. >> he published a series about three years after 911. the series was specifically on the fire department. it thought to talk about the decisions that happen that day and why folks went into the building. the firefighters had a level of casualties beyond the police department. he was a kid. people that loved him. we were the people that hated him. i came to regard the structure of individual life and the tragedy. it does not matter how other people commemorate that. how they observe that has nothing to do whether i have some level of empathy. those are two simple things. i can talk about hypocrisy up one side and down the other. it does not improve me. >> so many good questions and hear. people are asking about your sources of information and how you write. this question brings this full circle to where you started. which comes first, when you sit down to write, political intention or artistic intention? or are they one and the same? >> artistic intention, always. >> okay, i think we will leave it there. thank you very much. >> thank you. [applause]. [inaudible conversation] [inaudible conversation] and now on book tvs "after words", ben bernanke discusses his book, the courage to act. ben bernanke recounts the 2008 financial crisis and explains the steps taken to revive the u.s. economy. he is interviewed by ohio senator. ranking member of the affairs committee. >> mr. chairman, thank you. this is an impressive book. you began, began, my understanding from reading the book, you began writing this and you went into your first day at brookings and began to write this 600 page book. impressive in length and detail. in impressive in recall. it is being sold by october 2015 so not much more than an act 18 month process. how did you do that? >> i started right away as you pointed out. i left the fed on saturday and monday i was at brookings working on the book. i had lots of material. the federal reserve let me see my e-mails and because i manage my emails i had dozen and dozen of email each day and it was useful to go back and see, in real time, what you are thinking what was happening. i also had daily news clippings and other material. i had a wealth of material so i just set down and could bang out a draft. i should also say i had some help from david skidmore who was a public affairs person and took a year off. he edited and helped me with the process. i got a really quick start and i was done in about 14 months. >> a decade, more or less, in some of the most dramatic economic times in our lifetime if not in our ancient history, you probably have time to reflect about your life during that decade and reflect on economic policy. as you wrote over the 18 month policy, what did you learn about yourself question. >> first of all, writing the book, a big purpose of it was to think at leisure, the whole process. in that respect it was really useful to go through the experience. i think one of the things i learned, first of all is that there is a lot of hindsight and bias. we all have a story about what happened. and now it seems inevitable. this had happened and that he had to happen. when you go back and realize you're in the fog of war and things are actually happening, you try to make judgments about balance against one probability and one risk against another. i saw myself as a a risk manager. somebody who was trying to assess evolving chaotic situation and trying to find the right way forward. it was a very difficult to know at any given time what was really happening. >> i remember many years ago in reader's digest, as a teenager, teenager, i remember seeing a line from someone about being proud of the man i've become. as you, you don't strike me as a narcissist man. or an ego egocentric man. as you go back and reconstruct the time of events, and how it unfolded a confident confident about what happened? >> we were balancing risks into 2007 and it took us until then to recognize the thing was getting quite severe. after that, we were very aggressive. i think, broadly speaking, we did the right thing in effort to stop the crisis and help the economy recover. so like in any war plan, the first contact with the enemy and all of a sudden your plans are disturbed. there were certainly lots of things that on the margin, we could have done different, but i think once we determine we were going to hit this thing aggressively, i do feel we got the main things right. >> let's talk about your background. i know people are always interested in that and how that informs ben bernanke years later. >> small-town jewish kid as you said in your book. dodger fan because of sandy koufax. he played for boston and now washington. a lot of readers may have been surprised that you worked at a place called south of the border which i plead guilty, i know skyline chili in cincinnati and i know the diner that we go to in cleveland, i don't know south of the border but people in the east coast say everybody does because of all i-95 points to it. you are a middle-class kid, not poor and not fully rich. what did working at south of the border do for you? >> it was and is a place where economic situation is tough and people have to work hard. i worked as a construction worker. i worked in my dads drugstore. i also worked for two summers at south of the border. i got some appreciation for how hard it is to put food on the table and pay the rent, particularly if you don't have a lot of education. it was a good experience. i was both part of and not part of it. we were a jewish family and most of the town was southern baptist. it was quite different orientation but i was also part of the time i went to the public schools, i worked with people in the drugstore. we knew everybody in town. my father offered credit to anybody who he felt he could trust. the whole experience was one of getting to know, really, ordinary americans facing economic challenges. >> you tell stories about your grandmother in connecticut. you would sit on the front porch in north carolina, if i recall, talking to her about the depression. you and i were born, more or less the same year, you are a couple years older than i am. we all had had parents or grandparents that talks about the depression. your grandmother, then living in connecticut when this happened, talked about the paradox of the shoes. the great thing about that story, and sorry to preface your own story, which i anticipated, fortunately for the country you had talked enough about the depression, if i'm not putting dots to the other that shouldn't be connected, that led to later graduate school and economic study. talk about the paradox of the shoe. >> i used to sit on the front porch with my grandmother in south carolina and she would tell me stories about her youth in the 30s when she was living in connecticut. the story she told me was that she was very proud because her children were able to go to school and where new shoes every year. lots of the kids in town didn't get new shoes or in some cases didn't have shoes. i said why not? she said the shoe factory in the connecticut town had shutdown in the depression and their fathers had have lost their jobs and there was not enough money to provide shoes for the kids. i was six or seven years old but i could see something wrong with this. all they had to do was open the factory to do shoes and the kids would have shoes. she said no, it didn't work that way. the real puzzle, the real intellectual puzzle of the great depression is that the factories are there in and the workers are still there but it's not happening. the system isn't working. it was a real puzzle to me and i don't want to pretend i was inspired by the age of six, i was interested in all types of things, but when i came back came back to it in graduate school, i found it to be what i would call the holy grail of economics. it was the puzzle that all economists have and i spent a lot of time researching it. >> i'm guessing the paradox of the shoe will go down in economic history now. i came to the senate in january 2007. i was put in a committee that was later called the sleeping banking committee. they had finished with sarbanes-oxley but didn't have a lot of agenda. my wife and i, then, but not now, live in zip code 44105 and that doesn't mean what much to you but what it means is that there were more foreclosures in the zip code that i lived in than any other zip code in the united states of america. it seemed to me, as in 2007 and eight, in till the spring of eight, there wasn't all that much attention on housing issues because the housing crisis was more caused by lots of reasons. in cleveland it was predatory lending and obviously what was happening with manufacturing and a declining base of manufacturing. why did the fed miss this in some sense? why was the government overall, not cognizant that there were places all over the country. in fact, ohio ohio was in the middle of this. had more foreclosures every year than the year before, all over the state. why did we not see that as a country, how serious that was question. >> i spoke about foreclosures a number of times before the crisis. my concern was that some foreclosures are unavoidable and in some cases it seemed like there just wasn't enough effort being made to modify mortgages and find a solution where people could stay in their home. i did speak about that. we were very concerned about the housing market which was getting slow as early as 2006. we talked about foreclosures and the general problems and we thought about it from our economic perspective. what was the risk to the economy overall. we did worry about effects on communities and empty houses affecting local tax issues and the fed did pay attention to that. i also would say that consumer protections to stop predatory lending and some of those responsibility and the authority that the fed had, particularly prior to you, but i think you were more in tune than some of your predecessors. i just don't know and i began to hear from people in cleveland and other cities that sat on consumer protectors on some of the predatory --dash. >> your use of the word predatory is critical. in my book i have to go back before the time i was at the feds because a lot of this extends into the '90s. one of the big's dacians was made in washington. one of the big distinctions was between predatory lending what was illegal lending and got people into trouble immediately and then on the other hand legitimate subprime lending. that was a good development because of allowed people with more modest means to counteract redlining. that allowed them to get into a home and participate in the american dream. quite honestly, one of the reasons that there wasn't more aggressive effort to police that was the fear of cutting that off and that was a very strong distinction that was made between predatory lending which was already illegal versus subprime lending which was viewed as being a different kind of thing. on page 94 of your book, you, you wrote i don't think the key fed staff, you talk about how good they were in my dealings i would agree with that, you don't think the key fed staff were captured in the sense they perceived it to be to go easy. they were open to arguments that regulatory burdens should not be excessive in a competitive market forces would to some extent deter poor lending practices. i work in an institution. you may remember after dodd frank, they said now it's halftime. meaning they were going to go on to be the regulators. i'm at a place in the senate where they've come at you regularly, in part because you and i and our staff and your regulators, back when you were non-civilian, non- civilian, tend to hear from the most elitist society over and over and hear the same song. it's easy to get socialized and i used to say, got the stay in and try to win the war and link it would say no have to go get my public opinion back. that's a a place where people get their public opinion back. as pope francis that i have to go out and smell like the flock. that doesn't strike me that way so it just seems that the fed is less likely to be aware of the pain of how many fed regulators really know people who had their homes foreclosed on and are likely to see that and understand that. >> one teacher of the federal reserve systems is that we have these 12 banks around the country and there's one in cleveland. they would report to us what was happening in cleveland with housing and the like. your concern is not wrong at all. but i think what was happening well before the crisis was that there was a philosophical perspective that was shared that the financial system should be less regulated so it could be more dynamic and so on. we know there were a lot of problems with that. greenspan's view was that if banks had sufficient capital, you didn't have to watch them to carefully. the regulation shouldn't be too burdensome. while it wasn't done right either. let me ask you in a different way why did tarp funding, why did that work better than with what we had to do with other home programs? clearly your conception if you will in your pushing through congress that didn't really want to do this. why did that work better than what we should have been doing or try to do for homeowners? first we needed to stabilize wall street because we were afraid the effects of the collapsing system on the canon economy would be catastrophic so we work to stabilize wall street. the treasury led, this wasn't really a federal reserve responsibility, the treasury led the effort to do modifications and refinances working with franny and fatty which were partially owned and nationalized i was aware of what was going on because i was on the committee to oversee the use of the heart money. i got regular reports and i understood what was going on. all i could say is there was a lot of effort. i frequently heard from president obama, what are you doing that you could do more? i don't have a satisfactory answer other than to say it was hard to do. people didn't respond to your calls for refinance. they re- defaulted many cases after modifications were done. records were incomplete. a lot of refinancing and modifications didn't get done. i share your frustrations. it was, after all, the obama administration that was working on this and it just proved to be very difficult to get done to the extent that was desired. >> you spoke to congress many times including the banking committee for which i served, and i know, you didn't show it on your face, but i understand you are not having the time of your life. they used you of all being asleep at the switch. that criticism can come back on a lot of institutions. you had to testify dozens of times over the next eight years. i always disliked it. why is that? >> i thought it was a contentious proceeding, often. i didn't think it was really about, in many cases, informing the oversight committee. i thought it was about hearing the committee make leading questions or make speeches. there was a lot of conflict involved and i don't like conflict sows unpleasant. i certainly did it. i testified 80 times while i was chairman. i certainly acknowledge the important of doing it and the necessity of doing it. the fed needs to be overseen and to be as transparent as possible but it doesn't mean i had to enjoy it on a personal basis. >> cracked it doesn't mean you had to enjoy it. >> he testifies twice a year,. this makes us different from european central banks. it's important that the federal reserve has a dual obligation. one is to combat inflation. in europe it's only to restrain inflation and not to fight for unemployment. i would complement you and you seem to take the employee employment side of the dual mandate as serious as you did the inflation side and not something that the past may not have done. i also complement the current chair whose taking that seriously as well. let me talk about the first time you and i, with the cast of about ten others, had a really serious sobering conversation. it was september 19, 2008. in your book or in your book you refer to the calls you needed to make that day to people like me. i got a call in ohio east of columbus, a small city, and i got a call from the majority leader saying we need you on the phone at 2:00 p.m. this was september before the 2008 election. lehman and fannie and freddie and all those things that were about to happen, i remember how sobering the call was. you spoke to us outlining the problem and the secretary got on the phone and said we need legislation. my recollection was that he said it would be a three or four page bill and we need you to pass it immediately. one of the things i do in hard notes as i make up, i write reasons to be for an against. i remember writing at the top of the page, best vote i'll ever cast, worst political vote i'll ever cast. it was painful and nobody wanted to because i'm not a wall street guy, nor do i think are you, but i also i also knew what was best for my country. if you recall, republicans opposed it in the house and the stock market dropped 700 points and we went back and fixed it. >> i remember that all very well. >> i know you remember and you write about it in detail. from the time what you did with tarp and what came after was of much importance. but then in your book, i want to go to the next step is i think the conversation i watched talk a lot about the lehman brothers and the actual tarp issue itself. let's talk about chapter 18. getting us from financial crisis to economic crisis. after you had stabilize the system to the satisfaction of the treasury. and others. it's hard to forget what a bad situation the country was in. that day in 2008 through the first half of 2009, our economy hemorrhaged, i believe 8 million last lost jobs. you write over and over how the country needed physical help. you got the physical help in the late bush years through the tax stimulus that you supported. i think you felt it was inadequate but, there was another recovery act and stimulus in the obama administration. here's my question. i'm sorry for the long intro to it. why was it so hard, after we did that it was, it was so hard for you. i don't know a lot about your politics except what i read in there, sec. paulson was clearly republican, why was it so hard for you to step up on the fiscal policy to grow the economy? >> i think people had the wrong idea. basically there is this deficits that were very large, not just because of fiscal policy but gdp deficit as well. there was a lot of fear about what that would do and whether it would lead to high interest rates were inflation and in europe we saw, and in the u.k. we saw more rapid turn to austerity. don't ask me to defend it. i think it was entirely wrong. >> i said so at the time. >> this is a view that says the government is the same as a family. my family balanced my textbook. >> i remember getting this question. my teenage daughter over spencer credit card, we cut them up and we don't let them spend anymore. >> why you given your teenage daughter card? >> that's another question. i know a lot of them will wonder about this distinction but it's an important distinction. in a recession, government spending or tax cuts can help the economy recover and that in turn reduces the deficit by increasing the tax deficit. in some ways the disease is better than the cure. those are the kinds of idea and thinking and political views that lead to resistance. to be honest, we were less than some other countries were and i say so in the book that we turned quickly in the federal stimulus that we got in 2009 was offset by the contraction at the state and local level. a lot of spending takes place at the state and local level and all those budgets were deeply cut. that was offsetting to some extent at what was happening at the federal level. the net fiscal effect for the economy was probably less than what was put in the 2009 headline. >> in the reagan years when the economy started to come back and we saw significant job growth, some of that was fueled by job growth in state and local government. since this more recent recession we've had job growth for 60 consecutive months since the auto rescue and the recovery effort took off. we had a drag on that with local, state and federal hiring. with the obama administration, there are fewer and fewer government job. use the term headwinds a number of time that you were doing everything you could on the monetary policy level and the economy, let me use your words. the economic slump with the economy is still in freefall with interest rates already near zero. the economy needed physical help, increased government spending and tax cuts. i said to it in my standard bank speak. i wasn't endorsing a candidate. i was endorsing a program just as i had supported president bush's federal fiscal stimulus. one of the things you just said that you set at the time, my biggest frustration as a sitting senator on the banking committee was not your sensibility or your transparency, all the things that you mentioned but my biggest frustration was to get you to talk more precisely and prescriptive layabout what we needed to do. in a real world i wish you would've turned some of your republican critics and say we have to pass the transportation bill. i know that's an un- fed thing to do but we have to do it. interest rates are low and are infrastructure is declining. why couldn't you be a little stronger in your words even though your predecessors may have not acted that way. this is an extraordinary time. why couldn't you do that? >> you think that would've worked? >> i think it would've moved the public a little more. >> for better or worse, i was cautious cautious. i did say, quite often that we needed to be less austere now because this is a time we needed to get more jobs and think about long-term instead. >> why weren't you more explicit? >> i was concerned about overstepping, essentially and about violating the contract that congress doesn't make monetary policy and the fed doesn't make fiscal policy. >> while the fed is trying to do that. >> i agree and i don't agree with it. you may think this is wrong, my general rule was to talk about the direction of policy and the fact that we needed more fiscal support for the economy and try to stay away from issues of whether as transportation or tax cut or the kind of thing, that congress could work out among themselves. i think i was pretty clear that i wanted more fiscal support but i was reluctant to say it needs to be infrastructure versus a tax cut. i felt i would do more harm than good because there would be a reaction that the fed should mind its own. >> he said some eight times how shocked or surprised you were from conservatives, especially tea parties but especially conservatives who were blaming the feds and not blaming franny and freddie. let me ask you another way. understanding you weren't going to say should pass a six-year transportation bill or you might want to think of tax cuts or increasing your tax credit or whatever but something that must've bothered you, was the whole idea that every year or two, members of congress threatened to shut the government down or go right up to the debt ceiling. there's no question that hurt our economic growth. did you speak about that question i. >> i did. i absolutely did print i think that was an easy call because austerity, at least maybe reduce the deficit so some small benefit to reduce the fact that you're hurting the overall economy. the debt limit, people may not understand that that is not about restraining government spending, it's about paying your bills. not paying your bills is a deadbeat thing to do and it's dangerous for the government not pay their bills. i was pretty clear about that. i spoke about that quite often. i let the treasury take the lead because that's their role, but the fed was engaged in that pretty consistently. >> let me go to a different place. one of the things that happen that was concerned to some of us in the country is the increasingly, the increasing consolidation of large institutions. i believe 15 years ago the largest six institutions made up about 6% of gdp. by by 2010, in large part of what happened, that 18% of gdp, by 2010 was almost 60% of gdp. most consolidation was leading up as a result of dodd frank. bloomberg miscalculated that those large banks have about 80 basis points advantage when they borrow money because with financial markets, if i read this right, they believe that they are too big to fail and so they are a a low risk to lend money too. that gives those big banks another reason to get bigger at the expense of smaller banks who can't compete as well.xt15÷ should we be concerned about that? are they too big to fail or too big to regulate or too big to jail? should we be concerned about their political power? >> absolutely. i think some parts of the study suggested they were too big to fail funding advantage had shrunk considerably. >> because of dodd frank? >> i would just say that dodd frank in the capital agreement that we had internationally is moving us in a good direction. there are two things i would say in general. one is that under the new capital rules, there are a lot of costs it imposed on the biggest banks and their pose because they are big. the biggest banks have to have more capital than others. the biggest firms are -- >> higher percentage of capital. >> correct. supervision is tougher and there are more rules for the larger institutions. on the other side, we have the liquidation authority which i believe is moving forward in a constructive way which would give the fed and the fdic the ability to unwind a failing firm in a way that could be done without bringing down the rest of the system. i think the main thing that i would point out is that we are making it more costly to be big which is offsetting some of the advantages of being big and what you're seeing in the news is companies talking about shrinking. just today they were talking that aig should break up to avoid the additional capital overstate. there's a discussion of shrinking and simplifying. on top of this we have living wills which are requirements that the banks have to explain how they would simplify down. if they have to defend their size, in the hands of regulators, i think the tools are there to move us in the right direction. >> let me talk about the living well for men went because i was going to ask about that. the pronouncements and word of ben bernanke don't move markets in 2015 like they did in 2008 or 2010 or 2014. give us a little prediction. it's not exactly a prediction that the fed is now looking at all these big banks. the fed is saying to them, if you don't, if you can't be unwound without government infusion of a tarp like government infusion or go through bankruptcy cleanly, unlike how it was with lehman brothers, you will have to divest. give me a prediction if you think that will happen. i'm not asking which banks you think, but do you think the living wills will precipitate some banks #we are ready said ge capital. do you see that happening? >> yes i do do. i think it can happen. i think it probably will happen in a few cases but the alternative would be that the determination is that they are safe enough. i would point to another recent development which is the fed imposing the total loss absorption capacity rule which says that big banks have to have enough capital and long-term bonds in their holding company that could be converted to capital should they come close to failing. if it in convert those into agony, they're going to be more expensive. once again you're getting things pushing against the cost advantage. the trick here is to simplify, downsize and make things less complex, the large institutions without losing, it's often lost, they do provide important services and a lot of jobs. you don't want to, it's not feasible to bring break them all up into community banks. the ideas how can we get them to move in the right directions while maintaining their economic value and the value they provide to the academy? i think the way to do that is to make it costly to be big and tougher to be big and to take away the funding advantage by making a plausible case. : >> host: the coordinating of all the coordinated panel, if you will, of fed and treasury and fdic and others, are you concerned about that? in -- some of the legislation -- >> guest: some of the language is about replacing or eliminating dodd-frank, and i think on the whole to it's been very constructive. i don't think you necessarily need to defend every single clause -- >> host: no one does. >> guest: there are some things that are less effective than other things, and i hope we could make a rational review and decide where changes could be made and so on. but, you know, i would certainly oppose any wholesale attempt to roll back the dodd-frank reforms which, i think for the most markets have been pretty constructive. >> host: unlike unfortunately perhaps the two biggest legislative initiatives of five years ago, affordable care act and dodd-frank, we don't debate making adjustments. we work together on an insurance change on to something called the commons rule, but other than that very little on dodd-frank or the affordable care act. you're either for or against, repeal or not to. >> guest: it's not too much of a center. >> host: not a lot of gray area. >> guest: not a lot of coordination going on. >> host: what one proposal is to eliminate title ii, the resolution authority, and just strengthen bankruptcy rules. did lehman brothers, did that -- is that, was that the lesson, the lesson from lehman brothers in part not to do that, i assume? >> guest: well, what bankruptcy does, the goal of bankruptcy procedure is the to protect the creditors, to make sure that the bond holders and so on get as much return as they possibly can. unfortunately, that's, that was not the main public purpose at time when lehman collapse. we weren't concerned about the bondholders, or we were concerned about the stability of the overall system. they ended up losing a lot of money, which is fine. which, by the way, goes against the idea which lehman was easily saved which some people have argued. but anyway, the trouble with bankruptcy laws is they are not focused on the principal public purpose in a financial crisis which is to prevent the collapse of the overall system. the advantage of the early liquidation authority is it gives a lot of discretion to the fed, the fdic and other regulators to do what's necessary to stabilize the company, to stabilize the system without necessarily being constrained by doing things only and exactly those things which will give the highest return to the shareholders. liquidation authority is about preserving financial stability, bankruptcy is about protecting the creditors. i'm all in favor of protecting creditors in general, but the higher priority should be protecting the system. so that's why i would prefer to see a liquidation authority which is specifically dedicated to the proposition that the main objective needs to be to protect the overall system. >> host: perhaps a more personal question. you were in an earlier preface to an earlier question i said that ben bernanke pronouncements of 2015 don't move markets. inning it was sort of -- understanding it was sort of amusing in this book how you went from, you know, in 2002 you were, you joined the administration as a fed governor then and then became president bush's chief economic adviser. when you went back as chair of the fed, the transition, obviously, in your mind that your language had to be much more precise and more parsed than you've ever in your life -- how'd that work out at home? [laughter] how does family react to some guy that has to talk that way? and when you put your jeans on, do you talk totally differently? >> guest: i talk totally differently. i talk like a human being. [laughter] >> host: i've been accused by my wife sometimes after various kinds of things quit talking like that at home. >> guest: do you fight to go to the american people and things like that? >> host: i don't do that necessarily -- [laughter] i understand the pressure that was on you, obviously, during all of that. >> guest: my home life was a tremendous relief to me. you asked me a little bit about my personal experience, and my wife is really good at giving me a little bit of a sanctuary where i could unwind and relax a little bit and think about something else more a change, and that was really important to my mental health. >> host: and so also to the country's probably. in page 42 in this book, you talk about a book you were writing in 2002 when you got the call that changed your life to go to washington and be appointed to the federal reserve as a governor. you were working on a book could " the age of -- called "the age of delusion." age of delusion, how politicians and central bankers created the great depression. you were 120 pages into this book, if i recall. >> guest: right. >> host: what will the next ben bernanke call -- not your book. what title would they give to a similar book describing the leadup, not the solutions and the issues that you worked on, but the lead-up to this -- >> guest: the lead-up would probably be something like asleep at the switch or too complacent or something like that that, you know, one of the aspects of the '90s and the early 2000s was that things looked awfully, you know, stable overall, and underneath the surface these risks were building. the risks not only in the housing and mortgage sector which, of course, were important, but the risks in the broader financial system more generally. when, you know, that led to this conflagration that we ultimately saw in 2007 and 2008. so i guess that would be, in terms of the period before the crisis, i guess i would identify, you know, excessive confidence as, in some ways, as being the problem. and this that respect when you asked me about, you know, the future and how well dodd-frank is working and so on, i always have to say, you know, we've got to be sure we're paying close attention to what's happening because you can't assume everything will work out. you have to pay close attention. >> host: thank you. one of the first things that i've thought about after getting on the banking committee was how so many people in this country, so many people on wall street and in financial services were rewarded for risk taking, that they got the rewards and, unfortunately, the public had huge numbers of jobs lost. if you remember the month president obama took office, we were losing 800,000 jobs a month. and the loss in the stock market for a whole bunch of senior citizens in hamilton and chill cost think, ohio, were reflected on them. a lot of that's come back as, of course, you know. i was talking to tom curry, the officer of the currency, and he talked about one of the things that bank culture has changed is that every major financial institution now -- at least the goal, and i think we've done this fairly well but i'd like to though your thoughts -- has a risk officer now, somebody that has the stature and the compensation to sit at the table, a risk officer not making any money for the firm. they actually are pulling the firm back on risky behavior. are we doing that well enough? is that risk officer in every boardroom, does he have the authority and the gravitas and the support of the board of directors to tell a company, no, you can't do that, that's too risky for this company and only for our economy? >> guest: of course, i'm not sitting at the fed now, and janet yellen today is actually testifying on these very issues. it's an ongoing project to make sure all this is being done. but before the crisis, they had risk officers, but they were not necessarily, you know, at the table, as you say. they weren't given enough attention by the boards -- >> host: they weren't taken seriously. >> guest: or at least not seriously enough. so it's a big part of the strengthened supervision to make sure that the risk officers have very high profile, that they to report to the board, that they do have the information they need, the banks are able to assess their own risks. one of the problems was before the crisis we would ask the banks, suppose house prices dropped 20%, how would that affect your portfolio, portfoliy would say get back to us in a couple of weeks, we'll let you know. they couldn't give you a quick answer on that kind of question. now the stress test, you can only pass the stress test and get permission to pay dividends to your shareholders not only if you have enough capital, but the systems and the ability to monitor and assess the risk. again, i don't want to say the problem is solved, but things are moving in the right direction x there's enough consistent pressure from the regulators, that will be a big improvement. the other thing i want to mention is another aspect of bank supervision now has to do with the compensation structure. one of the problems is if people are paid bonuses strictly on results, you can take a lot of risk and earn the money and move on to another company, and the effects are felt, you know, down the road. there's a lot more now, regulators are insisting on compensation packages that allow for so-called clawbacks. if the investment ends up losing money that you have to east not get or pay -- either not get or pay back the money you received. is so trying to create a longer term perspective and a broader risk sensitive perspective by the way you structure compensation. there is a change in the culture. again, i don't want to claim the problem's solve toed or we've gone far enough, but the direction is very clear. >> host: you see on the institution where you last taught, princeton, had a reputation of send ago hot of people to wall street -- sending a lot of people to wall street to design some of the most extraordinary, complex financial vehicles, various kinds of delive tyes and various kinds of cdos and all. are young people, are young people less likely to do that now? >> guest: well, there's still a lot of interest in, of course, in finance at princeton and elsewhere. but i think the statistics show that the best and the brightest aren't necessarily heading to wall street, at least not in the numbers that they did, you know, in the '90s or the early 2000s. >> host: i'd like them to come to ohio and manufacture high-tech, leading-edge kind of manufacturing and make things and what that would mean for our society. not that how you did and what you taught and what they did on wall street is not important to our economy, but perhaps a little different balance than we've seen in the last 25 years. >> guest: again, i don't know whether it's far enough, but there has certainly been a shift in where college graduates are a going. >> host: i have two more questions more you. one is we talked about my frustrations, and you answered the question well, i thought. i still have the frustration that you weren't prescriptive enough, as much as i would like you to have been on what we need, what congress needs to do. you don't have those, any of those straitjackets on today. give me your advice on what's most important one or two things congress should be doing whether it's fiscal policy or something else to move this economy forward. >> guest: how are we going to get the economy to grow better. provide good infrastructure, that's an issue. we need to fix immigration, and in particular i object to the limits on high-skilled immigration. i think that needs to be rethought. skills and training, really critical for growth and also for income be distribution. and i think the government needs to keep us, keep a sound role in r&d technology. the government has got the ability to fund basic science that, you know, no individual company necessarily wants -- >> host: i'd really consider that part of infrastructure. >> guest: okay. >> host: medical research -- >> guest: the private sector's going to move the economy forward ultimately, but the government's job is to provide the foundation in some sense for that, and it's just been really hard lately -- as i'm sure you appreciate -- to get bipartisan support for, you know, for sensible programs. and there's a lot that could be done to help, you know, our productivity gains have been very aanemia bic in the last few -- anemic in the last few years. so there's a lot of, there's a lot of things that could be done to make our economy more vibrant, more sure. >> host: what are the two or three things -- i said i only had two more questions. i have more than that. what are the most important things we can do about wealth inequality? union representation? that may be my bias, but it's clear with the deline of uni-- decline of unions we've seen issues of globalization, issues of work force training -- >> guest: well, it's, i just first want to caution that this is a very long-term trend. federal reserve is sometimes accused of exacerbating inequality, i don't think that's true. i think these are long-term trends associatessed with globalization, technical change, a whole variety of things, and it's not going to be easy to reverse that, you know, that oil tanker. i guess the two main tools that we have, and they're not completely satisfactory, are tax and transfer policy, making calls about that. and the other is skills and train thing, make sure everybody has access, has the opportunity to succeed in the contemporary labor market. and we haven't succeeded in doing that. we have -- the inquestionalty in -- ine -- ini quality in our educational -- >> host: what did you mean, you referenced the tax programs, tax policy? >> guest: well, this is -- so i'm really going to punt in this time because this is really congress' decision. >> host: you are a citizen of this country -- >> guest: clearly one tool that you have as a legislature to address inequality is tax rates, income, wealth, inheritance, corporate taxes, all hose things. i think there are a lot of improvements could be made in those tax systems. i'm not advocating a particular tax rate. i don't think that's really -- really not my role. but it is a tool that you could consider and think about also the trade-offs of doing that. but it is one tool that congress has to look at. >> host: well, it's not your role except that you are a distinguished economist that speaks with a louder voice than almost any other distinguished economist. i know you're not going to let me pip you down on -- pin you down on what taxat

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