Real estate owned, empty foreclosed homes into the market, to rent them for a period, if thats appropriate. We were also part of the very large mortgage at the time settlement, which you are aware of, which part of the outcome of that is that banks have been working hard to increase their modifications, to reduce foreclosures, to assist home owners who were unfairly treated in the past and so on. So, from supervisory, regulatory perspective, we are trying to help. But in that respect, we are like other regulatory agencies who are addressing this issue. Finally, and i dont want to underestimate this part, an lit clirks the Federal Reserve, as you know is many, many good economist and we have devoted quite a few of them to studying housing issue, all the way back to the beginning of the crisis and before and influential talking to the other agencies, talking to the treasury, talking to the congress in providing ideas and approaches. So, we have had a lot of influence, i think, from an analytical, intellectual point of view, continue to try to do that but these are i think the bottom line here is that these are very challenging problems and the barriers to more mortgage lending, more rapid growth in the housing sector, are many and diverse. And theres not a single magic bullet, as you know you appreciate. We are trying to work on every margin that we can. In discussions of unconventional monetary policies, of which you were discussing several, the question of lowering the Interest Rate on excess reserves often comes up and im often asked, why doesnt the Federal Reserve do it . I usually thump for some sort of an answer, which i dont think is a very good answer. But i think you could probably do better. What would be your answer . Well, i hope i can do better. I dont know. So, heres the question. The questions the following. So, the Federal Reserve is the repository, so to speak, of a very large amount of reserves that the banks hold, you know, with the Federal Reserve. And we currently pay interest on those reserves, interest in excess of those reserves, of 25 basis points, onefourth of 1 , very, very low Interest Rate that we pay. Now, i can say parenthetically that this ability we have to pay interest on reserves is going to be very important in the future because when the time comes to raise Interest Rates, one of the tools that we have to do that will be this interest on excess reserve, which we can raise at the appropriate time, and this is in the power of the board of governors to raise and by raising it, we will make we will cause shortterm rates across the spectrum to rise because banks obviously are not going to lend into money markets at a price lower that they can get from the fed. So, this is a very important instrument from us and we will be using that at some point, at the appropriate time to begin to tight Monetary Policy. Now, youre talking about the other direction, why dont we just cut it to zero, pay no interest on excess reserves and there thereby, get a little more accommodation . It is something we have considered repeatedly, i dont rule it out as an action in the future. The cost benefit analysis we have done in looking at it, starting where we are at 25 basis points is the following. If we cut if we were to cut that it Interest Rate from 25 basis points to zero, our estimate is that it would affect very shortterm Interest Rates, like overnight rates by something on the order of eight or nine basis points, extremely small amount. And that, in turn, would have even a smaller effect on the Interest Rate wes care about like the rates on auto loans or houses, et cetera. So the stimulative effect of that action, while going in the right direction, we assess as being very, very small. On the other side you can the concern we have, or at least some have had, is that if there is no return on overnight money that a variety of different institutions, money market funds, rico markets and so on, may become more ill liquid, because there would be [ inaudible ] the perhaps is the federal funds grade itself may become less informative because it is being determined in a less liquid market. So, those are the kinds of concerns weve had. Now you weve seen some interesting experiments and relatively recently, seen in europe, for example, that analogous Interest Rate you deposit Interest Rate has been cut to zero and its hard to judge wheat the affect of that really is because the interbank markets in europe are not working that much any watch a question of what effect that has had. Those are the tradeoffs we are looking at. I think its wrong to look at this as a major tool that is a unused. I think if it were used, it would have some affects probably be at least marginally disruptive in terms of market functioning. On the other side, it would add just a few more basis points of accommodation. It is a relatively small cost benefit calculation. Thats what we have come out to this point. Well, ben, you mentioned the fiscal cliff, and i think everybody here and a lot of people who arent here, are very worried about what happens if we go over the fiscal cliff. With estimates that the combination of higher tax and spending cuts could take some 4 out of otherwise relatively weak gdp. But even if we dont and some deal is struck you t, the combi of eliminating the payroll tax deduction, which seems to be something that the administration supports, that together with some basebroadening, would probably be at least 2 of the gdp. And if there is going to be a deal it would involve spending cuts as well. So even if we avoid going over the cliff, it looks like there would be substantial fiscal contractionary impact next year. So in that environment what can the fed do to try to offset that to make sure that it doesnt take touts edge of or over the edge of a recession . So we will see what kind of deal comes out and i think there are a range of possibilities but you are correct, even if the most extreme scenarios are avoided that some plausible scenarios still involve relatively contractionary fiscal policy overall. I made that point in my remarks write said under most plausible scenarios, no matter what happens next year, that the tightening of federal fiscal policy will outweigh the stronger, more expansionary state and local fiscal policy we are getting. So, all of that is right. Its up to congress and the president , of course, to figure out how they want to make the tradeoffs between getting budgetary improvement in the long run and providing Additional Support for the economy in the short run. Then we are going to see how that goes. I think, again, my advice on this is sort of do no harm. And in that respect, what i am particularly concerned about is that we avoid the full force of the cliff, which would be quite substantial, as you point out. Um, so if there is some federal tightening, tightening at the federal level, offset some extent by state and local government, then that would be an ongoing headwind along the lines of what i described in my remarks, but again, i think in that situation, the economy will still be growing, albeit, you know, not necessarily at a rapid pace, but the Federal Reserve can do and will do is continue its stated policy, which is to do additional asset purchases by mbs and take whatever actions are appropriate to try to ensure that the outlook for labor markets improves in a sustained way. And a substantial way. So, we will continue to do our best to add Monetary Policy support to the recovery. A point that ive made though, and i just do want to reiterate this, is that the ability of the fed to offset headwinds is not infinite. We have certain tools. We have obviously used our easiest tools. And we can we can certainly have a meaningful contribution to supporting recovery, but in particular, in the worst case scenario, where the economy goes off the broad fiscal cliff, the largest fiscal cliff, which according to cbo and to our own analysis, would throw the economy into recession, i dont think the fed has the tools to offset that. And thats why it is important for congress to address these fiscal issues soon and in a bipartisan way, in a way that achieves the necessary longterm sustainability concerns, which i know you have talked about frequently, but also takes into account exactly this issue of how much restraint we will be experiencing in the next six months to a year from fiscal changes. [ inaudible ] you talked about the uncertainty of businesses because of all of the things that you also mentioned and thats impacting decisions on investment, et cetera. How much growth is being lost because of that do you anticipate . Well, its neither here nor there, but when i was a graduate student at 30 years ago, i wrote my dissertation on the question of how uncertainty affects investment spending. And i concluded that its not a good thing. [ laughter ] and they gave me a ph. D. For that. [ laughter ] so it seems pretty clear. One of the benefits of the way the Federal Reserve operates, you know, we have 12 reserve banks around the country. Bill dudley is here of the president of the Federal Reserve bank of new orleans. At the fomc, we have folks, therefore, from all around the country with different experiences, different backgrounds who, in turn, are talking to their boards, to local citizens, Business People, bankers, trying to get a sense of the economy. And so we hear an awful lot around the fomc table of an anecdotal nature and it is certainly true that businesses are very concerned about uncertainty and that that seems to be a drag on their investment, spending and hiring decision. In fact, i think its kind of striking that right now, consumers seem to be actually doing a little better. Consumer sentiment has rizzs un. Consumer spending has been a bit stronger, but businesses, probably in part because they are more exposed to the Global Economy and in part, because they may be more aware of these fiscal issues, more directly connected to these fiscal issues, Business Confidence has been pretty low and investment has responded to that been quite weak. So i think uncertainty has been an important factor. Im sure it is restraining, particularly longer Term Investments it is leading businesses to wait for resolution of uncertainty before they make commitments to new hiring and new projects, new markets. And is in that respect, it is clearly a negative. You asked for how much. You know, i think its probably significant, but its very, very hard to assess any kind of rigorous way exactly how big the affects r but again, i think they are meaningful, because we see, businesses have been quite cautious and conservative, particularly lately. Either the question i think though thats very important is uncertainty about what . Theres a lot of uncertainty his the world now. Theres uncertainties in europe. Theres uncertainty in the fiscal policy. Theres uncertain twist the stability and strength of the recovery. And its little bit hard to separate all those different factors when ask you Business People what are they most worried about. So, what wed like to do is attack that issue on all front. I think fiscal policy has a role to play. We hope our european colleagues will take necessary actions to create more stability on the continent. And as for the reserve, we are going to do what we can to support ongoing recovery in growth and jobs and create the demand for output and the demand for firms product that will remove that uncertainty about the future sustain built and the recovery. So if we work on all of these margins, i hope that we will help restart kind of confidence that we need to see strong recovery. I really have a sense that is a lot of unused capability, not just in terms of unemployed workers, but in terms of potential products, new investments, new technology, things that are just being on the shelf, not being utilized to the full extent because people are waiting to see how things will evolve. And i do think theres an important potential for the economy to strengthen significantly if there is a greater level of security and comfort about where we are going as a unt country. So i hope very much thats whats going to happen. Thank you. Country. So i hope very much thats whats going to happen. Thank you. So, chairman bernanke, on behalf a of all of us, thank you very much for that very insightful set of remarks. Ben bernanke before the Economic Club. Steve liesman will join must a moment. Lets bring in Tyler Mathisen and bob pisani. The fed chairman went into fed policy, the looming fiscal cliff and the recovery, said the economic recovery was continuing and largely positive about the direction of housing. I want to focus with you though on the fiscal cliff, because he centered on that and he did say that it poses substantial risks to the economy. In fact, its already hurting. This was a fed chairman saying dont look to me to fix the fiscal cliff, rise above and solve it. Could have been wearing one of our buttons in part of our speech today. He really basically said get your act together t is up to congress and the white house and the administration to hit the right balance between budgetary restraint in the long run and a do no harm policy to the economy in the short run. And he was absolutely Crystal Clear in his answers to one of the last questions there, scott, that if congress and the white house cant come together and we do a full Thelma Louise off the cliff you can the fed doesnt have in its quiver enough arrows to undo the harm and that would drive it almost certain fly another recession. I thought that was the most interesting portion of the last part of the q a, wit fed chairman said we will do our best to add help to the recovery. We have certain tools buts not infinite. We have used our easiest ones but he did say i dont think the fed can offset a recession if we can go off the fiscal cliff. He absolutely did. He said the easy tools have already been played. Our best cards have been played. So the amount of ammunition thats left there in the magazine is not quite as great as it once was. Scott, we are being told to go now to kate kelly, who has the latest details on an arrest aeit federal prosecutors say might be the biggest Insider Trading scheme ever. Kate . They are describing it as the most lucrative Insider Trading scheme ever with illgot gains nearly a quarter billion dollars, actually little more than that the q a session with the u. S. Attorney for the Southern District has just begun. Their prepared comments just finished. We heard from both berrera and s. E. C. Enforcement chief rob kuzami as well as april brooks of the fbi. Trying to use this case, tyler, very much as a warning shot, essentially saying if you are considering doing Insider Trading or cheating in any way, think better of t one of berr a berreras best, most memorable comments is if you are going to pursue ill got gains the only place you may be able to spend your profits is at the prison come mistary. They talk about the unlevel Playing Field created allegedly when the hedge fund in question at the behest of this defendant, a Matthew Mar Tomy marks who was arrested this morning, essentially traded out of pharmaceutical companies they had amassed positions in because they got early information about a drug trial that had not gone well, resulting ultimately in these quarter billion in profits. One thing absent from this commentary was any detail hot quote unquote Hedge Fund Owner was mention noticed federal complaint that is widely believed to be stevie keen,ed and runs sac capital where mar toma worked until 2010. He was not mentioned by name, but appears, he, tyler, figures prominently in a decision too sell out of the positions. Do we know anything about what mr. Cohens reaction may have been when he learned of this action on the part of the federal prosecutor in new york . Well, i would assume, although i dont know that cohen or at least his attorneys knew that this was in the works for a little while, so they had a chance to prepare. I dont know that im speculating. I have heard that the timing of todays announcement was made known or at least had the sense an announcement was made known to steve cone yesterdhen yester quite upset by that news. One thing that is concerned, of course, this is the latest event in which a former employee of sac and by extension, sac is implicated in this Insider Trading behavior. Cr intrinsic, the analyst and the Portfolio Managers provide knowledge to everybody, including you, at time, cohen himself about possible traced and possible ideas. It is very much a part of the fabric of that firm. Mar tomy mass let go at the end of 2010, ostensibly for poor performance. Toma was let go atf 2010, ostensibly for poor performance. We will have moron on the big stories of the day, ben bernanke speaking of new york, this prosecution of what is potentially the biggs Insider Trading case ever and the block busters announcement from hewlettpackard alleging accounting improprieties in the acquisition of the software company, autonomy. Back with more. Having you ship my gifts couldnt be easier. Well, having a ton of locations doesnt hurt. And my daughter loves the santa. Oh, ah sir. That is a customer. Lets not tell mom. [ male announcer ] break from the holiday stress. Fedex office. Monarch of marketing analysis. With the ability to improve roi through seo all by cob. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. Im going big. [ male announcer ] good choice business pro. Good choice. Go national. Go like a pro. Syou know, ive helped alot ofof bpeople save a lot of money. 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