the first part of the topic, fed up with the fed calls for a review of fed policy. has it been good? has it been bad? what's the score guard? -- score card? central banks generally don't have a very good history and track record and the fed certainly has it's black marks over its history as well. but let's look at where the world has come in the last several decades because a lot has been learned and monetary policy has been dramatically better around the world including here in the united states. so let's start with paul volcker's fed that killed the inflation of the late 1970s. when the inflation rate in the u.s. got up to 14% or so. since that time, it's averaged about -- since two years after that, as he brought the money supply back under control, inflation has averaged 3% per anum for that several-decade period. real g.d.p. has averaged about 3.2% which is its average for the last several hundred years in the united states. up through the first quarter of this year. and over the -- this decade, through 2006, leaving out the recession that we are now-i[in,t aver

so should we get rid of the fed? the answer i will provide mind and you can come back with two words --. [laughter] the answer depends on whether we believe not having a central bank would be better. in time alternative arrangements could be developed to clear and settle payments across separate banks or different institutions of payment and printing incriminating the value in the market a private currency. >> can you wrap it up? >> okay, the benefit would be purely private monetary system would be clear rules with very strong market discipline and private behavior. these are important benefits, the cost would be periodic financial panics and crises that would very likely overturn a system with massive government intervention. let's nods for rollout the workable for an imaginary utopian best solution and i will leave that to my partner to level. >> jean, do you want to give your point of view from the abolishing the fed standpoint? >> it is fun to be appearing in opposition to john fund, we both work for rupert murdoc

>>> is the fed deflating the stock market. how about a real accounting by congress. >>> congress could surprise on the upside, and how about gm selling little green go carts. fasten your seatbelts, "the kudlow report" begins right now. good evening, everyone. i'm larry kudlow. welcome back to "the kudlow report," where we believe free market capitalism this is best way to prosperity. breaking news, team obama considering using t.a.r.p. funds for small business loans, obviously, a few questions like, uh-huh? where does this come from? is it economic panic in the white house? besides campaign contributors, who is going to get this money exactly and how are they going to get it and what are the criteria? with us is a financial reporter with the "washington post" which broke this story a short time ago. welcome to the program, benjamin. give me a few hints here. what's the story as you understand it. >> the administration has been talking for a while about the importance of funding small business, as part of its economic recovery

so much money floating around. >> the fed has been doing the necessary things to keep the money stock from going down. which is not, of course, they have been run in the printing press but it was due to the banking crisis and the huge losses in the banking sector and a lot of money destruction so they stepped in to compensate that which is a little bit more subtle i think then just saying they kept on pumping up money. did did all the necessary things to present the money-supply from going down too much. >> in now, when i read the book i was unsure how to feel about the fact this very important person is an expert on the great depression. should we be glad that the person running our economy is focused on the depression? it doesn't sound -- >> probably one of the good things of the bush administration have put in their given his background given a good timing, go ahead iraq paul krugman says there haven't been enough money pumped into the economy and our other economists are starting to warn that the deficit has grown so much that it is getting very dangerous so how are you feeling? i

the proper conduct of monetary policy is the best way the fed can serve the american people.ing the fed to serve is a systemic regulator is just in fighting a false sense of security that inevitably will be shattered at the expense of the tax payer. thank you, mr. chairman. >> the gentleman from north carolina is recognized for three minutes. >> chairman bernanke, look forward to your discussion on the status of monetary policy and the economy. it is good news that many experts say and that the economy has improved since the last time your before this committee in feb to the extent that is true the federal reserve certainly deserves some of the credit. unfortunately my constituents are not yet feeling it. growing unemployment, foreclosure all are around and the like of much if any rebound in the value of their investments contained delete continue to feed their and sunday and uncertainty whether we have in fact turned the corner but the fed has been a sturdy methodical hand. more public exposure with the fed does has also stimulated discussion about some other things a lot of

the fed has some other important functions as well. set short-term interest rates in order to try to keep the economy on track. we have a mandate from the congress to move interest rates up and down as needed to try to promote employment and to keep prices stable, keep inflation low. so monetaryw= policy, move interesting rates around is very important. we have lots of other things we do as well. we work with other supervisors to try to make sure the banking system is stable. and we've had a lot of work to do on that in the last couple of years. and many people don't know, we also do consumer protection. so if you look at your credit card bill, will you see the periodic statement, the structure, the lines and the way that's organized was determined by the federal reserve. and the federal reserve sets a lot of the rules associated with how credit cards can be charged, kinds of penalties, fees, and so on. so broadly speaking, financial stability, trying to keep the financial markets stable, monetary policy, interest rates to move the ec

if the fed, let me put it this way, if the fed reacts too slowly we will have inflation. there isn't the slightest doubt about that but i have all the confidence the fed has the knowledge and the technical ability to make this move in a timely way. >> my guess is if the fed started to take the money away they are going to get a lot heat for it. politicians are going to not like that idea. >> that's the big problem because certainly the fed will have to move in this direction before the unemployment rate stops increasing. before the unemployment rate stops increasing. so, you're all americans, i think. you can easily imagine how the political authorities will react when the unemployment rate goes up from 9.4 to 10.2 and at that point in time the fed will start increasing interest rates. that would be a lot of ugly comments but that's the we would have to go. yes, sir. >> are the banks refusing to lend to the economy in order to beef up recruitments will for the war? >> for the war? >> the two boards. >> the question goes to whether having a bad economy gets people to join

i assume folks at the fed were having to hold back some degree of humor. there was discussion about them designing products for the financial industry. i assume you, like many of us, believe that is pretty outrageous and i would love any comments you might have in that regard. >> well, there's some economic analysis which suggests there might be benefits in some cases of having a basic product available, so-called vanilla product. the design of that would have to be an industry decision. >> by the private sector? >> by the private sector. also be careful to make sure that didn't eliminate or create a regulatory danger in some sense to legitimate products that are not the basic products but still have appropriate features that are good for some borrowers. so, we don't want to -- we want to make sure that simple straightforward products are available. on the other hand, we certainly don't want to roll back all the innovation in financial markets that take place over the past three decades or so. >> the fact is you believe that that should reside in the privat

the proper conduct of monetary policy is the best way the fed can serve the american people. asking the fed to serve is a systemic regulator is just in fighting a false sense of security that inevitably will be shattered at the expense of the tax payer. thank you, mr. chairman. >> the gentleman from north carolina is recognized for three minutes. >> chairman bernanke, look forward to your discussion on the status of monetary policy and the economy. it is good news that many experts say and that the economy has improved since the last time your before this committee in feb to the extent that is true the federal reserve certainly deserves some of the credit. unfortunately my constituents are not yet feeling it. growing unemployment, foreclosure all are around and the like of much if any rebound in the value of their investments contained delete continue to feed their and sunday and uncertainty whether we have in fact turned the corner but the fed has been a sturdy methodical hand. more public exposure with the fed does has also stimulated discussion about some other things a lo

the highlights there. steve? >> thanks, maria. fed chairman ben bernanke found himself defending the central bank's duties and its independence for a second straight day on the hill. a key issue, a proposal by the obama administration to strip away the fed's job of protecting consumers in financial matters and giving that job to an independent agency. bernanke today acknowledging that the fed dawdled early in the decade on consumer issues and he suggested dramatic changes could be in order if the fed is going to keep the job. >> suggestions i would make, one would be to put consumer protection in the federal reserve act along with full employment and price stability as a major goal of the fed. a second steph could be to require the chairman to come before you or another committee, at least once a year, present a report in the same way that we do for monetary policy on our consumer protection steps. >> congressmen were still very skeptical about that. bernanke would give no ground on the fed's independence and resisted the call to allo

that follows the second day of questions for fed chairman bernanke. ray suarez has the story. >> reporter: those tough questions came today before the senate banking committee. top of the agenda for senators: the fed's authority and its response to the financial crisis. chairman chris dodd of connecticut. >> reporter: richard shelby of alabama, the committee's ranking republican said he disagreed with an administration proposal to give the fed more regulatory power. >> in the end, it was the failure, i believe, of the fed to adequately supervise our largest financial institutions that required the deployment of its monetary policy resources to stave off financial disaster. in light of the fed's record of failure as a bank regulator, it should come as no surprise that congress is taking a closer look at the fed and reconsidering its regulatory mandate. >> reporter: some senators supported bernanke's responses to the economic crisis. still, many had questions and criticism. democrat chuck schumer of new york pressed the chairman on the fed's new rules fo

author of a major book on the fed, "secrets of the temple," greider says the fed began insulating itself back when it started nearly a century ago. >> this was the progressive era, which believed deeply in good government. it depended on professionalizing the management of government and that meant in some degree getting it out of the hands of people, the unruly public with its passions and ignorance etcetera. in many ways, it was created to make this volatile subject a secret and it succeeded.÷p >> solman: it succeeded and continued to for nearly a century. former fed vice-chairman alan blinder. >> my first advice when i went there in '94 from the feds press officer was, "i want to tell you we don't talk about the economy." i looked at him and said, "what would you like me to talk about?" >> solman: but then again, says alice rivlin, who succeeded blinder as vice-chair, there's always a risk of saying too much. >> i made a speech in nebraska which was interpreted as talking down the dollar. i certainly didn't think i had but somebody did and the dollar actually fell. but that was the ex

and the branches of the fed. lthough throughout business, branch means in effect another office, not even a separate incorporated subsidiary. so most of the world your branches as part of your tree. do you think it's appropriate to have privately elected governors serve in what appears to everyone to be a governmental capacity? >> the boards of directors of the reserve bank i think above the reserve banks have served a valuable function in the federal reserve. >> yes, sir. , in germany and before world war i they had what many people thought was either a good government. but your voting power, your control over government, any agency is dependent upon how rich you were. you could argue was a very good government that it made very good decisions right up until sarajevo. i'm not asking you whether it's good government. whether you have made good decisions. what i am asking is isn't consistent with what we celebrated on the fourth of july to have such governmental power in the hands of those elected on the basis of o

vince reinhart is a form senior staer at the fed. he says the ntral bank won't ise interest rates or tighte crit until it believes a durable economicecovery is under y. >>hey don't have that evidence yet, and they are ying to send a signal to push back agnst market participantwho are expecting too quick turn in monetaryolicy. >> reporte yes, banks are looking tter and markets stronger, but bernan cautioned the recovery hexpects later this year will be tepid and rising unemploymenremains a major ncern. >> job insecurity, tether with clines in home values and tight credit, is likely toimit gains in conmer spending. the possibility at the recent stabilation in household spending will provtransient is an important dnside risk to thoutlook. >> repter: so why all this talk abo an exit strategy? me analysts are concerned abt all the cheap credit the fed has pump into the financl system. banks are now holdg a lot of that cash in reservewhich could co roaring into the econy in the form of new lending once growth return that could mean high inf

the fed has some other important functions well. set short-term ierest rates in order tory to kee the economy onrack. we have a mandate from t congress to move intest rat up and down as needed to tryto promote employmt and to keep prices stable, keep inflation lo so monetaw= policy, move interesting tes around is ry important. we ha lots of other things we do asell. we rk with other supervisors tory to make sure e banking system is stble. and we've had a lot of work to do on tt in the la coupleof years. and ma people don't know, we aso do consumer proteion. so if you ok at your credit cd bill,illou see the periodic statement, the struure, the lin and the way th's organized was determed by the federal reserve. and t federal resve sets a lot of the rules asociated with how credit car can be charged, kinds of penalties, fees, and so on. so badly speaking, financial stality, trying tokeep the financial markets stable, motary policy, interest rtes to move e economy into a higher pace o a lowerace. banking supervion and conser protection

i'd only say that wile we consider making the fed the lead systemic regulator, the fed and we must examine how it can improve its functioning to take on these new duties. happen about the arguments against? while ensuring financial stability may be too big a job for just one regulator, even if the fed takes the lead, coordination with other regulators will be essential for success. coordination with regulators and central banks abroad may be even more critical than being in sync with regulators at home. markets and institutions are global, but our regulation is largely local. so i like the president's recommendation for its financial services oversight council and international cooperation and coordination especially. last, what about reassigning some federal responsibilities to other agencies? regular haters should do what they do best. and for example, as others have said, consume are protection and promotion of financial literacy could go to another agency. but i think that the fed may still play a useful role in supporting these areas. mr. chairman, let's me add that these views are mi

vince reinhart is a former senior staff at the fed. he says the ceral bank won't rae interest rates or tighten cred until it believes a durable economic rovery is under wa >> ty don't have that evidence yet, and they are trng to send a signal to push back agait market participants o are expecting too quick a rn in monetary picy. >> reporter:es, banks are looking beer and markets stronger, but bernankeautioned the recovery he pects later this year will be tepid and rising unemployment mains a major coern. >> job insecurity, togher with deines in home values and tight credit, is likely to lit gains in consur spending. the possibility th the recent stabilizion in household spending will ove transient is an importa downside risk to the outlook. >>eporter: so why all this talk aboutn exit strategy? so analysts are concerned abouall the cheap credit the fed has pumpednto the financiasystem. banks are now lding a lot of that cash in resves which coulcome roaring into the onomy in the form of new lending once growth rerns. that could mean high

look at the evolution the fed's balance sheet. structured a lot of the programs when i was back at the fed is that when the risk spread started to come down, people would turn to the market rather than turn to the fed to try to get some liquidity. so we actually had seen some fairly significant decreases in the size of the fed balance sheet in a very gradual, very orderly way. and i think we'll see a lot of that going forward. >> reporter: randy, the other thing i want to ask you is about the town hall the chairman just held. what is your take on that? is there a danger this is seen as political? >> well, i think if you look back at the writings the chairman had done long, long before getting to the federal reserve, and that many other economists had done, what many people think is very important the fed try to be as transparent as possible and try to speak broadly to various audience members, whether it's business people, whether it's consumers, whether it's members with congress. i think the chairman is taking this seriously and

i think the fed panicked on aig. it's cost the taxpayers about $150 billion to $170 billion so far and probably cost more. >> but aig, in my opinion, the way i view it and i could be wrong, aig seems to me to be the linchpin because ultimately, they were the ones that issued all the insurance and didn't have any way of paying off claims. >> there weren't any claims. what happened with aig was that they didn't have the collateral that was necessary to support the credit default swaps they had issued, right. >> right. >> but tlmp no claims on credit default swaps, you really have to remember this. it's as though you had homeowners insurance and your insurance company failed but you hadn't had a fire in your home and no loss in your home. and under those circumstances, what you do is you go out and you get a new insurer, and the idea that because aig failed and couldn't pay off on insurance on which there were no claims is not a crisis. in adigts, when goldman sachs was asked what would have happened to them if aig had b

we don't know who the fed picked to be winners and losers. and i think the public really has a right to know that. someday. >> on issues relating to our 13-3 authority, we're putting out money and lending money and so on. we can work that out. i agree with you that we're putting out taxpayer money. there should be ways for the government to be -- for congress to be assured we're doing it in a safe way that is -- has appropriate financial controls and so on and so on. so i agree with that part. monetary policy is a very specific element, though, of that. >> but that's the most critical. >> the gentleman's time has expired. the gentleman from ohio. >> thank you, mr. chairman and thank you chairman bernanke for being here. i had questions for you, as well, about the federal reserve's role, and the need for accountability and transparency versus the conflicting need for independence and to be free of political pressures. and if seems to me, what the public is more concerned about is not the federal reserves rule on monetary policy, but the federal

the fed has the power here. why isn't that happening?hy aren't we getting more support in order to demand these institutions start being far more responsive to the demand of industry and business out there relying on these institutions to expand and grow and help recover? >> well, mr. chairman, i think the first order of business last fall was to overt essential think collapse of the system and that was a very important step. we did achieve that and the system now appears to be much more stable. it's still very challenged. some banks are still short of capital. other banks are very -- concerned about future losses. they're concerned about the weakness in the economy and the weakness of potential borrowers. there are legitimate concerns that banks have. that being said, the fed and other bank regulators have been very clear that banks should be making loans to credit-worthy borrower, it's in their interest, the banks's interest as well as interest in the economy and we're working with banks to make sure they do that. i think that we are s

he is the fed head, mark. hat meeting, he can go and face its financial press where experts cross-examine him. >> larry, i agree with you but on the other hand, i don't think we should ex-age rate, the vast majority to of the financial press, except for cnbc are going to be softball questions. >> all going to go melissa is going to go steve's gonna go. >> all shouting at the same time. it will be ugly. we are going to leave it there. >> glad we solved that. >> trish? >> i'm going to go to, and i think actually i'm going to start a petition, we will get that going for us. okay. "power lunch" coming up at the top of the hour, bill griffeth, would you sign the petition and what you got in store? >> put me down. i do get cookies for that as well somehow? >> sure why not. >> coming up, back to school well under way this summer. find out hot winning retailers are as a result of all of that. good news also by the way, "newsweek" magazine has declared officially the recession is over. now we just have to survive the re

that follows the cond day of questionsor fed chairman bernanke. ray suez has the story. >> rerter: those tough qutions came today before the senate bankingommittee. top of the agenda f senators: the fed'suthority and its response to theinancial crisis. chairman chris dodd of connecticut. >> reporter: richardhelby of alabama,he committee's ranking republic said he disagreed witan administration proposal to give the d more regulatory power >> in the end, it washe failure, i bieve, of the fed to adequately supervise our largest fincial institutions that ruired the deployment of s monetary policy resources stave off finanal disaster. in light of e fed's record of failure as a bank regulor, it should come as nsurprise that congress is taking closer look at the fed and reconsideringts regulatory mandat >> reporter: some senator supported bernanke's respons tthe economic crisis. still, ny had questions and criticism. democrat chuck schumer new york pressed t chairman on the fed new rules for the credit card industry, which ke effect a new law sied by the

the fed has been doing a good job for the past three years or so, and we are committed to do it, and we will continue to work in an area. >> are there some dangers bifurcating regulatory process, where you have one entity looking at consumer products and determining what products and financial institutions can offer and endorsing those and having another regulatory agency looking at the safety and soundness, and how does that work? . and soundness and how does that work? >> there are some costs to it in that he would have doubled the exams and there wouldn't be as much coordination between the safety and soundness and consumer protection issues so there would be some issues related to that separation. >> so, at a time when i guess we are all feeling it is time to tighten up the regulatory structure, make sure we plug the holes and that's moving forward if we had some places where we weren't actually able to have the ability to or in fact doing the ability to or in fact doing our make sense? >> well, the argument for doing it i think is that those who believe that you need a separate

the fed one the fight and got the additional 40 it sought. ten years later however it is clear the fed has proven it is incapable of handling that responsibility. ultimately i believe if we are able to reach some sort of agreement on systemic risk and whether it can be managed by strongly believe we should consider every possible alternative to the fed has a systemic risk regulator. thank you mr. chairman. >> thank you, center and we are still missing 1i think. i need 12. if i have a colleague that can count walter i'm willing to move ahead. after all, this is washington. [laughter] >> we will wait for the 12 to arrive. >> is their someone sitting here? [laughter] let me invite sheila bair and mary schapiro and dan tarullo and injured as people who hardly need an introduction people who've been before the committee on numerous occasions. sheila bair as we know is the chair of the federal deposit insurance corporation, served as assistant secretary of the treasury extensive background in banking finance and of course many appear have known her

and i think the idea that the fed, in light of the cessation of economic decline, the fed should be withdrawing liquidity from the system in an imminent fashion. i don't see any basis for that argument. >> rick? >> i think they should at least in certain ways have token exit strategies outlined in a very precise fashion. just consider let's look at the program to purchase asset, 1.75 billion, a combination of mortgage backed agencies and treasuries. years before they can sell the securities but mean these can't snug it up or lower the bar on some of the liquidity programs early? no it doesn't mean they can. >> but they have. they have. >> okay. they have in certain ways. >> to look clearly at -- i don't think we have the charts this morning, but this is an important thing. they have stopped creating new dollars, going back now -- it's just about seven months, the initial surge of $1 trillion went in september, october, november, half of december. they have finished. and the demand for the fed liquidity has gone down and they haven't bought more treasuries to offset that. >> concretely put a fin

wants to extract the fed from the unprecedented private sector intervention. come august 4 you'll be able to read all about it in david wessel's new book "in fed we trust." ben bernanke's war on the great panic. tonight he'll tell us what bernanke was up to this week. >> that's right, gwen. the poor guy went to the hill three times, once in the senate and once before the house. he had a very consistent message. things are getting a little better and i deserve some of the credit. and barney frank told him no one got elected with a bumper sticker saying, you could have been worse. he said, you really do need to change the regulatory -- financial regulatory apparatus so we don't go through this again. and i'm 100% behind tim geithner, the treasury secretary and his plan, except for the things i don't want to do. he said to congress emphatically he hates this bill ron paul is pushing that has the surprising support of 2/3 of the house that would give the government the accountability office the right to audit the feds' monetary policy, their interest rate decisions

they are hoarding the extra cash the fed has put into the banking system. in fact, what this chart shows is this whole movement in fed cash that occurred last fall has basically gone into excess reserves. again, they're laying, they're not monetizing, not lending, being very cautious. perhaps that's what bankers should do. mr. bernanke should talk to us about the meaning of this excess reserves issue, and will he be using them as a target to eventually soak up even more of the extra cash he put in? a lot of my friends are worried about inflation. i say to them, guess what? as long as there's so much money sitting idle at the fed with excess reserves, there sblt going to be any inflation for i don't know, a year or two. but if this excess reserve number comes down, and banks start putting the money to work big-time, as we hope they will before too long, that's the signal for the fed to make a real exit strategy, and take out all this additional money. so my two points. number one, they've stopped creating new money in the past six months. and number two, the

it is stretching the resources of the fed. it complicates its ability to carry out monetary policy functions. at a time when our country faces -- let me say this, if we continue to do the things, continue to have stimulus packages and deficits, we are going to have crippling inflation. i think the fed will have its hands full dealing with inflationary pressures without being distracted and over extended by these new powers. the republican plan would therefore relieve the fed of some of its current regulatory responsibilities and allow it to focus on monetary policy. thank you very much. let me close by saying that we need to end the bailout that the fed has been instrumental in carrying out over the last 18 months. thank you. >> the gentleman from texas will be recognized for four minute. >> thank you. i am delighted you are holding these hearings today. this is a subject we have talked about for many years. we had earlier discussions. the position of the fed is that they reveal a lot of affirmation. they still argue the case f

ken lewis got what he wanted and the treasury and the fed got what they wanted. l of this happened against a backdrop of unchecked government policy. there is no transparent -- transparency or accountability. can those refuse to mid to have manipulated the system to his benefit. he started this bill when he made the first phone call to mr. paulson. they got the government involved. it got the treasury to cough up 200 billion dollars of taxpayers' money to help finance this merger. he never had to disclose $12 billion in merrill lynch to investors until it was over. he never had to as the shareholders to reconsider the transaction. in the end, mr. lewis got everything he wanted. mr. paulson and mr. bernanke also got what they wanted out of this marriage. they got an uninterrupted murder that they believe helped -- merger is that they believe help stabilize the market. while all of this was going on, the american people were kept in the dark. there was no oversight to determine whether this arrangement made sense. this is unacceptable and must be prevented from happ

>> it did happen on the fed watch, and there are two or three big mistakes the fed made. i would say put it all on what the republicans say -- let's put it all in a bank regulator under an umbrella, which brings the occ, the ots, merges them, and brings them together. and then form a council to identify a systemic risk. and that ought to be people from the private sector, independent people, as well as regulators, and even state regulators. let them identify problems, and then let the agencies that are now charged with avoiding or remedying that take charge. >> but the private sector -- isn't the private sector the one -- we were counting on them to identify risks that there were institutions in the past, which they fully failed to do. how can we rely on them now? >> mark, in fact, several people warned about the inverse curve that the fed allowed, which hurt the banks. they were warned about the very low interest rate. there were several economists who did predict this, with derivatives, there were -- even warren buffett back five, six years ago, called them weapons of ma

this is a record offering week from the fed. something people are watching closely and the yield continues to move higher. we are now at 3.73% as the market continues to have a greater appetite for risk and people move out of bonds. are they moving into gold? they are this morning. the dollar this morning at eight-week lows against a number of key currencies. joining us now to talk about what is going on in this market is christian tegland blogburg. and steven kokulis at td securities. steven, you say this rally that we're seeing appears to be liquidity-driven. we have so many central banks pumping liquidity out. there people taking advantage of that you're not sure it can sustain the momentum, are you? >> it's not clear whether we will sustain the momentum. obviously it's encouraging to see optimism moving back through the markets but we have to have an assessment of how strong is the economy. we still generally have gdp figures in most countries still negative, looks like it's staying that way. unemployment rising just about ev

the fed well and that fighting got the additional authority.ten years later however, it is clear that the fed is proven that it is incapable of handling that responsibility. ultimately, i believe if we are able to reach some sort of agreement on systemic risk, whether it can be managed, i strongly believe we should consider every possible alternative to the fed as a systemic risk regulator. thank you mr. chairman. >> thank you very much senator and we are still missing one. i think, is that one? i need 12 endless-- if i have a colleague back in cattiest well i am willing to move ahead. [laughter] after all, this is washington. we will wait for the 12th to arrive. let me invite sheila bair and mary schapiro and dan tarullo to join is that the with the table and let me briefly introduce people who hardly need an introduction and they have been before this committee and numerous occasions. sheila bair is our chair the federal deposit insurance corporation served as assistant secretary the treasury, an extensive background in banking and finance an

fomc staff agrees that the fed already has and can develop tools. agreeing, however, that most backup liquidity facilities should be extended into early next year. market kins, the minutes say, remain fragile. hour however, if improvements continue, a number of those facility may not need extension beyond february 1st of next year.. the committee agreed to changes to program of asset purchases is not warranted at this time. while it might provided some additional support. were uncertain. the economic outlike revised upward. but labor market conditions remain a major concern.. the updated economic outlook for the remainder of 2009, gdp, in a range of a negative 1.5% to 1%. unemployment in the 9.8% to 10.1% range, and core pce inflation, 1.3 to 1.6%. looking ahead to 2010. positive growth, unemployment declining slightly, and core pce inflation, 1.0% to 1.5%. a slow recovery, trouble with the job markets and moderating inflation concerns. erin? >> thank you very much, hampton pearson. >>> the gdp decline -- that is right? >> yes. >> i'm just making sur

the fed is committed to accountability in its operations. we report on our activities in a variety of ways, including like the one that i presented to date. the fomc releases detailed minutes of each meeting on a timely basis. we have increased the frequency and scope of the published economic forecast of the participants. we provide the public with detailed annual reports on the activities of the federal reserve system that are audited by independent firm. we also publish a complete balance sheet. we have recently taken additional steps to better inform the public about the program's been instituted to combat this financial crisis. instituted to combat the financial crisis. we expanded the website this year to bring together already available information as well as considerable new information on policy programs and financial activities. in june we issued a report to the congress that provides even more information on federal reserve programs including breakdowns of lending a seceded collateral and other programs a established to address the

after that, the fed became more independent, brought inflation down. now that's exactly what it would do. if that carve-out is eliminated, the congress would have the authority anytime to ask the gao to come in and audit and look at that's not consistent with independence. >> lehrer: crosby kempner has a question about regulating. >> crosby kemper, mr. chairman. i've also been a banker in kansas city and now im a librarian. as a banker, i can tell you that the two banks who are represented here, my cousin and i, are two of the solvent banks left in the country. im the director of the kansas city public library and an amateur historian. and i've read your book, essays on the great depression. wonderful book. and you talk about two causes of the great depression. one is the failure to the federal reserve to provide an adequate monetary policy. it tightened too much during the days after the stock market crash. and you talked about the non- monetary problems, part of which was the failure, despite great liquidity of the banking system, to respond to the,

and i think it's an unwelcome problem for the fed. i think the congressional bill to audit the federal reserve is just an example of the kind of mischief that lies in the weeds. >> glenn, where are you on this consumer agency? a lot of people have come on this show, and they're really unnerved by this. they say it's going to act as more bureaucracy, more layers. or maybe, you know, with the fees that people have been paying in terms of credit cards, maybe there is room and a need for a consumer advocate or consumer agency. what do you make of this? >> well, first of all, consumer protection is important. and the greatest bulwark for that lies in information disclosure, transparency, and simplicity of contracts. i think a consumer agency, if we're going to have one, should be part of this umbrella regulator that sits by the fed, not a separate stand-alone that i agree, could wind up raising costs to consumers. >> and do we need a systemic regulator? i mean, part of this makes me go back to what was in place. we had a structure in place,

as more banks go belly up, more than 300 of them are on a short leash...but are the feds being too patient with some troubled banks? plus, how the nation's stock cops have responded to missing big scams...and does the s-e-c have the tools necessary to restore public confidence? also...as the price tag on healthcare reform continues to grow...a look at the impact it could have on taxpayers and workers pockets...it's all ahead on this ediiton of first business. welcome in at six trading sessions six updates for the dow jones industrial average and for the s&p 500 if you listen closely you're within whispering distance of a brand new high for the year. as a positive response come from these early seasons. it tickled at the nasdaq 100 it's been a pretty easy ride of 27% since jaber able to look at about and that's barely positive right now so the dollar is definitely struggling against rest of the market. will talk more about what has been leading the market and has been technology but we took a look at these are nothing blowing them out of the water but the fact is what we've seen with the ec

does that force the fed to do something about the debt. maybe liquidity says there's something to it. >> did you see the article in this journal he would not monetize the deficit. he recognized to me the have this $300 billion program of buying treasury bills and bonds. what is that if that's not monetizing the debt. he claims he has the tools and wisdom to turn the money machine off and have an exit strategy. what if you have rising prices, i know you, larry, i first got to know you in the '70s, what if we had rising prices and weak economy, what if that were to come back, would he have the wisdom to know when to raise interest rates and exit strategy when the economy is still weak? that's a possibility. we don't know exactly how this will transpire. i think that's a real possibility. >> you have 274 co-sponsors for your idea to have a government accounting audit of the fed, including the fed's policy. tell us briefly about that. mr. bernanke, of course, opposes it. >> he strongly opposes it. he talks about transparency. he's for transpar

it's the independence of the fed. it is not bernanke's self agrand eyesment, which is diving this very, very unusual public exposure to unlock the secrets of the fed temple. >> he is wrong. i think, larry, that ben bernanke thinks he's bruce springsteen. he's going out on this tour, and i think this is about not what you were just talking about, i think this is about vindication and what i'm not hearing from ben bernanke is any kind of mea culpa, any kind of humility for being there when this crisis started. larry, i blame ben for a lot of the financial crisis. i know you're a strong supporter of him. >> no, mediocre. i want to correct that record, i'm a very mediocre supporter, and i've suggested publicly on the air that if i were assured that larry summers would be a king dollar guy as he was in the 1990s, i might prefer summers, because i agree with part of what you said, that bernanke has never protected the value of our money or consumer pocket books, and he and greenspan deserve a lot of the blame. >> and i think

so what metrics do you evaluate that allow you to get ahead of that curve when the knock on the fed has always been that they're too late reading the trends? >> it's a very difficult problem. and even though we have these unusual circumstances, it's really the same problem we always face which you just pointed out, picking the right moment to tighten and pick the appropriate pace of tightening. since monetary policy takes time to work, the only way we can do that is by trying to make a forecast, make a projection and we use large amounts of information including qualitative information, anecdotes we receive, former models, a whole range of techniques to try to estimate where the economy will be a year to a year and a half from now. and based on that, we try to judge the right moment to begin to raise rates. so we will be looking to see more evidence of a sustained recovery that will begin to close the output gap and improve labor improvements and we'll be looking for signs of inflation. there are inflation expectations that would cause us to respond as well. >> given the debate of overh

gold at this hour is trading to the upside, as well, up nearly 1.5% at $948.70. fed chairman ben bernanke is set to deliver a fresh report today before congress. on wednesday, bernanke will go before the senate banking market. in an op-ed piece in the wall street journal, he says the huge amounts of money that the fed has pumped into the system will not undercut its ability to raise interest rates when the time is right. he says it's like an easy policy will be needed for some time, but as the economy recovery takes hold, the fed will need to tighten monetary policy to prevent, quote, an inflation problem down the road. joining us now is christian blaabjerg, market strategy at saxo bank, and steven davesys, the ceo at chaplain wealth management. we're having a bit of a round table of sorts. gentlemen, i'm not sure if you got a chance to read better bernanke's piece in the wall street journal, but he essentially says, we're going to need to keep interest rates very low and we understand the risks of spurring more inflation here. but we have an exit strategy. a lot of

we'll have the fed pulling back eventually on the purchase program. i think the curve can steepen more. >> okay. >> david, thank you very much. appreciate t.david greenlaw joining us today, and now we're going to go out to julia boorstin, and she is at a very interesting conference and has a very special guest with her as well. julia? >> reporter: thanks so much, sue. i'm joined now by barry diller, the ceo of iac. thanks for joining us. >> happy to. >> reporter: barry, it's been nearly a year since you spun off four different businesses including ticketmaster and lending tree. nearly a year later, what is the plan for iac? >> well, the plan is was in the original concept of when we spun these off. iac has research, it has match.com and ask.com so it has a whole series of businesses that are a billing and that's what we're doing and they are building. i mean, notwithstanding the economic mess of the day, the companies are all profitable. >> reporter: well, speaking of economic mess of the day, in your last earnings call back in april you said you didn

, butn the crises gone t places fed chairmen haven't ne before. did a press conference t the naonal press club. he went on 60 mintes" and sunday night e's doing a own meeting in kansas citythat wi be on news hour. ose are things greenan never did. i hink hisprimary ambition is peoplare suspicious of the fed and goinover the hads of congre to say, look i saved e country and here's w i did it, trust e. then it mas him a little mre lily to be reapinted, then that's an add benefit. >> wil he be reappointed? >> i think if thepresident had to decide rig now, i thin the odds favor reappointment. you can bet on th internet on this. and i checked before i cme ov, nearly 70 odds of reappointment. but i hink the white house will wai a whle becase if something else goes wong, if the econy goes south and the need somebody to blame, they would like to hae the opportunity. gwen: i'm curious. he was gving a version of the green cutes spee, things are getting beter. s optimism is uted. is ijustified. >> i think if yousay are we at the risk of havi another great dep

>> we're in a situation where the fed has to have an exit strategy. to what chairman bernanke will testify about today. but the real issue is not the technical aspects, which is probably what chairman bernanke will focus on, but whether there's sufficient support the federal reserve can do what it needs to do to make sure that inflation doesn't heat up again. the following issue is, the economy's recovering at some point, the federal reserve will have to raise interest rates -- >> in the short term. in the short term that's going to put the brakes on the economy. >> and so even now one of the big issues that's occurring right now is that the ability to have expansionary policy has been very limited by fears about future inflation, by fears of proligate spending, which there's no talk about the amount of government debt of gdp is expected to double for sure but it will keep on growing after that. these are things creating a huge, huge problem. the second issue is that people are furious about what has happened, and it's going to be a question about whet

would you not give the fed the authority to deal with that?>> i would not. >> who would you give the authority to deal with that? >> i think we need a new regular tear institution to be the consolidated regulator of financial institutions. i would not separate out the too big to fail ones and give them a special regulator. >> but that shouldn't be the fed is what you're saying. >> so you would create a new agency for that purpose? >> i deally i would. >> we're getting quite a bit of pushback from the proposal to create a new agency for consumer protecti protection. would you create a new agency for consumer protection, too? >> i would. let me explain what i meant the first time. i would consolidate regulation of institutions, financial institutions into a single regulator, ideally. i wouldn't separate out the too big to fail ones from the other one. >> so they would have the ability from all the existing regulators from some others? >> yeah. you would unmake a bunch of agencies. >> what i wanted to stress was not doing the too big to fail inst

the fed is changing its policy without announcing it. somebody's got to put that on the table. >> do we still have peter and paul with us? i want to know exactly what do i do as an investor given each of these scenarios. peter, what do you buy? how do you really maximize strength as you believe it's going to be or rather weakness -- i'm getting peter and paul mixed up here today. weakness in the u.s. dollar? >> let's look at gold. we had this massive deflationary debt crash. we had the worst economy since the 1930s, and gold is 100 bucks from its all-time record high. that is sending a message. >> it hasn't moved in three years. >> it's probably one of the best performing assets since the highs of september. >> it hasn't moved in three years. >> oil is at $60. remember the world we used to live in when oil went from $20 to $30 and went to $40 because we had a war? it's now at $60. corn is 60% above its long-term trend. inflation is there. it's a process, not an event. just because it's not raining doesn't mean the clouds aren't coming. >>