mr. chairman, and welcome chairman bernanke. you know, i guess over the last 30 or 40 years i've criticized the fed on occasion but the congress deserve some criticism too. the federal reserve is a creature of the congress and if we do not know what the fed is doing, we have the authority and we certainly have the authority to pursue a lot more oversight which i would like to see, so although the fed is on the receiving end and i think rightfully so, when you look at the record. if fed has been around for 99 years. and 99% of the dollar value is gone from the 1913 dollar, so that is not really a very good record. we are witnessing the end stages of a experiment, yes, they have been debasing currencies for hundreds of thousands of years, they always end badly. and they also run to gold and simple. this experiment is something different than what we had before, it started in 1971 where we were actually given an opportunity in many ways to be the issuer of the currency and we had too many benefits from that then people realized. bu

mr. bernan bernanke, do you do your own shopping at the grocery store asked by congressman paul, and why did he ask that? >> because the price of food has been increasing, and when the fed talks about the price of inflation they say they want the prices and the wages to increase no more than 2% per year, and food is increasing more than that, and the fed does not include food prices in the calculation of inflation, because the food prices fluctuate up and down quite a bit and the same reason they don't include gas prices in that measure, but what mr. paul is noting is that for ordinary americans buying food and gas living the ordinary lives, inflation can be a significant force than the numbers show, and challenging mr. bernanke saying that isn't inflation actually more of a problem than the fed is acknowledging. >> and bringing an ounce of silver to the hearing, what was that about? >> well, senator paul has a long history of arguing dr. paul, and that is that american currency should be exchanged for precious metals which it was for a long time and it was the called the gold standard w

mr. bernanke has to say. >> we've got the ltro out of europe, mr. bernanke.a lot of things coming out of the woodwork. >> auto zone had fantastic numbers today. we know how well priceline did, o'reilly auto at a new high as

mr. chairman. and thank you, dr. bernanke for visiting with us today. clearly, this economic recovery has been long delayed. it remains fragile. my constituents are frustrated as are so many of us serving them that we're not doing some things on the fiscal side of the ledger to get the economy moving more quickly. private sector forecast indicate that in the coming year we're going to be at 2.2%. that is well below the 3% growth that trends recent history. we have a jobs deficit 8.6 million jobs lost in '08-'09 recession. less than a third recovered. i'm concerned about our country tipping back into a recession at this point maybe as a result of europe. we spent some time discussing europe here today. in your interaction with ecb officials and others, but what i'd like to hear from you, doctor, is what preparation our fed has made for an orderly -- excuse my, a disorderly default by greece or the other countries within europe? i haven't heard any specifics there. you indicated that the fed is prepared to use all the different liefers that you have. so t

mr. bernanke's written testimony at 10:00 a.m. eastern time for hints of what would have cause thd very strange reaction in the 10-year treasury. maybe rick can comment on that. look at that. we spiked over 2%. that is a very sharp move up. almost like a machine trade was done. a lot of people speculating what was going on there. the important thing here is a lot of people assumed the fed was going to be very accommodative. maybe mr. bernanke did not come off quite as dovish as some people anticipated. move on here, show you some of the effects on other markets. we saw in currencies the euro just completely collapsed here. the dollar rallied dramatically and that was a factor in sharon's move to the downside in many of the commodities. how about stocks? well, the s&p did react. but wait a minute, it took a little bit of a while. this reaction took a bit longer than the reaction in the currency markets and commodity markets as well as treasuries. i would say yes, stocks dropped but took a little longer. one thing you can clearly se

mr. bernanke say? it literally happened instantaneously. they talked more about positive developments in the labor market, maybe that helped a little. perhaps a little less bullish that he's been recently. put up the dollar. clar rallied dramatically. the euro moved to the down side. you see what was going on. we ended near the highs for the day on the dollar. look at what happened in gold. we have not had a day like this, you see that, down 5% in gold. we haven't had a day like that in a long, long time. of course, less qe-3, or the prospects of it, might mean less inflation. that makes gold a little bit less attractive. this is the important thing about stocks. yes, we did drop here. but on a percentage basis, not as much as you might think. i think the prospects of a better economy, we sold out with the beige book in the middle of the day, clearly trumped the prospects of any sugar high from qe-3. i this i that's why the stocks held up a little better. leap year today, we've got a very good month overall. great month. s&p, dow industrial

mr. chairman bernanke, we want to hear your views and i hope you'll speak further about what director elmandorf said. >> thank you very much. >> mr. chairman. >> acting chairman nelson, ranking member sessions and other members of the committee, i appreciate this opportunity to discuss my views to economic outlook, monetary policy and the challenges facing fiscal policy makers. over the past two and a half years the u.s. economy has been fwra gradually recovering, while conditions have improved the pace of the recovery has been slow particularly from the pr speck active of the millions workers that are unemployed. supply chain disruptions risked to stall the recovery indications have showed signs of improvement. the federal market committee paet a say they expect stronger growth this year. the close monitoring of economic developments will remain necessary. as is often the case the able and the willingness of households to spend will be an important factor in how the economy expands in coming quarters. households continue to face significant head winds. notably real household income and wealth

mr. bernanke comes back for the second appearance this year we will begin where we left off. members who do not get to ask your question today, we will start from there and they will get to ask the question the second time. >> thank you. we have the same procedure. ms. waters, we hope you will continue this cordiality. >> thank you very much. i'm interested in housing. everyone agrees that this economy is not going to rebound until the housing market is vigorously operating. so i want to find out a little bit about what is happening with the servicers and maybe some -- something about principle reduction. on february 9th the federal reserve assessed money to penalties totaling $776 million on the five largest market services pursuant to the consent orders you issued in april of 2010. these five servicers also happened to be part of the settlement between the state attorneys generals and federal government announced on the same day. as i understand it, the penalties paid by the servicers under the consent orders issued by the fed can be satisfied by loan modifications that the

mr. bernanke would you tell me whether you do your own shopping at the grocery store? why did congressman paul ask that? >> he is pointing out that the price of food has been increasing and when the fed talks about the amount of inflation they want in the economy they want prices and wages to increase no more than 2% a year. food has been increasing more quickly. fed does not include food prices in inflation because they fluctuate quite a bit. they don't include gas prices in that measure. what mr. paul is noting is that for ordinary americans buying gas, buying food and living their daily life inflation feels more significant than the numbers show. he was challenging mr. bernanke and saying isn't inflation much more of a problem than the fed is acknowledging? >> benjamin's work is at nytimes.com. for the fist time in seven months the president is sitting down for a bipartisan luncheon, a private session that took place at the white house. this is the first such meeting since the debt ceiling negotiations last summer that ultimately dissolved. the group limited to top

mr. bernanke in the next day or so. >> yes. i'm curious to hear his answer. certainly the low borrowing cost is what we have in our baseline projections. but still maybe the case. we think it would be the case relative to what would happen with debt that was this big, having the debt that is this big will raise interest rates. so that increase was coming from a lower baseline level and is often the case. we that i extra demand for credit will still push up the cost of credit. >> and another question, i appreciate that. will the higher deficit figures come in march? another trillion dollars for fourth year in a row just unbelievable. what is your latest estimate of when the federal government will run out of money without using extraordinary means? >> we don't try to track treasury cash flows on a monthly basis. so we're not the people to come to for a specific prediction at any point of when the date might be -- >> going into the treasury for a specific prediction would be problematic as well? on the day they said they would run out of cash, they ran out of r

in the past several years has been right if you look at the statements of mr greenspan and mr bernanke you see that everything everything they've said over the fairest fewer years has been totally wrong and we know that their policies have been wrong this does not work it did not work in japan and the japanese of the last two decades the japanese stock market today lauren is eighty percent below where it was twenty two years ago that's not a typo eight percent below where it was twenty two years ago they tried this absurd policy didn't work there it's not going to work here do you think that's where the u.s. has headed to see a stock market decline that much and a lot decades. well we've already lost one of those we already have one last decade as you know the stock market is not not done very much in the list ten or twelve years the economy certainly hasn't done much in the last ten or twelve years it would but it's judged by real measures of course we're going to have another bed at least what worries me lauren is we're going to have another two or three bad decades where these guys

mr. bernanke. finally, homebuilders all on the upside today. standard pacific has a terrific and surprising earnings report. that stock up rather surprisingly here, 17% today. sue, a lot of the homebuilders are near 52-week highs. >> that's been a great story for the last week or so. bob, thanks so much. >>> breaking news right now, more than $30 billion in three-year notes up for auction. rick santelli is at the cme with the results. what kind of grade are you going to give it, ricky? >> before we give the grade and this grade is the demand snapshot at 1:00 eastern. let's go over all the details. $32 billion, the ultimate yield at the dutch auction, .347. a bit higher than 34.5 basis points. pretty much right there, 35 basis-point bid offered at .345. but here's where it starts to get a little dicey. 3.35, the average bid cover, last ten auctions. this was 3.3. just to give you some perspective on that, you have to go to october's auction, equal 3.3, september's auction to find a lower 3.15 bid to cover. also below the 37% ten auction average

they've changed their inflation measurement several times in the last few decades the last rate mr bernanke you said we're going to change the way we do it again and guess what a new way shows this and collation but there isn't traditional or ok so the people that say you know government and measure it's don't show a lot of inflation and they're pretty pathetic so i don't if people just sucker is that they're looking at these government figures. and you must have learned by now that if you don't listen to the government any government to get your investment advice you're going to go broke and u.s. get a better way to go with the russian government the u.s. government the germans those i'm not thinking it's all good chinese governments it's only orderly you would know because you know about actually making money which is that why i know that you know you're the expert on these things i want to look at the federal funds rate if i can bring up that chart for our viewers. it shows that during each recession since one thousand nine hundred eighty the fed has taken rates lower and lower and lower

mr. bernanke said the u.s. economy is slowly improving. the baej book report came out and said this just an hour ago. look at this. hiring is higher, manufacturing is expanding, consumer spending is positive, residential real estate is slowly improving. this is the beige book just an hour ago. mr. bernanke had comments out this morning. of course, the idea of supporting the economy is improving. yes, that means less qe-3. let me ask you something, would you take less qe-3 in a better economy? i sure as heck would. and i hope everybody else would. the dollar rose, gold moved to the down side, less inflation, less qe-3. we'll hear more about that in just a minute. the s&p up 9%. are you looking at this for the year? this is the best start for the s&p since 1998. 191 -- 1991, excuse me. 20% below the same period last year. >> the new normal. >> to what do you a tribute that? >> number one, individuals are trading less. number two, the big corporate trades, the mutual funds are trading less. high frequency traders are trading less. right acros

mr. bernanke for being here. thank you for the conversation on the phone a few weeks ago. i agree that there's efforts, and i'm excited to see that you'll be out in the circuit. and i'll be anxious. i might tune into one of those to see how they go i'm new here, too. i'm not here to defend the president at all. we're all to blame for the fumgs of washington, d.c. it's not just the president. it's congress that is also part of the problem here. that's what i hear when i go back home. and because of that, and you kind of answered it, and i think i want to clarify or make sure i hear what you're saying and that is because of the inability for this body to figure out and compromise and figure out pathways with long term certainty, it has an impact to the consumer confidence and the business confidence of this country. yes? >> yes. >> so, you know, what i've learned while i've been an executive, an assembly member in this legislative body is -- legislative bodies love to blame the executives. executives love to blame the legislative body. at the end of the day. there's 100 of u

mr. chairman and dr. bernanke. a suggestion was made earlier that you make policy pronouncements on housing, and i'm very deeply, as you know, involved in trying to restructure housing finance and the housing market. as much as i personally wish that were true and that you would weigh in on the side of the proposals that i have made and versus others, you and the fed have been, i think, judicious in not doing that, but what you have opined on and i would like to be ask to you say in your own words is the importance of housing, the housing market and a housing recovery if we wish to have a robust economic recovery and job growth. would you care to comment on -- >> oh, i certainly would, and this is the reason that we have a housing committee, basically, at the fed, which a bnch unch o staff and governors looking at this all the time. i would say that one of the main reasons that the recovery has been as disappointing as it has been is that usually housing provides an important amount of the impetus to growth. not ju

mr. chairman bernanke, we want to hear your views, and i hope you'll speak further about what the director said. >> thank you very much. >> mr. chairman. >> acting chairman nelson, ranking member sessions, and other members of the committee, i appreciate the opportunity to discuss my views on the economic out look monetary policy and thing challenges facing fiscal policy makers. >>> over the past two and a half years the u.s. economy has been gradually recovering from the deep recession. conditions have improved, but the pace has been slow. particularly from the perspective of the millions workers that are unemployed or under employed. more over the slow pace has left it vulnerable to shocks. spill overs from the european debt crisis risk derailing the recovery. unfortuna fortunately over the past couple of months, there have been signs of improvement and economic projections just released the participants indicated that they expect somewhat stronger growth this year than in 2011. the out look remains uncertain and close monitoring of economic developments will remain necessary. >>> as is

. >> chairman bernanke, the vice chairman of the full is now recognized for five minutes. >> thank you, mr. chairman. chairman bernanke, in your testimony you described the recovery as modest relative to historic terms. i would note for the record that under this administration when you add in those who are underemployed, those who have left the labor force due to giving up the true unemployment rate is 15.4%, half of all americans are now classified by the census bureau as either low income or in poverty, one in seven now have to rely on food stamps. so from the perspective of my constituents, the use of the term modest is indeed modest. i would like to the subject of our structural debt. one of the major players in our economy has said, quote, the major driver of our long-term liabilities, everybody here knows it, is medicare and medicaid, and our health care spending, nothing comes close. that, of course, our president barack obama. so i would suggest to the ranking member when convenient he first debate the president on the subject before he debates us. and i would ask this simply, mr.

mr. bernanke's reluctance to rule out qe-3. there was vague talk, maybe the iranians would get involved in the syrian situation. so gold and oil both spiked up early. >> energy on that list, another winner on the year. >> a lot of new highs in energy. >> bob, thank you so much. meanwhile, behind the steady moves, brian shactman with that angle. over to you, brian. >> a very tight range today. i want to take a look at the realtime exchanges out there. at top, mcdonald's back above $100 a share. they report earnings tomorrow morning. microsoft holding up above $30 a share. financials, the weakest in the dow at least is bank of america, and jpmorgan. i want to drill down on coke. obviously still down year-to-date. getting a nice bounce after earnings today. north america, much better than expected, coke, down almost 2% for the year. but 1% to the upside. other earnings stories, young brands touching an all-time high. still up 2 3/4%. toyota, sales growth was 17%. harman international beat on the top and bottom lines. we want to lo

mr. bernanke saying?e out, we were reading it, figuring out why did everybody react negatively? there have been vague rumors of a fat finger trade in ten year treasury trading. that may or may not have been a factor. that got people talking within a minute after his testimony was released. most people feel, right now, that the fact that he was commenting on an improving labor market. he did say we have seen positive developments in the labor market. that and his -- the fact that he did not at all mention in his testimony qe-3 or operation twist ending on june 30th. that's a clear indication. simon referenced this, withdrawal of the liquidity for the market is is not good for the stocks, that's the most important thing. take that assumption, guys you have to work under the idea sell treasuries and, boom, look at that on the dollar here. you've got -- you buy a dollar, you get a rally in the dollar and commodities follow from there. put up gold. logical development, sell gold. there you go. look at that. st

mr. bernanke made. remember what we saw this morning. we saw big dollar rally, we saw commodities move to the downside. put up the s&p 500 for me on our tell straiter. a lot of people wrote in and said, gee, if things were looking a bit more grim, no qe-3, none of that's going to be happening, why did the stock market drop even more? put up the s&p 500. i think the simple answer is somewhat improving economy long-term should trump any short-term concerns about no qe-3 or a more not as dovish position for the federal reserve. so the bottom line is improving economy, that's going to be the most important thing. that's why the s&p didn't drop quite as much as some people had anticipated. move on here and show you the commodities stocks. while we did have a big rise in the dollar, commodity stocks dropped rather noticeably on that. i think you'll find some of that will be fairly short-term. bhp and everything else moved to the downside. there you see that. but here's a positive comment. look at some of the other sectors and you'll see, for e

mr. bernanke was warning about the long-term fiscal issues but saying congress should not cut expenditures too sharply in the short run. are you at all optimistic about a grand plan to get a handle on the long term debt and deficit or should that not be the priority, larry? >> the biggest priority for the united states right now is getting recovery going at a rate that is rapid enough to produce sustained increases in the economy relative to its potential to produce. economic growth over the next five to ten years is the single most important determinant of what our national debt will be five or ten years from now. we have to focus. it has to be a focus for monetary policy, for fiscal policy. it has to be a focus as we concentrate on exporting more on getting this economy more rapidly. we absolutely are going to have to put in place a set of measures that bring our revenues and bring our expenditures closer into balance. the deficit projections, even assuming the economy recovers are not ultimately sustainable. and so that's an issue that has to be addressed as well. >> let me ask you what

mr. bernanke came before the committee last week and i asked him about this, and i would like to quote him. if no action is taken, this is a quote, if no action is taken on january 1st, 2013, between expiration of tax cuts, sequestration and a number of other measures, there will be a very sharp change in the fiscal stance of the federal government which by itself with no compensating action would indeed slow the recovery. cbo predicts a 1 1/10% growth and increase in unemployment in that year and that is based entirely on their current assumptions so they're assuming that contraction will take place, end of quote. mr. secretary, do you agree with chairman bernanke's and cbo's assessment that the failure to prevent this tax increase will have serious negative impact on our economy in terms of gdp growth, and unemployment? >> absolutely. but with just one short qualification. what the president's proposing is to extend the bulk of those tax cuts that go to 98% of taxpayers and to let expire those that affect only the top 2% of americans. in addition to that, to limit the value of deductions

mr. chairman. dr. bernanke, i want to drill down on something you talk about in general here today which is europe. i want to go into detail on the central bank, swaps with the dollar swap agreements. since you've been here last time, i think it's grown from the agreements with various central banks have grown to $103 billion as of last week. my first question is, where does that money come from? is that money you have in existing reserves? is that new money? where does that $103 billion come from that we participate in the agreements? >> it's -- it becomes both a liability and asset on the federal reserve's balance sheet. in some sense paid for by greater excess reserves in the banking system. and on the other side, we have an asset which is the money given in exchange to the european central bank. >> but to the extent that it's in layman's terms, it's new money. it's not something you moved over to a swap agreement. this is money you set aside? >> we chose to do that way because monetary policy currently is o

mr. bernanke was speaking, not ruling out additional stimulus. a number of sectors moved into positive territory. a little after 2:00, 2:30, industrials, consumer staples and health care were negative on the day and they moved into positive territory. more new highs today in the tech group. below some of the energy groups. historic high for apple, microsoft up there, and lsi, dell hitting a new high as well. after the close, and we are waiting on some of the key stocks, disney, panera, and diagnostic equipment maker perkinelmer up today. >> a move on disney even before the company reports on the numbers. let's take a look at the other business headlines as we await news coming out. ben bernanke today testified before the senate budget committee. he reiterated what he told a house panel last week. he repeated that we will still have a long way to go before the labor market can be said to be operating normally. particularly troubling is the unusually high level of long-term unemployment. he urged lawmakers to reduce the long-term budget deficit, bu

mr. bernanke said at the hearing was, you should definitely look for a savings in the outer years and you shouldn't stop at ten, you should go beyond that because that would give encouragement to the financial world that the united states is on a better path and it's stunning that the president does not propose that. and if we had a plan that the world would see would not lead to disaster. >> i'll take a quick crack at it. both the cbo and chairman bernanke said that by letting the tax cuts expire, you're going to dramatically harm growth. so this president's budget, he's seeking to raise taxes. nay are making things worse. >> when you were budget director, there was no money in there for the amt, there was no money in there for war spending, there was no money in there for emergency spending, they would say those budgets were a ginobili agiven and were dead on arrival. >> the president's budget was taken to the floor last year and you would expect it if you're right becomes partisan that you would have had a majority of the senate support it. and the vote was 97-0, and we don't know what

mr. chairman. chairman bernanke, i appreciate your hard work. i wanted to ask you in a followup to what senator portman framed, over $15 trillion in debt, rising health care costs, a situation where, if you're relying on entitlements like medicare, trustees have said that will go bankrupt in 2024, and then looking farther out, social security in 2036. when you think about the fiscal state of this country and your responsibility as the charm of the reserve that keeps you up at night? >> well, i've tried to stay away from individual programs and taxes, but i feel it is within my remit to talk to congress about the overall fiscal situation, and i think it's very clear, and i'm sure doug elmendorf made a very clear presentation, that on current reasonable expectations about policy, that the u.s. federal deficit will become unsustainable within 15-20 years at the most, and possibly some of those effects will be even brought forward by markets. so, we clearly need some major changes in our fiscal planning and our fiscal paths going forward, and these

mr. bernanke told us a few days ago in the budget committee that you really need be to looking beyond the ten-year window. that's an artificial window, paic systemic problems like our entitlements that are growing so rapidly. i believe the american people are entitled to and must have an honest budget, a budget that clearly lays out the challenges that we face and we do face challenges and how the chief executive would expect to meet those challenges. i can't imagine a governor in alabama, gov more bentley, not seizing the opportunity to present a budget to layout how he will meet the budgets that we have. these are matters that executives have to lead on. this is a fourth year of this president's term in office. this is his final opportunity to layout a coherent vision for how this country ought to meet the challenges that we're facing financially. remember, his chairman of the joint chiefs, admiral mullins said debt is the greatest threat to our national security. just this morning on msnbc richard oss chairman of council on foreign relations showed film much greece and he said this cou

mr. bernanke and his colleagues share those sentiments in private with you, but they must take the logical step of suspending bank dividends. it makes no sense to allow the banks to pay out the capital. they should keep it on their balance sheet and build up their equity relative to the losses they could face, for example, if the euro market collapsed which i would say is a real possibility, if that market were to collapse, we need as much of a buffer as possible in our banks. and the suspension of bank dividends ordered by the federal reserve applied on a blanket basis would stabilize and help strengthen our financial system. secondly, we should be scoring. your point, senator johnson, we should be scoring for you, the fiscal impact of financial calamity. and particularly, the dangers posed by a financial system that is run irresponsibly. they do score for you important contingent liabilities including as you showed us, medicare. that's a contingent. we don't know what exact costs will be for medicare in 30 been 40 or 50 years and the cbo takes a hard look at that and gives you a sensible

mr. bernanke said the best approach would be to put in a long term solution. >> i think he would be thrilled with ten years. >> i want to address two things, one is cost of medicare, we came up with an idea, and it was an idea that warranted debate. i want to talk to you about interest payments. you've got nearly $5 trillion of interest by the end of the decade, ---6% of outlays. based on projection, if we look at the trend lines here, it's going to go to 25% or 30% or 40%, given that the estimates that you use for interest rates stayed pretty much the same. i want to know what your feelings are about confidence regarding interest rates if the trend line there continues beyond 2020. >> that's a very important point. you're using the nominal deficit number and what matters for confidence and credibility and interest rates and growth, is whether the debt ratio of the economy stays at a moderate level and if you were to go that chart in terms of gdp, you'll show that deficits come down to the level that stops the economy from growing. >> so you're pretty comfortable with the interest rate proje

mr. bernanke said the best approach would be to put in a long-term strategy. i understand -- >> i understand going beyond ten-year window is difficult. i'm concerned on two things. >> he meant ten years i think. he would be thrilled with ten years. >> he probably would be thrilled with ten years. we haven't got a strategy to address key drivers i'm concerned about. one is the cost of medicare. we came up with an idea. it got pretty badly demonized last year. they'll use it as television commercials i'm sure. it was an idea that warranted debate. the other one is interest payments. i'm going to talk to you about interest. i think interest is critical. you have $5 trillion of interpret interest over the next decade, then it triples from 6% of out lays to over 16% of outlays. could i have figure three brought up while we're talking oovps. based on the projection, if we look at the trend lines here, it's going to go to 25 or 30 or 40% given that the estimates you use for interest rates stay pretty much the same. i want to know what your feelings are about confiden

mr. bernanke. i want to turn to your speech. you say, having a large and increasing level of government debt runs a risk of economic consequences. i will start out here with increased debt. therefore, it reduces productivity growth. that results in more borrowing. from foreign governments, which then increases our future income devoted to interest payment, which comes back to increasing the amount of debt. i think that in a diagram will help my constituents to see why this is so important. i am intrigued by your results. impairs the ability of policymakers to respond affectively. it is our role and our responsibility. unsustainable deficits, increased the possibility of sudden fiscal crisis. it can happen here. i think you have diagrammed that well. my point is, investors lose confidence. in the ability of the government to manage its policy. the fiscal policy piece of that is our role and responsibility. would you agree the economic growth from investments and savings -- not borrowing? >> sometimes, you have savers who want to

mr. chairman. welcome, chairman bernanke. it's always a pleasure to hear you because you are eminently sane about all of these issues. i have heard from our life insurers and grantors or providers of annuities that they are very concerned, as you can imagine, about an interest rate squeeze that may occur in the future. almost feels predictable in some respects. how do you recommend that they proceed, that they anticipate the challenges that we're facing because of the way in which we have to have an accommodative monetary policy? >> well, we've had numerous discussions with insurance companies and pension funds and others. and there certainly is a problem in the sense that they're under a current accounting rules. obligations to put money into the fund or what can be greater with low interest rates. i agree that's a problem and one we've discussed with them. again, going back to my conversation to mr. mccotter, on the other side we're trying to strengthen an economy that gives them higher return on portfolios. so it cuts both

mr. bernanke told us a few days ago in the budget committee that we need to be looking beyond the 10-year window, particularly problems' like our economy. are entitled to and must have an honest budget, budget that clearly lays out the challenges we face and how the chief executive would expect to meet those challenges. i cannot imagine governor bentley in alabama not taking out how he is going to meet the challenges we have, where -- or brown in california or governor cuomo in new york. this is the fourth year of this president's term in office, and his final opportunity to let out country ought to meet the challenges that we are facing financially. that debt is the greatest threat to our national security. just this morning on the msnbc, the chairman of the council on foreign relations said reece could be the united states next year. erskine bowles, testifying last year before the budget debt crisis and it could happen as early as two years. we are in that second year now. this is not something that is just a normal dog and pony show around congress. it reflects the challenges that we w

mr. bernanke's testimony and hit some of the big movers you may have missed when the "halftime report" continuesck to the ft. meade "halftime report." we're still monitoring the testimony of fed chairman ben bernanke, which should be wrapping up in several minutes, at least we expect. we want to get back to what was one of the biggest stock stories not only of this young week but certainly last week. that's vivus. shares of vivus are up yet another 4% today or thereabouts. this is a company with the diet drug known as qnexa. clears the way for this to be approved by the fda. the first fda-approved diet drug for a long time. we spoke with the ceo earlier this week and asked him what the company would do now. how it would spend the money it needs to spend on marketing for such a small company. he said they have about $145 million in cash. we pushed him on what he would do in terms of raising capital. let's listen to what he said. >> we have adequate money to take us through the approval process through april 17th. and we will raise capital at some time. we have historically had a fine record of be

mr. bernanke at the budget committee hearing last weekmr. chaired by senator conrad who announced that we should have a 5 trillion-dollar reduction in spending over ten years, not fon coming and he also said reallyln an would like to see a balancedl budget, andce i think senatorine conrad is right on boths. accounts. even has i the budget in thet committee this year he won't beb brought up on the floor. so i don't know what we will do. whether we will have a budget markup b or not. but mr. bernanke indicated thaty when you reach that level as high as we are today, the growth of debt being 100% of the grossy domestic product the country isa at risk particularly when the inevitable shot in the world occurs you don't have the margie of strength necessary to ride out the crisis, and we could go into a crisis.pened to i just happened to see this morning on the msnbc presidentnt have a debt crisis next year,hee talking about greece he said wee did have a crisis next year ands he laid out a scenario. this is the council on foreign s relations, the

mr. bernanke is crushing the middle class. that is the truth. all in an effort to bail out banks. >> do you think that reported inflation, let's call it the cpi for the moment. >> core cp seme is what he is looking at? >> no. >> his defenders say he is correct. >> it's a prediction that will bite him in the butt. like home prices will not effect the overall economy >> michael, first of all, how are you. >> good, here comes punch. >> this is the same conversation we have been having for four years and it the same story. the federal reserve is creating inflation, so on and so forth. i do not disagree that there are reasons to be concerned. strike all that. where do you think we would be if the federal reserve had cdon nothing? >> i think we would have been well to way to a free market economy with real gdp growth not the 3.2% nominal growth and real growth that they reported. which means they are telling you, that we had a .4% annualized increased in inflation. 3.2 nominal means we are in a recession. >> we are not in a recession. >> let me make m

mr. chairman, thank you for letting me share those remarks. we -- chairman bernanke, we value your opinion. and if you can help us work our way through the most dangerous systematic debt challenge i believe the nation has ever faced. thank you. >> thank you senator sessions. senator sessions, i'm optimistic. you said you are not optimistic. i am optimistic. >> about the budget the president is submitting? >> about the overall -- >> okay, that is different. i said i'm not optimistic he would layout a plan to get us off an unstainable debt course. excuse me. >> well i'm optimistic and the president's budget that is going to come out, i think, will reflect the overall optimism that is rising in the country with regard to the committee and think it's all summed up in this chart. this is private sector jobs. and you can see for about a year and a half, there were massive job losses in the private sector in each of the months and of course, this only starts in january of '09 in this chart, you can take it back to further in '08, that is when the crisis started. this tells

mr. bernanke, and operation twist ending. that's why i believe tomorrow he's going to be peppered with questions about that. he's going to be testifying in the house. >> interesting how operation twist is ending, and ltro is beginning for a second time. with the european central bank. >> the ecb is adding liquidity. the question is, will the fed keep doing that. that will be the questioned tomorrow. >> thank you very much. breaking news right now. let's get to mary thompson. she has been at the jpmorgan investor meeting all day. over to you, mary. >> hey there, maria. you know, these, of course, ending the day when we heard about the benefits of jpmorgan's size and diversity, jamie dimond saying i'll be damned if we don't see record profits in the next year or two. of course, the size and diversity consistently cited as a benefit to investors during today's presentation. speaking about regulation, dimond said it could be a benefit to the larger firms because he said they could absorb these costs, but hinder some smaller firms

mr. bernanke said at the hearing was, you should definitely look for savings in the out years and you should not stop at 10, you should go beyond that. that would give encouragement to the entire financial world that the united states is on a sound path. it is rather stunning that the president does not propose that. it would help to establish growth and our economy if we had a plan that would not lead to disaster. >> both the cbo and chairman bernanke said that allowing the bush tax cuts to expire would harm economic growth. this president's proposal, increase taxes and it will harm economic growth. even though the president says he wants to grow the economy, his policies are doing the exact opposite and making it worse. >> when you work budget director, the president -- president bush's budget would come up and democrats would point out there is no money for the empty or four were spending more new money for emergency spending. they would sit as budgets were a bunch of gimmicks and it was dead on arrival. why should we believe this year that this is somehow worse than what we have been see

mr. bernanke says will it will be zero a couple more years.r government bonds, i explained why i don't see fascination with 2% yielding justification for inflation of taxes. third is high yield, done extremely well the last few years, high yield a record tight spread against treasuries down around 7%, maybe one off, they make some amount of sense but as an asset class, they are not particularly attractive and then you are left with equities. reference equities. the average equity city 13 1/2 times earnings, yield 2%. >> sounds pretty good relative to a couple years ago, by the way. >> let me elaborate. the last 50 years, the s & p multiple has averaged 15 times. as we sit here today the multiple 13 1/2 about 10% the average but the s & p multiple averaged 15 the last 15 years, ten-year government bond average 6.67, currently 2. >> wow. >> i look at the stock market, i think modestly cheap against history, cheap against interest rates, cheap against inflation, i don't have some outlandish number. we have a strategy group co-managed by steve eye

mr. chairman. chairman bernanke, good to have you back again. one of the things that the g-8 central banks have expanded their balance sheets. if you convert the currencies to dollars to about $15 trillion over the last two years. what do you see looking forward? how much more expansion in these balance sheets in these central banks do you see? and what could be some of the consequences of that? >> well, i don't know what expansion may or may not be. the japanese, for example, have, again, begun some asset purchases. the ecb has put out again this morning about a half a trillionutrillion u eur euros. i think some is sterilized. these central banks is dealing in a similar way. it is not unusual. they're trying to find ways to provide more accommodation in a situation where interest rates are close to zero. and so standard cutting the basis of the federal funds rate by 25 basis points doesn't work. all of the central banks in question have similar tools to the ones we have including the ability to pay interest on reserves, ability to sell assets,

mr. bernanke says he doesn't see any inflation out there. why do you? >> that global liquidity that is being pumped all around the world ahead of the election cycle, not just here but in other parts of the world, will lead to future inflation. that is a risk that investors are not well-prepared for. one of the reasons larry fink told investors to get in stocks and out of bonds is because he sees the fund flow. he sees how much money has gone and what we learn investors can lose money in anything. there's no such thing as a risk-free return. many investors hiding not only in domestic so-called safe haven stocks that investment strategists have been recommending, but also in the bond market are running from risk and not being sensitive to the real risk out there, future inflation risk and higher interest rates which will decimate the bond. >> i agree with you there. i'm saying, no, there are two or three other places i would much rather be. >> i agree with that. >> you guys both get to come back, okay? >> okay. >> and continue this conversation. promise m