still, volcker held to his long-term course.solidating and extending the heartening progress on inflation will require a continuing restraint on monetary growth, and we intend to maintain the necessary degree of restraint. schoumacher: by 1982, the economy had fallen into the deepest recession since the great depression. even the reagan administration was urging the fed to relent. but volcker and the fed board, determined to bring inflation down, held tight. finally, in late 1982, the fed saw inflationdropy and eased the money supply. this last week, the federal reserve bank the fed saw inflationdropy decided to lower its discount rate to 9.5%, the first time this key interest rate has gone below two digits since 1979 and the fifth reduction in just four months. this demonstrates the fed's confidence that inflation and market rates will continue coming down and its confidence that we can work together for a healthy, non-inflationary recovery. schoumacher: throughout the recovery that followed, inflation held at . though inflatio

in august, volcker announced an easing of monetary policy. wall street was first to respond.ter memories of the recession lingered on and faith in countercyclical policy was a casualty. many people blamed the misery on the failures of 1970s stabilization policies. others, like congressman reuss blamed the unnecessarily harsh policies of the 1980s. in my view, curing inflation could have been done without stepping on the brake so hard the economy was thrown through the windshield. by christmas, the economy was growing again. workers began returning to their jobs, and inflation held at 4% throughout 1983. by 1985, after two years of recovery, inflation remained at 4% but the economy still bore the recession's scars. millions of manufacturing jobs were gone. unemployment remained stuck at 7%. 15 years of entrenched inflationary expectations had been sharply reduced but only after the government proved willing to pay the price to wring inflation out of the economic system. we asked richard gill why tight monetary policy caused such hardship. taking a benign view one could argue t

and the volcker rule that went from four pages to 963 pages, even volcker doesn't supported anymore. opportunity when i was elected to lobby for a tremendous amount of money to be moved out of wall street and indirectly help homeowners. i got a commitment in writing from the new administration to move 50 to $100 billion out of wall street. that is the type of involved and engaged advocate that you want to have. a champion that says less for wall street and more for homeowners. i push the administration very hard to create a homeownership program that would work well. they didn't take many of my ideas but they kept -- but i kept pushing. >> you have taken heat over allegations that your health care position was plagiarized from other sources. what you tell us how your positions on health care reform differ from your opponent? >> my campaign already addressed this issue but i have been involved in health policy for over 30 years, involved with the texas medical association, the oregon medical association, the washington committee. i have been a trustee for the american medical associat

when that thing gets written, totally like volcker rue, when it comes down to the volcker rule whichrevents proprietary trading it will be much more expansive. goldman is hoping to be as expansive as possible. from practical standpoint, take out dodd-frank, this means nothing. what the poll that we should be looking at, does wall street support hillary clinton any did a column in the "new york post." she still has a lot of friend on wall street. blackrock, lloyd blankfein. melissa: corporations don't create jobs. that sy amazing. >> they support her. melissa: cosmopolitan magazine will shuttle college voters to polls in north carolina. tough listen to the story. party bus and models obviously included. they looked at 10 races. they endorsed democratic candidates in all 10. had a contest with colleges to see which college they would go to in order to shuttle women, to the polls. they chose the kay hagan race in north carolina. they're bringing buses by with models, party buses, to take women to the polls. >> male models. melissa: where they are endorsing democratic candidates. and the

she is not paul volcker.nd when, when ben bernanke announced qe3, he said, the specific goal of quantitative easing was to raise asset to raise real estate prices to create wealth effect would hope to trickle down to the overall economist. it didn't trickle down. stayed in hands of a few people that benefited from qe. this is the only game the fed knows. it will keep playing it unttl we have a crisis worries than we had in 20088 >> the way you play it out, peter, you say unless they keep adding quantitative easing, then we will have a bear market in stocks. they are too fearful of that. >> yee. liz: even though role of central bankers in essence to calibrate interest rates to promote growth but -- >> but it doesn't promote growth. we will when there is currency crisis, but, liz, it doesn't promote growth. it undermines legitimate economic growth. it blows bubbles. that's what we're doing. yes, if the fed stops qe, we'll have a recession. we need that recession. the last recession didn't flow naturally because

a 10 year, 20-year paul volcker bond market that refuses to correct.be when the two year yield goes from 0.5 to 0.3 retirees are going yes! bond prices are going down. >> no one knows how bad. we have to look at where are risks are concentrated. i mention of avoiding concentration in the front end of the curve. managing liquidity risks. some sectors of fixed income are going to cost more to transition out of. >> how will janet yellen, stanley fischer, bill dudley, how would they communicate this? do you expect a speech of a rubber chicken? >> a lot of ways in which they will lead into the change in communication could be through speeches. priming the markets for the official communication. we have the fomc minutes. sometimes the conversation that occurs in the minutes is a way of laying the groundwork for the markets on the change. >> jeff rosenberg with blackrock. out of jacob -- adam? >> look at where the markets are trading. i got so excited. s&p futures are up seven points, 1/3 of a percent. the 10 year is flat. the euro getting a bid, 1.2560. , fi

can you attribute this to dodd-frank in the vocal role -- -- the folklore rule volcker rule? cycles, banks could use their own money to absorb a bad sale, not trickle buffer somemarket, of the outflows that we saw from some of the funds. people who are you -- who are holding a mutual fund, they are not looking at their holding say, oh, my gosh, it just lunch. i better take my money out. the concerned is that, if people see the mass decline or a significant to drop in the value of their holdings, they will be prodded to take out more. the question is could this spur a cycle. they are not holding as many treasuries. dealers held treasuries to offset holdings of are scared at. even if treasuries don't --'s of riskier debt. on the other side, people are saying there is too much liquidity. >> i was just going to say, if banks are doing what seems to be the right thing and reducing the get of the balance sheet, things together or there may be more regulation than you think is possible right now -- they are doing the right thing but it is causing all this craziness? >> they may be r

. >> people like paul volcker have complained about the best and brightest going into financial engineering and it's really bad because they should be going into other places. do you think that is happening? for thosepossible people now, because of the power of silicon valley -- i don't know many people that have been 10 years on a business and all of a sudden could sell for $20 billion. is that more attractive to the smartest? first, wall street attracts people that are very ambitious but don't know what they are ambitious about. silicon valley, they have an idea. they have something specific. it kind of have to know about computers and they tend to come with a clear set of skills. slightlyalley is a different crowd that i think drifts that way. provideeet still does for the best colleges in the country. business school, columbia business school? or undergraduates? they studied as you did, romance languages. wall street has infected the educational system so they don't study art history so they go get a job in economics. >> there's no sense in the value of the humanities? >> there's no sen

the volcker rule that went from four pages the now 963 pages, even bolder doesn't support it anymore. merkley: i had an opportunity after i was elected to lobby for a tremendous amount of money to be moved out of wall street and indirectly to of our homeowners. i got a commitment in writing from the new administration to move 50 to $100 billion out of wall street and to help homeowners. that's the type of involved, engaged advocate for organ homeowners that you want to have, a chance in this is less for wall street, more for homeowners. i push the administration hard to create a homeownership program that would work well. they didn't take many of my ideas but i kept pushing. >> moderator: next question is for dr. wehby. >> dr. wehby commute taking heat over allegations your health care positions were plagiarism other sources. and you address that? will both details of your positions on health care reform different from your opponent? wehby: my campaign already addressed this issue, but i've been involved in health policy for over 30 years, involved with the texas medical association,

. >> they have had the volcker rule take out proprietary trading.u're not going to get hammered in the banks the way we've gotten hammered in the past. having said that -- liz: david's premise, what about the hedge funds? >> let's talk about that. liz: there are trillion dollar hedge fund -- >> not one hedge fund in the 2008 crisis caused that crisis. most of these things are self-owned, self-managed. the portfolio manager of the hedge fund has their own capital in the fund. so you didn't see a tarp recipient in 2008 on the hedge fund side. now we've had blowups in the hedge fund market. liz: long-term capital management. >> long-term capital. long-term capital 11 years ago did affect the markets and required some fed intervention. there is not one hedge fund out there, liz, that i can look to has the size andscape and capability of long-term capital. david: i have to ask you, i saw you talking this morn about qe you. you say if things look very bad and dire if economic weakness spilled over into the u.s. economy you expected there to be another qe

. >> rose: the other thing that interests me is that people like paul volcker and others have complained about the best and bright going into financial engineering and that's really bad because they should be going into government and other places. do you think a that's happening and b is it possible those are people now because of the power of silicon valley and the amount of money being made in silicon valley. i don't know many people who have been ten years on a business and all of a sudden sell it for $20 billion. you're not doing that on wall street. so is that more attractive to the smartest. >> i think there are a couple answers. first, wall street tracks people who are very ambitious but don't know what they're ambitious about. silicon valley is attractive if they have an idea, something specific they want to do. if you want to know about computers. they tend to come with clear set of skills in sell cone valley with a slightly different crowd i think drifts that way. wall street4]-still does provis the use of the bjv]st colleges n the country with a place to go when they don't k

. >> remember the initial question was posed to paul volcker.eant to answer the question, does money matter to baseball or not? it's the same guy who invoked the volcker rule. >> are you going to level the revenue field so everyone had the same amount? he didn't understand. it's the obvious question. how can a team with $40 million compete against a team with $120 million. the answer is, one you can learn things and find out things and market inefficiencies but there's randomness in baseball. people see giants win and they tell a story about how that was really going to happen but it could have gone either way. >> it's like the red sox from worst to first to worst and last year you had seven guys who had their best season ever and it was never going to happen again. sometimes lightning just strikes especially in playoffs. let's go back to this. 25 years later what's changed? >> what great productive positive moves have you made? >> you talked about wall street run by a bunch of people that made way too much money and played fast and loose with t

is 1228.gold to 30 year bond, not back paul volcker. we just rolled over once again through it in the long-term linkage to the possibility market. pretty consistent trend there, even with the bobs along the way. we want to bring in our guest host. 500 lasted posting its biggest weekly drop in two years and futures has stayed the course, indicating a lower open as well. give us your take on the state of the markets. is the fed driving this or reacting to this? fed's reactor. we are problems of global growth, especially in europe. not just wrote growth, but inflation problems, too, so concerns about deflation and you put that together and the markets of the world are taking a pause and a little concerned. we're doing some technical damage in the meantime. it will take a while to repair this. the 200ve gone down to day moving average on the s&p 500. the first time in two years. i was stunned how fast we got there. but no question about it. 5%.e only down s&p 500 we were down 7% in january. or percent in april and august. -- 4% in april and

dodd-frank was put in vice as well as the ball roll -- as well as the volcker rule. street cannot act as a stabilizing agent in a more tom are we going to look at the rules and put in place and say maybe we went too far? >> i think what we saw last week and the big deal left the was not what happened in the stock market. was a sixal last week or seven move in one hour in the bond market. that suggested -- it was the equivalent of a flash crash only up. it took place in the 10 year bond and in longer-term treasury bonds. aboutaises real questions market institutions and the adequacy of liquidity that people are going to have to study. i think those problems have been there, by the way, but what happened yesterday or last week, pointed up some real risks that we will have to live with for some time. yes, i think it's important to think about assuring there is adequately put it in those markets. >> will we be able to live life without qe yes just fine.will live interest rates at the 10 year and now much lower, not much qeher, then they were before started. what a really

hopefully on wall street if they are following the volcker rule, they are not allowed to think they takethey used to, but they are in the client service business, so if their client wanted them to do that, now they are feeling pain, they will have to figure out another way to make that money back. ex adam, it is not be london whale, it is the london guppy. >> you keep thinking rates are going to go up and then they go down. >> the fed keeps getting pushed back a little bit. let's bring in our twitter question of the day. we ask to this before we've heard about the german reduced forecast, but it seems more appropriate now. do falling stock prices or falling bond yields matter more? the extent fell often at woody's and of course the rally in bonds and those record low bond yields for so many countries. some answers -- i would initially go for stocks but would choose bond yields. at?%, is that where we are 18% because you have to round up. >> 10 basis points on the 10-year. >> second year -- sears driving stocks and bond yields down, buy stocks. >> is the fear out there? >> it is not on th

and i'm wondering if there is any -- well, currently there are issues in the regulations such as volckerrule or basel iii, and is there any relationship with these regulations and politics? and also i'm wondering that do you believe that these kind of regulations will ultimately impact positively on our economics? >> right, thank you. well, i mean, of course regulation is decided upon and implemented by the political class, so, yes. after the financial crisis, there have been some additional regulations, but the financial industry has lobbied very heavily to water it down. so there is that worry. but, you know, i'm not an expert on finance, so let me just say two things. i mean, one important principle that we have to bear in mind which i, you know, unfortunately didn't have time to emphasize enough in the book is what jose antonio has always emphasized; you have to make these regulations countercyclical, yeah? unfortunately, many of these regulations are procyclical. they encourage -- you know, basel is standard. when asset prices rise, banks have more capital and, therefore, they can l

regulated awayen by dodd-frank or by the volcker rule, so goldman sachs is still does to do what it best- figure out a way to make a lot of money. >> do you feel we are in a better position today than we were in 2008? the fact that dodd-frank is they the negative here is cannot absorb -- when blackrock or pimco or whomever needs to sell -- >> you cannot have it both ways. on one hand we want the banks to be more like utilities and on the other hand we are complaining because they're not making enough money -- >> imf eu -- are we in a better situation? -- i am asking you, are we in a better situation? we need toare, figure out a better benchmark to figure at how these firms are doing. theilize the market -- street cannot stabilize the market. the federal government is the only one i came in and stabilize the market. >> i think it is interesting -- you think we are in the golden age because the economy is going to improve, but at the same time you realize that this u.s. economy is addicted to the opiate of quantitative easing -- that cannot be good. >> not the u.s. economy, the stock marke

but so it's been a long-standing political goal to my mind it's fully consistent with the volcker rules in many ways, and represents a -- represents important aspiration. how it's actually executed is yet to be determined as the panelists have said. but, i do think it's important to recognize that and china's emphasis on ftap is wholly consistent with the apec leaders meetings at least in the past six or seven years. so thank you. other questions? yes, sir? >> good morning. thank you. lieutenant colonel scott mcdonald united states marine corps strategic initiatives group. leading off that comment, sir, and stepping back towards our theme of asian architecture, how do tpp and ftap, through apec, how do we step back and use these structures in order to build an asia pacific that is more welcome both for trade and security for all partners in the asia pacific? in other words we talked a lot about specific free trade initiatives, which are all to the good. more freedom more faster is more better. but how do we make that into an architecture tool? thank you. >> i'm happy to talk about what

volcker rule supposed to solve the problems.d of the day, thomas is right on another point and that is you probably should separate the investment bank completely out of the commercial bank. take wells fargo. america's greatest run bank. >> competing issues. if it's sheer size, that's a totally different -- >> it's complexity much more than size. >> no, no. look. see, you can't do both. that's what you're inferring. wells fargo is basically a large community bank that specializes in mortgages. nice and simple. virtually no investment banking. there's no broker dealer operation. citibank, on the other hand, rescued every five years, whether it needs it or not. should be put out of its pain long time ago. they do so many different things. that's where your complexity. >> yes. >> not to say the kids doing it aren't smart but the organization of the bureaucracy is not smart enough to manage it. >> what about the investors? >> no one can. >> taxpayer risk. >> here's the question. >> i was at treasury working on t.a.r.p. i know about

. >> did he at the core acknowledge because of things like the volcker rule, not have as much inventorygapping? we saw? >> there's no support in the market on bad days. years ago, we get the dealers go into the market on bad days. today, wouldn't you say that that's just too cozy or something? >> no, we have created the -- i have said this on the show before. we have created the circumstances for really bad days and we had them this week. >> mike, you were gonna say? >> i do think lloyd blankfein, you have to operate in the world we have right now. so, goldman sachs, okay, fine, you want us to put less capital there, you want to penalize us for doing the market making, do less of it, going to have a lower roe business, pay our people a lot less, all that's happening, be a lot more of an agency-type business and hope investment banking comes bang in huge way so they canback. >> r.o.e. is a reference on return on equity. one last thing he could have done is actually come out and say to europe, you have to fix this. you have to do something. >> that's right. >> we didn't hear that. >> he e

volcker or dodd-frank, typically the banks would have sucked up a lot of that.uld have positioned things. today it's really customer driven. it's not leading to their bottom lines as much. >> in the end what does the volatility mean for these guys? >> the currency side is going to save the day. clearly you had some very good stuff on the equity side. alibaba was giant fee. and the advisory side is also still pretty robust. a lot of people are predicting its death. but it's still good advisory fees out there. >> i know you own citi and bank of america. what are you expecting out of those two in particular? >> citi will be interesting. they continue to bring down citi holdings. they're going to ipo either their subprime consumer unit or they're going to sell it. that'll tell us more about that we hope. also clearly credit continues to improve for everybody. and i think cost cutting continues to be a big thing for citi, bank of america, the whole industry. because maher gins are just too tight. competition's too tight. so cost cutting continues to be a story as wel