I would say the general mood is not optimistic for major legislation. Will republicans be able to hold firm in the senate on the confirmation process . It sure seems like the Senate Republicans are not planning on changing their tune anytime soon. Every time that the white house goes out of its way to pretend that there is some sort of changing of the tide you immediately hear from senator mcconnell and judiciary chairman Chuck Grassley saying exactly the opposite. It doesnt look like anything is going to move on that until after the election. Thanks for being on newsmakers this week. [captions Copyright National cable satellite corp. 2016] [captioning performed by national captioning institute] which is responsible for its caption content and accuracy. Visit ncicap. Org] the book tells both the story of the fact that the manuscript, this national treasure, wasnt what we thought. While also trying to chronologically think about, what was madison encountering at the time . And keeping those two narrative straight was quite tricky. Maryight on q and a, sarah bilder discusses her book madisons hand, which takes a look at the notes James Madison wrote in between the conventions constitutional conventions. He took notes on pieces of paper, and he full did those sheets in half, and then at some point, he sewed all of these people pieces of paper together into a manuscript. One of the things we noticed was that the last quarter of the manuscript, the holes he had earlier ones,the and is confirmed my suspicion that the end of the many script had been written later. It was a wonderful thing to get to see that in person. 8 00 p. M. Night at eastern on cspans q a. This month, we showcase our winners, cspans annual documentary film competition for middle and high school students. This years theme is road to the white house, and students were asked, which issues do you want President Shall candidates to discuss . Fromf our winners are maryland. R and prestonheime beatty want president ial candidates to discuss criminal Justice Reform. Imagine 100 different American Adults of different economic, ethnic, political, religious, and racial backgrounds. Odds are one of those people is currently in jail. One of the most stunning facts about the u. S. In karsh race and system is that while u. S. Citizens account for just 5 of the worlds population, u. S. Incarcerated citizens represent 25 of the worlds incarcerated population. Individuals are serving time for drugrelated crimes. Mandatory minimums where judicial discretion is limited by law are a controversial part of the criminal Justice System. These laws increase the time served by a convicted individual and leave little to no ability for a judge to give an individual rolling. Massroblem of incarceration and mandatory minimums is a topic for public debate, although little has been done by the president ial thisdates to address issue. Eric holder, former attorney general of the United States, is an expert on the criminal Justice System and believes reform is the only way to solve this issue. How effective is the criminal Justice System currently . Feel i would give our criminal Justice System next reviews. I think it is better than it was , not as good as it should be. We incarcerate way too many people. We have a high recidivism rate. People come back into the system. I think we are doing better than weve done in the past, but we need to change the approach. Eric holder and other politicians for criminal Justice Reform point to many issues within the system in order to make the case. Weve recognized Crime Reduction strategies have included a greatly expanded use of the criminal sanction. Incarceration rates have skyrocketed. Our nation has the greatest number of prisoners of any nation in the world. Is five to 10 times higher than those in western europe. President obama suggested that some of the 80 billion spent each year to incarcerate prisoners should be used to prevent people from coming into the criminal Justice System in the first place. How do you believe this money would be better spent . Thats an important point. People need to understand that this mass incarceration we have comes at a huge cost. Of money,n is a lot and that is money that could be used in different ways. If we spent money that money on prevention activities, coming up with mentorship programs for young people mandatory minimums for nonviolent offenders is commonly pointed at as the easiest and fastest way to cut back on the amount of people incarcerated, as it would reduce the amount of time each prisoner is sentenced to. On a topic of mandatory minimums, do you think mandatory minimum sentencing can be effective, or should they be eliminated from our criminal Justice System completely . I think we make too much use of mandatory minimums. I believe they serve a purpose, especially when it comes to people committing violent crimes, but too often they have that aed to show politician was being tough on crime. If the mandatory minimum is 20 years to life, he gives him 20 years, hes going to do 18. 5 in the federal system. In the state system, its different. Every state is different. Unless he cooperates. Usually what we do, it isnt about arresting people. Its a matter of going after the command and control structure of the organization. To arrest, you need people, and we need them to tell us who their boss is. Supporters of the current incarceration system point to statistics showing that the crime rate is the lowest it has been in 50 years. Millions are safer now than they have been for 2030 years, and at the same time, the prison population is depleting. One Group Opposed to reform is the National Association of assistant u. S. Attorneys. Usa believes the war on Drug Trafficking has been effective. And major principle behind the organization is just because a drug trafficker is not armed at the time of arrest does not mean they are not violent. Heres the president of the naa usa on a bill he believes would relieve a large people of drug criminality. The federal prisons are full of significant drug traffickers. If you look at the statistics, what you will see from the Sentencing Commission is less than five and individuals incarcerated at a federal prison were found by a sentencing judge to have a mitigating role. A minorto say they had or minimal participation. Claims of those with this view is that for the most part, are beingtraffickers portrayed as victims of crimes they have committed, but usa, thely to the naa system that is currently in place has done what is intended it was intended to do, reduce Drug Trafficking in the u. S. Mr. Cook believes our criminal Justice System has exceeded, and he is in no way alone with that belief. It is indisputable that the drugrelated crime rate and a crime rate overall has decreased since mandatory minimums. The issue for many, however, is how justly that was accomplished. The Different Solutions to whether this serious issue of Public Safety and a fairer criminal Justice System should be talked more about in the election, because criminal justice affects our economy and Public Safety. Crimes are going to be committed, and how we deal with those responsible for committing them is a legitimate problem that will affect all of us. Regardless of our viewpoints, we must all come together as one to fully solve this issue and create an effective and fair system. Ation for that reason, present or candidates must address this issue and explain their approach for solving the problem, but regardless of why this issue how this issue will be solved, it must be addressed, conversation is the only thing that can lead to a resolution. To watch all of the documentaries in this years student cam competition visit student,cam. Org. The house and senate are in session this week. The senate meets tomorrow at three clock p. M. Eastern to continue debate on a bill to extend funding for the federal aviation administration. At five 00, senators consider the nomination of waverley crenshaw junior to be the u. S. District judge for the middle district of tennessee, with a confirmation vote to follow. The house is back from a threeweek break. They meet monday for a pro forma session. On tuesday, members debate a bill that would make zika virus vaccines eligible for fda priority reviews. You can follow the house live on cspan and the senate live on cspan2. Monday on the communicators, chair tom wheeler in his first interview with cspan since being nominated by president obama in 2013 talks about issues facing the fcc, including net neutrality, expansion of the subsidize lifeline phone program, regulation of the internet, and privacy, and the um auction that is just beginning. He is joined by brian fawn, the Technology Reporter for the washington post. Enough i was fortunate to be able to do in the cable industry and Wireless Industry was to be involved as they were bringing great change to the American Economy and the way people live their lives. That is what we are dealing with at the fcc. We are now in the middle of one of the great revolutions of all time, and the job of the fcc is to say, how do we deal with the kinds of changes that are happening all around us as result of technology . Communicators monday night at 8 00 p. M. Eastern. Next, Federal Reserve chair janet yellen and the previous three chairs, ben bernanke, Alan Greenspan, and paul volcker. This is from the International House of new york. It is about one hour and 15 minutes. [applause] welcome. I am calvin sims, the dude from the video and also president and ceo of International House. I want to thank you for joining us. We are very excited to have what we call the Fabulous Four fed chairs. This evening is going to be spectacular for a variety of reasons. First, i want to take a cue from adam mckay, the former lead writer of saturday night live. He said there is nothing people love more than a Federal Reserve joke. [laughter] so i will tell you a joke. It is a joke by a Federal Reserve chair, who served from 1951 to 1970. You may have heard this before, but i think it is worth restating. He said the job of the Federal Reserve is to take away the punch bowl just before the party gets going. [laughter] so tonight, were going to learn the process of taking away the punch bowl, or adding something to the punch in the bowl. You heard in the video a little about International House. Its mission has been about values that promote empathy, respect, moral courage. Among people and countries. There is no question you could get some Global Perspectives by taking an International Course at university or college. But nothing compares to the Daily Exchange here in this wonderful community. They live together, work, study, and dying, and have a lot of fun. These hermit bonds forged at International House have been a hallmark of this institution for 90 years. It would not be possible for this to happen if there were not certain people i need to recognize. There are 750 residents from 150 countries. They attend institutions across new york that represent about 60 fields of studies. We are proud of our residents here tonight. I would like all of our residents to clap and make yourself known. [applause] we would also like to thank our trustees, who do so much to keep this place relevant the last 90 years. Could our trustees also stand and be recognized please. [applause] as well, we are enormous leak grateful to our underwriters. Every dollar of their support will go to scholarships and fellowships here that enable our students to sustain this community. Our underwriters are morgan stanley, j. P. Morgan chase co, bcg henderson, ubs, and bny mellon. Thank you for your support. [applause] i will say quickly, throughout our history here, ihouse has convened thought leaders on International Affairs impacting our demographic, global millennials. Tonights event continues that legacy, not just because of the panels of speakers. It is the inaugural event of the paul volcker speaker program, which was named in honor of paul volcker and his service to ihouse as a trustee and on the board. This is the first inaugural paul volker speaker program. I think we have done him justice with this turnout. Thank you. [applause] i would like to turn quickly to what will happen on the stage momentarily. This historic conversation has less to do with Interest Rates, whether they rise and fall, and at what percentage, more to do with the fed chair perspective on leadership and the values in their decisionmaking. In other words, this is a focus on values, which is ihouses mission. We hope you will agree this conversation and many more like it to come in the future demonstrates that the ihouse can be a beacon of International Harmony and understanding proving humanity can surpass barriers of race, nationality, culture, and traditions that have divided the world. I would like to make an introduction to someone who i think embodies Global Leadership at International House. That is none other than james gorman, the chairman and ceo of morgan stanley. James is also a 1987 alumnus of International House. He will bring to you the bridge you have been waiting for to understand why we are hosting this event and why it corresponds to ihouse. [applause] james thank you, calvin. Thank you. Good afternoon. It is, indeed, a terrific honor to be invited to participate in what is an historic event. I was humbled to be asked to come to the stage as something of a warmup act before you get the real deal. Of course, the four great chairs of the Federal Reserve. Ive been honored to work directly with three of the four chairs, and i have tremendous admiration for their public service, intellectual capacity, and there careful stewardship of Monetary Policy in the Financial System. Each has made an outsized contribution to Economic Growth and stability of this great country, and to each we owe a debt of tremendous gratitude. Calvin asked me to reflect on my experience as a student of International House. It was three decades ago. He asked me to reflect on how it helps develop the career i have been lucky to have here in the United States of america. I was accepted International House, lucky to be so, and arrived here on the seventh of september, 1985. It was a hot and humid day. I can still feel it. Like so many other foreign students who lived here, i was tremendously relieved to have such a safe and welcoming community to move to in new york city. That week, i began a tradition of writing a letter to my family in australia, something i continue for many years after i arrived in the u. S. My father passed away several months ago. Before he did, he gave me several shoeboxes filled with my letters. Each numbered, each kept in their original envelopes. For those of you in the upper decks, this is a letter with an envelope. [laughter] [applause] i have a child in berlin who has not in three months written the equivalent of one of these. [laughter] i thought very briefly i would touch on five extracts from those letters. A paragraph of each, capture a hopefully some of the life i experienced at International House. The first was arrival. I wrote dear all. That may not feel personal, but if you had nine siblings like i did, you are not about to spell out their names every week. I arrived safely after 36 hours of flying. The former tenant of my room is still asleep in my bed. Lets say the changeover was finely tuned. Then again, everything is a little on the margin. My room is small. Very small. But i discovered i can see the Empire State Building if i lean out my window far enough. Ihouse reflects new york. Fantastic facilities, dirty, and very security conscious. [laughter] [applause] life experiences. Sunday was a big event. Suit, tie, and entertainment. The president spoke. He mentioned the australians had came from the farthest place. For what i thought was a minor accomplishment, we were roundly applauded. Thereafter followed one hour of violin, piano, and jazz. It was great fun. Jesse jackson is coming this week as is Prime Minister gandhi, and gerald ford. Where else in the world would you be so lucky as to have those people speak within one month . And then on friends, tonight, i studied with a spaniard, a filipino, and a frenchman. It sounds like the beginning of a joke. [laughter] the yanks are incredible. Loud, happy, friendly, buzzing with energy. They ask questions in class continuously. Many of them needlessly. [laughter] as participation is graded, i am forced to do the same, when in rome, put your hand up. Fourthly, money. I purchased a hewlettpackard 12c calculator today for 100. [applause] with books of 200, my finances are riding a bit of a storm. By the way, not part of the letter, that was Good Practice for the financial crisis i would confront 25 years later. [laughter] i was always short of money. I borrowed a student loan. Those of you concerned about your student debt, i borrowed at 24 . Then along came volcker. [laughter] [applause] finally on career. International house was highly instrumental in pointing me toward a career in banking. As this final extract will evidence. I have been lucky to be assigned to a trustee as part of the studenttrustee program with each trustee match to one student. Mine is shelby davis, a legendary wall street banker. Indeed, mr. Davis this is me speaking was a tremendous support of ihouse. His name adorns the room we are sitting in. He took me to lunch at a fancy club in new york. At the end of lunch, he pointed at me and said you should pursue a career in finance. So i did. [laughter] thank you, International House, on behalf of myself and so many others who have benefited from your welcome, your warmth, and your worldliness. It is now my great pleasure to introduce fareed zakaria. Most of you know fareed. Suffice to say he has had an extraordinarily decorated career from running Foreign Affairs at the tender age of 28 to hosting on cnn and writing two New York Times bestsellers among his many accomplishments. He is universally recognized for the quality, depth, and insight of his commentary. As a trustee of ihouse, he understands and appreciates the mission and he has a wonderful addition with his celebrated work we are about to hear from. Thank you very much. [applause] fareed thank you so much. That was a fantastic introduction. I love the letter. I hope it will be published one day. The letters of james gorman. Let me just say a few things before we have our distinguished guests joined us join us, which is this is being recorded for my show. [laughter] so can you please turn your phones off and refrain from applauding until the end. Because in any case, we dont want to create that sense that the fed chairman has to pander to popular whims. But more importantly, it will interrupt the broadcast. I think that is all i have to say. Thank you so much for joining us. This is such an extraordinary event. You know, Henry Kissinger once said those who need no introduction crave it the most. [laughter] i think that is not true of the people im about to introduce. Im not going to give them much of an introduction other than to point out we have with us the four living chairman of the Federal Reserve, past and present. They comprise together 37 years of Federal Reserve history, which is essentially one third of the history of the Federal Reserve. And that some point, perhaps somebody will make a musical out of all this in the style of hamilton. I would like to ask the current chairman of the Federal Reserve, janet yellen, to come in. Then we have ben bernanke, her immediate predecessor. We have paul volcker, the legendary fed chair who also happens to be deeply associated with International House. And from washington, where he has just celebrated his 90th birthday, Alan Greenspan. Welcome all. Thank you. [applause] fareed madam chairman. I have to begin with you. Because i think everybody is going to be interested in the things you are going to say. Let me ask you to start, if you look at the economy very carefully, are we in an economic bubble . Is the economy as perilous as some people on the Political Campaign trail are suggesting . Ms. Yellen i was say the u. S. Economy has made tremendous progress in recovering from the damage from the financial crisis. Slowly but surely, the labor market is healing. For well over a year, we have averaged about 225,000 jobs a month. The Unemployment Rate now stands at 5 . So, we are coming close to our assigned congressional goal of maximum employment. Inflation, which my colleagues here, paul and alan, spent much of their time as chair bringing inflation down from unacceptably high levels for a number of years now, inflation has been running under our 2 goal. And we are focused on moving it up to 2 . But we think that it is partly transitory influences, namely declining oil prices and the strong dollar that are responsible for pulling inflation below the 2 level we think is most desirable. So, we are making progress there as well. And this is an economy on a solid course. Not a bubble economy. We tried carefully to look at evidence of a potential financial instability that might be brewing. And some of the hallmarks that are clearly overvalued asset prices, high leverage, rising leverage, and rapid credit growth we certainly dont see those imbalances. And so, although interests rates are low and that is something that can encourage and reach for yield behavior, i certainly would not describe this as a bubble economy. We have relatively weak Global Growth, but the u. S. Economy has been doing well. And domestic strength has been propelling us forward, in spite of the fact we are suffering a drag from the global economy. Fareed let me ask you about one of those statistics that you cited the Unemployment Rate. There are many people who say the actual Unemployment Rate it is not 5 , it is much higher. There are people who say it is in the 20s. Do you think the Unemployment Rate is accurately reflecting the realities out there . Ms. Yellen there are different concepts of unemployment. And the measure that i cited, 5 , is the most commonly used metric to judge the labor market. There are broader definitions. For example, one definition that counts discouraged workers and those who were working parttime who want fulltime jobs and cannot find it that is quote a bit higher, closer to 9 . So, broader definitions that count more people who may be underemployed are always higher. I think any metric that you look at shows broad improvement in the labor market. Parttime involuntary unemployment, employment is higher than one would expect given where the standard Unemployment Rate is. So, there i see some additional slacker improvement that we could have that suggests that the 5 understates the state of the economy. But i think overall, whatever measure of the market you look at, many other different kinds of measures suggest a labor market that is vastly improved. Fareed i think that for most ordinary people, they must wonder, the Federal Reserve has all of this power over the economy. You have a mandate to provide to keep inflation under check but also to see people are employed. Why not take extraordinary measures to help boost employment, help perhaps even wage growth so that peoples wages rise. You mentioned the Federal Reserve tries to set a target of about 2 for inflation. But that is not a ceiling, it is a target. Why not take aggressive measures and may be overshoot the target by a little bit. After all, you have undershot the target for seven years now. And i think people might wonder, why not try to do something that would help ordinary working people . Ms. Yellen maximum employment and price stability is the mandate Congress Gave to us. And we take both parts of it very seriously. We have had, i would say, very aggressive monetary policies over the last six or seven years, when you contemplate the fact that it was december of 2008, over seven years ago, that we took the short term overnight Interest Rate essentially down to zero. And then engaged in very largescale asset purchases, communications, Forward Guidance policies, to provide more stimulus. Weve really done great deal to foster more rapid recovery. And most of my colleagues anticipate that unemployment will actually dip somewhat below levels now with the policies that we have in place that they would see as sustainable in the longer run. So they do see some overshooting in that sense. But we are not shooting for a target that is in excess of 2 . With inflation running, even extracting from Energy Prices and the dollar, below our 2 objective, a path like that serves both of our goals. Namely, strong employment, putting people back to work, progressing, moving up in job chains, getting greater experience. But also inflation moving at a faster pace back to 2 . We do not seek to consciously overshoot our 2 objective. But it is also the case, 2 is our goal and it is not our ceiling. In we do envision a path similar to what you described. Fareed in december, you raised rates. Many people, including larry summers, distinguished economic commentators and economists, felt it was a mistake. In retrospect, was it a mistake . Ms. Yellen i dont regard it as a mistake. I said at the time and continue to feel the economy had made very substantial progress [sneeze] ms. Yellen toward our goal. [laughter] fareed i think Alan Greenspan was registering agreement with that. [laughter] fareed madam chairman, if you can just begin again. [laughter] ms. Yellen sure. So, we sit at two criteria to boost the funds rate. That led to the december decision. One was we wanted to see substantial progress in the labor market. And we felt that has been satisfied. And we also, recognizing that inflation was running below our 2 objective, wanted to feel reasonably confident that inflation would move up over the mediumterm back to 2 . And we all felt those conditions were satisfied in december and justified taking a step. Now, Monetary Policy is not on any preset course. So, although every three months, my colleagues and i set out our individual projections, both of what we anticipate for the economy and also, going along with that, what we think is a Monetary Policy path that would be appropriate. We set out projections like that. That gives a suggestion of where people think the economy is going, but weve tried to make very clear there is not a preset course of rate increases. We will watch very carefully what is happening in the economy and adjust policy as appropriate. So, we took one step. Now, the u. S. Economy has continued to progress in a satisfactory way. We have continued to see good job performance, some evidence of inflation moving up. So, that was our expectation when we raised rates in december. We indicated that we thought the path of rate increases would be gradual. And that remains our best guess and expectation. That if the economy continues on the path it is on of recovery, that further rate increases will be justified. But, for a variety of reasons, particularly a set of headwinds that are the legacy of the financial crisis that we suffered, and weak Global Growth and the strong dollar that has gone with that, that the level of rates that are sometimes called the neutral rates, a level of shortterm rates that would neither be particularly stimulating the economy nor holding it back, that level of neutral rates is quite low. So yes, there is accommodation in the Monetary Policy that we have. But we think a gradual path of rate increases will be appropriate and adjust what we do depending on how our views of the economy evolve. So we remain on a reasonable path. And i do not think december was a mistake. Fareed the dollar has been weakening. Is that a positive trend or a negative one . Ms. Yellen so, we dont have a goal for the dollar. What we are looking at is the economy as a whole, and the likely paths for inflation and employment to achieve our goals. And financial conditions, broadly speaking, the state of financial conditions impacts our forecast for economic variables. The dollar is one of those. I would call it part of financial conditions, along with longerterm Interest Rates, equity prices, other asset prices, credit market spreads. So, it is the case that the appreciation of the dollar that weve seen over the last year and a half, along with slower Global Growth, has created a drag on the u. S. Economy in the sense that our net exports have been holding back growth. But u. S. Consumer spending has been Strong Enough to offset that. And we look at the balance between those two things. And taking that balance into account, the u. S. Economy is moving forward, and i think financial conditions are forecast that are taking everything into account. The prospects for continued growth in the labor market and inflation look good. Fareed one of the recent fed chairs, neel kashkari, made a speech very recently in which he said the big banks need to be broken up. Do they . Ms. Yellen well, we have been very focused since the financial crisis and the dodd frank act has directed us to Pay Attention and try to put in place policies that will deal with too big to fail. So, we certainly i certainly share president kashkaris concern with too big to fail. I feel more positive on the progress that weve made. First of all, we have put in place policies through supervision and regulation that has greatly enhanced the safety and soundness of the Banking System. And so, we have more capital, higherquality capital, more liquidity. We do rigorous stress tests in our supervision. So, i think the odds of failure of large Financial Institutions is lower. But were also dealing with the issue of, how would we resolve such an institution if one were to fail . And i think weve also made considerable progress there as well. Were working internationally with other countries. Weve identified strategies that could be successful in resolving a company. Weve asked the firms to produce living wills that address a number of areas that could be problematic in a resolution. For example, under the Bankruptcy Code or under title ii, and i think the firms are working hard on the living wills, and simplifying their structure and identifying resolution strategies. And weve recently passed a rule that will require them to hold, in addition to a substantial amount of capital, enough longterm debt that if a company were to encounter distress, there would be, essentially, resources that could be bailed in in a resolution to recapitalize that company. So, i think weve made considerable progress, and i certainly havent arrived at the conclusion that my colleague has. Im pleased with where things are going. Fareed one more question before i open it up to a larger conversation. Lawrence summers, who some thought was one of the contenders for the job you hold, says that there is no question that Bernie Sanders is right on one central point, which is the financial industry has too much influence over the structure and governance of the Federal Reserve. Do you think that is true . Ms. Yellen i dont think it is true. I think we are charged by congress with regulating Financial Institutions and we take that mission seriously, and are tough supervisors and regulators. We talk to bankers, of course, on a regular basis. We are actually required, and we have bodies like the federal Advisory Council that jamie gorman has served on, where we meet regularly to exchange views and understand the perspectives of bankers. But we are very focused on regulating and supervising the Banking System in a way that will achieve congress goals. Fareed chairman bernanke, can i ask you about something that i suspect if i ask janet yellen, she would be even more evasive than she has been in the last few minutes, which is of course entirely what you are supposed to do, and i respect and admire it. [laughter] fareed about every seven or eight years, there is a recession. Both globally and in the United States. That is roughly how long these recoveries last. Were about seven years since the last recovery. So, statistically, we are due for a recession. My question is and nobody has ever been able to predict these. The fed has not. The cbo has not. If there is a recession, traditionally, the Federal Reserve cuts Interest Rates by about 3 . What is the jargon is called 300 basis points. What is it going to do now, given that there arent 300 points to cut . Mr. Bernanke excellent question. Let me just say first that, as janet has pointed out, theres no sense in which expansions die of old age. The risk of recession is more or less constant in every year. 10 or 15 as you suggested. Though we cant forecast them, theres no reason to think that just because weve been in seven years of recovery, doesnt mean we are due for another recession at all. We are facing, and i agree with a lot of janets early analysis, we are facing some risks like developments globally, which are creating headwinds in the United States. Productivity growth is only modest, which is also a problem. But domestic u. S. Economy is moving toward. Households are pretty strong. Financially speaking. Housing sectors continue to expand, and so on. I dont see any particular reason to think a recession is any more likely in 2016 than it was in 2015 or 2014. That being said, it is true that if a recession were to begin in the next year or two, we would be starting from a lower level in shortterm Interest Rates than is normally the case. The extent to which the fed could cut would be less. Now, my reaction to that there are a couple of things. One, is that there are some other tools. One of the things weve learned over the last decade is that Central Banks do have a set of tools besides cutting shortterm Interest Rates. For example, there is communication, Forward Guidance, which can be a very helpful and easing policy. We did quantitative easing, and it was helpful. There are other tools as well. We are seeing some experiments globally in japan and europe. So, there are other tools. The fed in particular is not out of ammunition. But that being said, also, i think we have learned that it is a mistake to put all of the burden on the Central Banks and Monetary Policy. That a more balanced policy with a greater fiscal component or a broader set of policies would no doubt work, even in a situation where Central Banks were pushed to the limit. So, we do have a range of policies we can use. I do think it is unfortunate that, not just in the United States but around the world, that Central Banks have carried so much of the burden. Weve gotten the wrong impression that only Central Banks can respond to downturns. Fareed expand on that. Are you saying that you think that theres been too much of an emphasis on austerity and that, in effect, governments should spend more money to boost the economy . Mr. Bernanke under appropriate circumstances, yes. In 2013, the United States, between sequestration and budget cuts and the like, the Congressional Budget Office estimated that in that year, that fiscal policy was taking 1. 5 of growth off of what otherwise would have been the case, which was something at that point we really could not afford. Im not saying that the government should always be spending. Obviously, we are looking at longerterm fiscal sustainability, which is very important. But at certain times, particularly in a recession when the central bank is out of ammunition, the fiscal policy does have a role to play. Fareed Alan Greenspan, may i ask if you would agree with ben bernanke, that this is a moment at which governments around the world, particularly in the western world should be spending mr. Bernanke i did not say that was the moment. You asked me a hypothetical. [laughter] fareed if there is another recession, which presumably at some point there will be, in order to combat that recession, should governments spend more money . Mr. Greenspan let me just say this. I thought i had run out of time with my sneeze. But i appreciate i did not. [laughter] mr. Greenspan no, i think the major problem that exists is essentially the issue that productivity growth, over pretty much across the spectrum of all economies, has been under 1 per year for the last five years. This is true in the oecd. It is true in the ec. It is true in the United States. And i think our major problem as i see it, at this stage, is how do we create a gdp growth rate which enables us to get all the values that we get out of Growth Without getting productivity . Because the gdp growth rate is essentially output per hour, effectively, times the expansion in the labor force. And we have, as janet has correctly and accurately pointed out, our labor force, our slack in employment, is gradually dissipating. And the Unemployment Rate is going to reach a level soon below which it cannot get, realistically. So, unless we come to grips with the issue of productivity, then we have no major advance in the future. I think the data that i see is that the productivity slowed down pretty much across the globe as a function of the fact that Capital Investment pretty much everywhere has slowed down to a significant extent and as a percent of gdp, has been dramatically lower than it has been historically. And so, our function and i certainly agree that Monetary Policy should not have the whole load of getting us out of this phenomenon it is fundamentally a fiscal problem, and spending money only increases the debt. I think that the data very importantly showed that what were facing with the demographics that we have in this country is a major expansion of debt under existing policy. I think unless until we address that issue, were going to have problems that are not going to get resolved. I agree with janet and everyone else that if theres a bubble, it is not a major problem, and i doubt very much if a recession is what our problem is. I think it is fundamentally the issue of Economic Growth over the long run. Fareed paul, what do you think the economy looks like, in this conversation, fundamentally . Mr. Volcker i agree with everybody. [laughter] mr. Volcker i would supply a little historic perspective. We used to have recessions before we had a Federal Reserve. [laughter] mr. Volcker there are other factors that work in the economy that tend to produce ups and downs. And i wouldnt worry too much about the present situation. Fareed you dont think we are in a bubble economy . Mr. Volcker i certainly dont think we are in a bubble economy. I think there are aspects of the financial world that are overextended and tend to be conducting unduly risky activities. Theres a lot of reliance on very shortterm borrowing to make liquid investments. A large part of it in the Financial System itself. Without contributing to productivity or real investment, and increasing risks in the economy. Fareed you said you thought the last Financial Sector innovation that added productivity to the economy was the atm. Do you still feel that way . Mr. Volcker there may be some others, but i cant think of any others. [laughter] mr. Volcker i can think of some that have contributed to uncertainty and complexity and problems. Fareed ben bernanke, when you took over the Federal Reserve, it had about you had assets of about 900 billion. You ramped that up to about 4 trillion. Over 4 trillion. There are a lot of people, as you know, on the right, who look at that with horror, and they say, how will that end . So, how will it end . How will you unwind that asset portfolio . Mr. Bernanke fortunately, i dont have to do it. [laughter] ms. Yellen he did bequeathed that to me. Mr. Bernanke let me just say, i think there was an enormous amount of understanding and the media advanced a lot of very uninformed views on this subject. So, for example, if you went back a few years and listened to media, congressmen, variety of people, they said that this would cause hyperinflation, dollar collapse, energy spikes, financial bubbles and collapses and none of that has happened. What has happened is that those policies maybe they were not by themselves efficient, but they were helpful. They helped our economy recover. Our economy is, even if it is not perfect, it certainly has made a lot of progress. And Monetary Policy has helped there. And many, if not all, of the things that some people were afraid of some people were. Informed people were not afraid. They have not come to pass. That is simply a fact. In terms of the unwinding, it actually is a very straightforward process at this point. The fed has been very clear, and we discussed this when i was there as well, is that at some point, the fed will simply stop reinvesting securities as they mature, will simply step back, and say, for now on, we are going to let things roll off and mature. Over a period of years, it will just go down. In the end, all we have to show for it is the fact, over the last five years, from those securities, besides the fact that they helped our economy recover, the fed has sent profits to the treasury of 500 billion in profit, which has reduced the burden on the taxpayer by 500 billion, approximately. It has been, on the whole, a pretty successful policy, and one where the rolloff has already been planned and laid out. I dont think its going to be terribly problematic. By the way, it should be noted that even today, the fed the the size of its Balance Sheet is roughly the same as other major Central Banks, like the European Central bank and the bank of england. The main counterexample is the bank of japan, where relative to gdp, the assets held by the bank of japan are three times the size of the feds. So, its obvious that many of the concerns people had have simply not manifested. Not to say that those policies are panaceas. As i was thing before, as i was saying before, Central Banks need help from other policymakers. But so far, many concerns have obviously not come to pass. Fareed its worth pointing out that, japan, with three times the size of the Balance Sheet, has not experienced hyperinflation or the debasement of its currency. Mr. Bernanke they would like a bit more inflation, i think, then they have now. Fareed since you have to run this operation, are you comfortable with what he said . [laughter] ms. Yellen i certainly am. We have laid out, as has been indicated, a strategy for how we will wind down our Balance Sheet. We have made clear that eventually, we want a substantially smaller Balance Sheet. And at the present time, we hold a large quantity of mortgagebacked securities, agency, fannie and freddie, mortgagebacked securities. Eventually, we would like to go back to an alltreasury portfolio, but we will do it in the manner that ben just explained. We have shown the move in december showed we have the tools and ability to successfully manage shortterm Interest Rates. We moved them up not a lot, but 25 basis points. That occurred smoothly, in spite of the fact that we had this very large Balance Sheet. So, we have tools to tighten Monetary Policy as we think is appropriate for the economy. And we would like to, you know, get a little bit further underway in terms of moving shortterm Interest Rates toward more normal levels before we let follow the strategy bin outlined of allowing assets to run off our Balance Sheets. If we do have another adverse shock, if there is a recession, we would most like to be able to you shortterm Interest Rates, manage it, and waiting to start that process of having assets roll off our Balance Sheet until shortterm rates are a little bit higher. The economy has gotten to a point where that is appropriate. That creates a little more scope for us to cut Interest Rates if we need to. But, it has all gone quite smoothly. And i completely agree with ben. There are a lot of fears around this. I think people didnt really understand the economics of this properly. And, nothing terrible none of these terrible things have happened. Fareed let me switch gears a little and just ask you all about what its like to have this much concentrated power. Alan greenspan, when you were running the Federal Reserve, people would sometimes describe your performance there as god on a good day. [laughter] fareed i think senator john mccain said that his strategy to succeed you was to have a dummy made up of Alan Greenspan and put him in the Federal Reserve chair like weekend at bernies, that movie. At wall street, they would celebrate your birthday with cakes and things like that. Did that go to your head . [laughter] mr. Greenspan no, but it sure enough embarrassed me. I very much appreciated that. [laughter] mr. Greenspan i got past the embarrassment very easily. Fareed paul volcker, you had a slightly different situation. You were hung in effigy when you raised Interest Rates, because people thought that you had singlehandedly plunged the American Economy into a recession. How difficult was it to deal with that . Mr. Volcker i thought they were cheering me. Fareed you thought they were cheering you . Mr. Volcker look, to answer your basic question, what is it like to be chairman with all of this authority you have a board, you have a public, you have reserve Bank President s. You cant quite do exactly what you want without a lot of people being encouraged to agree with you, and some of them sometimes disagreed, so its not quite so absolute as you suggest. But, look, i always get asked this question about the farmers circling the Federal Reserve and so forth. We wouldnt have survived without a lot of public support. People thought there was a big problem, and they didnt know all the answers, but people were unhappy with malaise. And the inflation rate going up a couple of percent every quarter. And they were unhappy. And i think they gave us some rope to hang ourselves. [laughter] mr. Volcker they felt we were doing something. They were going to be patient for a while. Fareed did you feel like because inflation was very high, you raised rates to break the back of inflation. Did you worry that you would run out of time, that the public would lose patience . Mr. Volcker yeah, well, we had a longer period than i would have anticipated, yeah. Did i worry . I worried all the time. [laughter] mr. Volcker the floor of the Federal Reserve office, it shows where i was walking all the time. Is that still there . Fareed ben bernanke, when you adopted your extraordinary measures to save the American Economy through this global recession and crisis, you faced a lot of people from what was, in a sense, your own party. You were appointed by a republican president. And you had republican congressmen, republican senators. If you had the republican governor of texas saying that you were engaging in treason. How did that make you feel . [laughter] mr. Bernanke it did not make me happy. Describe the job is powerful, i think more of the responsibility site. We had very huge responsibilities, all of us. Indifferent contexts different events, to try and use the power of the Federal Reserve along with our colleagues and staff, it is a wonderful institution. There are a lot people working together. But we had tremendous responsibilities to try to address these terrible risks. And i think it is a good thing federalhin reason, the reserve does have independence and room to operate. Critics the ability to say what they wanted to say, but we could do what was needed, as long as we could maintain the broad support. That was our strategy. I didnt take the job for adulation, certainly if i had, it would not have worked. There was really no alternative to doing what has to be done in your best judgment to try and address whatever problem you see. Fareed then there is the issue of communication. How do you communicate the views communicate, at the same time you want to leave you want to get result room to maneuver. Alan greenspan, i recall once in a senate hearing, the senator said, i think i heard you say clearly, and you interrupted him and said, if i said it clearly i must have misspoken. [laughter] fareed were you trying to be deliberately incomprehensible at times . [laughter] mr. Greenspan i thought i had succeeded marvelously. Fareed is that our the goal, you dont want to Say Something to definitive because it constrains you . Mr. Greenspan i think the real problem is that Monetary Policy is very largely economic forecasting. Our ability to forecast is significantly limited. To keep the context of what we say in the context of what we know, and this is a very serious problem that has always existed. Janet has mentioned, she is confronting this all the time, us had to live through that. How do you convey what you know and what is clear, without going into the area of forecasting beyond our knowledge . Fareed you have a representation reputation for being very prepared. The airport soto early that you are the first person on a plane. Into thethat translate way you approach this job . I think that is a lifelong habit that is probably accurate about me. Prepared, like ben, in oc. Ging the fm we have a very thorough process in the runup to meetings and trying to prepare materials that will generate useful, productive discussions. That will reach closure over time uncomplicated matters. I confer regularly with my colleagues to try and understand their point of view. No matter how much you prepare, you think there is some level of intuition . Ms. Yellen that is absolutely true. I dont disagree in any way with what allen said. I encountered a very unusual situation when at the end of 2008, shortterm Interest Rates came down to zero, and we still felt the need to add , and we had to think about what could we do that would provide more accommodation. We focus on longerterm Interest Rates. They were still several hundred basis points, there did seem to be scope to move those down. Since one of the factors that influence is longterm Interest Rates is the publics expectations for how shortterm Interest Rates will move over time, we needed to think a lot about how to appropriately public, ourto the expectation that we would be keeping shortterm Interest Rates at rockbottom levels for a very long time. A toolmunication became of policy. And probably the most potent tool that we have, along with asset purchases, that we could use in a situation where we really have no scope to move shortterm rates. So, we experimented over time. At one point, we said i think it was in 2011 that we did not expect to raise shortterm rates at least until mid2013. We put that data out. And we became more inventive in trying to provide some conditions with which we said that we could not see raising rates until the Unemployment Rate declined to at least 6 . We tried to communicate as clearly as we could to shape expectations, that that was a policy tool in and of itself. Fareed one more question to paul volcker. Then i will open it up to all of you. The one question risen here, william martin, the great fed chairman from the 1950s, once defined the role of the Federal Reserve chairman. He said, i am the guy meant to take the punch bowl away as soon as the party begun. I have to raise rates. You have tended to adopt that approach when you were fed chairman. Do you feel that some of your successes put the vodka in the punch bowl . [laughter] i look at my successes with great awe. Fareed that is a very diplomatic answer. [laughter] fareed i think we have questions from the floor. The lights are not great. So, i think yes, they are ok. If you introduce yourself and ask your question, and i hope it is brief. [laughter] im a student from turkey. I go to columbia journalism school. My question is about the international economy. When the fed makes the decision they can have drastic effects in other countries, especially through the Foreign Exchange rates. So, what is the feds responsibility with regard to minimizing International Economic blunders or turmoil in other countries . Fareed let me ask Alan Greenspan to take this. There is this dual function. You faced it in your term, the central banker of the United States . Or the central maker of the world . In 1998 there was the russian default, and you cut rates. It mightve been the right for the world economy, but the u. S. Was growing at 6 . Was it the right thing for the u. S. Economy . How did you resolve that tension . Mr. Greenspan at the time, and i think even now, you cannot disassociate what happening in the United States from the rest of the world. In that particular instance in the late 1990s, we have a situation in which if we did not endeavor to stem some of the problems that were going on elsewhere, it would be just a matter of time before it impacted on the United States. So, even though statutorily and legally we are responsible only for the Monetary Policy of the United States, it would be full list to think we could act in an isolated manner from the rest of the world. There is no way that can happen, and especially in recent years, where the integration globally has been so extraordinary. So, i think i make that distinction. Fareed madam chairman, you faced the opposite situation. Where you have the bank of india as publicly critisizing the bank of the u. S. , saying that youre not taking into account the effect of the policies are having on us. Ms. Yellen we do look very carefully and try to minimize adverse spillovers when possible of our policy. One thing we can do that tends to minimize volatility around policy changes is to communicate as clearly as we can how we are framing policy, to attempt to avoid surprises. And we meet regularly with other central bankers to make sure that we are explaining how we are thinking about policy. We do have a domestic mandate. We recognize how important the influences are from the global economy. The u. S. Economy, we recognize that if we impact foreign countries, that will in turn impact us. So, that is a key part of our analysis. But you know, when the u. S. Is