Think december was a mistake. Fareed the dollar has been weakening. Is that a positive trend or a negative one . Ms. Yellen we dont have a goal for the dollar. What we are at is the economy as path forand the likely inflation and employment to achieve our goals. 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, other asset prices, credit market spreads, so it is the the that appreciation of dollar that weve seen over the last year and a half, along with slower global growth, has created a drag on the Global Economy in the sense that our net exports have been holding back growth. U. S. Consumer spending has been Strong Enough to offset that. We look at the balance between those two things. Taking that balance into account, the u. S. Economy is moving forward, and i think financial conditions are forecast to take everything into account. Prospect for continued growth look good. Neel kashkari made a speech recently in which he said the big banks need to be broken up. Do they . We have been very focused since the financial trisis and the dodd frank ac has directed us to Pay Attention and try to put in place policies that will deal with too big to fail. I certainly share president cache currys concern with too big to fail. I feel more positive on the progress that weve made. First of all, we put in place policies through supervision and regulation that have greatly enhanced the safety and soundness of the Banking System. ,o we have more capital higherquality capital, more liquidity. Stress tests. 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 . I think weve also made considerable progress there as well. We are working internationally with other countries. Weve identified strategy 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. Roblematic in a resolution for example, under the bankruptcy code, i think the thes are working hard on living wills, and simplifying their structure and identifying resolution strategies. We recently passed a rule that inl require them to hold addition to a substantial amount of capital, enough longterm debt that if a company were to encounter distress, there would essentially resources that could be mailed 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. Charged byare congress with regulating Financial Institutions and we take that mission seriously, and our tough supervisors and talk to bankers, of course, on a regular basis. Required, and we have bodies like the federal that jamieuncil gorman has served on, where we meet to exchange views and understand the perspectives of bankers. But we are very focused on regulating the Banking System in a way that will achieve congress goals. 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] about every seven years, there is a recession. That is roughly how long these recoveries last. Were about seven years since the last recovery. Statistically, we are due for a recession. 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 cut Interest Rates by about 3 . 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 every year. 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. 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 a problem. The domestic u. S. Economy is moving toward. Households are pretty strong. Housing sectors continue to expand. I dont see any particular reason to think a recession is it waskely in 2016 than in 2015 or 2014. It is true that if a recession were to begin, we were starting for a lower level than is normally the case. The extent to which the fed could cut would be less. One, ision to that, 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. There is communication, forward guidance, which can be a very helpful easing policy. Quantitative easing was helpful. Were seeing some experiments in japan and europe. There are other tools. The site is not out of ammunition. That being said, also, i think we have learned that it is a mistake to put all of the burden on Central Banks and Monetary Policy. 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 are pushed to the limit. We do have a range of policies we can use. I think it is unfortunate that around the world, Central Banks have carried so much of the burden. Weve gotten the wrong impression that only Central Banks can respond to downturns. Fareed are you saying that you think that theres been too much emphasis on austerity and that governments should spend more money to boost the economy . Mr. Bernanke under appropriate circumstances, yes. , the13, the United States Congressional Budget Office estimated that in that year, fiscal policy was taking 1. 5 of growth off of what otherwise would have been the case, which is something we couldnt afford. Im not saying that the government should always be spending. We are looking at longerterm fiscal sustainability, 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. Greenspan, may i ask if you would agree with ben bernanke, that this is a moment at which governments around the world should be spending mr. Bernanke you asked me a hypothetical. [laughter] 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. I appreciate [indiscernible] the majort, i think problem that exists is essentially the issue that productivity growth, 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 United States. I think our major problem as i create a, how do we gdp growth rate which enables us to get all the values we get out of Growth Without getting productivity . The gdp growth rate is essentially output per hour effectively times the expansion in the labor force. We have, as janet has correctly and accurately pointed out, our slack inr force, our employment is gradually dissipating. The Unemployment Rate is going to reach a level below which it cannot get realistically. With the come to grips 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. 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. Verynk the data importantly showed that what were facing with demographics that we have in this country is a major expansion of debt under existing policy. I think until we address that issue, were going to have problems that are not going to get resolved. I agree with janet and everyone bubble,t if theres a it is not a major problem, and i doubt very much if they recession is what our problem is. I think it is fundamentally the issue of Economic Growth over the long run. Think paul, what do you 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. There are other factors that work in the economy that proves up and downs. 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 have extended and are conducting unduly risky activities. Theres a lot of reliance on very shortterm borrowing to make a liquid investments. A large part of it in the Financial System itself. Contributing, increasing risks in the economy. Fareed you said you thought the last Financial Sector innovation that added productivity was the atm. Do you still feel that way . Someolcker there may be others, but i cant think of any others. I can think of some that have contributed to uncertainty and complexity and problems area and 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 say, how will that end . How will you unwind that asset portfolio . Mr. Bernanke fortunately, i dont have to do it. [laughter] 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. For example, if you went back a few years and listened to media, congressmen, variety of media, they said this would cause dollar collapse, bubbles, and none of that has happened. Those policies maybe they were not by themselves efficient, but they were helpful. They helped our economy recover. Our economy is, even though it is not perfect, it certainly has made a lot of progress in 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, at some point, the fed will simply stop reinvesting securities as they mature, step back, and say, for now on from now on, we are going to let things mature. Over a period of years, it will just go down. In the end, all we have to show for it is, 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, which has reduced the burden on the taxpayer by 500 billion approximately. It has been a pretty successful policy and one where the rolloff has already been planned. I dont think its going to be terribly problematic. By the way, it should be noted that even today, the size of the 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. Central banks need help from other policymakers. But so far, many concerns have 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 devaluation 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] am. Yellen certainly we have laid out a strategy for how we will wind down our Balance Sheet. We have made clear we want, eventually, a substantially smaller Balance Sheet. And at the present time we hold a large quantity of mortgagebacked securities, fannie and freddie, mortgagebacked securities. Eventually, we would like to go back to an alltreasury portfolio, but we will do it in a 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 ben outlined of allowing assets to run off our Balance Sheets. If we do have another adverse shock, if there is a recession, we would wait to start the process of having assets roll off our Balance Sheet until shortterm rates are a little bit higher. The economy has gone 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. I completely agree with ben. There are a lot of fears around this. I think people didnt really understand the economics of this properly. 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 described 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. 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 . I thought they were cheering me. You thought they were cheering you . Mr. Volcker to answer your basic question, 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 someone 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 would not have survived without public support. People thought there was a big problem, and they didnt know all the answers, but people were unhappy with malaise. The inflation rate going up a couple percent every quarter. They were unhappy. 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 wild. 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 we had a longer period than i would have anticipated. Did i worry . I worried all the time. 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. You had republican congressmen, republican senators. You had a republican governor of texas saying that you were engaging in treason. How did that make you feel . [laughter] mr. Bernanke it didnt make me happy. You described the job as powerful. I think more of the responsibility side. We had very huge responsibilities, all of us, in different contexts, different events to try to use the power of the Federal Reserve, along with our colleagues and the staff. Its a wonderful institution. Its not a singleperson organization. There are a lot of people working together. We had tremendous responsibilities to try to address these terrible risks. I think it is a good thing that, within reason, the Federal Reserve does have some independence and some room to operate, so that, you know their critics can say with the critics can say what they wanted to say, but we could do what we needed, as long as we could maintain the broad support. And that was our strategy. So, you know, i didnt take the job for adulation. Certainly if i had, it would not have worked. Really, there was no alternative to doing what has to be done, in your best judgment, to try to address whatever problem you see. Fareed and then there is the issue of communication. How do you communicate the views you want . You want to communicate, but, at the same time, you want to leave things you want to get yourself room to maneuver. Alan greenspan, i recall once in a senate hearing, i think it was, the senator said, i think i heard you say clearly and you interrupted him and said, if i said it clearly, senator, i must have misspoken. Were you trying to be deliberately incomprehensible at times . [laughter] mr. Greenspan i thought i had succeeded marvelously. That is where fed speak comes from. Fareed is that part of the goal, that you dont want to Say Something too definitive . Because that constrains you . Mr. Greenspan well, i think the real problem is that Monetary Policy is very largely economic forecasting, and our ability to forecast is significantly limited. And we have 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, and i think janet has mentioned she is confronting this all the time. And the four of us have had to live through all of that. So, 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 reputation, just work habits you have a reputation of being very prepared. I read in one of the profiles that you always get to the airport so early that you are the first person on a plane. How does that translate into the way you approach this job . Ms. Yellen i think thats a lifelong habit that is probably accurate about me. I am prepared, like ben, in managing, for example, the fomc, we have a very thorough process in the runup to meetings, of trying to prepare materials that will generate useful, productive discussions, that will reach closure over time on complicated matters. I confer regularly with my colleagues to try to understand their points of view. Fareed if Alan Greenspan is right, there is a lot of uncertainty. No matter how much you prepare, do you think that there is some level of just intuition . Ms. Yellen i think that is absolutely true. I dont disagree in any way with what alan said. But i think ben and i encountered a very unusual situation when, at the end of 2008, shortterm Interest Rates came down to 0 , and we still felt the need to add accommodation. And we had to think about what could we do that would provide more accommodation. We focused on longerterm Interest Rates. They were still several hundred basis points there did seem to be scope to there did seem to be scope to move them down. Since one of the factors that influences longterm Interest Rate is the public expert expurgation about how to appropriately think to communicate to the public our expectation that would be keeping shortterm Interest Rates at rockbottom Interest Rates for a very long time. So communication became a tool of policy. Improbably 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. I thinkt, we said it was in 2011 that we did not expect to raise shortterm rates at least until may 2013. 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 untold the unemployment until the Unemployment Rate got about 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 raising 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 ball away punch bowl away as soon as the party began. I have to raise rates. You have tended to adopt that approach when you were fed chairman. You feel that some of your successes put the vodka in the punch bowl . [laughter] look at my successes with great awe. Fareed that is a very diplomatic answer. I think we have questions from the floor. The lights are not great. I think yes, they are ok. If you introduce yourself and ask your question, and i hope it is brief. [laughter] my name is ross. I go to columbia journalism school. In m 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. The is the fed response of 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 pressure russians. It mightve been the right for the world economy, but the u. S. Was growing at 6 . How did you resolve that tension . Time and need the i think even now and indeed i think even now, you cannot dissociate what is happening in 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 impacted on the United States. So even though statutorily and legally we are responsible only policyry of th ary pol of United States, it is fully to think we can act isolated from the world. There is no way that can happen. And especially in recent years, where the integration globally has been so extraordinary. I think i make that distinction. Fareed madam chairman, you faced the opposite situation. Where the bank of india as public we criticize the bank of the u. S. , saying that youre not taking into account the effect of the policies are having on us. We do look very carefully and try to minimize adverse spillovers 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. We have raised these 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. That is a key part of our analysis. But you know, when the u. S. Is when well and growing, and our job market is good and we are growing in a healthy way, it tends to be a plus for the Global Economy. And i think we have experienced in that way. Fareed thanks. I studied economics at columbia business school. My question would be, the political effect of the economic increase of the past years. Governorssociation of and the Clinton Campaign recently, my question would be, so i just find that decisionmaking process will do more political and less technical, as we have seen in the u. S. Supreme court. Fareed ben, do you want to take that . It is interesting. I think you have 30 senators vote against your confirmation, the highest ever. And janet yellen and roughly 30 people vote against you. Has the fed become more politicized . Ben well i sit here next to paul volcker, the fed has always had little pressures at various times. The fed is trying to do the right thing. And sometimes the right thing is not what everybody agrees on. So yeah, i know that i understand that there is political pressure out there. People arent happy with the economy. Obviously, they were very unhappy with the economy a few years ago. I think all the fed can do is try to do the right thing for the economy and help them better economy will make people, you know, more open. And also to be as transparent as possible. One of the important goals we talked about communication, many purposes to the clarity of the market and the like. But one of the purposes is to explain why you are doing what youre doing. And hope that people who are paying careful attention will understand and appreciate the decisions you take and why you are taking them. Fareed paul . Paul a comment about congressional reactions. I had votes against me. When i was reappointed, i had the perfect situation. 12 right wing republicans were against me. And 12 left wing democrats were against me. [laughter] so i figured i was in pretty good terrain. [laughter] fareed sir. Phd studentrdyear in economics. They are usually conditional statements. Discreete fed be more in the announcements in order to avoid ambiguity that might have howe for high volatility, is this reconciling with the potential of raising of credibility . Have to ask the man who created the paper tantrum. It is you. En so the basic principle of trying to be clear and transparent is a very important one. It is for you have to keep things relatively simple. If there are too many conditional parts of your statement, and sometimes it can be less well understood. Following, if the you go back and see what we said, it was very straightforward. We said what we thought we were going to do. We ended up doing that. The effects of the u. S. Economy were pretty much nil. The economy continued to recover. There was essentially no discernible effects of the bond market volatility on the economy. I do not view it as being a really bad episode. But i do think it illustrates that communication is very difficult. It is much harder than the textbooks would suggest, if i may say so. But it is so important to be clear and to communicate. And as janet understand as well, and as al was saying, because we can only make conditional statements essentially, because we have to respond to what is happening in the economy, there is really no way to avoid that conditionality data dependence as you talk about policy. Journalism and peers isaac lumia. I want to followup at columbia. The same followup, effects that the banks are too big to fail, how do you support these comments and what you think about them. There, both questions how can this guy who is a regional fed governor make a speech that seems to contradict what you are saying . When congress decided on the structure of the Federal Reserve, i think they purposely chose a decentralized structure, with reserve banks and president s of reserve banks who would be able to take views now on regulation and supervision. The responsibility is invested in the board of governors. Where the president s do participate in our Monetary Policy decisions. Research,ll engage in on topics that are of interest to them that they think are important. And we have encourage that in the Federal Reserve system. That people have different interests and different points of view. Opinion isversity of a positive attribute. We do not want to fall into groupthink. And i think it is within his purview to look at these issues. Thank you. Elaine. Is ala my question is related to china. It is becoming increasingly important, the currency in the economy. For example, a new establishment of Infrastructure Investment bank. And the imf and the reserve currency, with the special sowling rate, my question is would you comment on the challenges of the currency, versus the u. S. Dollar. Respond how do you like the changes in the coming Monetary Policy to maintain this dominant position of the u. S. Dollar . Fareed each of you very quickly,. Is the question is chinas currency likely to be in the next 15 years the single greatest challenge to the reserve currency status the dollar currently holds. Allen comedy want to start us off . Alan, do you want to start us off . Indeed, it is fairly evident that the yuan is getting close to a floating currency. Cut to as not been point where it is accepted internationally. And the total amount of holdings of the yuan and International Reserves privately is really very small. So they have a long way to go. Yuan dont think that the is a significant threat to the tower, as of yet. But it obviously could be. If in doubt it changes its overall structure, which it is doing very slowly. Fareed paul, the you have any paul what are they threatening . The threat of the dollar . [laughter] the dollar will be an International Currency as long as we have stability at at home. I do not follow all the advice of increasing the inflation rate and so on. [laughter] china is very big. How big are you looking . 20 years ahead . It will be a lot bigger than the United States, economically and as well as population. If you look that far ahead. Becomes anency International Currency, it probably will affect an opening of the chinese economy, which will be good for the world. I dont see why it will hurt us. Fareed but then they say that the United States enjoys great privileges with the dollar as a reserve currency. Ben i dont think that is all true. There are modest benefits. But in any case, the chinese have taken this as a very big symbolic issue. For example, i think the actual economic