only the federal reserve, acting as a central bank, can provide more relief. in 1931, as the gold flowed to europe and so on, that was a loss in reserves the central bank had to make it up. the fed would not stand by. it raised its scountate to force banks to increase the rate of inrest paid to depositors. the result--foreign investors earned more interest and left their money in u.s. banks. that ended the gold drain. but raising thdiscount re had other, less fortunate, consequences. if the federal reserve raises the discount rate, that transmits a message to banks and the money market that it wants to be restrictive. for the economy as a whole, the result was disastrous. high interest rates discouraged borrowing, choking off business credit. more businesses failed, more jobs lost, and more banks collapsed. the country was pushed deeper into the great depression. well, professor, if you graded the fed-- a, b, c, d, f-- what would it be in the 1930s? i would grade it as an "f" applying today's standards. probably a "d," applying even the standards-- the most adv

when the federal reserve wants to fight inflation, wh it does is provide funds -- basic funds we callerves, funds to the banking system -- less fast than bank customers are asking for money and credit to finance the kind of spending they're trying to do in this inflationary period. that means banks have to hold back a bit in terms of the amount they lend, may have to sell some assets, sell some securities to adjust. that puts a little more restraint on borrowers, they don't get quite as much money. banks typically charge higher interest rates. those higher interest rates lead borrowers and investors of all sorts to think a bit more before they decide to make that next expenditure. and in that slow, pervasive, percolating way, a sort of a gentle, restraining hand is laid on the economy. schoumacher: but the fed's restraining hand began to have a negative effect when unemployment started to rise in late 1974. by january of '75, 7.5 million americans were out of work. the pressure was on washington to act. representative henry c. reuss was chairman of the house banking committee. several

the federal reserve leaves interest rates where they are and stocks move higher. >> coming up, oracle and fed-ex, two corporates report disappointing earnings. >> and hot houses. more good news on housing sends home building stocks higher. we'll look at whether or not there's a thaw in the mortgage market as we continue our stream guide. all of that and more ahead. >> so, tyler, all about the federal reserve and the economy. >> and cyprus in there for good measure. it was a very busy news day. we're here to tell you all about it. the federal reserve did it again. says it's going to keep interest rates where they are, near 0%. and it also says it's going to keep up its bond-buying program. the markets like what they heard from the fed along with a pledge from the new head of japan central bank about its own bold, easing measures to be unvailed on thursday. as a result, stocks moved higher here about. the dow touching an all-time intraday high. the blue chips did close 56 higher. nasdaq up by 25 and the s&p 500 rose for the first time in four sessions adding 10 points and taking us to w

federal reserve accepted the plan of citigroup, bank of america, wells forego. jpmorgan and conditionally accepted they have to revise and go back. aly and bb & t rejected. those banks did not have enough of a cushion in reserves should there be a severe economic downturn. former chairman sheila bair telling me it's not perfect. >> one of the positive things we're getting more information about what's on their balance sheet and what the impact of the losses could be and stress scenarios. it's an imperfect process and one that's evolving. we're in much better shape. we still have a ways to go. we're in much better shape to go than europe. i'll take our banking system over europe. >> meanwhile starting to sound the same but in a good way. by thursday of last week, the dow notched a ten-day winning streak, the longest streak since 1996. each day up set an all-time high. treasury secretary said he doesn't think the markets are in a bubble right now and that the economy is recovering. >> we still have a lot of work to do. there doesn't seem to be any push to create a

the federal reserve did it again. says it's going to keep ierest rates where they are, near 0%. and it also says it's going to keep up its bond-buying program. the markets like what they heard from the fed along with a pledge from the new head of japan central bank about its own bold, easing measures to be unvailed on thursday. as a result, stocks moved higher here about. the dow touching an all-time intraday high. the blue chips did close 56 higher. nasdaq up by 25 and the s&p 500 se f the rst time in four sessions adding 10 points and taking us to within a few of an all-time high. steve leaseman tells us where we go from here. >> the federal reserve voting 11 to 1 to keep its policy in place and purchasing $85 billion a month in treasury and mortgage-backed securities in an effort to drive down long-term interest rates. but the federal reserve chairman in the press conference after the statement came out, suggested that the fed may reduce the amount of monthly purchases if he sees sustained improvement. >> we are seeing improvement. i think one thing we would need is to make s

what did the results tell you that we heard from the federal reserve this week? >> well, the banking system is in a much stronger shape than when i was there during the crisis. if you look at each of the criteria that they have, how much basic core capital they have, core equity capital, the reason that's so important is because if financial institutions facing losses, that's the loss-absorbing piece. so if you have 5 or 6% who are equity capital, you can sustain 5 or 6% losses and still survive. in the old days, unfortunately, the capital ratios were much lower and certainly the crisis dramatically lower. so they're about double in many cases where they were. so we're by no means in a situation where we will never have a crisis or never have any problems. we can always have problems. but we're in a much better situation to be able to absorb shocks and losses than we were before. >> jim, what do you think about the banks? would you buy the bank stocks here, jim, or do you think they've had too big of a run-up? does this market have more room to run? >> yeah, i th

federal reserve is being very close to the vest.y're not saying what they did not like in the bb around t plans. the fact you see smaller regionals getting approved is an indication basically the banking sector is healing. what is really interesting too, i've got to tell you, david, the fact that american express, the breaking news here, american express resubmitted their capital plan before the announcement today. what happened was the federal reserve initially rejected american express's dividend hike. they went back and cut it. so they did get approval. that is interesting. amex you will probably see a dividend hike coming out of american express momentarily. david: we already saw, was that bb&t or ally? we saw the after-hours trade. they are trading down, presumably as a result of this news. after-hours. i'm wopd iring what is the news on jpmorgan chase. we saw bb&t. it is now down to 30. there is jpmorgan. closed at 51 flat. it is now trading a tick below. it is not affecting the value that much. what that says to me it will no

you have background in the federal reserve yourself. what ben bernanke seemed to be telling us was something i didn't believe about the financial markets and what we see in the stock market rally of recent months, that the fed is not directly responsible for the stock market rally. that it's, it's the economy in general that is pushing up the stock market. do you buy that? >> not entirely, no. the market reacted postively after qe1, qe2, qe3, operation twist. it is hard to believe the fed providing a lot of liquidity into the market isn't helping goose the market. david: when you see a growth rate in our economy as sluggish as it is, you think, god, these market rallies are not based on that pathetic growth rate. they must be based on the stimulus from the fed, no? >> they are. i think this is liquidity-driven market to a large extent. what he did say the fed does not target asset prices. i believe as far as the stock market they don't target the stock market. they are aware of what the stock market does and he has to be happy about it.

especially the district banks federal reserve bank of new york has a vested interest in making sure that this institution grows that it it remains unquestioned unquestionable jamie's on the board of directors a new york fed was to say or his term has expired now but yes after we left fire but now he's up it all conflict it was a conflict there's a conflict well we have to remember yes he a public official or see a private banker the federal reserve district banks or private institutions they're not even part of the federal reserve board their bank owned corporations where at the end of the year most of the money they make goes to treasury but there's a dividend paid out to those banks that own them or the london whale situation they claim that it wasn't it was an accident they're not doing proprietary trading anymore that they're supposed to not be doing proprietary trading but it was a glimpse into the use you call reckless endangerment is that a perfect example of how no little fat finger trained little this and that seventy eight billion gets vaporized and that's the most im

the federal reserve prints money? who knew? [laughter] this is why we have the federal reserve. this is what it's been doing since 1914 when it first came. but to a number of americans, this was kind of a revelation, it was big government, and you had these unelected people like bernanke and his colleagues doing all sorts of things that they didn't know they could do, all of which were perfectly legal, by the way. you had, as i mentioned earlier, the explosion of the deficit. americans have always at the lip service level -- b so when i say "always," i mean as long as we have polling data. this goes back at least to the '30s, and i'm sure it was true earlier than that -- thought deficit's evil, bad thing. it's bad to have a deficit. franklin roosevelt railed against the budget deficits of herbert hoover, for example. but if you look one level lower at the polling data, you also see that with a single exception of spending on international affairs, foreign aid, single exception, americans oppose every single thing that might reduce the deficit. any tax you name, any piece of spen

a real serious problem, gives so much power to the federal reserve that i fear it has turned the federal reserve into another political player in washington and in doing so undermines the independence of the fed. >> thank you very much. we are about to come to your questions, ladies and gentlemen. we talked about the federal reserve and systemically important financial institutions. i have a favorite line some of you will have heard. the biggest city of the mall is the federal reserve. has the biggest possibility to create risk and create booms and busts in the economy and to get a quick advertisement, a month from now in the same place we are going to have another book event, a book written by a friend of mine, brendan brown entitled the global curse of the federal reserve. if this is interesting to you come back to our next book event. all right. as we go to your questions let me remind you please wait for the microphone so we get you properly recorded so they can hear you, tell us your name and affiliation. if we put a statement first in the form of a question that is okay as long as

in particular, the federal reserve's interest expenses will increase as short-term interest rates rise, while reserve balances initially remain sizable. in addition, policy normalization may well involve significant sales of the federal reserve's agency securities holdings, and losses could be incurred in these sales. a recent study by the board staff considered the effect of a number of scenarios on federal reserve income, based on assumptions about the course of balance sheet normalization that are consistent with the exit strategy principles adopted at the june 2011 fomc meeting. the projections resulting from this exercise imply that federal reserve remittances to the treasury will likely decline for a time. in some scenarios, they decline to zero. once the federal reserve's portfolio is normalized, however, earnings are projected to return to their long-run trend. the study supports the conclusion that the federal reserve's purchase programs will very likely prove to have been a net plus for cumulative income and remittances to the treasury over the period from 2008 through 2025,

but, you know, i think the federal reserve has come a long way. , in 1994, we didn't even tell people when we changed the federal funds rate. now we're telling you what the state of the economy is going to be when we raise the federal funds rate. so we are making progress in terms of forward guidance. >> chairman, donna borak with american banker. there have been a number of policies floated in the last few months with regard to strengthening u.s. banks. one being, perhaps making adjustments to the basel three leverage ratio, and then also, placing a cap on banks' non-deposit liabilities. firstly, do you agree with these policies and whether or not the fed should be pursuing them, along with supervisors. and secondly, in the context of this question of too big to fail, do you think these policies would actually help to finally convince the market and the public that too big to fail doesn't exist? >> well, i think capital's an important element in addressing too big to fail. one of the things that will be proposed and is not in effect yet, will be s

i think the federal reserve has come a long way. even tell people when we change the federal funds rate now we're telling you what the fate of the economy will be when we raise the federal funds rate to we're making progress with forward guidance. >> chairman, the american banker. there have been a number of policies included in the last few months regarding strengthening u.s. banks. one being making adjustments to the leverage ratio, requiring banks to hold long-term unsecured debt and lacing a cap on banks non-deposit liabilities. do you agree with these policies whether or not the fed should be pursuing them along with supervisors? in a context of too big to fail, depending policies have helped to convince the market and the public too big to fail doesn't exist? >> it is an important element in addressing too big to fail. one of the things that will be proposed and not in effect yet will be surcharges on the largest banks, the largest financial institutions will have to hold more capital as a percentage of their assets than smalle

. >> what about the federal reserve stress tests at the end of the day? find out if the fed is okaying their capital plans. does that move the stocks again even though they have had such a tremendous run? >> the market is brought into the fact that the stress test is going to be a walk in the park and a lot that have stuff is more of a formality right now and they are looking to make sure they keep the checks and boston going forward but the stress test issue is not what it was four or five years ago, and i don't think it will be from this point on. >> big show. >> bill, i'll see you tomorrow. larry fink, jack welch, stress test, see you in a couple minutes. >> doesn't get any better than that. >> one thing that could derail that, the jobs report tomorrow morning, don't you think? >> i don't, because i don't think one number is indicative of a trend, and i think we've seen a nice steady upward trend in the job market that way. hasn't been quite the recovery we want, but it's been study. i don't suspect one number, even if it turns out to be bad, will torp

we'll cover that with among others, richard fisher exhead of the dallas federal reserve. all the indices are up. that is good sign. they are not booming the way they were earlier but all in the green, liz. liz: optical company sienna leading gains as shares surge following a better than expected quarterly results. their customers include everyone from at&t and verizon, said they expect to win more contracts this year. the stock responded beautifully up 17%. david: oil responded to all the various things going on. its price was depressed in the past but improved by 1%. stronger economic data lifted the price. this is the highest level so far this month, settling in at $91.56 a barrel. liz: natural gas showed signs of life rallying 3.2% to the highest level so far this year. you get the thursday data every week. it showed larger than expected drop in supplies. that was bullish for prices. the nat-gas etf, ung, up more than 4% alone. david: not bad. we have a very packed hour here on fbn. later this hour the results of the latest bank stress tests will be released. we'll bri

the dow ends at a second consecutive all-time high as the federal reserve says the economy is growing but modestly. >> and america's energy future. in focus, a special report on a sector that could power u.s. growth and jobs for decades. >>> and stormy weather. a big problem for you but also a big pain for business. how mother nature is the great disrupter. >>> and welcome to all of our public television viewers. tyler,nother day of stocks and the economy grabbing the headlines. >> the stocks once again, another day the dow jumps over the moon. the blue chip index adding 42 points. the broader s&p 500 was up one. the nasdaq though edged nearly two points lower, pulled down by apple and google. the markets began the day higher after better than expected news about jobs with payroll firm adp reporting 198,000 private sector jobs added back in february, more than economists expected. also helping today, applications for new mortgage loans shot up 15% last week after home mortgage rates edged a tad lower. >> new records have a way of making investors feel optimistic. they also triggered n

first, with the federal reserve and systemically important financial institutions. i have a line that the biggest of them all is the federal reserve, it has the biggest possibility to create risk and booms and busts in the economy and if i could get a quick advertisement one month from now in the same place we will have another book event from brendan brown entitled the global curs of the federal reserve. that this is interesting, a comeback for our next book yvette. [laughter] let me remind you of a e. i. rules please wait for the microphones to tell us your name and affiliation and ask the question if you put a statement first in the form of a question as long as it is brief and if not the chair will remind you your statement time is over. >> afternoon, i have a question. mr. wallace then, it is one thing to say i told you so after the fact if you were writing all along with the broadcast media but what would have been your solution legislatively? did you have a chance to talk with mr. greenspan who by the way he mentions publicly he did not think dogs drink would

from the federal reserve board here in washington this is just under an hour. >> the federal open market committee committed a two day meeting earlier today. as always my colleagues and i reviewed recent economic and financial developments and discuss the economic outlook. economic outlook. the data had been generally consistent with our expectation that the fourth quarter recovery would prove temporary and modern economic growth would resume. spending by households and businesses have continued to expand. sector has seen for gains. the jobs market has shown signs of improvement over the next six months. private payrolls are growing more quickly,hours of work have increased. the rate of findings and employment insurance has fallen. the unemployment rate has continued to dip down. at 7.7%, the rate remains elevated. thatmains a concern economic growth and job creation may be slow in coming months. theontinue to monitor recent increases in japanese prices. prices which seem to be due to factory shutdowns. apart from temporary variations, inflation is running some of the long run objectives

if the federal reserve and what they are doing today's incredibly risky to our economy, office chairs i don't care how big a bank of the run at the federal agency is such a sin in itself, the system is risky. it is riskier today. it's the individual institutions can't manage risk in the context of a bigger systematic risk. i've are going to private banking system used in a the standard. if we are doing that, by a recommendation, a step we can take to have much more capital than they do today is that they had a private banking system, something like 20% pure equity in retail 95% including 100% of dodd-frank m. at the market take care of the allocation of capital. it's a better solution than what we're working on today. i would share peter's enthusiasm and maybe more personal about repealing dodd-frank. it's hard for the average person to realize the banking system in the united states is very much controlled by the government today. if you want to control an economy, control the allocation of capital. and if you don't get blamed when things blow up come exactly what happened with subpr

. >> significantly, the federal reserve did reduce its outlook for unemployment in the united states. the fed saying that it sees unemployment falling to 6.85% is in in 2014. that's the first time since the fed has been forecasting and making those public that it's been below 7%, a quicker pace of improvement in the unemployment rate could bring a near end to the fed's effort to stimulate the economy. and the fed chairman made comments about what's going on in cyprus and the economic and financial difficulties in that small country. >> so a lot of uncertainties and questions about how the way cyprus has created for other countries and the like. it does have some consequence. having said that, you know, the vote failed and the markets are up today. and i don't think that the impact has been enormous. >> finally, the federal reserve in its statement for the first time made mention of fiscal restraint, which is another way of saying the sequestration that many analysts did not think was going to happen. fed chairman did say that he has concerns that reducing federal spending could reduce

and the former chairman of the federal reserve, allen greenspan.weigh in. >>> tonight we have examined where the economy is growing and where headwinds remain. but let's shift to the bigger picture and explore what the long-term significant obstacles could be to america's economic privacy and prosperity. four challenges we face. challenge number one, health care. we will spend $2.8 trillion on it this year. that's about 1 out of every $6 the u.s. can economy will generate. we pay more for health care than the next ten biggest spenders combined. and we don'tç get better resul. we have higher rates of disease and injury for every age up to 75 and shorter life spans than any of 17 other wealthy nations. we rank 50th in the world in infant mortality. according to "time" magazine, cuba is number 41. >> we have to do something about health care costs. that is the main driver. but it doesn't really mean cutting benefits. that means cutting costs. >> reporter: bottom line, even though health care creates jobs, an expected 5.5 million this decade, what we

louis federal reserve bank president. very interesting talking points.preciate your time. >> good to be with you. cheryl: the closing bell will ring. we are almost done. sixteen minutes to go, and the dow, up 82 points. so approaching session highs. the dow is up more than 10% for the year. s&p is up about 9% so far for the year. curious if the decision to keep pouring money from the fed will push these markets fire. that is a question. the best place to pour your money into the market. coming up next. ♪ investor. yeah, i'm a serious investor but i'm a busy guy. it used to be easier but now there armore choices than ever. ii want to know exactly whow much i'm paying.n. i want to use the same stuff the big guys use. find out why nine out of ten large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investnt objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. ♪ cheryl: you know, we are so close right

. >> well, a lot of credit for the recent bull run is being given to federal reserve chairman bernanke. he gave stocks another boost today. the fed did, with its latest beige book survey of economic conditions around the nation, and steve liesman gives us a closer look at what the central bank found. >> reporter: the consumer is troubled, according to the federal reserve's latest beige book. the beige book is a collection of economic anecdotes from the fed's 12 districts around the country, and it helps policy-makers figure out beyond the data what's really going on in the u.s. economy. what they found was a mixed picture on consumers. they are still spending on autos and tourism and services, but retail is struggling. according to the beige book, retail sales were better in only five district and flat to weaker in seven. the districts said retailers complained of higher payroll taxes, which went up this year, high gasoline prices and government spending cutbacks. one positive piece of news, residential real estate. according to the beige book it was up in most districts with strengthe

according to a report from the federal reserve bank of new york. one out of every three people under 30 who have student loan debt, are at least three months late on their payments. that's a 10% increase from just four years ago. the new york fed also says people behind on their college loans are more likely to be late on other debts like mortgages, credit cards, and car loans. >> tom: some of that debt could be avoided if students find the right fit. about a third of students transfer colleges, adding to the high cost of higher education. ruben ramirez takes a look at one website trying to streamline the college search, and education experience online. >> reporter: max alcobi is like most high school seniors around the country, waiting by the mailbox for responses from college admissions offices. getting to this point wasn't easy. >> there were a lot of colleges i wanted to apply to but i really had to narrow it down. my school told me i had to, my parents told me i had to. >> reporter: with more than 4,000 four-year colleges and universities arou

the market dominance they being driven by the federal reserve.ncome growth, so the real question is when we get the point the fed begins to withdraw liquidity, will the fundamentals have caught up? will the income growth by then, plymouth growth by then? i don't think there will be so in the fed starts to pull way that liquidity, you will see interest rates go up, you'll see the market starts to come down and i want to emphasize the thee things can actually happen quite quickly. the fed is betting on a gradual withdrawal, the market will not overreact and they are playing with fire. i am very concerned we get to a .6 weeks, six months, might be two years or longer, but we will get to appoint this could quickly turned ugly. gerri: i don't think anybody was thinking of a quick change coming from the federal reserve. what do you see as the impact of the fed unwinding this debt? >> the fed encourages bad behavior, dangerous behavior, so doesn't want people to save, and wants people to spend, it is actually targeted inflation for the currency. this is

>> the ability to pay banks to keep reserves at the federal reserve banks. which is new.s did not happen in the future, in the past. david: a lot of people like alan blinder an wayne angell are against the policy because they think it prohibits or at least suspends for the moment the ability of banks to lend money out because they get paid by the fed. >> it will tamp down lending. that is what you want when things get too hot. not now. we don't have inflation now. in the future when things get too hot, when the economy is roaring you need a tool like ttat. liz: randy warren. david: thank you. one of his picks is boeing. we have breaking news on boeing airline. the faa approved the 787 certification plan. what does that mean? it means boeing is able to test the 787. you see the stock moving slightly higher in the ask. at least. they're able to test the 787 battery fixes. he will not allow 77s to back to service until he is satisfied about the planes. randy, while we still have you, is this -- >> you have tin years of r&d coming to fruition. they're able to sell these thing

federal reserve policymakers beginning their 2-day meeting. guest said the fed will has been substantial, don't expect changes anytime soon. that should be music to the ears of most investors. joing us, former federal reserve vice chair princeton economist alan blinder and the author of the book after the music stops. great to have you with us. >> nice to be here. lou: let's start with cypress. this little place, million folks. they're creating quite a mess. $400 billion lt of global markets yesterday. we should blame -- >> multiple of the gdp. i actually think of like what is usually the case, the markets are taking this relatively, it. well have imagined real panic runs on banks lou: and the shorts were trying to get us to imagine. >> they always do. that's how they make money. markets tend to go overboard. i don't think they did go overboard. i think their is a real danger. he knows what kind of a precedent this might be. lou: as a precedent i think it's worrisome that of all people the head of a european central bank would apparently sign

lie like that so there's a lot of problems with the federal reserve is saying and this is drawing attention to bitcoin which is now a four hundred million dollar market and it has room to become one to five ten percent of the global forex market so that bitcoin price which last year was at four dollars which is currently trading almost at fifty dollars if it captures ten percent of the global market you could see it going straining for one hundred thousand dollars a bit going to million dollars a bitcoin that has its own so let me ask you guys i mean is there any and i love the anonymity part of the big question i think it really can get a lot of widespread appeal but i mean as it gains more traction what kind of efforts could we see or should we expect to see rather from the banking industry and from you know these bank lobbying efforts to really block this i mean is it possible for them to really stifle the growth of this. i don't think it is possible to stifle the growth aside from just shutting off the internet completely but even in that case you could store your bitcoin offl

another buyback here on the heels of the federal reserve news tonight.uncing a $5 billion stock bye back program, sending the stock up 4.5% in the extended hours tonight. we've got real action in these banks tonight. will the s&p close out the week at a record high? wall street's top money pros next. stay with us on "closing bell." but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ suddenly, faraway places don't seem so...far away. it's not what you think. it's a phoenix with 4 wheels. it's a hawk with night vision goggles. it's marching to the beat of a different drum. and where beauty meets brains. it's big ideas with smaller footprints. and knowing there's always more in the world to see. it's the all-new lincoln mkz. ♪ there'll be the usual presentations on research. and development. some new members of the team will be int