CNBC Exclusive: CNBC Excerpts: Former Federal Reserve Chairman Ben Bernanke Speaks with CNBC’s “Squawk Box” Today

WHEN: Today, Monday, October 5th

WHERE: CNBC's "Squawk Box"

Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE interview with former Federal Reserve Chairman Ben Bernanke in his first TV interview since leaving office. Following are links to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000428942, http://video.cnbc.com/gallery/?video=3000428944, http://video.cnbc.com/gallery/?video=3000428947 and http://video.cnbc.com/gallery/?video=3000428952. Additional links are available here.

All references must be sourced to CNBC.

FULL TRANSCRIPT TO BE RELEASED LATER TODAY

BERNANKE ON MANDATE OF MONETARY POLICY

THE MANDATE OF MONETARY POLICY GIVEN TO THE FED BY CONGRESS IS MAXIMUM EMPLOYMENT AND STABLE PRICES. THAT'S WHAT MONETARY POLICY SHOULD BE AIMED AT. NOW, FINANCIAL STABILITY – THE FED WAS ACTUALLY CREATED IN 1913 PRECISELY FOR THE PURPOSE OF ENDING FINANCIAL PANICS AND PROMOTING FINANCIAL STABILITY. THAT IS ALSO – THAT IS THE THIRD OBJECTIVE I THINK. BUT THAT IS ONE THAT SHOULDN'T BE PURSUED, AT LEAST IN THE FIRST INSTANCE, BY MONETARY POLICY, BUT SHOULD BE PURSUED BY REGULATORY, SUPERVISORY, OTHER KINDS OF ACTIONS AND TO BE TOUGH ABOUT THAT. I THINK THAT'S OUR BEST CHANCE, REALLY.

BERNANKE ON TOUGH CALLS

IT'S NOT EVIDENT TO ME THAT POLICY IS TOO EASY BECAUSE AGAIN, INFLATION IS VERY LOW. WE ARE JUST NOW APPROACHING SORT OF A FULL EMPLOYMENT LEVEL OF OUTPUT. SO IT'S A TOUGH CALL, BUT AGAIN, THE FOLKS WHO WERE ARGUING A FEW YEARS AGO THAT FED WAS CREATING THIS RADICALLY EXPANSIONARY POLICY, THEY WERE PREDICTING HIGH INFLATION. WE HAVEN'T SEEN IT. SO THAT IS AN INDICATION THAT POLICY IS NOT RADICALLY EASY ANYWAY. AND WE WILL SEE, AND AGAIN, OBVIOUSLY THE FED IS LOOKING TO NORMALIZE OVER TIME AND THEY'RE GOING TO MAKE SOME TOUGH CALLS ABOUT HOW TO DO THAT.

BERNANKE ON CHINA

THE IMF HAS TALKED ABOUT SOME RISK IN EMERGING MARKETS AND THE EFFECTS WOULD BE FROM A WEAKER CHINA AFFECTING COMMODITY PRICES AND EXPORTS FROM EMERGING MARKETS PUTTING PRESSURE THEM, CAUSING THEIR CURRENCIES TO WEAKEN, CAUSING PRESSURE ON THEIR DOLLAR BORROWINGS, WHICH THEN BECOME MORE EXPENSIVE. SO THERE'S A BUNCH OF MECHANISMS THAT HAVE TO BE PAID ATTENTION TO FOR SURE. CHINA, HARD TO – YOU KNOW, WE DON'T HAVE A LOT OF INFORMATION ABOUT WHAT'S GOING ON INSIDE. I WOULDN'T, FOR EXAMPLE, GET PARTICULARLY WORRIED ABOUT THEIR STOCK MARKET PROBLEMS.

BERNANKE ON THE WORST MOMENT

THE WORST MOMENT, I THINK IT WON'T SHOCK YOU, WAS THE LEHMAN WEEKEND AND THE KNOWLEDGE THAT IT WAS GOING TO FAIL, AND THE FEAR AND UNCERTAINTY THAT WAS ASSOCIATED WITH THAT. AND THEN, THE NEXT COUPLE OF DAYS, AS WE HAD TO DEAL WITH AIG, TALK TO CONGRESS, VERY TOUGH.

STEVE LIESMAN: WHAT DOES THAT MEAN, THE WORST MOMENT FOR A FED CHAIR? DOES IT MEAN YOU WERE WORRIED THAT THE ECONOMY WAS GOING TO BLOW UP?

BERNANKE: YEAH. I WAS VERY WORRIED. I MEAN, MY WHOLE BACKGROUND AS AN ACADEMIC WAS STUDYING THE GREAT DEPRESSION, STUDYING FINANCIAL PANICS, THEIR EFFECTS ON THE ECONOMY. AND I SAW WE WERE HAVING THE GRANDDADDY OF ALL FINANCIAL PANICS ABOUT TO EXPLODE ON US AND I THOUGHT THE CONSEQUENCES WOULD BE TREMENDOUS.

BERNANKE ON THE LEHMAN DECISION

IF THE NEW YORK FED WHICH IS WHERE THE WORK WAS BEING DONE, I WAS IN WASHINGTON, NEW YORK FED IS WHERE THE WORK WAS BEING DONE THE STAFF AND LEADERSHIP AT THE NEW YORK FED WAS CONFERRING CLOSELY WITH OTHER FINANCIAL INSTITUTIONS BECAUSE THEY HAD THE EXPERTISE TO LOOK AT ALL OF THESE ASSETS AND THEY WERE ALL WORKING TOGETHER TO TRYING TO EVALUATE IT. IN THE END, IT WASN'T SOME KIND OF LEGAL DECISION TO SOLVE IT OR NOT SOLVE IT. THE QUESTION WAS SOMETHING WE COULD IDENTIFY HOW MUCH DO THEY HAVE IN THE WAY OF ASSETS THAT WE CAN LEND AGAINST THAT ARE COLLATERALIZABLE AND WOULD THAT BE ENOUGH TO STOP THE RUN AND THE JUDGEMENT NO IF WE LEND TO THEM ALL THAT WAS GOING TO HAPPEN

SORKIN: PEOPLE WILL ALWAYS SAY WAS IT JUDGMENT

BERNANKE: SO THE JUDGMENT WAS THE FOLLOWING DAY, IT LOOKED VERY LIKELY TO US IF WE LENT TO THEM AGAINST THE COLLATERAL THEY DID HAVE ALL THAT WOULD HAPPEN WOULD BE THAT THE OTHER CREDITORS WOULD PULL OUT AS FAST AS THEY COULD AND LEAVE THE GOVERNMENT WITH THIS SMOKING HULK.

BERNANKE ON WHAT CREATED THE FINANCIAL CRISIS

WE KNOW HOUSE PRICES WERE REALLY HIGH. WE KNEW SUB PRIME MORTGAGES WERE A PROBLEM. WHAT WE DIDNT SEE WAS THE EXTENT TO WHICH THE FINANCIAL SYSTEM WAS ENDANGERED AND DRIVEN INTO PANIC BY THAT PROBLEM. SUB PRIME MORTGAGES WERE A RELATIVELY SMALL ASSET CLASS. BUT WHAT HAPPENES WAS WAS THAT THEY CREATED DISTRUST BY INVESTORS IN ALL DIFFERENT KINDS OF SECURITIZED ASSETS AND CAUSED A PANIC THAT CAUSED MONEY TO BEING DRAWN OUT OF ALL DIFFERENT ASSETS. THAT PANIC IS WHAT REALLY CREATED THE CRISIS.

BERNANKE ON EXPLAINING THE CRISIS TO THE AMERICAN PUBLIC

I DID MY BEST TO MAKE MY CASE. THATS REALLY ALL I CAN DO. I THINK THE ONE THING THAT I -- AS I GO BACK AND THINK ABOUT WHAT -- YOU KNOW, WHAT WE DID DURING THE CRISIS. WE WERE SO ENGAGED IN TRYING TO DEAL WITH THE WEEKEND EMERGENCIES AND THE CHAOS IN THE MARKETS AND IN THE ECONOMY. I DON'T THINK WE DID AS MUCH AS WE COULD HAVE. WE DID A LOT, WE DIDNT DO AS MUCH AS WE COULD HAVE TO EXPLAIN TO THE PUBLIC WHAT WE WERE DOING AND WHY WE WERE DOING IT. I WENT ON "60 MINUTES" I DID A BUNCH OF THINGS TO TRY TO EXPLAIN WHAT WE WERE DOING. STILL OUT THERE WAS A LOT OF YOU, OH, 'THE FED IS HELPING WALL STREET, NOT HELPING US,' SO ON. AND I -- YOU KNOW, I THINK IF WE HAD DONE MORE OF THAT, MAYBE SOME OF THAT CRITICISM WOULD HAVE BEEN DIFFUSED.

BERNANKE ON LOW GROWTH

WELL, THE LOW GROWTH IS COMING NOT FROM THE RECESSION PER SE. WEVE COME BACK QUITE A BIT. UNEMPLOYMENTS DOWN TO 5% SO WEVE COME PRETTY CLOSE TO FULL EMPLOYMENT. THE SLOW GROWTH IS COMING FROM SLOW PRODUCTIVITY GROWTH. OUTPUT PER WORKER HAS NOT BEEN GROWING QUICKLY. WHY THATS HAPPENING IS NOT TOTALLY UNDERSTOOD. I DON'T THINK IT HAS MUCH TO DO WITH MONETARY POLICY. IT HAS TO DO WITH THE WAYS OF INNOVATION. WE SAW SLOWING IN PRODUCTIVITY GROWTH EVEN BEFORE THE CRISIS SO I THINK THAT'S PART OF IT. BUT CLEARLY ONE OF THE ISSUES IS THAT WE HAVE BEEN RELYING TOO MUCH ON THE FED. THE FED IS THE ONLY GAME IN TOWN IT HAS BEEN DOING MUCH OF THE POLICY HEAVY LIFTING FOR THE PAST FEW YEARS. WE NEED TO SEE MORE ACTION FROM OTHER POLICY MAKERS.

BERNANKE ON USA TODAY OP-ED HEADLINE

NOT ONLY DOES THE OP-ED WRITER NOT HAVE A CHANCE TO WRITE THE HEADLINE, BUT I COULDN'T EVEN FIND OUT WHAT THE HEADLINE WAS UNTIL IT APPEARED IN THE PAPER.

JOE KERNEN: WHAT WAS YOUR RESPONSE WHEN YOU SAW IT?

BERNANKE: MY RESPONSE WAS THIS IS NOT WHAT I WROTE ABOUT. WHAT I WROTE ABOUT WAS THAT THE FED HAS DONE WHAT IT CAN, THINGS ARE NOT GREAT, BUT THE FED CAN'T BE EXPECTED TO SOLVE ALL PROBLEMS. IT IS TIME FOR OTHER POLICY MAKERS TO JOIN IN.

KERNEN: BUT I'D HATE TO BE QUOTED ON THAT IN THE FUTURE AS YOU SAYING THAT BECAUSE YOU REMEMBER THE COVER OF THE MAGAZINE, THE COMMITTEE THAT SAVED THE WORLD WAS RUBIN, GREENSPAN.

BERNANKE: WHAT CAN I DO ABOUT IT? BUT, AGAIN –

STEVE LIESMAN: WRITE A LETTER TO THE EDITOR IS WHAT YOU CAN DO.

KERNEN: AND YOU COULD GO ON RECORD HERE.

BERNANKE: IT WASN'T MY HEADLINE, IT WASN'T MY INTENT.

BERNANKE ON MONETARY POLICY BEING A LAST RESORT

IT SHOULD BE A LAST RESORT BECAUSE YOU HAVE TO RAISE RATES AN AWFUL LOT, FOR EXAMPLE, TO HAVE THE KINDS OF EFFECTS JOE IS CONCERNED ABOUT AND WE DON'T EVEN KNOW VERY MUCH ABOUT WHAT THE LINKAGES ARE. ARGUABLY, IF THE ECONOMY IS REALLY WEAK BECAUSE YOU RAISED RATES TOO SOON, THAT COULD CAUSE FINANCIAL PROBLEMS AS WELL. SO THE RIGHT THING TO DO FIRST IS DO EVERYTHING YOU CAN ON THE REGULATORY, SUPERVISORY, MACROPRUDENTIAL FRONT. AND THEN, IF NOTHING ELSE WORKS, THEN YOU CAN THINK ABOUT MONETARY POLICY. BUT IT'S REALLY SELF-DEFEATING TO USE THE WRONG MONETARY POLICY.

BERNANKE ON INFLATION

I WOULD JUST POINT TO THE INFLATION RATE. YOU KNOW, EVEN IF THE FED HAD NO INTEREST WHATSOEVER IN GROWTH AND EMPLOYMENT, WHICH OF COURSE IT DOES, BUT IT HAS A 2% INFLATION TARGET. IT NEEDS TO GET INFLATION UP TO THAT TARGET AND, YOU KNOW, EASY MONEY IS JUSTIFIED BY THE NEED TO GET INFLATION UP TO THE TARGET.

BERNANKE ON CRISES

SOME PEOPLE DON'T APPRECIATE ENTIRELY THAT – AND THIS IS SOMETHING I TRY TO EXPLAIN IN THE BOOK – THAT THIS CRISIS WAS VERY SIMILAR IN STRUCTURE AND IN FORM TO CRISES THAT TOOK PLACE 150 YEARS AGO. AND WE KNOW FROM THERE HOW CENTRAL BANKS RESPOND TO THOSE.

JOE KERNEN: YOU TOLD ME NOT TO GO BACK TO 1950s AND 60s. NOW YOU'RE GOING BACK 150.

STEVE LIESMAN: 1870.

BERNANKE: ALRIGHT, SO I WON'T GO TO 19THCENTURY. 1907 WAS A GREAT ONE. JPMORGAN INTERVENED AS A PRIVATE CITIZEN TO STOP A PANIC, THAT WHAT LED THE CREATION OF THE FED. THE FEDS JOB IS TO INTERVENE AND STOP PANICS, BUT YOU ALSO HAVE TO HAVE STRONG REGULATIONS SO THAT PANICS ARE NOT COMMON OCCURRENCES.

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