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Bush Names Bernake to Replace Greenspan in Federal Reserve

Aired October 24, 2005 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KYRA PHILLIPS, CNN ANCHOR: Thanks, Wolf. Three big stories we're covering for you this hour.
Feeling the wrath of Hurricane Wilma. We're live from all over Florida with stories of survival.

And amazing pictures. A huge explosion in the heart of Baghdad. That news, coming up.

Also in just a few moments, the president names his pick to replace Fed Chief Alan Greenspan, live here on CNN. What does that mean for your finances?

It's Monday, October 24th. From the CNN Center in Atlanta, I'm Kyra Phillips.

Stocks and bonds, inflation and interest rates. All of those make us richer or poorer, month in and month out. All are in the balance as President Bush announces his choice to replace Alan Greenspan at the helm of the Federal Reserve. The announcement is due any moment, and the smart money is on Ben Bernake, a former Fed governor who now heads the president's Council of Economic Advisers.

Greenspan's term runs out at the end of January, and his supporters and critics agree, he'll be a hard act to follow. Many never knew any other Fed chairman. Greenspan has served for 18 years, through booms and busts, under Democrats and Republicans and peace time and in war. One thing never changed, Greenspan's trademark ability to tell us anything we want to know in ways we can't possibly understand.

CNN's Ali Velshi joins me now with some insights on the Fed leadership past and future. Maybe give a little history and then look forward, Ali, to what the background is has been for Ben Bernanke as we wait for this announcement.

ALI VELSHI, CNN CORRESPONDENT: Kyra, you know when you are in trouble with your girlfriend, you send flowers. This is the president about to send flowers to people he's in trouble with. He's about to say everything is on track. Because it looks like it could be a rough week. Let's go to the president.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Good afternoon.

One of a president's most important appointments is chairman of the Federal Reserve. In our economy, the Fed is the independent body responsible for setting monetary policy, for overseeing the integrity of our banking system, for containing the risk that can arise in financial markets, and for ensuring a functioning payment system.

Across the world, the Fed is the symbol of the integrity and the reliability of our financial system. And the decisions of the Fed affect the lives and livelihoods of all Americans.

To lead this institution, a chairman must be a person of impeccable credentials, sound policy judgment, and character.

BUSH: Today, I am honored to announce that I am nominating Ben Bernanke to be the next chairman of the Federal Reserve.

Over the course of a career marked by great accomplishment, Ben has done path-breaking work in the field of monetary policy, taught advanced economics at some of our top universities, and served with distinction on the Fed's Board of Governors.

He's earned a reputation for intellectual rigor and integrity. He commands deep respect in the global financial community. And he will be an outstanding chairman of the Federal Reserve.

Ben will replace a legend, Alan Greenspan, who will retire when his current term runs out at the end of January.

For nearly two decades, Chairman Greenspan has shepherded our economy through its highs and its lows. Under his steady chairmanship, the United States economy has come through a stock market crash, financial crises, from Mexico to Asia, two recessions, corporate scandals, and shocks ranging from devastating natural disasters to a terrorist attack in the heart of America's financial center.

BUSH: Through all these challenges, Chairman Greenspan's prudent judgment and wise policies have kept inflation low. He has played a major role in America's strong economic growth. He has dominated his age like no central banker in history. He has contributed a better life for all Americans. And I thank him for his service.

Ben Bernanke is the right man to build on the record Alan Greenspan has established.

Ben graduated from Harvard with top honors, earned a doctorate in economics from Massachusetts Institute of Technology. He's built a record of excellence as both an academic and policy-maker. He's the author of several scholarly books and is one of the most cited economists in the world.

As Fed governor, Ben advocated greater transparency in communication with the public and markets. His speeches were widely admired for their keen insight and clear simple language.

Ben's career has also been distinguished by leadership. He was chairman of Princeton's Economics Department, founding director of Princeton's Bendheim Center for Finance, and a founding editor of the International Journal of Central Banking.

Since June he has served as chairman of the Council of Economic Advisers.

BUSH: Ben is also a kind and decent man who is held in high regard by all those who have worked with him. He has the support of a strong and loving family.

I'm pleased to see that Ben's wife, Anna, and his two children, Alyssa and Joel, are with us today. I want to thank Ben for his willingness to serve in a position so important for world markets and so vital to the well-being of the American people.

I urge the Senate to act promptly to confirm Ben Bernanke as the 14th chairman of the Federal Reserve.

Ben, thanks for serving.

BEN BERNANKE, NOMINATED TO BE CHAIRMAN, BOARD OF GOVERNORS, FEDERAL RESERVE: Thank you.

I'd like to express my deep appreciation to President Bush for the trust he has shown in me in asking me to lead the Federal Reserve system. If I am confirmed by the Senate, I will do everything in my power, in collaboration with my Fed colleagues, to help to ensure the continued prosperity and stability of the American economy.

In light of the announcement the president has just made, it's especially gratifying to have Chairman Greenspan here. In more than 18 years at the helm of the Federal Reserve, Alan Greenspan has set the standard for excellence in economic policy-making.

I'm personally grateful for Chairman Greenspan for his collegiality and support during my time as a member of the Fed's Board of Governors.

BERNANKE: Our understanding of the best practice in monetary policy evolved during Alan Greenspan's tenure at the Fed and it will continue to evolve in the future.

However, if I'm confirmed to this position, my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years.

Finally, I would like to thank my wife, Anna, my daughter, Alyssa, and my son, Joel, for their love and support. I could not contemplate undertaking these new challenges without their help.

Thank you very much.

BUSH: Congratulations, Chairman.

BERNANKE: Thank you.

BUSH: Mr. Chairman, thank you for being here. Appreciate you.

Thank you all.

PHILLIPS: If confirmed, you're looking a t the new head of the Federal Reserve. He would be the 14th chairman if indeed this nominee, Ben Bernanke, is confirmed to that post. Ali Velshi joining us once again live from New York as we set this up, Ali, we're talking about Alan Greenspan, 18 years. A lot of people say, boy, tough shoes to fill.

And considering everything he took us through from declining inflation, declining unemployment, healthy economic growth. It's a lot of responsibility to take on. And you and I were talking agent that even though this is not a political position, boy, does it affect politics.

VELSHI: It's so political in its implications. And that's a big message.

Alan Greenspan worked through Democrats and Republicans. He was a Republican just like Ben Bernanke is a Republican but the idea is while this is a political appointment it shouldn't be a political position. It's a cornerstone of our economic system. The idea that the central bank of the United States is independent of government pressure and policies, that the central bank works to protect the American people, not the government. The idea was set out when banks were in trouble during depressions where this -- the Federal Reserve not only set interest rates but it guaranteed the money you put into banks were safe.

And that's part of what the Fed does. It controls the flow of the economy. Now, what I said before we heard the speech is that it's kind of like someone giving their girlfriend flowers. Right now the White House has picked an interesting time to do this. We knew they had to appoint - that President Bush had to appoint a successor to Alan Greenspan prior to the end of his term in January. Nothing was supposed to happen today.

Today is a busy day. The white house has got to be looking at Florida, things going on in Baghdad. But those indictments might be coming through about the Valerie Plame leak. And what that could do is when indictments reach that high into executive offices as these ones might , we don't know yet, that could shake the economy, could shake other people's confidence in the U.S. economy.

And that's what the president is trying to do. He is trying to send a message, disregard Harriet Miers. Disregard Karl Rove and Scooter Libby and everything that seems to be not going properly in Washington. This is safe. Ben Bernanke is the man who is going to lead this economy through over the next hopefully many, many years. And for the average American the only contact you have, Kyra, with the Fed is usually your car payment, home payment, credit card payment.

There's some chance the Fed influenced the rate you're paying. For the average American is message is it's the same as it's always been. It's safe. There's one key difference with Ben Bernanke. He likes the idea of inflation targets, keeping inflation within a certain rate. Most economies do do that. The U.S. economy has resisted that.

Wall Street, and you can see markets are up quite dramatically on this news. Wall Street likes people who are solely devoted to keeping inflation low. Not even targets. Right now this is the litmus test for a Fed chair. This, of course, like Supreme Court nominations, Kyra, has to go before the Senate and I think President Bush is betting that Ben Bernanke is safe and will be confirmed. So all in all this is the president saying, we've got things under control. Don't worry.

PHILLIPS: Ali, looking back at a couple articles that were written prior to this nomination. One thing that was stated a couple of different times in "Fortune," was that, I'm reading this one quote by Justin Fox who wrote this one article.

"What the foreign experience suggests is you don't need a genius to be the next Fed chair, you just need someone willing to make fighting inflation his top priority." Also it goes on, even Greenspan coming forward saying, you don't necessarily need that skill as a banker like you used to in the past.

VELSHI: Yeah. I mean, it really is a very complicated job and it's unclear what the best preparation is, whether it's being an economist or being a banker or having a little bit of a stint of White House experience as Ben Bernanke has now had.

The idea is the markets, the investors want someone who keeps inflation low. Inflation is if enemy of investors. But inflation is tough, Kyra. It's not -- you can't eliminate it. There's got to be a little bit of inflation. It's how you manage that. In the old days interest rates could manage that. But today it's much more con complicated. We may have inflation because China needs more oil or somewhere else or these hurricanes caused the cost of goods to get more expensive. It's very scientific.

Ben Bernanke once said managing the U.S. economy is like fixing a car engine while it's still running. And I think that's probably not a bad analogy.

PHILLIPS: Ali Velshi, thank you so much. We'll continue, of course, to check in with you as we follow the nomination for the new head of Fed. Thank you so much.

Fresh video in right now from Islamorada there in Florida. You can see as water rises, people desperately trying to get out of certain areas. I'm not quite sure where exactly this is as we get this video. We try to identify exact location and who it is that we're actually -- looks like everything's okay because he's smiling. Not far off. You can see how close the water has come on the side of the roads there. Actually saw a couple of signs for gift shops.

So this might be one of the main thoroughfares through Islamorada there. As you can see the rising water effecting parts of Florida. We just got this in. We will continue to roll this, of course, as we are talking about a number of different areas in Florida.

Actually, Jacqui, we're going to go straight to Jacqui Jeras. She is monitoring the forecast for us right now. And we're continuing to get these new pictures in, Jacqui, and sort of see how the weather has affected - continues, I guess, to affect areas that have already -- parts that have already -- it has passed through.

We get this fresh video. It's still making impact on parts of Florida, obviously.

JACQUI JERAS, CNN METEOROLOGIST: Absolutely. Yeah. This storm is really far from over, but even though it has been a quick assault we still have a lot of things that we need to worry about, as the storm center itself is already about 65 miles to the north and east of West Palm Beach.

Here's West Palm Beach, that little green dot that you see there. That's an identifier for West Palm Beach. So 65 miles offshore, shooting up to the north and east very rapidly at 25 miles per hour.

The hurricane force wind field, we just got this in from the National Hurricane Center, the 1:00 Eastern Time advisory, it's expanded even more. 100 miles out from the center of the storm. So you do the math here. We're talking about 65 miles away. We still could see hurricane force winds and wind gusts expected. Especially in these squall lines around Port Salerno, extending down towards the Juno Beach area.

We're going to go right in to West Palm Beach, you're not in the worst seasons but just about. Looking at wind gusts at 70 miles per hour. Sustained winds at 49 miles per hour. So still some very wicked condition there's. This is not the time to go outside. The storm is not over yet.

We're up here toward the Ft. Pierce area there. And the west coast of Florida, the rain totally cut off. And by the way, notice how sharp this line is. You're in torrential downpours and all of a sudden, boom, your rain cuts off. Your winds are weaker on this side of the storm now.

Fort Myers reporting wind gusts at 37 miles per hour. So we're not even at tropical storm strength here any longer at this time, but we still could see those gusts -- maybe another hour, hour and a half, that's a possibility. So be aware of those effects. The entire storm offshore now but I don't think we're going to be in the clear here until later on this evening. And we still have this westerly flow moving through the keys.

Here's Key West and Islamorada is right about in this neighborhood. And with that westerly flow, they still have that on shore flow and that's going to continue to keep the storm surge up. And we've been hearing reports of five to eight feet across of the island of Marathon Key and Marathon, the city itself on that key reporting four to five feet of water over the entire city. Kyra?

PHILLIPS: All right. Jacqui, talk to in a little bit.

Meanwhile, Florida, of course, is reeling after a thorough kickboxing from Wilma. Everybody expecting the punches to the west coast but not many anticipated the storm's roundhouse kick as it crossed to the eastern side of the state. CNN's Allan Chernoff is in Hollywood, Florida, where many residents there were caught off guard. Allan?

ALLAN CHERNOFF, CNN CORRESPONDENT: Kyra, the winds are still whipping around. But some people are venturing out from their hotels, from their condominiums just to see what damage there is and they can find that Wilma certainly did pack a punch.

Down Ocean Drive, South Ocean Drive, a large crane snapped in two. About six floors of that crane are now stretched across a portion of South Ocean Drive. Many roofs were damaged. Chunks of roof have been flying about, scattered on the beach. Even in the ocean, in the waves. And there are so many broken windows.

In fact, I'm (inaudible) suffered two broken windows. Also our hotel, a potted palm went flying through one of the windows in the lobby. So certainly quite a bit of damage around here. Kyra?

PHILLIPS: All right. Allan Chernoff there in Hollywood, Florida, as we continue to monitor all parts of Florida right now.

Also, Jason Carroll, you know, he had been tracking the path of Wilma across Florida in our mobile Hurricane One. He started out in Naples, Florida and then filed this report as Hurricane One team tracked Wilma's path of destruction right across the state.

(BEGIN VIDEOTAPE)

JASON CARROLL, CNN CORRESPONDENT: We've pulled off of I-75. We've just arrived in an area called North Bailage (ph), we're just north of Miami Beach.

I want you to take a look at the damage right outside Hurricane One as we look across Biscayne Bay here. There are several houseboats that have been severely damaged by Hurricane Wilma. We count at least five of these houseboats that have various states of damage, here.

You can see that one right in the middle that has fallen down into the Biscayne Bay. At this point Miami Dade search and rescue, they have arrived. They're out here. It's unclear at this point if anyone was in any of these homes. They've just arrived. Search and rescue, they are going to be checking out the scene to see if there's anyone inside there who may be in need of any assistance.

Several of the apartment buildings in the area, we saw from blown out windows there as well. This by far is some of the most severe damage that we've seen so far just arriving here in the Miami area. Once again, we're in North Bay Village. Just north of Miami Beach where several houseboats have been severely damaged by Hurricane Wilma. I'm Jason Carroll reporting. Back to you.

PHILLIPS: Well, stay with us here on LIVE FROM. Right after the break, we're going to take you to Baghdad where two massive explosions took place at two local hotels, American hotels, pictures were dramatic, where international journalists are staying. We'll have a live report from there coming up.

(COMMERCIAL BREAK) PHILLIPS: One of the best known areas of Baghdad is smoldering this hour and 10 people are dead after audacious attacks at sunset. Police say three vehicle bombs went off in Fardus Square where that giant statue of Saddam Hussein was so memorably toppled. Journalists in two adjacent hotels say the first two explosions were rockets.

In either case the final blast apparently was aimed at police and medics who responded to the first two. We have the very latest now from CNN international correspondent Nic Robertson. Nic, what do you know? Anything more about who's responsible?

NIC ROBERTSON, CNN CORRESPONDENT: Well, the police are saying that these car bombs were suicide car bombs and they say that 22 people have been wounded as well as those 10 people injured. They say they're investigating how these cars, how the vehicles were able to get so close to the hotel to explode them.

What you can see when you look at the pictures is there's an explosion about 100 yards away from the hotel and then in the foreground of the picture that cement mixing truck drives right through a security barricade, right at the foot of the hotel, drives into that secure area before it detonates. Detonating very, very close to the hotel. Extensive damage inside the hotel. Stores inside the hotel damaged.

Dust tumbling down from the ceilings, elsewhere. Parts of the roofing and the stairways collapsed. And the journalists inside the hotel reporting that there were some injuries right inside the hotel. Journalists clearly shaken from the pictures that we've been able to see so far. But the very fact that the insurgents were able to use a multiple style attack if you will, one car bomb and another larger one driving in is an indication of these complex types of attacks that they're beginning to use here now in Baghdad, Kyra.

PHILLIPS: Now, Nic, normally there's such a huge gap between these hotels and where you can actually enter from. There's usually a large security perimeter. Do those not exist anymore? Are they still there?

ROBERTSON: The security perimeter is there. And if you look at the pictures you can see that concrete barrier by the road. There's a gap in the concrete barrier clearly made to allow one vehicle to pass through. And what seems to have happened and by judging by the pictures, that initial explosion, the two explosions before the cement truck drives in, perhaps causing the security guards at that checkpoint to abandon their positions to run and hide. We don't have audio on that tape. We can't hear what is happening. There were reports of gunfire around about that time. So the initial indication perhaps that the first blast made the security checkpoint, the men on the checkpoint remove themselves=, go and hide and that's when the bigger cement truck drives in and gets so close to the hotel. Kyra?

PHILLIPS: All right. Nic Robertson live from Baghdad. We'll continue to follow the story as we get more developments and new information with regard to those suicide bombs. Nic, thanks so much. And right after a quick break we're going to check in on this markets and see how it's reacting, how Wall Street is reacting to a possible new head of the Federal Reserve.

We'll take a quick break. More LIVE FROM after this.

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KATHLEEN HAYS, CNN CORRESPONDENT: I'm Kathleen Hays live from the New York Stock Exchange. President Bush has made his choice and he has appointed Ben Bernanke to succeed Alan Greenspan as chairman of the Federal Reserve.

Bernanke is a former Fed governor. He is currently serving as chairman to the president's Council of Economic Advisers. Stocks are rallying as oil prices fall again. Some say there's relief that Bush finally announced his pick. In any case, most market watchers had expected Bernanke's appointment.

Right now the Dow Industrials are rising about 112 points. The NASDAQ Composite is up about a percent.

Big question now for financial markets, consumers, will Bernanke keep guiding the Fed toward more interest rate hikes? Long-term rates are already rising today as traders bet he will. For consumers this could mean higher mortgage rates.

That's the very latest from Wall Street. CNN's LIVE FROM is coming back right after this.

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