed, they are confirmed by the senate but they serve for 14 years so there is not, presumably, the chance for one president to get everybody. that's built in some staggered terms there. but there are also five votes that are cast by regional presidents of the federal reserve banks. these five people, it's on a rotating basis, the new york president always gets it, four others out of the remaining ones go on periodically, these are people helping set the most important public policy in america. monetary policy, interest rates. but they come with no -- nothing remotel

little bit station and the other thing is i'm not sure that you want an entirely independent federal reserve board anyway but you want one which makes decisions purely on the economics of the case on the politics of the case and the crucial thing was greenspan you're absolutely correct because greenspan more than anybody politicize the process because he was basically at the end of the day a political person because he was a very poor economist everybody agrees that it was a very poor economist and he basically knew how to keep the bankers happy his constituency was always the bankers from eighty seven on with every time the banks had a problem because interest rates are low the system with money and that created this huge debt burden to a large degree so you can't get off that but i think you've got to break that nexus i agree with that is the thing i was thinking of the wall street protest perhaps rick perry. i would like to go down there are doing that because remember he was the one railing about the fact that the fed was basically should be tried for treason but actually should be tried

we're lucky here in that the federal reserve has a clear mandate to set interest rates for the us then we have a unified federal bond market so in that sense the fed can act and is allowed to act it's different in europe where the e.c.b. is not authorized to necessarily set italian interest rates with the german interest rates that's not in their mandate and that's the problem they have we have a unified market so the fed can act we have more firepower here to solve these problems but in the long run we both face you know ultimately too big of a national debt well will harm us ok i want to get to the debt but you said that over there can act in the u.s. my question becomes many think the u.s. is going into a recession economic data comes out again and again showing that we have a jobs crisis and bernanke he calls it a national crisis so should the federal reserve be doing more well i actually think they should they have to mandate under law one is not from employment which they say is unemployment rate of around five percent and the other is stable prices which they say is an inflation

circumstances you get into a problem what do you make of the current interest rate policy of federal reserve banks around the world zero interest rate policy it seems forced quantitative easing one to force heaping interest rates artificially low it's not just perpetuating the ponzi well now to some degree but the ponzi now is the government's because the government actually took over the debt from the private sector because they had to through the banking system of the banking system became literally insolvent and now what we're seeing is a concerted effort by the central banks to keep interest rates low because they know for instance take japan it's got two hundred percent debt to g.d.p. that's gross debt not net but he pushed up interest rates from one percent to three percent while japan basically goes out the back door quicker than you can blink so everybody actually has to keep interest rates now the most interesting recent example is ben bernanke and the twist are basically what he's doing is pulling down the long into he's saying all sorts of things like mortgage refinancing they wou

the charge on that but there has been a lot of chatter along those lines is there a role for a federal reserve bank it's a relatively in america carlos really started as a way to get away from the bank of england ben bernanke on made this case you know one reason we started america was to get rid of the bank of england get away from them it was created by german strangely enough to pull good and when they introduced in one thousand perching they brought in the income tax that's ok so now is there a case for a federal reserve bank at all i suspect you would need it because among more than one treat comics you cannot get away from a central bank somebody has to print money somebody has to control the money supply somebody has to control the debt issues if you look at a state like north dakota in america yet they owns the bank they have a very tight control on the money supply and they didn't have any of these banking probably just going back to hike and basically say you have a rule based system where you're basically saying look there's a series of rules you just follow the rules in which case