captioning sponsed by macneil/lehrer proctions >> lehrer: good evening. i'm jim lehrer. a deadlock at the climattalks in copenhagen. >>rown: and i'm jeffrey brown. on the "newshour" tonight, hundredsf protesters tried to disrupt the conference. >> lehrer: we'll get theatest from ray suarez at the summi suarez: another day of netiations here have still fail to produce a text world aders can embrace here, but the u.n.ecretary general told the "newshour,he still believesgreement is possible. i'll have a report. >> bro: there were some steps forward today, includingledges to prote rainforests. 'll see how that could play out in themazon.

>> lehrer: then, a perfoance review for federal reserve chairman b bernanke. economisjames galbraith and formered vice chair alice rivlin date his record. >> brown: and the levance in our time of hn maynard keynes: "newshour" ecomics correspondent paul solman haa someat off-beat explanation. ♪ my general theory made quite a impression i transformed e econ profsion, you know me, modesty say it loud and say itlear, we're l keynesians now. >> lehrer: that's alahead on tonight's "pbs newshr." major funding for e pbs nehour is provided by:

>> this is the enge that coects abundant grain from the american heartla to haran's best selling whole wheat, whe keeping 60 billi pounds of carbon out of the atmosphere every year. bnsf, the enginehat connects us. monsanto producing more conserving more. improvinfarmers' lives. that's sustainablegriculture. moret producemoreconrvemore.com. >> chevron. this is the power human engy. and by toyota. vestas. grant thornton.

and byhe alfred p. sloan foundation. supporting science, tenology, and improved economic perfmance and financial literacy in the 21 century. and with the ongng support of the institutions and foundations. and... this program was made poible by the corration for public broadcasting. and by contributions tyour pbs station from viewers likyou. thank you. >> lehrer: there was confrontation insi and outside the u.n. climate talksoday. ray suar has our report on day ten of the conference, fro copenhagen, denmark. >> suarez: the meleen the streets erupted asundreds of presters tried to storm the conference hall. danish police fired roundsf pepper say and beat back the crowds with batons. >> i was just beaten both

hands and by sticks d had some pepper spray in mouth and my eyes. >> reporr: police reported at least 230 arrests. meanwhile, tensionmounted inside the smit as well. negotiats worked through the night to hammer out a deal, th president obama and mo other worlleaders scheduled to arrive on friday. but e of the first to arrive, venezuela's president d major oiexporter hugo chavez, told the conrence he agrees with the protester- the burden is on rich nations to more. >> ( translated ): in the streets they are saying e following: if the clime was a bank, you would have alrdy saved it. and i thinthat's true. if the climate was a b capitast bank, you would have alreadsaved it. you, the rich governmes. suarez: still, deadlock persisted on major iues: first, setting firm targs for cutting greenhouse g emissions by industrialized natis and ining in emissions growth in the developing world. cond, getting the u.s. and

other rich nationso spend billions of dollars on hping poorountries adjust to global warming. and third, verifying that emergingowers like china and india stick to their promis to cut emissions. china's lead negotiatocharged again today developed cotries are asking too much. and, hsaid, they are backsliding on the commitmen they made inyoto, japan more an a dozen years ago. >> ( tranated ): if we look at the difficulties in negoations, we find the additional and unreasoble requests made some countries. they try to lee the regulations of the conventn d the kyoto protocol aside, and make those ueasonable requests for developing countries. >> reporter: danish leader attempted to bak the deadlock today drafting a simplified agreement, but china l an effort to quash thdeal. but in an interview, the u. secretary geral, ban ki moon, appealed to both sides to compromise. >> i would urge all veloped andeveloping countries to come

onboard. developed countrieshould come out with more ambitis mitigation targets andlso developing countri, they shld come out with nationally appropriate mitition action, miting their growth of emissions. >> reporter: u.s. climate negotiator todd stern said ina's cooperation is critica the two nations arthe world's largest rbon emitters. >> i thinkhat from our point of view, youan't even begin to have an vironmentally sound agreement thout the adequate and significant participatioof china. >> reporter: it s widely reported u.s. gotiators had refused to cmit to firm pollution ts until congress can approve the needed legislation. a billo reduce u. emissions has been pending for mths in the u. senate in the fe of strong opposition. back in copenhen, the president of thealdives

appealed for quick action. his island nation in thendian oceais threatened by rising seas. >> if we are not ablto seize this opportunityand we are not able to come to annderstanding during the coursin the next 48 hours, i fear we mht very well be doomed. i hope that is not wt we are contemplating. >> reporter: the u.n.'s n said he was confident there will reement by week's end. >> i confident that there will a deal in copenhagen, a dea at meets the needs of all th counies in addressing climate ange, a deal which will be corehensive, actionable and fairnd also binding. >> reporter: and in washingt, a ite house spokesman said president ama hopes his presen will help lead to a

deal, so long it's verifiable >> brown: and once aga today, i had the chance to talkith ray copenhagen. we spoke a short te ago. >> lehrer: r, the issues you list as part of the current deadlock, the taets, the aid, the verification, doesny of them stand out as the most important or are they somew all ed together? >> suarez: on th day of the conference, certainly one the most contentious sues are the st advanced economies those counies have set a goal for themselves of limiti future emissions to that which wod cause less than two degrees re global heating up, but the poorescountries in the world respond, "sure, that's fine a global average, but we allow the temperature go up another two degrees celsius, rghly six degrees hrenheit on average, you will bcomfortable but we

will be baking. our waters will disappear, o spngs will dry up and we are gointo have to get paid a lot more money to adt to that newer, wmer world, or you're going to have to low your targets to have no more th another gree and a half ceius of global warming. it's o of the central fights of this day of the cference. >> reporter: yterday you and i talked abo the dead lock. a day lar do you sense the positions haening? or are these public debating points being put forwa? >> suarez: so far althe drafts th have been circulating around this coerence have the toughest nutto crack in brackets -- meaning thathey are remaing to be fully negotiated, d so far it hasn't been announced that y of the really toughtuff, whether it's the ba and forth between china and the united states er verification, or the amounand durati of the payments from the richest counies to the poort -- nothing has been

settled in a final w that can be annoued to the public, so if positions a hardening, i can't say for sure b they certainly aren't softeni in a way that'seen allowing coosite. >> reporter: what about the one area where there seemso be someovement -- a plan to help preserve forests, particarly tropical rn forests? tell us about that. >> suarez:his is called the redd negotiations for reduction of degredation a destruction of the world fores, and dependg on who you talk to it's beingescribed as one of the few bright sts in the gotiations. forery has to be negotiated along withechnology transfers, and adaptation, and finance,nd sevel of the other big areas ofegotiation, and they have had a cole of breakthroughs, and they've real been trumpeting that progress but a lot of the n.g.o.'shat organize around forest issues say theris really less than

mes the eye in that draft docunt since, again, all the tougst nuts -- all the really rd bargaining that has to go on bween countries over eservation of forecasts in t deveping world is still all remaining be set out in tail. the document ifestooned with phrases like, "deemed appropriat" and "appropriate cisions by countries" and really, what's appropria remains to be hashed out >> reporter: we're talking aut what's going on inside the hl ere you arthere. we saw thoseictures and you reported on the otests outside. can you tellow much of that resonates insidend in the meetin? >> suarez: the prosts from earlier in t week were pretty genial, because they were planned. the utes and locations were work out between the authorities anthe protesters. this was somethingf another order all together -- high levels of nfrontation between large mbers of protesters who were ready to sh, and shove,

and press agait the barricades which are being moved fuher and further away frothe convention center wherthese lks are occurring. widespread use of pepp spray and batons, as we saw in the earlier report. was a tougher day of confrontation tween protesters and police, t i have to tell u, you wouldn't be aware of here. the curity perimeter -- the fenc, the barriers, the public transportation that u might use to get to this convention cent is leading you off further d further away, so any ruckus that occurs on the streets of copenhagen isept well away fromhis place. >> reporter: you he some world leers there already and you have more to ce real soon, inuding president obama. bedes their mere presence, what exactly is supposedo ppen that may break any dreadlocks? >> reporter: there was a defini change in tone today. earlier in the week, pple who were involved inhe negotiatio were talking about e impending arrival of the

world leaders as bota reason hurry along with the deliberaons, and as a catalyng event which might lp get things moving. w, they're talking about the possible embarrassnt of having all these worlleaders here and going home empty-hded. very definitchange in the nor of those remarks about what it would mean to ve some of the bigge names on the planet in this convention hl. reporter: ray suarez joinin us once again from copenhan, thanks a lot. >> lehrer: now, fothe other news of the day to hari sreenivan in our newsroom. hari? >> sreenivasan: the feral trade commission accus intel today of anti-trust violions. the agency filed auit charging that the world's lgest comput chip maker has shut rivals o of the marketplace by using thats and manipulating ices. intel is a "nehour" unrwriter. it called the f.t.c. complai "mguided" and said it competes airly and lawfully." >> sreenivasan: the european uniohas dropped a long- stanng anti-trust case against microsoft.

the softwareiant agreed today to give uss in europe a choice amg a dozen web browsers and nojust microsoft's own nternet explorer." the e.u. dispute with microst has dragged on f more than a decade, and the company ha already pa more than billion in fines. the u.s. house voted tod to let e treasury borrow another 90 billion over six weeks. that way t government will not fault when it hits the curre debt ceiling of $12 trilon in the ming days. on the hou floor, republicans andemocrats skirmished over calls rein in spending. >> when ll it stop? when wl washington get the meage that we can't borrow and spend and il our way back to a growing amera. and thene come here right before thehristmas break, on the day we're probly heading out of ts building, and we're going to ps a $290 billion inease in the statutory limit on the national debt

the american people don'want more debt for chstmas. >> this is not a cheery me for e american people. this is a veryifficult time. a reminder, the leslation in front of us now is to pay r the war in ira to pay for the war in afghanist, to pay for our veterans' hospits, and to pay for nextonth's social securi recipients, to receive their chk on time. >> sreenivan: the house also approved a defense bill totang nearly $640 billion. and it med to act on a jobs creation packa totaling $170 billi. democrs plan to pay for nearly half of e package with unspent money from the bk rescue program. all three bis need senate acti as well. the govement of pakistan suffered a majoregal blow today. the country's top court stck down aamnesty shielding thousands of officia from corruption charges. asif a zardari retains his immunity, so long ase's in office.

but after e court ruling, the main opposition pay demanded his regnation. iran has tt-fired an upgraded version of its longest-rge misse. state television brocast video of today launch, from several differenangles. the missile can trel 1,200 mile a range that includes israel, american bases in e persian gulf, and parts of southeastern europe. the test sparked criticismrom the u.s. and other worldowers. theye already weighing new sanctions over iran's nuear program. for violating existing u.s sancons on iran. the juice department said the fincial firm hid its illegal dealings with irann banks for decas. the settleme ends a five-year investigation. last week's stng of car bombs in baghdad involved meers of the iraqi securi forces. prime minier nouri al-maliki said today an investigion shows at least 4security offirs helped in the high- profile attackon government

targets th killed 127 people. maliki also id the bombings willot alter plans for u.s. forces to lee iraq in two years. and, he offered a ward for informion on car bb plots. >> these bombings won't affe the u.s. military thdrawal. the deline for the u.s. military withdrawal remas in a final form and with fixe timetables. yesterday, t cabinet adopted a resolution offing a reward of 100 million iraqi dina-- about to anyone whcan help lead iraqi security forces garages or other places ere extremists assemble car bombs sreenivasan: maliki also sisted iraqi elections will ahead in march, noatter what. u.s. companies will haveo make executive pay policiesore transparent. the securities andxchange commission votedoday to beef up dclosure rules for publicly-held firms. starting next spri, companies will have to discle more about stock options and stk awards. the s.e.c. also wantmore public information on how compensation polies might encourage too much rk-taking.

wall street was ttle changed toda the dow jones industal average lost more than 10 pointso closat 10,441. the nasdaqose more than five pots to close near 2207. those are some of the day'main stories. i'll be back at the end of t prram with a preview of what you'll find tonit on the "newshour's" web site. but for now, back toeff. >> brownand still to come on the "nshour," two views on how fed chairman bernankis doing, anthe return of keynesian economics. that follows our looat the plan to prect the world's forests. as ray and i discuss earlier: six nations: t u.s., australia, france, japan, rway and itain pledged $3.5 billion today for a program call "redd": "reducing emissionfrom deforestation d forest degradation." the money will fance a u.n.- backed plan to reward develong nationfor saving carbon-rictropical forests. can "redd" maka difference? jonathon milr of independent television news nt to the heart the world's largest

rainforest recentlto find out. >> reporter: the are many in reporter: we traveled 2,000 miles ross the amazon basin, which contains more thanalf the wods remaining rainforest, to ask brazil'amazon pioneers what they make of this plan. could they be enticed toreat this forest as thelobal resource we all like to thk it is? and, who amo the amazons 30 million people, stands to ga? thplans known as rd and a couple of weeks from n, it its success will hinge on wealthcountries convincing amazonians that money rely can grow on trees and that ty'd literally be better off aving their forest intac the past, logging has simpl been too profitae. and now the idea bind redd is that, left untched, all this wille worth more standing up than it will be in a tber ya. the dd fund could be worth one and a half blion pounds a year to brazil, yet thoseushing it

say redd's still one of e cheape and easiest ways of reducing genhouse gas emisons and averting climate change. but will redd work? we're on a logging road,iles from anywhere. off to o right, the unmiakable roar of a chainsaw. it echs through the forest. me illegal loggers have just felled cedar. chainsaw gangs likthis wreak trails of devastation. ey're aware that an evermore eco-conscious outside rld now brands them environmental terrorists but they're t bothered. >> ( transled ): we don't want to get paid do nothing. weant to live here, working at what we do. why is it th rich countries are so interested inreserving thamazon and they don't preserve their ownorest? tell me that.

>> reporter: brazil's modern amazians have a wild west mindset. nothat long ago, the government was hding out free land and chainsaws. productivity measud by the nuer of trees you felled. the more you cared, the more land youould claim. r amazonians, the forest isn just a b nature reserve. th have to work and trade and get around a for that, they need rds. and thiss the most controversl road in brazil. the br319 cuts through theeart of the azon. it's controversialbecause it's beinpaved-- all 500 miles of it. when you p down tarmac, it makes it even easier f people and bilogging trucks to pillage the jungle. theyuild little roads off big roads, le the 319 here, and satellite imagery shows thatn the azon alone, there are now 173,00kilometers of

clandestin illegal roads. that's enougto encircle the earth four tim over. 80% of defortation takes place within a tee mile radius o the side roads. but it'sot just loggers o blaze trails of struction. in an isolated junglclearing known as new el doradoillegal ld miners have devastated th forest for miles aund, pollutedhe ground water and rive with mercury and caused e river to completely dry up the estion for those designing redd is how earth does the rich world get its mey to illegal miners, illegay occupyg land in the middle of the jungle? until it can, there'll blittle incentive here to do anythg but keep on digging an destying, although the miners don't think they're e problem. >> ( translated ): an illega miner destys less forest than a rancher. one year, a rancher can destroy millions a millions of

hectares and an illegal ner n stay in the same place for years. we destroy a fractioof what they destroy. >> reporte brazil's meat industry is the biggesin the world and flavio the min is right: cattle farmers are deed responsie for the vast majority othe deforestation. early on, rahers grabbed lan up here too, andike the illegal loggers and miners, felled great swathes o rainforest. most farme have fake titles to the land, but posseson is nine nths of the law. >> reporter: the ranchers re are all-to-oftenainted as the bad ys. th've chopped the forest down, ey've made a lot of money fr the timber a then they've raised all these cattle anthey get lot of money out of th. the interesting thing thou is that they are going to bone of the chief beneficiarieof redd. and so ty should be, says augair vuik, who bought her

2,500 hectare rah legally 25 years ag more tn half of it's still forested. if it's to stay that wayshe can't expa her herd and for that, she says, she shou be compensated. >> ( translated ): iis not our fault at is happening to the world. th have to give us a financial incentive stop cutting down the trees because people canot just stop working cause the rld thinks that saving the amon is going to save the planet. to presee the forest, you need money; you need to he people around to make sure th conservation does take pce. if i wasn't here, all is forest would have been cutown. i ft part of my forest untouched. >>eporter: even brazilians who ree that the forest shld be saved, insist therhas to be a balance betweeprotecting it and feeding a country oflose to 200 million pple.

we're on the movagain. from amazonas stat 500 miles southeast to mo grosso, and we're still in t amazon basin. "mo grosso" means thick forest. spot the irony among the endlesfields of soya, there aren't that ma trees left for redd save; at few remain lie mostly within native indian reservions. 've come to meet a parecis indi chief. cacique kazaizkairo turned up with her daughter riding pillion. thparecis pose no threat to the forest, of which thehave more thaa million hectares. they grow only what ey need to eat. they tap wild rubberharvest forest fruitand hunt and sho and fish. but the pacis don't stand to ga from redd which would pay onlyhose posing the greatest danger to the fore.

the chief says its aecipe for conflict and corruptio it rewards the whiteeople, she says, by whichhe means, anyone who isn't indian. >> ( translated ): it is an injustice that the pple who are destroying the fest will get pa. if that's the case, we wl destroy our forest to see they pay us as well. if the white peoe have land today, they want more tomorr d even more the next day. if they e going to pay those who are destrong, we will deroy too. >> reporter: the cboys stand the amaz is vast, so how do you police it? the long arm of the lais alreadover-stretched. these are e amazon's airborne enforcs, whose job it is to catch illegal loggers. we're now 0 miles northwest of the parecis resee. rondonia, a small azilian

state that's bigger an britain and for which the amazon police ve only got two choppers. eachf the tiny triangles on this map is a g.p.s. fix on suspected sites of illeg logging. the plan is for redd to be policed using satelle intelligence just likehis. wee on an operational mission and they'rcoming in fast and low. they circle thr target. redd will need eorcement and in brazil, theseolice are the only enforcers arod. th're constantly clamoring for more resources. but unbelievably, they face closure becausof pressure from the powerful agribusiness bby. the raid is a total failure. the suspects he fled into the fore; their rice and beans still piping hot. forest police woulbe the eyes and ears of nations whh bankroll redd.

if it's thisard to catch the culprits, there's danger redd could end up thring good money after bad. the police admithat arrests arincredibly rare in operations like th and if a case does finallmake it to court, the case catake years. the risks for the loggers ar low anthe fines are miscule compar to the profits. redd will mean nothing to illel loggers. man arrives. thpolice are immediately suspicious, but he claims 's an innocent bana seller. in the amazon,uilt and innocence, hd to tell apart. he arguewith the policewoman, lecting her on how the cops shouldn'be wasting their time on opetions like this but should be after the big fish whget away with destroying the fore by paying huge bribes, he says. brazil is pretty pleased tt

ly 2,700 square miles of the amazon rainfest was chopped do in the first eight months of this year. that's the lowest on record and half amuch as last year. but braz still leads the world in acreageost. around the tropics, the fellg and burning of rainforest releasesore greenhouse gases than all t worlds ships, trai, planes and automobiles put tother. >> lehr: next, assessing the tenure of federal rerve chairman b bernanke as a senate committee prepareto vote on a second term. "newshour" corresponnt kwame holman begs with this port. >> reporte the federal reserve keptnterest rates at historic lows today--ear zero-- and in a statement, it reported t fragile economy continueto pick up, and job lses are owing. to the m at the helm-- chairman ben bnanke-- it may be furer evidence the fed's licies are working, as he to

a senate hearing ts month. >> we played a ctral role in effos to quell the financial turmoil. for exampl through our joint efforts th other ancies and foign authorities to avert a collapse of the glal banking system last fall. >> reporter: a today, bernanke reived a boost of his own. the fed chairm was named "time"agazine's "person of the year," for hping-- in the magazine'sords-- to "ensure that 2009 was a period of we covery rather than catastroic depression." in an intervie bernanke countered criticisms that hi actions haveelped wall street athe expense of main street. "i come from main streetfrom a small to that's really depressed. th is all very real to me." he said adding, "i'mot happy with where we e, but it's a lot better than where could ." the rmer princeton economics pressor is expected to be confirmed by t senate for a second four-year term, in e near future. but he's also been takg some heat, likehis, from republican

senator jim bunnin >> the a.i.g. bailout alone ason enough to send you back to princon. >> reporter: his critics othe right,eft and in between say bernanke did too little fore last year's crash, b used checked powers after crisis set in. and today, vermont indepdent senator rnie sanders-- who has t a hold on bernanke's nomination--ontinued his push to have the chairman repced. >> one okey functions of the fed is to oversesoundness. and alaround him was wild spulation, gambling type taking place. where was ben beanke when this was happening? >> repter: the nation's top banker has takenxtraordinary actions-- usg the fed's power in novel ws to pump trillions

of dollars into thfinancial system. last year,mid debate over the wall street bailout,e answered critics who said the gernment should let the csis take its urse. >> why don't we allofree market system to correct ielf? >> my respon is that the pain would be very signifant, it would be very difficult fomain street, if this credit syste broke down, it would be ry costly to average people. here's better solution. the tter solution is to recognize thathings went wrong, we've got a proem that we c solve if we address it with enough force. >>eporter: bernanke defended his use of tt force again at his sena confirmation hearing two weeks ago. >> ten together, the federal reserve's actions have contributed substantially the significt improvement in financial coitions and to what now apar to be the beginnings of aurnaround in both the u.s. and foign economies. >> rorter: even with that nascenrecovery, the fed faces ves in both the house and th

sete to strip it osome powers and irease oversight of its balance sheet. >> lrer: and two differing views of chairman bernke's performanc.. alice riin served as vice chair of the federaleserve duri the greenspan era, and was directorf the congressional dget office. she's now at therookings institution. and james lbraith is a long- time observer of the fed. he's a professor of gornment and busiss relations at the univsity of texas at austin. professor garaith, you do not believe beanke should be nfirmed. why no >> well, iave a great deal of respect for chairman bnanke, both as a cil servant and as a ofessional economist, but th was an institution failure of the first magnitude. was chairman of the fed in advance of the crisis. he faid to heed the warnings that werbeing offered about the daers in the housing

marketabout the dangers in derivatives. the fewas lax in its approach to the regulation ofhe fincial system at that time. and, the crisis ppened on his wah. in a sense, was the admiral of the fleet. it wenaground. seems to me that, in the principle ofommand responsibili, the institution shld get new leadership at this time. >> lehrer: ali rivlin, you see differently. >> i d >> lehrer:ell us why. >> think the whole financial commity bears a lot of responsibili, and there were regulatory failures, a the fed actetoo slowly, but when the cris came, ben bernanke was absolutely the rig person to be there. he w calm and collected. he was very knowledgeable. he was bold in using the pers of t fed to stabilize the financial system. itas a really dangerous, chaotic situation.

weould have had domino effect, big instution after big institution going down and total meltdown you othe financial system. he aided that. >> lehrer: but you don believe -- you d't buy professor galbraith's ptain of the ship analog-- right? th it happened to his watch so he suld go? no, i don't. i n't have a good explanation of why so many people who watched thfed carefully and who watched the maets carefully ssed this crisis, but almost all of did, and i don't thk bernanke, who came in rathelate in the development -- he took over e fed in 2006 -- nowthey might have acted more ickly in 2006 and 2007before the crash, but nobody s this coming, and i don't thk it's fair to say bernanke should ha seen it when nobody el did. >> lehrer: what about th,

pressor galbraith? nobody else saw it. why shld bernanke have seen it? >> iight go to court and change my name t"nobody." there we people who saw it. very well spected people. warren buffett warned that derivatives re weapons of financial mass dtruction. there re warnings from within the feral reserve board about the dangerthat were emerging in the mortge market and the subprime sector. there were warnings. i think -- it is t job of the federal serve to be on top of financl danger, to be skeptical abt speculative activityn the system, to both warn and to t. and it's chacteristic in advance of crisis that that is very diffilt to do, but it is their responsibility, and whe i agree with alice tt action a very, very large scale was

warranted and carried out,n the wake of the cris i also think it's a mistakeo personalize this too muc ben bernanke plad a useful role, but so did t congress in extendg insurance on bank deposits. soid the president, in putting the exchange stabilition fund to work behind the commercial-paperarket. in many ways, this was aeam effort, and itould not be right to do what "timemagazine did today and sentially attribute it to the extraordinary pors of a single invidual. >> lehrer: alice rivlin also just said that he was thright man athe right time to go foard -- in other words, to meet the cris head-on. you dot see it that way at all. >> well, as i say, ihink ben bernanke perfoed well under extreme pressure ithe fall of 08, but i don't think that should qualify him to ad an institution which ry, very much needs a new cultu, an stitutional reform at this time. if hwere coming up for

chairman for the firstime, i uld be in favor, but i think the overring consideration now is, are we gng to get a regulatory structure which as with theggressiveness and the skepticism that was lacking in advance othe crisis? >> lrer: alice rivl, you rved in the fed. you watched it for many ars as has professor galbraith. he says a whole new culturis eded and it can't haen with the current chaian. you don't see it. i think a lot of changes ar necessy, and some of them are in the processf being made. we he a bill from barney frank's commite that will -- >> lehrer: in e house. >> in the hoe -- that would chan the regulatory structure rather consirably. i don't agree wi all of it. but i thk bernanke is an experienceperson who was a studt of the great depression, had handled himself extrely

well under fire, as jamie lbraith said, and is the rig rson to go on leading e fed now. >> lehrer: professor gbraith, if not bernae, who? or do you ink in terms like that? th, well, there is a better person out there who couldo the b? is it what you say, a ltural problem, not an individual pblem? >> i thi there are capable people. there are capable ople in the federal reserve stem now who would be put in arge. people who have the requite experice and the leadership capacity. the esident made a choice to -- in effect, to connue mr. bernanke, but the senate can, if it chooses, obli the president to make a dierent choice and i guess mview is, withoudisagreeing with alice very strongly about chaian bernanke's personal meritshat that wou be the better policy decision at this momt. >> lehrer: but that's not ing to hapn, is it, alice rivlin? >> no, it's not going to hapn,

i think the senate will ta some opportunity for thoseho are angry -- a angry at the fed,ngry at the banks, angry something -- and they have right to be angry. th'll take an opportunity to nt, but they will confirm beanke. >> lehrer: let move ahead. les assume for discussion purpos only, professor galbraith, that bernankes ing to remain chairman of th federal reserve. what do you expect him to do or whado you think he should do from this point on at's different om what he's doing now, or otherwise? >> well, he has a ry -- >>here are several important -- >> lrer: let's go to alice rivlin first a then to you, pressor. sorry. he has a very delicate job the moment, becausthe economy beginning to recover but it certainly not there yet, a anything like raing interest rates would slow dn the recovery. >> lehr: today, the fed and his colleagues -- thchairman and his colleagu said keep

inrest rates low -- almost nonexistent. >> rightand i expect them to keep them there >> lrer: is that a good thing to do? >> yes, and i pect them to keep them low until we he quite stng evidence in the labor rket that unemployment on the way down. >> lehre how do you feel about that, professogalbraith? what the fed didoday under bernanke and what u see when you look aad. under his tenu? >> i think monetary poli is an extremely weak read, going forward. the bankare simply not prepar to resume lending to the ivate sector in the way that we woulneed to see in order to have a stng economic recory. so the task of generatg a revery really remains with the president's team and wit congss, with the tools of fiscal policy, and ion't think that chairman bernan is all that central to that proem. on another set of issuesit

seems to me that chairman bernanke is heading toward a seris confrontation with the congress on the fed's sponsibility to come clean about its tivities during the crisis. the congress -- mbers of congre are pressing, i think, in a very serious way r more informatn. chairman bernanke refusing to give them th information. and it seems to mehat the federal reserve real does not ha the authority or the right toake a decision about what information itay give or not give to congress. so ixpect that -- assuming that he is cfirmed, that that issue is goi to cause him a great deal otrouble in the nths ahead. >> lrer: do you agree with that, ice rivlin? a great deal of trble for this man still to come? >> i think the will be trouble, but the chairman's in thru will be to protect the independence of monetaryolicy, as he should. >> lehr: that's the federal reserve. >> butt's the monetary policy

function of the federal serve, setting interest ratesif you will, and acting as a lenderf last resort,hat's not somethg you want politicians muing around in. that's why whave an independent federareserve. now, sharing infortion about at their -- opening their books, theirooks are mostly open alrdy, and i don't think that's going to be a controversy. but allowing the congre or another agency to cond guess themn monetary policy would, i think, ba disaster. >> lehrer: ok. alice rivlin - >> my ew is it's the congress that can decide what infmation 's entitled to and what inrmation should be wheld, and if information needso be provided -- should be withheld, d if information needed to b provided in confidence t congress has a way of dointhat in oth ways, national security information, for examp. >> lrer: thank you very much. >> thank you. >> tha you.

>> brown: now, weighing th legacy of another faus economist. one from the paswhose theories are part otoday's national debate. "nshour" economics correspondent pa solman has the rap on the man behd the idea ogovernment intervention in the economy it's part of his continuin reporting-- "makg sense of financianews." >> reporter: britishconomist john maynard knes. bo 1883. died 194 he was an onomic revolutionary in the930s, an icon of orthodoxby 1965-- pretty much passe from980 and the advent of ronald reagan. but anks to the financial crisis and all the stimus spending based on his theoes, keynes is back, perhs bigger and badder than ev, as in this educational rap video from producer-director jo papola d economist russ roberts. >> ♪ jn maynard keynes, wrote thbook on modern macro ♪ the man y need when the economy's off trac whoa. ♪ depression, recession now your questions in seion ♪ have a seat a i'll school

you in one simple lesson. ♪ >> reporter: theounter-tenor, ifou will, is friedrich hayek. >> ♪ thiis hayek, winner of e nobel prize. >>eporter: a colleague of keynes, during world war twond hero to conservatives ever sce we've been going bk and forth for a ntury. ♪ want to steer markets. want them set free. ♪ there's a boom and bust cle and good reasoto fear it. ♪ bme low interest rates. no, it's the animal spirs! >> repter: russ roberts is, like hayek, a government spending sptic who acknowledgeshowever, that grand mastereynes is today's onomic force to be reckoned with robert skidelsky, a memberf the british house of lor, is keynes' famed biograph, interpreter, and ahor of "a new appreciati, "keynes: return of thmaster. " we inved lord skidelsky and ofessor roberts to debate ynes' cure for today's great recession, appropriately eugh, in the boa room of the international monetaryund, an organizaon keynes helped create to dealith the

aftermath of thereat depression. skidelsksums up keynes with three idea one, markets are inherently vatile; two large scale unployment can develop; and the thd idea is that there's nothg to stop that unployment growing unless the governmentomes in with a stimulus to place declining private ending by public spending. >> often with borrowed mey and in the currentituation that's what we're dng now, and i think it's mistaken, but think it very much a keynesian argumentnd people invoke keynes all theime. >> rorter: and so the essence of keynes in thasense is the econy because of uncertainty has the propsity to occasional contract and maybe stay contrted. >> yeah. >> reporte with too many people unemploye therefore whenever that ppens, we've got to as a govement spend the money to get theconomy back up and moving. >> absolutely.

and you don't wait until you ve reached this low point before startinspending; you intervene the downward slide by injectingxtra aggregate demand into theconomy. >> repter: aggrete demand means just more spding from everyby? >>ore spending. yes, tot spending. >> ♪ i had a real plan a fool n understand ♪ the advice, reasimple, boost aggrege demand! ♪ >> reporr: what's not to like about stimating an economy whenillions of people-- 15 million at the moment,t the very lea-- are out of work? >> capitalt economies have slowdowns, contraction slumps, recessio and depressions. some of th is due to natural forces, some dueo government mistakes. we have a long history of contractns in the united states- the 1933 depressiowas not the first one. we had one in 94, we had one in the early 10s and the economy bounced backairly quicy without government intervention >> reporter: yes, says skidelsky,ut... >> there werterrific suffergs, i mean people, whole communities were uprooteand everything.

but in the end, ings got going again. we do not live in that sort world and don't think we can take risks othe kind i think you're ilying. i think the political dosides of taking those risks are gog to be too greaand in germany they we absolutely horrendous in the ear 30s. >> reporter:s that not true? >> well, my clm is that in our attempts to engineer our ecomy from t top down, we've actually made in my cases the worlless secure, workers ls secure and lowered our prosperi and hurt people. >> reporter: becse otherwise the system would have justed? >> would he got better. >> reporter: to keyn, however, it was spend or suffer, as t papola-roberts r recounts. >> ♪ boom. 1929, the g crash ♪ we didn't bounce back economs in the trash ♪ persistent unemoyment, the result of sticky wages ♪ wait for recovery? that's outraous! ♪ >> reporter: a mern economy simply doesn quickly adjust to a shock, keynes gued. prices don't simply plumt until consumers willuy again;

people are loa to sell their homes at steep dcounts; woers, unwilling to take deep pay cuts. that's why prices d wages are called "sticky." government has tprotect the econy from itself, keynes thought. but roberts thinks marts, unprotected, do a tter job. >> what markets do is they punish you if you systatically make the same mistakesver and over again. when you destroy the punisent system that markets naturall perfor you're going to see more myoa, more hubris, more overconfidence. >> it's interesting, the wd "you they punish you. if it was just thayou made a mistake and the marketpunished you,ecause you were out of a job that's fine, but ty actually punish llions of people for the mistas of a quite a few people and no governme, no democratic government is going tollow that degree of punisent. >> reporr: unemployment for long periods of time? >> unemployment and e bankruptcy of lots of coanies who e not making mistakes,

they're just affected the people that ve made the mistakes. >> reporter: sthen lord skidelsky, what do you thi keynes would actuallhave us doing now? >> i think he might ve wanted a bigger stimulus, actuall because the stimulus hast actually broht about a recovery, it stopped thelide. >> reporter: but wt would he have said to the comment: lo, in t long run it will all turn around and be okay. >> he would ha said in the long r, we're all dead. i don't think he bieved that economies would remain depreed forever, he thout they would recover, but that they wouldt recover fully to a full emoyment position once they'd been severely shocked withoua continuous stimulus for long period and i thi that's the prospect we face today actlly. incomplete recovery. >> reporter: and do you t worry about that? >> well, unfortutely what keynes has done is he has gin solace to politicians who nt to spend money wastefullon special inrests rather than on

things tt would help us. >> reporr: is that completely unfair? >> no, not completely unfair there's a lot of waste. thers going to be a lot of waste inhis, but the waste doesn't matter. there's re waste if you have heavier unemployment. u're balancing a smaller was against a larger waste. there'no ideal way out of the hole. this right now, right now, not x months ago, not two years ago, but right now ia problem of anxiety, riness about thfuture. e question is: how do you create people's nfidence going foard? >>eporter: and thus the question beces one that keynes pod 70-plus years ago: amidst the irrational ups and downs how do you nurture the rea imtus of economic growth confence, optism, "animal spirits." ♪ there's a boom d bust cycle and go reason to fear it ♪ bla low interest rates. , it's the animal spirits.

>> reporr: because, as a memorable newshour voi reads keynes memable words... >> "ifhe animal spirits are mmed and the spontaneous optimism falters, leavinus to dend on nothing but a maematical expectation, enterprise will fade andie." >> reporr: but, says roberts... >> you have to fe the possibility that the stimulu package which haincreased our deral deficit this year to mae $1.5 trillion is actually discraging confidence. >> ♪ your so-cled "stimulus" will make thingsven worse ♪t's just more of the same, more incentis perverse ♪ and that cred crunch ain't a liquidity trap ♪ just a broke banking syst, i'm done, that's wrap. ♪ >> we're doing a lot of ings that are bad public policy tt i as an economist believe e going to hurt our chances fo growth in the future. >> reporte but robert skidsky thinks keynes' theory of spendg does stimulate confidence, making h again the man of the hour, and trefore apy rhap-so-dizing herene last time. ♪ my general theory's made quitan impression ♪ transform the econ profession ♪ you know me, mosty, still have to take a bow ♪ sayt loud, say it proud,

we're l keynesians now! ♪ ( laughter ) >> lehrer: aga, the major developments othe day. the climate chan talks in denmark were deadlocd, with prident obama and other aders set to arrive in 48 hour the feral reserve kept a key short-te interest rate unchanged. it said the economy istarting to grow very slowly, andran the "newshr" is always online. hari sreenivasanin our newsroom, eviews what's there. hari? >> sreenivasan: ray arez has an update from the climate summit in copenhagen, cluding excerpts from his intervw with u. secretary general ban ki moon. the head oour patchwork nation project exples new data showing who benetted from the "cash for unkers" program and who did not. on our afghastan war page, a podcast featuresilitary experts and human rights watchers. they debate the wisdomf paying protection moneyo the taliban in order to guarantee e flow

of supplies. and on paul solman's "maki sense" site, there'sn excerpt of robt skidelskys biography of economist john maynar keynes. and from oureries "on the economic year ahead," look at conventional wisdoms that so economists nowronounce wrong. althat and more is on our web site: newshour.pbs.org. ff? >> brown: and that's the "newshour" for tonight i'm jeffrey brown. >> lehrer: and i'm jim lrer. 'll see you on-line and agai here tomorrow eving. thank you and good night. major nding for the pbs newshour is provided by: >> what the world neednow is energy. the energyo get the economy humming again. the engy to tackle challenges like climate chae. what is that energcame from an energy compa? everyday, chevron insts $62 miion in people, in ideas-- seekg, teaching, building. fueling growth around the world move us all ahead. this is the poweof human

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