"Too big companies to allow them to go bankrupt - it is one of the biggest challenges faced by our country."
Fed Chairman spoke on 8 December, the chief editor of TIME Richard Stengel, managing editor, John Hugh, an assistant editor in chief Michael Duffy and chief correspondent Michael Grunwald, talking about everything from the economy and ending with the contents of his wallet. Below are some excerpts of that conversation:
TIME: Explain in general terms for our readers, what has been done over the past year and how it affected their lives, for better or for worse.
Ben Bernarke: Almost all major financial institutions in the world is also facing bankruptcy. And we knew, and I knew, based on their political experience, that if the financial system will collapse, in the sense that many large companies go bankrupt, the financial sector will cease to function, and implications for the global economy would be catastrophic. We would have probably had to deal with depression, comparable to effects of the depression in 1930. Such events would not hypothetical.
Agree, there is a certain irony in the fact that a man who has spent a lifetime studying the economic history of one day wakes up and realizes that now he is in the center of the story during a very unusual title.
Well, of course I did not expect such an event, when he came to Washington in 2002. Undoubtedly. When I became chairman of the Fed in 2006, I hoped that my main goals would be improving the management, coordination and monitoring of policies. We were certainly aware of the risks of financial crisis, however, of such size and danger, we did not expect. I would like, but it was not the case.
This year you could move a little farther than the previous chairman of the Fed. Are you still confident that the awareness of people about what is happening at the Federal Reserve brings a positive result?
Yes. In the past, the Fed chairman did not apply to people directly. I felt that the problem was not only a misunderstanding of what makes the Fed, but I also knew that fear and uncertainty that now and then appeared in various surveys related to the fact that people do not understand what is happening with the economy and financial system . And I thought it would be very useful, as chairman of the Fed, go out and talk directly with people who try to explain what we are doing and why, that is likely to happen in the future. I think it helped some. It is true that the Fed is faced with strong political pressure and it is unpopular in many circles. Work Fed is to make the right decisions, to seek long-term interests for the essence of the economic system, often, such measures are unpopular. But they are necessary for a favorable outcome.
The money that the Fed releases and what we spend on subsidies - are one and the same. The rest we have to borrow. There are lots of people who would say that this system can not be sustained, and the only solution may be some kind of tax, for example, the sales tax and VAT. Do you favor one of these alternatives?
The way I presented it to Congress said that, I strictly uphold the law of arithmetic. This law means that if you're a person with a low-tax, you are responsible for finding ways in which you save your expenses so that there was an imbalance between revenues and expenditures. In the same laws of arithmetic, if you or anyone else believes that government spending is important and believe that the cost of major programs are to grow - that you should figure out how to reach revenues to offset expenses. So, once again, I think that is the main task of the Congress. I talked about the deficit, because I think that the budget deficit strongly influences the economic and financial stability. We should talk about it. However, given the specifics of achieving financial balance, it is still the responsibility of elected officials.
You said that banks are still in the process of recovery. Tell us more about what this means.
The situation in the banks stabilized. They have built up capital and therefore are in better shape than we were. They are engaged in lending, but at insufficient levels to maintain a healthy recovery. One important reason is the loss incurred by them, and what they went through, so now they are very conservative in the conditions are still very weak economy. As the organ of banking supervision, we are in a difficult situation. We limit it clear to banks that want them to make loans to credit-worthy borrowers. It is in the interests of the bank, is in the interests of the economy, and, of course, is in the interests of borrowers. The problem is that banks have already given enough credit, which can not be repaid, so we do not want the new "bad" loans. Thus, we try to work with the banks, so that we can be confident that they will be given as much credit for viable as possible, we want to be sure that they have sufficient capital, short-term financing, and experts and regulators do not unreasonably denied loans. We want to work with banks to make sure that they comply with the balance between prudence and caution, giving good loans for the benefit of the economy and their own profit.
Do not slikshom much money the bankers?
I think that the bankers should recognize that the government and taxpayers have saved the financial system from collapse last year. Recognizing this, I think that the bankers have to look in the mirror and decide what might need to exercise more restraint in how much they currently pay, given that taxpayers have the power to save the entire system.
Goldman Sachs and Morgan Stanley returned the money back, but they have become bank holding companies, and is now governed by certain articles of the Federal Reserve, right?
Yes, in the long term, I think we need tools to get rid of companies that are too big to fail. This is a big problem. I want to be very clear: "too big to go bust" - a huge problem facing the country, and we must take steps to eliminate this problem.
There were times you have days when waking up, you do not know what to do next?
I want to remember the lessons of the Depression and that showed Franklin Roosevelt: when all the traditional methods have failed, the need to try new ideas. And he really wanted to try unconventional methods when traditional proved useless.
Fed Chairman spoke on 8 December, the chief editor of TIME Richard Stengel, managing editor, John Hugh, an assistant editor in chief Michael Duffy and chief correspondent Michael Grunwald, talking about everything from the economy and ending with the contents of his wallet. Below are some excerpts of that conversation:
TIME: Explain in general terms for our readers, what has been done over the past year and how it affected their lives, for better or for worse.
Ben Bernarke: Almost all major financial institutions in the world is also facing bankruptcy. And we knew, and I knew, based on their political experience, that if the financial system will collapse, in the sense that many large companies go bankrupt, the financial sector will cease to function, and implications for the global economy would be catastrophic. We would have probably had to deal with depression, comparable to effects of the depression in 1930. Such events would not hypothetical.
Agree, there is a certain irony in the fact that a man who has spent a lifetime studying the economic history of one day wakes up and realizes that now he is in the center of the story during a very unusual title.
Well, of course I did not expect such an event, when he came to Washington in 2002. Undoubtedly. When I became chairman of the Fed in 2006, I hoped that my main goals would be improving the management, coordination and monitoring of policies. We were certainly aware of the risks of financial crisis, however, of such size and danger, we did not expect. I would like, but it was not the case.
This year you could move a little farther than the previous chairman of the Fed. Are you still confident that the awareness of people about what is happening at the Federal Reserve brings a positive result?
Yes. In the past, the Fed chairman did not apply to people directly. I felt that the problem was not only a misunderstanding of what makes the Fed, but I also knew that fear and uncertainty that now and then appeared in various surveys related to the fact that people do not understand what is happening with the economy and financial system . And I thought it would be very useful, as chairman of the Fed, go out and talk directly with people who try to explain what we are doing and why, that is likely to happen in the future. I think it helped some. It is true that the Fed is faced with strong political pressure and it is unpopular in many circles. Work Fed is to make the right decisions, to seek long-term interests for the essence of the economic system, often, such measures are unpopular. But they are necessary for a favorable outcome.
The money that the Fed releases and what we spend on subsidies - are one and the same. The rest we have to borrow. There are lots of people who would say that this system can not be sustained, and the only solution may be some kind of tax, for example, the sales tax and VAT. Do you favor one of these alternatives?
The way I presented it to Congress said that, I strictly uphold the law of arithmetic. This law means that if you're a person with a low-tax, you are responsible for finding ways in which you save your expenses so that there was an imbalance between revenues and expenditures. In the same laws of arithmetic, if you or anyone else believes that government spending is important and believe that the cost of major programs are to grow - that you should figure out how to reach revenues to offset expenses. So, once again, I think that is the main task of the Congress. I talked about the deficit, because I think that the budget deficit strongly influences the economic and financial stability. We should talk about it. However, given the specifics of achieving financial balance, it is still the responsibility of elected officials.
You said that banks are still in the process of recovery. Tell us more about what this means.
The situation in the banks stabilized. They have built up capital and therefore are in better shape than we were. They are engaged in lending, but at insufficient levels to maintain a healthy recovery. One important reason is the loss incurred by them, and what they went through, so now they are very conservative in the conditions are still very weak economy. As the organ of banking supervision, we are in a difficult situation. We limit it clear to banks that want them to make loans to credit-worthy borrowers. It is in the interests of the bank, is in the interests of the economy, and, of course, is in the interests of borrowers. The problem is that banks have already given enough credit, which can not be repaid, so we do not want the new "bad" loans. Thus, we try to work with the banks, so that we can be confident that they will be given as much credit for viable as possible, we want to be sure that they have sufficient capital, short-term financing, and experts and regulators do not unreasonably denied loans. We want to work with banks to make sure that they comply with the balance between prudence and caution, giving good loans for the benefit of the economy and their own profit.
Do not slikshom much money the bankers?
I think that the bankers should recognize that the government and taxpayers have saved the financial system from collapse last year. Recognizing this, I think that the bankers have to look in the mirror and decide what might need to exercise more restraint in how much they currently pay, given that taxpayers have the power to save the entire system.
Goldman Sachs and Morgan Stanley returned the money back, but they have become bank holding companies, and is now governed by certain articles of the Federal Reserve, right?
Yes, in the long term, I think we need tools to get rid of companies that are too big to fail. This is a big problem. I want to be very clear: "too big to go bust" - a huge problem facing the country, and we must take steps to eliminate this problem.
There were times you have days when waking up, you do not know what to do next?
I want to remember the lessons of the Depression and that showed Franklin Roosevelt: when all the traditional methods have failed, the need to try new ideas. And he really wanted to try unconventional methods when traditional proved useless.
Time
December 16
December 16
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