Full Interview: Ben Bernanke Reflects on 2008 Financial Crisis

The former Fed chairman talks with George Stephanopoulos on "This Week."
13:57 | 10/11/15

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Transcript for Full Interview: Ben Bernanke Reflects on 2008 Financial Crisis
So I love the scene where he's saying financial crisis with President Bush essentially told. In the fate of the US global economy. In your hands you must feel relief every day happening to Lou Paulson and me we were the president basically told us. You know to you guys do which it needs to be done else portrait which we appreciate it and and you say. This can elect him in the fate of the world in your hands so what does that feel like we know it's kind of the decisions you me. And ripple across the it's it's tough and I think the only way to get through that is really to focus. It's much he can on each step what he trying to accomplish and each day try to get done which need to get done and in some ways you prepared. Your entire life. For that job at that moment we'll accidentally because a as an academic I studied financial panics. The Great Depression. Howell financial crises affect the economy all those things Internet be very useful obviously thinking about so what to do and striking said that in some ways this crisis. Was worse than what we signed nineteen point nine there. Well I'm I'm comparing not to depression itself which was at the loss of jobs and unemployment in the thirties was clearly much worse than what we saw recently. But the financial part the beginning of the crisis. Where I'm in the 29 with the stock market crash when it you know international. Financial stress but in the US in 20072008. Think it was actually worse than that. Financial part of the great. Fresh and if so many times that. You missed and many other experts missed the scope of the mortgage crisis financial crisis in early 2007. Accepting that let let let's turn back the garden state he had missed it. You knew in January February march 2007. This was coming could she have done anything to stop it. Well I suppose we could have you know try to get the banks to start cleaning up earlier in you know maybe a little bit stronger but it was a big complicated. Phnom news. Panic and top mortgage problems housing problems a couple of slow economies it was estimate could be easily been hampered. And when you look back what he thinks the single most important thing. You got right. The decision made difference. Well decision we got right was. Was two there's some folks who said you know let the financial system fails just Wall Street real cares affect the US economy. And our view lists that we needed to prevent the financial system. From collapsing if it collapsed the consequences would not be contained in this other half in New York City it would be. Nationwide globally. Pretty down economic activity. So. We were always very aggressively trying to prevent the crisis from pesticides. Were and government says eighty billion dollars American International Group insurance company. We lent. Let's start gave lent 85 billion dollars the Fed did and this was before. The congress had passed what was called a TARP which was. Providing money for capital. Investments in banks. And that helped it survive. And we did it not because we cared specifically about AG. But we were concerned if it failed that would bring down old and new insulate yourself from something you couldn't be completely the public debate at the time you write about. Walking by cars and seeing the bumper sticker where's mine absolutely bail hours by Taylor you understand that anger. Of course I mean first of all it seems it was inherently and fair. That Wall Street was getting help. You know before main street was at of course our motives were trying to protect main street but in the end you know in main street took a pretty big hit as well. And so you know I've been totally understand I absolutely. Do you think there's something wrong with a system where the hallways and main street is to bail them. Well for thought you know Bailey has a bit of a strong word because for example. The owners of Bear Stearns for example the shareholders lost most most or all of there wealth. The creditors you know the employees many people were over lost there. Steak. So wasn't pure gift in that respect what restraint that was keep these firms just collapsing agree with that. But F after the fact you know after the crisis is over. It was incredibly important that we take whatever steps necessary to make sure does it happen again to make sure that offers too big to fail. And that firms have enough capital enough for their own. You know equity stake that they don't have to ever do this. And you feel the effects that public debate easier Fed Chairman we go to congress and take the questions. That. I guess similar one in the what does it feeling dated day to know that's all out there but also know. You have to do your job pension insulate yourself from it. Well I've mostly try to focus. I have to do it but that but the challenge was what would need to be done. To stop the collapse of the system. But inevitably you know in my book there's. Descriptions when it went to give testimony before congress and they were demonstrators standing right behind me as I was talking to the senators so. It was possible obviously due to be completely insulated it wasn't totally surprising because I knew from history's 1930s that in periods of of tremendous financial stress and job loss that you do get political response and members that respect news. Really could be it dissipated and when you look back what is the single most. I guess what is the same decision to take back when you wrong. Well I don't think that once you know once we identify what was happening and we resolved that we intervene and prevent the collapse of the financial system. I think the broad things after that think we got right we we prevented the collapse weaving came in we did stress testing. To get the banks have enough capital. And we were able to stabilize the system by the spring of 2009. The financial system was stable and in the economy begin to recover after that I think whereas you know where you could look back and say. The Fed and other regulators have done a better job was clearly before the crisis in particular the regulation of subprime mortgages was obviously effective. And that would been an area where you know going back in time. The Fed and other regulars did a better job you've also said that the Justice Department could have been done a better job investigating individuals even having prosecutions. Well I I rejected. To the to the strategy and the strategy that Department of Justice took. Was to penalize large financial institutions. Billions of dollars. For various offenses and different kinds. But to go after the firms as firms rather than looking at the individuals who are responsible for those decisions. It seems to me that you know corporation is only a legal fiction and the corporation itself can't do a good thing or bad thing it's only the people. Inside the corporation make so thanks so much a seventeen. Bad judgment excessive risk taking. The stakes you know it's hard to do is a shade into each other to some extent. But that there there are some crimes since and that sort of been prosecuted you know for example a number traders who Rick market's going to jail. 2002. Hottest political candidate presidential candidates right now both tangled with you in the past at least two Q line Bernie Sanders said you've failed. What do you make of that. Well I think that I understand the anger I understand that politicians respond. Two. Public's concern about the economy about their own jobs so I understand that but I think that's substantively. That. They were mistaken I think that again they concede that regulators and congress and many people didn't see the crisis coming and made mistakes. But once the crisis began I think the Fed act appropriately aggressive we did what had to be done. To get us back through the other side and I I. Think those criticisms substantively. Are not accurate but I also understand why. There's a lot of anger out there and it congress would be reflecting the awesome write the Bernie Sanders basically conspiracy there's what you believe. Well I want to get into individual politicians but there Cleveland about a new bookings yes these conspiracies well I mean I think there is a sense that and in the in the public in general if anything bad happens it's gotta be because some evil person will happen and having been inside the government. I can tell you. A lot of things bad things that happened happened because. People make mistakes there or or just don't make the right choice rather than being actively trying to you know hurt hurt the economy that's usually what that. You know the way that the economy's viewed most magazine has been fairly strong. Recovery over the last few years don't feel. And they think the system is rigged for the wealthy. Are they right. Well it's certainly true that the wealthy and higher income people have. Enjoy disproportionate part of the gains economy's recovery. And this is not a new thing I think it's important to emphasize that the spreading out at the income distributions. The accumulation of wealth at the top. Has been going on for thirty or forty years so call it rigged. In the sense that some folks sit down and had planted all this way and that pressure that's accurate but there are some very powerful forces at work including globalization. Technical change. International competition variety of things that have led to these developments so I guess that that any individual necessarily willed that. But whole bunch of long. Stating forces have have led to that so given all your years of experience in the government give an understanding what can be done about it. Well it's the most critical question there is mean the economy is only working insofar as it works for the great while the population. And it's not working the grateful population because not everyone is sharing and prosperity. Unfortunately it's not sending me south on the bumper stickers that some can be solved overnight it takes sustained effort. And it could be improved certainly academia long list of policy just give me three I gave you three. Better training its skills at getting people ups to the point where they can compete in the global economy that's that's really important that we the first one. Public infrastructure we need to have a better. Roads bridges airports policies need to be better quality so weakened as a country can compete. More effectively. Research and development I think the government needs to continue to support R&D to help. Improve our technical. Knowledge and to keep America in first place. Globally in technological advances you possibly in the congress in your book for making economic situation worse now. Well after the early fiscal program 2009. From 2010 on. Fiscal policy nastase was actually. Very tight very contraction Aires that there were. They were far fewer jobs created. Through the public sector than in previous recoveries for example. That was made worse because in United States a lot of government spending takes place at the state and local level. And with that house budget rules that they have at those levels state and local governments over cutting cutting cutting their capitals manager cutting jobs. And with the federal government kind of more neutral the overall effect was a very tight fiscal policy so let's. Ebitda at the height of the crisis yet even more power than President Bush said he act and think you're emperor for a day. Should congress have to have had this past and even larger. Stimulus into I can expecting. I think it would it needed to be larger because. It was being offset phrase substantially at the state and local level with where there was a lot of contraction and more importantly than that I think. The government switch to quickly in 2009 after. 2010. Switch to quickly to a kind of tight contraction or policy cutbacks sequester is just you know setting the government down all these things which have. Which are understandable what the motivation is but have had the effect of slowing recovery and putting too much on the Fed so a lot of people are concerned the Fed is doing too much. You know interest rates been too low for too long all those things the reason that's the case is that the Fed has been the only game in town the Fed is the only. Government institution has been trying to push for recovery and so it all falls on the Fed's if others were contributing more effective do. But before you were fed chair before he served in the fact he worked in President Bush's White House counselor economic advisors. But you're no longer Republican why not I'm a moderate now I'm a moderate and I am hoping for people who can work across the I'll. Cooperatively. You know I think that I'm both in both parties extremes of cut him you know moved moved out. And I'm less comfortable with it with some of the practically the anti fed rhetoric you see. In the populous wings of both parties so I I prefer to be nonpartisan in the middle any candidates there. Well I hope so pistol or early to tell you this is kind of that. Early stage this point finally. If a future. Fed chair future professor of economics is studying your role in the crisis that in the crisis what is the most important lesson you hope they take away from. Well in economics and I think that the importance of keeping financial system. Stable providing the credit and financial support it is needed I think it's really critical. As an economic perspective to get that done and that's very important lesson that we really try to carry through. I think that you know consistent with the title of the book courage to act I think you also have to know that sometimes it's hard to do what she thinks the right thing because the political environment. And the public discourse is very much against it. And in this case we really had to do what we thought was the right thing and I believe it was the right thing to help our country recover. Chairman thanks very much thank you.

This transcript has been automatically generated and may not be 100% accurate.

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