a little bit with paul volcker in my -- i met with paul volcker in my office recently and talked to him some length about this. paul volcker is dead right and so is the president. this is going to provoke an unbelievable battle here. i understand that. there's a lot at stake. the big interest, they want to keep doing what they're doing and the big investment banks at the moment, you take a look at their balance sheet, they're not by and large loaning money to the interest in this country that desperately need. it they are trading on proprietary accounts and making a lot of money trading. the fact is they're still too big to fail and are, that is called no fault capitalism. it our risk, not theirs. none of them would be around if the federal government had not stepped in to provide a safety net. they're telling us that, well, these changes that the president and other suggest, they are radical changes. no, they're not. they're changes that go back to future in many ways. they're changes that go back to a period of, 1999, before a piece of legislation called -- a piece of legislation that

heaid we've been working on this-- you raisethe right qution about paul volcker, why didn't ty present this idea ba in june. >> woodruff: without rehasng the whole interview, he talk about the impetus the senate legiation. let me ask youbout one half of this, and that is ensung that no bank owns, invests inr has any sponsorship of a hge fund or pvate equity fund. what about that part othe proposal? >> that would,bviously, put the ins on the current fed chairman, and this adnistration with what they use in ordero try to get us out of the suation that we're in right now, ght. had thr rules been put in place a year ago, theyould not ve been able to try to push for so of the mergers that we did e on wall street to try to bring us o of this situation. so that's one real question at weave to put back to the administration. what will they do next time? anthe second major point is this-- iwe want the banks to nd-- and we all do-- if we wanthe economy to expand-- and we all do-- do you reallwant to start confining the banksnd their abily to make profits in order to generate more capit to lend o

, i will take paul volcker back. i don't think a lot of this would've happened if bulger was still the fed chairman. you need -- he's a banker so he understood -- you need a feed to a sort of catch a thief sort of thing. in the 1930s we brought in ackles who ran a bank in ohio. and turn that one of the greatest fed chairman ever. so if you can find someone by that, by all means. [inaudible] >> possibly. i think he's a bit -- he's certainly want to consider. i have some reservations about his role as sec chairman. but anyway, if they could find somebody like that i would agree. but i should say realistically that's not going to happen i don't think. and with all the political impetus being on health care, i think we will be lucky if we get any sort of financial regulation through next year. so this stage i'm thinking, well, if obama's -- it's been like health care. if it's obama's legislation or nothing, i'm in favor of obama's legislation. >> the question of jobless recoveries, globalization off shoring of jobs here

former federal reserve board chairman, paul volcker, who heads up the economic recovery board for the president, he's publicly advocated this for the last year. he's been very open about it. he told reporters last summer the president had said no to this. what changed the president's mind? >> i just want you to know i'm very close to paul volcker, have enormous respect for him, and the president and i have been talking to him about this for a long period of time. and you saw in the house bill that passed the house, and even in the draft senate bill, a provision that was very responsive to paul volcker's ideas, and this provision would give the fed the authority to impose these types of restrictions, exactly these types of restrictions. we thought it was time to provide a little more clarity about what this would mean because we're at the critical moment where we need to make the last puck to get reforms through the senate. >> woodruff: why not do it earlier? >> again, we've been working on this for some time, and-- but he thought now was the time to bring some clarity to it. >> woodru

at the time, fed chairman paul volcker said this bailout would not set a precedence. but the markets know it set a precedent. we got a new freeze any financial industry, if not yet in the public lexicon, which was too big to fail. in the independent bankers association, which represented small banks, understood the implications of this. its presence at the time warned these big banks have the ultimate anti-competitive government subsidy. they are too big to fail, and regardless of how mismanaged they may become, the buck will stop with the taxpayer. so when the government wants more of something, it subsidizes it. if you want more corn, subsidized corn. if you want a financial crisis built up over decades based on banks and other financial companies borrowing for the purpose of reckless speculation, and subsidized banks and other financial companies borrowing for the purpose of reckless speculation. and that is exactly what the government did with this new policy. banks and later other financial institutions could borrow at rates that they could not have otherwise bor

don't think anything this would have happened if paul volcker was still the chairman. he is a banker said he understood. you need a thief to catch a thief. he understand help banking works. and the 1930's we brought in eckels who ran a bank and ohio. it turned up to be one of the greatest fed chairman severs so we could find somebody like that by all means. [inaudible] possibly. i think he is a bit, i mean he is certainly one to consider. i have some reservations about his role as sec chairman but any way of a could find somebody like that i would agree, but as we say imperialistically that is not going to happen i think in with all the political health care we will be lucky if we get any financial regulation through early next year, so at this stage i am thinking well, it is a bit like health care. aidid this obama's regulations are nothing i am in favor of obama's regulations. >> the question on jobless recoveries and the globalization of showing of jobs. just a question of people out of work and where you think the jobs are? also they look down on manufacturing jobs

paul volcker says "i would exclude from commercial banking institutions ownership or sponsorship of the the hedge funds, private equity funds. so should, in my view, a heavy volume of proprietary trading with inherent risks." it is common sense for us to begin to shut down those types of activities. let me say i understand the need for financial institutions. i understand that. it's a very important part of this country's economy. but i also understand, having studied economics and taught economics ever so briefly that we have in this country for 200 years had kind of a contest about who rules the roost, those who produce thoers who finance -- or those who finance productions? in recent decades those who finance production have had an unreasonable amount of influence in this country. i don't think it contributes one thing to this country's economy to have big financial institutions trading synthetic derivatives. does anybody know what a synthetic derivative is? a derivative is something that derives value from something else. the value on the front end or the something else somewhere ha

and that's something that some previous fed chairman, paul volcker, alan greenspan, your time at the fed as vice chairman, you have done a lot of washington before. so i don't think it was a help that he didn't have this experience. but i think that the portfolio skills he had figuring out what to do in this instance was the most important thing that we could have asked for neh chairman at this credibly terrifying moment in our history. >> host: what about his personality? >> guest: i think that's also interesting. you know, alan greenspan, in my view, made it a little bit too much like the vatican. he was the pope that he was invaluable, and those people did know anybody else's name. and bernanke came to washington determined he said at the time to follow greenspan's policy, but to be different and greenspan. i call him in the book to be the un-greenspan. to elevate over the character of the chairman. i think actually that was a bit naÏve. but it did help him build a consensus at the fed. so when the time came for him to exert a strong leadership, to push people to do things that th

but we thought it would work and it did, because ronald rage and an paul volcker implemented it, and by the middle of the 1980's, inflation was down very substantially and growth had been restored, and this was viewed as a success for the supply side model. host: as a former proponent of reagan economics, how difficult it was to write a book about its fame insure guest: well, the reason why it wasn't working in the 1970's is because it was misapplied in inappropriate circumstances. and i think the same thing happened with supply side economics in the 2000's. i think a lot of policies implemented by the george w. bush administration were said to be based on supply-side economics, but in fact, they were not. they were making ridiculous claims and implementing unwise policies. they said they were based on supply side economics, and they weren't. i think some of the problems we had were developed from that misunderstanding. host: i want to follow occupy that point, because in your introduction you write about what remains when people think of supply siders is a caricature, that there is

over the course of the last year, certainly paul volcker and member of the economic recovery advisory board have been in frequent and constant contact with the economic team. in the fall, the president thought about these issues quite a lot. another factor has been, you saw coming out of the rescue, the government provided a safety net to financial institutions that they use, and they have in recent months started making considerable profits of their proprietary trading for themselves, not for their clients. that is certainly a factor in convincing a lot of people we have to make sure that issues like that are not going to be pervasive going forward. >> why does the president take -- why did he not take this action six or eight months ago when there was anger about the bonuses that those on wall street were getting? some of his greatest allies were saying do something now. now it looks like a question of political expediency. >> i am here only to talk about the policy matter of this. we have been thinking about this azinger. tim and larry and the rest of the economic team have been in

but i do have one question, especially about paul volcker back in the 1980's.hat was it he was doing? i know he put a stop to inflation -- money tight and raising interest rates. we had a two-year recession, 10% or 11% unemployment. some people paid the price and it hurt the manufacturing sector because the dollar got so expensive relative to other currencies. i think that really is what started. between then and now, the amount of money for profit, their earnings every year, 20 cents for every dollar earned in america, to 42 cents. how will you have labor intensive industry and how would you have people working when all the money is going to the financial sector where you don't have to hire to many people. all this money, bonuses and everything else and nobody can stop it. last thing, the need to bust down and break up the big monopolies, oligopolies to places like goldman sachs and let banking get back down to one -- to earn money in their own businesses for people at home for the family spirit it is not about speculation or hedges or anything else. guest: th

i just had a very productive meeting with two members of my economic recovery advisory board, paul volcker. what is the former chair of the federal reserve board and phil donaldson, previously the head of the fcc. i deeply appreciate the counsel and these two leaders and the board that we have offered as we've dealt with economic challenges. over the past two years, more than 7 million people have lost jobs. rarely does a day go by that i don't hear from folks that are hurting. every day, we are working to put the economy back on track and put america back to work. even as we dig our way out of the deep hole, it's important that we not lose sight of what led us into the mess in the first place. it began as a financial crisis. when banks and financial institutions took huge reckless risk in pursuit of quick promises and bonuses. when the irresponsibility was over, several of the world east oldest and largest financial institutions had collapsed or were on the verge of doing so. markets plummet thed. credit dried up. jobs were vanishing by the hundreds of thousands each month. we were on the

i talked to paul volcker over the weekend, he says he sees a very real chance of a relapse. he says look, there are good signs out there. businesses, very few of them comparatively, considering the depth of the recession have gone out of business. still, they are reluctant to hire. it's the vicious cycle we hear about. unemployment goes down, demand is down, business is down, how do you come out of that? i don't think the administration has the answer. >> there is extraordinary anger out there. the gap between wall street and main street has never been larger in my experience. not only is inequality out of control, people's sense of who is winning and losing in this economy. big businesses are doing well. they continue to do well. because they're cutting payrolls and going global. back here at home, people are really in trouble. how you manage that anger, particularly when you have already bailed out wall street is a big political challenge. >> back here at home there's excess capacity throughout the economy. hotels, malls, cargo ships. franklin roosevelt said that capital h

paul volcker had taken control of the economy and vowed he's going to kill inflation no matter what happens. now no one's taking control. we just have this massive flood of money. not only from america, but from europe, from all the developing countries, and gold has a 5,000-year history of being a stored value. i know doesn't have industrial uses but it didn't have industrial uses when trading at $ 250. one other quick point. it's not a short-term thing, gold. between 1971 and today, if you look at gold versus the s&p 500, guess blah? they're almost the say. including dividends. gold is actually outperformed liquidity. i don't want to sound like a gold bug. let me end it by saying i hope i'm dead wrong, but when i look at the flooding of occurrence currencies in these developing country, you have to own some gold, the bull market is likely to continue. >> diane? >> i stay away from gold. it doesn't have industrial use. makes nice wedding rings, i've had a few. holding on to the last one a nice christmas present. not something i can buy. you know, as an investment, because i don't understan

and if we need to act additionally, on additional items that paul volcker or others may recommend, wel certainly give them careful consideration and act. >> currently there are three pending free trade agreements affecting jobs from places like maine to new mexico that could create thousands of new u.s. jobs. how should free trade agreements fit into any job stimulus effort? >> well, i am a proponent of at least two of the pending free trade agreements. i think we have some additional work to do with south korea which is the largest of the agreements. but my own view in columbia and panama we ought to pass those. i've been publicly indicated to that for some time. trade is very controversial in both parties. and there are bipartisan opposition and bipartisan support. the president's trade representatives indicated he is interested in moving ahead on the trade agreements as has the president. we need to continue to work on those. i believe that in america that is competitive. can and will compete with the rest of the world in open markets. now, we need to assure fair markets, fair acce

. >> reporter: that was the era in which fed chairman paul volcker famously choked off the money supplytes and ended the great inflation of the '70s. for decades thereafter, claims john taylor, the fed had followed a moderate course. then suddenly, around the year 2000, the fed began to deviate, keeping interest rates too low for too long, ending in the crash of '08. >> if i were to think about why after two decades of good performance starting with volcker, going through most of greenspan's term, why there was a deviation? i think it's really trying to do too much if you like. things were working well and if you're doing well you try to do better. >> reporter: try to do better by boosting the economy with cheap money, thus setting the stage for the inevitable bust. >> the busts are terrible and more the boom gets out of hand the worse the bust will be. >> reporter: so it is really true that the higher you fly the farther you fall? ( laughs ) >> in general. ( laughs ) >> reporter: and that, taylor argues, is the worry today: that the fed is again keeping rates too low for too long, fuel

. >> reporter: that wathe era in which fed chrman paul volcker famously choked off the ney supply tond ended the great inflion of the '70s. for decadethereafter, claims johnaylor, the fed had followed a moderate cour. then suddenly, around the ar 2000, the fed began to devia, keepininterest rates too low for tolong, ending in the crh of '08. >> if were to think about why after two decades ofood peormance starting with volcke going through most of greenspas term, why there was a deviatn? i think it's really trying tdo too much iyou like. things were rking well and if you're doing well you try do better. >> reporter: try to do betr by osting the economy with chea money, thus seing the stage for the inevable bust. the busts are terrible and more the boom getsut of hand the worse the bust will be >> reporter:o it is really true that thhigher you fly the farther you fall? ( laughs ) >> in geral. ( laughs ) >> reporter:nd that, taylor argues, is the wor today: that the fed is again keeping rat too w for too long, fueling new bules and a future collapsethis time perhaps an u.s. dolr itself,

but i do have one question, especially about paul volcker back in the 1980's.what was it he was doing? i know he put a stop to inflation -- money tight and raising interest rates. we had a two-year recession, 10% or 11% unemployment. some people paid the price and it hurt the manufacturing sector because the dollar got so expensive relative to other currencies. i think that really is what started. between then and now, the amount of money for profit, their earnings every year, 20 cents for every dollar earned in america, to 42 cents. how will you have labor intensive industry and how would you have people working when all the money is going to the financial sector where you don't have to hire to many people. all this money, bonuses and everything else and nobody can stop it. last thing, the need to bust down and break up the big monopolies, oligopolies to places like goldman sachs and let banking get back down to one -- to earn money in their own businesses for people at home for the family spirit it is not about speculation or hedges or anything else. guest: t

but we thought it would work in a dead work because ronald reagan and paul volcker implemented it in by the middle of the 1980's, inflation was down very substantially in growth had been restored and this was viewed as a success for the supply-side model. post goes a former proponent of reaganomics, how difficult was it for you to read about its failure? >> guest: the recent keynes economics was a work in the 1970's his cousin was misapplied in inappropriate circumstances and i think the same thing happened with supplies of economics in the 2000. i think a lot of policies by implemented by the george w. bush administration were said to be based on supply-side economics, but if that were not. they were making ridiculous claims and implementing unwise policies that they said were based on s.w.a.t side economics and they weren't and i think some of the problems developed from that misunderstanding. >> host: i want to follow-up on that point because in your intro you read about what remains when people think of supply-siders is a caricature that there is no problem that more and bigger t

effective inside player in washington dealing with congress and that's something previous fed chairman paul volcker, alan greenspan, your time at the fed as vice chairman you have done a lot of washington before, so i don't think it was a help they didn't have this experience. but i think that the portfolio skills he had figuring out what to do in this instance was the most important thing we could have asked for in a fed chairman of this incredibly terrifying moment in history. >> host: about his personality? >> guest: i think it's also interesting. alan greenspan in my view need to fit a little bit too much like the vatican. he was the pope and he was infallible and most people didn't know anybody else's name and bernanke came to washington determined he said at the time to follow greenspan's policy but to be different than greenspan i call him in the book to be the ungreenspan. i think actually that was a bit naive but it did help him build consensus at the fed so when the time came for him to exert strong leadership to push people to do things they were not comfortable with he had acquired thei

paul volcker made some recommendations. glass-stegal is one that he wanted to focus on.we are going to work with the senate. we have passed legislation on credit r cards and regulatory reform and on being tougher on large financial institutions and very frankly we need to be tougher on those in the consumer community that would go deeper into debt as well. if we point the finger of fiscal irresponsibility, we can point it at us all. government went into deep debt, business went into deep debt and consumers went into deep debt and at some point in time, the light went on and said you cannot co-do that for all time without there being a consequence and that light went on frankly in september 2008 which is when really all of us found out how deep the crisis was. that's when we went into this deep recession. we have acted and look forward to working with the senate and if we need to act additionally on additional items that paul volcker or others may recommend, we will certainly give them careful consideration and act. >> currently there are three pending free trade agreemen

indeed, i am in agreement with paul volcker.it is hard to find evidence associated with growth in many of the innovations and our financial system. underlying all of these failures is a simple point, which seems to be done. financial markets are in means to an end, not an end in themselves. we should remember, too, that this is not the first time that our banks have been bailed out, safe from consequences of their bad lending. market economies of work to do -- produce growth and efficiency. unfortunately, the financial sector was misaligned and that is why the discussion of this incentive is so important. the consequences of the failures of the financial system were not born just by those in sector, but by homeowners, retirees, workers and taxpayers, and not just in this country but around the world. the impacts are massive and there's a reason why it is appropriate that congress should be concerned. the presence of externalities' is one of the reasons why the sector needs to be regulated. in previous testimony i have explained

heeding some of the sage advice as president obama has today provided by paul volcker, current chairman of president obama's economic recovery advisory board. chairman volcker said -- and i quote -- "commercial banking institutions should not engage in highly risky entrepreneurial activity. that is not their job because it brings into question the stability of the institution. it may encourage pursuit of a profit in the short run, but is not consistent with the stability that those institutions should be about. it's not consistent at all with avoiding conflict of interest." end of quote. i strongly support the ideas chairman volcker has put forward regarding the need to limit the proprietary trading activities of banks. indeed they get at the root cause of the financial meltdown by insuring wall street's recklessness never again, never again cripples our economy. we can reduce the moral hazard present in a model that allows banking to mix with securities activities by prohibiting banks from providing their securities affiliates with any loans or other forms of assistance. while commerci

thank president obama for his announcement this morning acknowledging what former fed chairman paul volcker has been saying for months. it's time to reinstate the institutional protections that safeguarded our country for more than a half century. the glass steagall act. ironically repealed in 199 at the behest of the financial services industry. the only thing in america that can ever be deemed too big to fail is america itself. it is time for those of us in congress to grow a backbone. to have the courage of our convictions and stand up to the big banks. no longer can we allow the greed of a few to put the entire nation at risk. just as we are united in our effort to combat threats from abroad, we must be vigilant to those very real threats from within. we were sent here by the voters to take care of them, the taxpayers and the consumers. the banks can take care of themselves. i yield back. the speaker pro tempore: for what purpose does the gentleman from texas rise? >> to address the house for one minute. the speaker pro tempore: the gentleman is recognized for one minute. >> as we appro

paul volcker was the most independent chairman the federal reserve has had and that is why he was able why he was able to end the big inflation of the 1970's. the present federal reserve is not acting independently at all. i.t. cop buritz with the treasury. previous vedra reserve denny in anything like this one has done. >> guest: how was the word independents dude within the federal reserve? >> guest: when i was writing my book i ask them about that. we added to our conversation about it. it is pretty vague i would say in their mind. they don't like legislating congress looking too closely at what they do but of course this is a democratic country and congress under the constitution has the right to coin money so the federal reserve as their agents. they don't like, they often cooperate with the administration but they like to keep a hands-off relationship with the administrations so they are not forced to do things that they don't think are in the public interest. >> host: i have here at the desk before me volume one excuse me but one in two of volume two. these are advance copies. y

. >> i just had an important meeting with my advisory board, paul volcker and bill donaldson. deeply appreciate the council they have offered as we have dealt with a broad array of economic challenges. over the past two years, 7 million americans have lost their jobs in the deepest recession our country has known in generations. rarely does a day go by that i did i hear from folks that are hurting. we are working to put our economy back on track and put america back to work. even as we dig our way out of the holes, it is important that to not lose sight of what put us in this mess in the first place. the economic crisis began as a financial crisis banks and financial institutions pursued reckless risks when the dust settled, the irresponsibility was over and several of the oldest financial institutions collapsed or were on the verge of doing so. credit dried up. jobs were vanishing by hundreds of thousands each month. we were on the press this of a second great depression. to avoid this, and the american people who were already struggling were forced to wrest the financial fir

he and the vice-president meet this morning with paul volcker, chairman of the president's economic recovery advisory board. following the meeting, the president makes remarks about financial reform. the president also meet later today in the oval office with secretary of state clinton. she is delivering a speech in this morning on the obama administration's strategy for protecting freedom on the internet, this after the internet co. google said it will remain china only if the government relents on rules requiring censorship. in remarks earlier, china's vice foreign minister said the dispute is having with google should not be linked to its bilateral ties with the united states, adding the rift with google over online center should and security should not be, in his words, over and interpreted. you can hear her speak later today on c-span radio. john edwards of north carolina, former u.s. senator and democratic presidential candidate, is admitting in a written statement to "the today show" that he is the father of his former mistress is baby, francis quinn hunter. he said he will do everyth

paul volcker has made some recommendations that he wanted us to focus on, and the fact is we're going to work with the senate. we have already passed legislation and on regulatory reform, on being tougher, on large financial institutions, and we need to be tougher on those in the consumer community that would go deeply into debt as well. we could point the finger of fiscal irresponsibility -- irresponsibility at a sol. government went into debt. -- we could point the finger of fiscal irresponsibility at us all. we all went into debt. we could not do that for all time without there being a consequence. that light went on in september of 2008, which is when all of us found out how deep the crisis was, and they started retrenchment, and that is when we went into the recession, so we have acted. we look forward to working with the senate, and if we need to act additionally two additional items others may recommend, we will certainly give careful consideration and act. >> currently, there are a sri pending free-trade agreements affecting jobs in places from maine to new mexico -- 3 pending

he received more no votes than any fed chairman before, topping paul volcker was confirmed 84-16 in 1983fort mill, south carolina, and the republican line. frank. caller: i just listen to the gentleman who called and it sounds to me like -- i might have missed it -- but if you raise taxes, even on the wealthy this is going to help the economy. there are plenty of people out there who paid rush limbaugh but he came out with a great statements that in the history of this country, raising taxes has never driven the economy. and as long as you continue putting democrats in positions of power, starting at the president and working your way down, this economy is going to struggle. i am or originally from upstate new york, and if you ever want to see an economy that has been driven into the ground by high- powered rates and through the ceiling taxes take a ride up to upstate new york, all of you democrats who keep pushing for the high taxes, take a ride up there and see what happens to a state in an area when you continually raise taxes. guest: again, i come from a very libertarian publication

indeed, i am in agreement with paul volcker.it is hard to find evidence associated with growth in many of the innovations and our financial system. underlying all of these failures is a simple point, which seems to be done. financial markets are in means to an end, not an end in themselves. we should remember, too, that this is not the first time that our banks have been bailed out, safe from consequences of their bad lending. market economies of work to do -- produce growth and efficiency. unfortunately, the financial sector was misaligned and that is why the discussion of this incentive is so important. the consequences of the failures of the financial system were not born just by those in sector, but by homeowners, retirees, workers and taxpayers, and not just in this country but around the world. the impacts are massive and there's a reason why it is appropriate that congress should be concerned. the presence of externalities' is one of the reasons why the sector needs to be regulated. in previous testimony i have explained

indeed, i am in agreement with paul volcker. it is hard to find evidence associated with growth in many of the innovations and our financial system. underlying all of these failures is a simple point, which seems to be done. financial markets are in means to an end, not an end in themselves. we should remember, too, that this is not the first time that our banks have been bailed out, safe from consequences of their bad lending. market economies of work to do -- produce growth and efficiency. unfortunately, the financial sector was misaligned and that is why the discussion of this incentive is so important. the consequences of the failures of the financial system were not born just by those in sector, but by homeowners, retirees, workers and taxpayers, and not just in this country but around the world. the impacts are massive and there's a reason why it is appropriate that congress should be concerned. the presence of externalities' is one of the reasons why the sector needs to be regulated. in previous testimony i have explained

" this morning writes about -- several papers this morning write about ben bernanke, that says paul volcker, former federal reserve chairman and advisor to president obama, said he was concerned that the fed could be left in a vacuum, "bernanke has been through a fire and, given the experience he has had, eighth lot more experience -- he's a lot more experienced and more qualified than he was four years ago qutsdz. if bernanke were reject, volcker added, i don't think that would be received well at home or abroad. anxiety began to build around the fate of bernanke's reappointment within hours after republicans seized a crucial 41st senate seat, throwing president obama's healthcare bill, the entire democratic agenda, into chaos. the front page of the "wall street journal" talks about many things, but also takes a look at the stock market. several investors and people who study these things saying the fate of bernanke also leading to the current condition of the stock market, which you see there in the graphic. good morning to tom on our republican line. before weather ben bernanke should st

staff director and chief economist of the economic recovery advisory board, which is chaired by paul volcker. austin is on leave from the university of chicago where he is a professor of economics. on his left, carmen reinhart professor of economics and director of the center of economics at university of maryland. she has had a very illustrious career and i would say it is probably one of the u.s. experts on crisis analysis. illustrious career and it is one -- she is one of the experts on crisis analysis. how workers have been at the cutting edge but for more than a decade. much of this work has been together in an absolutely spectacular new book which is one of the best performing the government books of all time called "this time is different, 8 decades of financial falling tholly." alston, let's start with you. you arenw&x#Ñ always optimistic. -- austin, let's start with you. you are always optimistic. where are you on the shape, what kind of letter would you assign to the shape of the u.s. economy and give us a flavor of what next year will look like for the u.s. >> i'm back to ph.d. ti

and, again, "banks reviving synthetic bets as paul volcker blasts default swaps." bloom beg. so here we are, the financial system collapsed, steered this economy flight a ditch. millions and millions of americans lost their jobs, lost their homes, lost hope, are still struggling. the biggest interests got bailed out and made whole and now are making record profits again, prepared to pay $140 billion, i'm told, in bonuses, and now we see they're back to trading synthetic derivatives, the very same firms. now, how often do we have to learn this lesson? once, twice, three times, or ten times before the congress will decide no more of it? my point is just like with kids you say, you know what, you better hope your kids are running around in a good crowvmentd i mean, that's the success, isn't it? having them run around in a good crowdopposed to a bad crowd. as i take a look at all these nominations and appointments, the question for me is, what kind of crowd do they run around in? and, ub know what? there's a kind of insular crowd that all comes from the same locations. and they a

paul volcker recently has been quoted as saying that, you know, banks have been engaged in risky behavior. we had people in our offices saying that -- and if mr. volcker is listening, this is not me saying it. i am just repeating it, okay, that he is not really saying the way things are. let me put it that way. and yet, we look back, you know, i know senator warner and i have spent a lot of time on the resolution issue. and the problem that occurs with a resolution which you are dealing with at the time of year ago, was the fact that commercial bank inside a highly complex bank holding company is very hard to sort of take out. and yet, the 23 a and b. regulations, which basically say that a bank deposit cannot be used, that depositors money cannot be used to engage in other things with their affiliates that might pose risk. there's also been some statements made that maybe you listen that activity over the last year or so, a couple of years. and the fact is that bank deposits have been used more aggressively with affiliates than they had in the past. and the reason it's important, it's im

of our nation's most distinguished economic thinkers: our former fed chairman alan greenspan, paul volcker have both said it would be irresponsible not to extend chairman bernanke's term. douglas eken, the former c.b.o. director who was senator mccain's economic advisor in the 2008 election campaign, says -- quote -- "it would be a disaster not to confirm bernanke. warren buffet has said that if he could vote for mr. bernanke's confirmation he would. twice. mr. buffet explained -- quote -- "we talked about the economic downturn being an economic pearl harbor, and he did what should have been done in response to that pearl harbor." these respected economic thinkers know that emerging from our nation's deepest and most protracted economic downturn since the great depression will require continuity of policy. financial conditions might now suggest that our economy is in fact turning around, but a complete turnaround will require that families and businesses, investors and financial markets see consistent policy actions. and central to that consistency and that continuity is leadership at the

paul volcker has suggested that financial firms might be categorized between activities with ongoingelationships such as lending and transactional interactions such as trading. he has proposed these functions to be separated. a corollary question is whether it would be preferable from a public policy point perspective, and adequate from a capital market points of view, to require proprietary investing to be in private partnerships. until it went public, for example, goldman sachs remained a private partnership and was able to attract sufficient capital and whether a series of large losses. in closing, my hope is that the commission will determine that a 21st century model is consistent with the need for stable banks and capital markets sufficient to finance the world economy. the commission has an opportunity to approach this challenge and a bipartisanship manner. these conclusions can hamper profound effect on legislation as to the recommendation of the 9/11 commission. in doing so, the commission will make a major contribution to the stability of financial markets and will have a c