closer to a moment when the financial system stopped functioning, where banks failed, where unemployment went even higher than it is now, where we had the kind of shattered lives and shattered confidence in capitalism that marked the great depression. we came closer to that than we have at any moment in 70 years. but today, we've pulled back from that abyss. the economy isn't healthy, but it's better. the economy is out of intensive care. and what i write about in this book is the role that the fed, and particularly, been curb played if bringing us to this point, where we can talk about this with a little bit of past tense. now, i have always thought that the fed was the most undercovered institution in washington, relative to its power. i mean, my newspaper and others send literally hundreds of people to cover political conventions that are, if you admit it, pretty much like
>> it is after all about the fed, but i think it is a pretty good story and an important one. i'm really glad to be here at our own little national treasure, politics and prose, with so many friend. my wife naomi and my kids and my sister and her husband and other people who sort of supported me through the agony of trying to write a book that turned out to be a lot more -- a lot bigger payoff than i thought i was telling at the beginning. the fed is not a one man show. but to a large extent, the book in the story of what happened is the story of ben bernanke. bandshell overbake a nice jewish boy from dylan, south carolina. who grew up in a nice town where
his father and his uncle ran the local drugstore. he was known as a really smart kid in town. his sat scores were public information because they were so high. and he was very good at spelling, good enough to make the national spelling bee at the mayflower hotel here in washington where he bombed out on the word edelweiss. [laughter] >> it turned out there was no movie theater in dillon, south carolina, so he hadn't seen the sound of music. [laughter] >> he was probably going to end up at the university of south carolina or the university of north carolina, where his parents had gone. but for a uniquely american story, there was a guy in dillon, south carolina, six years older than ben bernanke, a black eye named ken manning. can mannings family had warm feelings toward the bernanke family because bernanke's drugstore gave credit to black people. and not all the other people and
the vendors in that town would. in manning threw another american miracle found himself going from a segregated high school in doland south carolina to harvard. he was taken -- since you asked. [laughter] >> he was recruited into a program run by the national presbyterian church. i think it was, which took out the black kids in the south and sent them to private high schools to finish their high school. he didn't want to go to a private school, so he went to north haven connecticut where he lived with a family of pediatricians, a jewish pediatrician which becomes relevant and what do north haven high school and they went to harvard. he came and told ben bernanke's parents that his son was too good to go to unc, or usc. despite what people in the south carolina think in north carolina. and convinced them to let him go to harvard. ben bernanke's parents were somewhat reluctant to let them
go. and one thing they told caymanian who later became a professor of the history of science at mit was that they were worried that he would lose his jewish identity by going to harvard. ken manning, this black guy assured them that actually there are in boston also. >> and in fact, ken manning because he had become friendly with this family of a jewish pediatrician in north haven connecticut whose mother lived in brookline, he made sure that ben bernanke went to rosh hashanah services is first year in hard and took him to brookline for rosh hashanah dinner. bernanke told his parents have always been upset that can mannings down more meaning and judaism than he did. [laughter] >> but it turned out all right for both of them. bernanke goes to harvard. he gets a phd in economics, mit. is a shy, introverted guy. a fan of baseball statistics which seems to be a habit of central bankers. alan greenspan has the same
fascination. he becomes the economic equivalent of a paleontologist. he spent his academic career trying to figure out how was it that otherwise smart people at the federal reserve in the '20s and 30s did such a lousy job and let us to the great depression. and it was a fascinating intellectual study, with, he thought, not much relevance today. you fast-forward a bit and february 2006, or 96 seats out of greenspan at the federal reserve. when he is sworn in, george bush comes to the fed for the swearing in, and describes our greenspan quite accurately as a rockstar, which he was at the time. sort of amazing how things, how quickly things can change. [laughter] >> ben bernanke comes to the fed convinced that his mission is to follow alan greenspan's policies, but to have a somewhat different style. he wants to be the un- greenspan. he thinks greenspan has created
a federal reserve is going to much like the vatican, everybody else is kind of irrelevant. he promises to try to elevate the institution the other mems of the policy committee and to de- emphasize the role of the individual of the chairman as assemble for the fed. and for the first year that's about what he did. and then things start to get pretty different than he anticipated. i think and i describe in the book that bernanke, and he admits this, was off the mark. both he and hank policy understood we had a housing problem. but they thought it was in their word contained. they didn't think that was a cancer that was going to endanger the entire financial system and the whole u.s. economy. and it took him a while to figure out his diagnosis was wrong. in january 2008, he catches a. he cuts interest rates dramatically by one and have put that there is this remarkable bear stearns episode where we have an institution that is not
supervised by the federal reserve. one for which they have not been responsible. it's about to go down. bernanke decides that it has to be saved for the good of the system. and there is no one else in the country who can save it, except the federal reserve. the president of the united states can push a button and launch a missile against north korea or iraq or iran, or mexico if he chose. but he doesn't have the money to fight a financial panic. only the federal reserve does, and so they use that power in march 2008. and they say they're bear stearns from bankruptcy. they settle into jpmorgan chase, and they buy $30 billion worth of stuff off the bear stearns balance sheet that jpmorgan chase didn't want. and for the next six months, things sort of oblong, and there some problem. fannie mae and freddie mac turn out to be now solvent and have to be taken over effectively by the state. there are a number of ways in
which the chairman of the federal reserve and other people at the fed seat to keep lending going in the economy, understanding that lending interest in the cercla choicest of the economy. and if it isn't functioning economy can't function. but it is only in the fall of 2008 that we can in september when lehman brothers, merrill lynch, and aig all get in trouble at the same weekend, that the drama really reaches its crescendo. and as most of you know and i'm happy to talk about in question, the fed did not say the lehman brothers. it went under. they knew it would have some ripple effects. it turned out to be a sin on the. they didn't have to save merrill lynch because they married into bank of america. much to bank of america's later regret. and in the wake of that and in the wake of a run on the money market funds that was just as bad and severe as anything we saw banquets in the '30s, they decide to save aig, which has become a giant money sink, again
with your money. but at that point having let or maybe been forced to let lehman brothers go under, bernanke adopts a new mantra. the mantra is whatever it takes. and from that point on, he sees himself as the only thing that stands between us and the calamity of the depression. they lend tons of money to aig, $85 billion in the first truck. he helped convince to get $700 billion to prop up the banking system. figured he money market funds. they guarantee the debt of almost every financial institution in the country. they launched the whatever it takes campaign, that for the benefit of hindsight, the little hindsight we have, i think you have to judge it a success. "the wall street journal" a few weeks ago pulled a bunch of wall street economies and ask them to great bernanke. i've really liked the comment that one of them made to us. he said bernanke's record was outstanding with flaws.
well you know, when i go, i like for someone to say that my record was outstanding with flaws. so i'm happy to talk about why they did -- didn't save layman, didn't save aig, seems to be a subject of endless fascination of my e-mail. but i thought i would ask a couple of questions which have come up. one is if this guy is so smart, why didn't he see this coming? i mean, after all, he wasn't at princeton when some of the stuff was going on. he came to washington. he was a memo the federal reserve board under alan greenspan. he worked a while for george bush in the white house as chairman of the council of economic advisers. and i think you really are two very simple answers. one is simply a failure of imagination. a lot of people have likened this to 9/11, and it is a metaphor that makes me uncomfortable because a lot of people died in 9/11 and this hasn't been that kind of event. there were people who said maybe someday some terrorist will seize an airplane, but really
the people who defended our country did not think it possible that someone could commandeered three or four airplanes and fly them into the pentagon and the world trade center. this was a similar thing. it simply didn't occur to the people who were responsible for managing the financial system that so much of the financial system could be built on a single premise, that turned out to be wrong. that housing prices across the united states will not fall everywhere. we might have the balls in one community or another but they wouldn't fall everywhere. and it turned out that we had a financial system that was a house of cards built on this very flimsy foundation. because houses were the collateral for mortgages that were turned into securities that were turned into more securities that were turned into more security, and slice and dice in ways into people that were buying a song and didn't understand what you were. but if housing prices hadn't fall, it would have been so bad here but they did fall and in huge losses to be taken. i think that's the first thing.
the second reason this crisis is so bad, why we have had him and we can now say tentatively the worst recession since the great depression itself, for all the work that's been done in economics over the last 70 years since the great depression to try to prevent something, and even though we had $700 billion of taxpayer money, a somewhat heroic federal reserve, interest rates cut to zero, all sorts of unusual and actions taken, even with that, we ended up with the worst recession since the great depression and sell. how could that be? i think the answer there is an extra in a number of things people and institutions fail. the list of call for terri's really often want. and i'm not sympathetic to the people who say look, if only this law had been changed, glass-steagall only if greenspan had done this it would have happened. the lesson here is that almost every check on the system failed. you can play the wealth paid executive and director of the bank to gamble their own
companies and didn't know what they were doing. risk management committees that were not managing risk that they didn't even understand the risk they were taking. credit rating agency that stamped aaa on paper that wasn't aaa, but then people bought it knowing it was in aaa but pretended it was to play and was surprised when the money didn't get paid back. there were people who made loans, mortgages, to people who they knew, couldn't pay it back. there were people who took loans that they knew couldn't pay it back. they were just hoping that home prices will go up and they would continually refinance. there were people who make that visa every part of this process. and there were people who had a lot of money in the game and ended up -- and relied on to know what they're doing to didn't. and i think you can blame the politicians who let that happen, who bought into this notion that the markets always know what they're doing and the press has to take its share of responsibility. two, there were stories about things not being right but they were not well done enough or would have had more effect. and yes, i think you have to
blame the fed itself and alan greenspan. because after all, it was their job to maintain financial stability and to head this off. so i think that when you look at greenspan with the benefit of a small amount of hindsight we had out you can argue about whether he kept interest rates too low, toulon with the benefit of hindsight. important caveat. i think he probably did, and that contributed to an orgy of speculation and borrowing. i think you'd argue that he didn't use the regular muscle that he had to try to prevent some of the subprime abuses. i think the most interesting thing is somewhat less specific. it has to do with the mindset. the minds that was the one that if you have a lot of sophisticated investors who have their own money in the game, they will police the poker table better than regulators and bureaucrats can ever do. and that was, what greenspan himself in his testimony before henry waxman's committee, why if you wanted a confession you choose to do before henry waxman
is beyond me. [laughter] >> but that's what greenspan said he got wrong that it turns out they were not policing the table. the table was overturned and it nearly took all of us with it. so we have situation where i think we've learned a lot. i think we've learned everythi everything, this is one of those episodes that will be re-examined for the next 20 or 30 years before we really have clearly. but i think we can draw some lessons about what happens in a crisis and we have a system where, for all its flaws, a bunch of people can come together and do something. sometimes bending the rules, sometimes stretching the law. not terribly democratic but they didn't have to have an active congress in order to the financial system from going under. and that turns out to be something that is such a. if we had waited for congress to decide that this thing really need to be -- water finally had to go on the fire, the house would have burned down.
let me just conclude with quickly asking where he are right now. i think there are three parts to that i want to talk about it on about it on good to and real quick. where are we in the economy. as i said we're out of intensive care. things are getting better but they are not good and they're not going to be good for a long time. the history of recessions that are caused by financial crises are that the recovery is very painful and slow, and despite the recent euphoria i see no reason this one will be different. where are we on ben bernanke and his reappointment? his term is up on january 2010, and my bet is that the president had to make a decision today he would reappointing them. changing drivers when the road is so bumpy and the road so kirby is risky. putting his own person into the fed would inevitably spark speculation and concern among our people who lend us money from the rest of the world, the people on whom we are now dependent, that obama was putting in his own person in order that easy money, more inflation, a weaker dollar.
i don't think the president appointee would likely do that, but people would think that he was and that would cost them something. finally, what all these decisions are made, it's all compared to whom? i think the president probably concludes that despite some pretty attractive options on his own staff, larry summers, that for the sake of the economy and stability that bernanke to reappointment would probably be the safest course but if that's true why does he does come out and announce it tomorrow? i think the president wants some ushers. he wants to make sure the economy -- before he makes it his duty was to make sure the economy really is appalling apart. if the economy falls apart in the next couple of months, the political pressure to replace bush's appointee to the bed with someone else will be very strong. and then there's how have we learned up that we don't produce again? we went through a financial catastrophe. we almost had another great depression. congress still hasn't done the things that are needed to fix
it. the president, the treasury secretary and the fed chairmen have no more power today to deal with a teetering financial institution that's not organized for the banks then they did the day lehman went down. that concerns me that and neither seems to be this atmosphere on wall street that, well, that's over, we can go back to business the way we did before. that's also fighting. while i'm comforted that we are not on the abyss of a great depression, while i am pleased the economy seems to be getting better than worse, i don't think we can be complacent. we can't expect the federal reserve to again rescue us from ourselves. we were warned that we needed to fix things and it's up to us as a society to fix those things so that we don't -- the market in belgrade the economy off the side of the clip again. thank you very much. [applause] >> there are a lot of people here. people should use the mics. i think to be 30 people, we
should kind of remember that questions in with a question or can try to keep them short. [laughter] the mac i'm happy to hear the speeches afterwards, but let's not subject everybody else. spirit can ask you about your stance of what bernanke and the fed to think about how this will unwind over the next five or 10 years? because the classic response is inflation. which whether they want it or don't want to, given the amount of damage from the fed and the unbelievable stimulus from the congress, may well lead us to that, at which point we have a response to pick up which point we keep going back and forth. we have the baby boomers retiring and that will crush government retirement. how did he get back to a goldilocks economy without, i mean, whether it would take 10 years to do that? >> i think that the fed believes that make you point out exactly the risk. there's two risks here.
one is they panic and a tight too soon and we get 1937 again where we plunge back into depression. so i think they're going to be very cautious about pulling back the credit too soon and tightening monetary policy to suit arguing that fiscal statements used to be withdrawn. on the other hand you're absolutely right to give you way too long you get inflation. the fed has created enough money to get inflation. they clearly have the technical capability to take the credit out of the system to use their tools of the way they handle bank reserves to raise interest rates and to get the credit out before it creates inflation. i think the problem you identify is really one of political will. they will have to type before it's cleared all of us and the economy is healthy. they will be with a lot of political resistance when they do the. look at the criticism there getting out and they recently have it wide open. there is that risk. there are people who say that's inevitable, that every country
agosta this has huge deficit and logic monetary statement against inflation. i think they've identified the problem and will just have to see whether they have the guts to turn the spigot in time to stop. but that's a risk. >> thursday? i'm concerned about, about two years ago the profits in corporate america are over 40% gone into the financial sector. of course it's going to go down now, but are you concerned about financial as agent of the u.s. economy, such a large part of activity and the flow of money being involved in financial as asian. and if we continue this way, it's going to do what is already done, you know, wrecked economy. >> i don't it's going to commute that would. i think we had a bubble in finance. when you have sony people coming out of engineering school going
to work on the trading desk or the computer desk at goldman sachs and j.p. morgan chase, morgan stanley and all like that, and it becomes the preferred option for people getting degrees in engineering, you know that things have gotten a little out of hand. i think one of the silver linings is more of those people who do have something useful. [laughter] >> so i think that proper is taken care of itself. i think it's important though, we don't want to on financial eyes of the u.s. economy. finance is an essential part of a modern economy, the reason we can all good fixed-rate mortgages, life insurance, how it ends that people can finance the business of. so i think we have to be careful not to demonize the entire financial system. it got to beat. it got too big as a share of economy. it is now contracting. maybe someday it'll go up again but i don't think it is a near-term problem.
>> reading your book, the image in my mind was not a thriller, that of a screenplay of a 1930s horror show. [laughter] >> with aig and citicorp leading the role of bela lugosi and oris karloff. >> are you offering a movie deal here? [laughter] >> if only i could. i mean, those were frightening times. there was no place to hide. >> right. >> but the question i want to ask is looking in the future, i think they have established a committee to investigate the financial crisis. suppose you would lead counsel on the committee, or the advisor to who would be the two or three people you would like to invite before the committee? what questions would you like to ask them? >> there is a commission, and you know, the hope is that it will be something like this famous commission that followed the depression.
although i'm not convinced it's organized. will see if that happens. i think it would be -- i think there are two sets of people i would like to hear from. one is i actually think alan greenspan's reflecting on what he learned from this is a fascinating conversation. and when he's not defending what he did, but thinking about how the world turned out to be somewhat different and more important, how he thinks about to be constructed in the future, it's an interesting conversation. some people may say it's like going to a malpractice trial and hearing the surgeon talk, but that's interesting sometimes. and the second thing is i think we have a lot to learn about what were these guys thinking on wall street? you know, the people who were running merrill lynch, goldman sachs, j.p. morgan chase, some of them saw it coming and some of them didn't. but what were they thinking and how did they account for the fact that they have such big
enterprises with so many people, and so much skill and so made computers, and so much talk about how they were managing risk if they got it so wrong. and i'd like to explain. so in your my mind, what did you get? i guess that's it. i can't wait to see this commission go to work and i hope their success because there's a lot of important questions that have to be answered if we're going to understand how to avoid this. >> i listen to you all the time. my question is, the point of capital market is to allocate money to the highest and most viable use. how is it such a huge amount of money went into housing which is consumption? for people borrowed money on their houses for consumption, instead of eggs invested in activity that would allow people to get jobs?
>> the u.s. government for decades, going back to hoover and roosevelt, write to clinton and george bush, has always called for every american to own a house. i don't think every american should own a house. i think we made sort of a collective mistake in telling people that to be a real american, a member of the middle-class, you have to own a house. some people shouldn't own a house. some people don't have enough income to pay a mortgage and to maintain a house. so that was one part. one part is simply a myth that we made people think that he had to own house. the second is go to the question about trade for. it became a money machine. there were endless amounts of money could be made by turning mortgages into securities. and when all the good mortgages were made, the people who wanted to own the securities were not satisfied so they went to the people who are making more so than say you have to make more. they kept pushing the frontier further and further. to one of the reforms that they propose it seems common sense is
if you're going to make a mortgage and turn it into a security, you should have to keep a little piece of the laws, other things that you get hurt. otherwise you have no incentive to making angelo. >> isn't there a problem with capital markets that that was -- >> i don't think the problem was with capital markets that the problem was we tilted the capital market. it wasn't the capital market that created fannie mae and freddie mac. that was us. it wasn't the capital market says that everybody in america should own a house. that was the president of the united states. >> you were asking about what the ceos of the banking, larger banks were think that i'm thinking they were thinking it's my money. it seems to me that the obama administration has not gotten very much credit for pulling our bacon out of the fire. and i was curious about what
your take on that might be. >> your first question, unfortunately, too many of them didn't think it was their motive that they thought their play with other peoples money. if they had been play with their money, it might've been a little more careful. it's not an accident that this whole episode comes when the partnerships are turned into corporations, law firms are turned into profit maximizing things that we saw this earlier in the 2000s during a corporate scandal when all becomes about, if it's all about making money in one of these agencies or law firms are accounting firms, if you don't take this business in the next guy will get the business so you might as will underwrite this thing that's not a good. look, i think the obama administration deserves a lot of credit. i think we're on the path to getting things better. i think the -- whatever you think of george bush's leadership in this thing, and in the book i write about how largely irrelevant he was in the
process, he did let bernanke and pulse and run the show and he did stay behind them when they went to get $700 billion. that was probably needed to save the economy. but i think a lot has happened since inauguration day that is positive. americans are not convinced that this team is worked, but it seems to be if there ever was a time when you want a fiscal status, this was it. secondly, despite all the criticism that got this bizarre stress testing needed, which was a metaphor that they're going to put the bags on the treadmill and some of them would pass out or something. [laughter] >> and it created months of uncertainty. in the end, it gave people confidence that the banks have come clean with her stuffed. a number of banks, surprising number of banks have been able to raise capital privately. i think those are two things he obama in their station did that are important. stimulus and the stress test that the next test is can they get something through congress we don't have to go through this again. you've got to get through before
people forget the crisis. >> thank you for the incredibly clear framework you've provided. and i did wonder what you think congress should do or what you think we should do, what you propose in this current situation and especially looking at some other proposals that have come up like consumer financial protection agency, what we do about shadow markets and the federal reserve and self. >> i think we know a couple of things that are problems that have to be addressed if there is not anyone way to address them. you mentioned a couple. we definitely need a way for the government to take over a non-bank financial institution so the only choice is a bailout or bankrupt. the government can do that with banks. it can't do that with insurance covering or brokerage house or investment banks if there are any left out there, and that's important. secondly, we had a fit consumer regulation. i don't care much whether they make the existing agencies better or they make a new agency, but i think it's widely agreed that we need a system where people can't be sold,
products that are so clearly not in their interest and people can make so much money off of it that they keep selling them. i think that we had -- you mentioned the shadow baking system. we now know that regulators spent too much time looking at things that are conventionally defined as the banks. citibank, while cobia, not those things did get us into a lot of trouble, but bear stearns, bear stearns, aig, these are outside the banking system. the money market funds. they pose the same threat that conventional banks did. so that's why the president is proposed and most of the people who don't agree with the president on the specifics that you need a broader thing. the financial system has to be regular. we understand why that is. both of us to. and we can't set up a system where people go around and say i'm going to shop for a regular and constantly put the regular against a. suppressant has chosen not to smoosh all this together into one agency unhittable if you try to make it less attractive to banks to shop around.
and finally, banks and have more capital than they had coming in. capital is cushioned that the shock of door where you take your losses so you don't have to go by grubbed or on bid me to the government. we have to find a way to make sure the banks have more capital, they have better shock absorbers. >> my question is a little bit broader. in a sense it's more cultural and social. why are we as a culture so ready to give billions of dollars, money, to people who simply pass paper around? and yet, they are willing to take it on the upside and the taxpayer -- is like institutionalized socialism if you don't mind my saying that. i think what we are expecting is not capitalism. is economic tyranny. because of these people's bad
decisions, millions of americans lost their homes, lost their jobs, lost their health to pick these guys have the audacity to be taking billions of dollars in more bonuses this year. >> so there's clearly a problem where they get the upside and we get the downside. nobody out to be able to support a system like that. and we had that. let me ask a question sleigh giveaway. why did these guys like bernanke and pulse into this? why did they bail out the financial system? was it because hank paulson any of his buddies on wall street are you take your guys, or do they have some broader social purpose? i actually think, although it's not mr. potter, at least not in this zip code, that he did the right thing because the alternative was worse. when bernanke one of 60 minutes he sat on a park bench on main street where his father's store had been.
if it had been called wall street he would have been dead. [laughter] >> and he said i didn't set out to save wall street. i set out to save main street in order to save mainstreamed i had to save wall street that when you go out the financial system, that people make their money and don't financial institutions get bailed out. and that just happen. the question is, what, are we charging him enough money for this great service we did. we will see when it is in. , pay back their money. it's been a pretty healthy return for the taxpayer. the other thing are going to enough so that we are not in this situation again for your somehow? that really would be criminal. when what we know now, we cannot just a bump along with the status quo and hope that we can avoid this because they've learned their lesson because they're so evidence that people learned their lessons. >> we have time for three, four more spectacular opportunity to talk to i agree with you on a couple of very key points. but perhaps disagree on which
ones are the true underlying. true underlying cause your. i agree that there's a cultural issue that is part of his. i think the underlying almost parmer culture of wall street is really what was to blame your. i have some first and expect having originated some of these mortgages and took out six or seven. [inaudible] [laughter] >> it's okay. >> the underlying point was and is markopolos, it was very much a traditional game of poker. there was a bluff and it was passed around and there was a patsy. the problem is the path that was built with his glove was unsustainable. and i feel sort of let down and disappointed by the current response, i feel nothing has been done to actually get at this underlying cause. as you have said, wall street is taking this as a license to conduct business, business as
always. it's kind of interesting see what the outcome of this commission will be. thus far there've been no criminal charges against anyone who clearly and by any definition committed securities fraud. one got a slap on the wrist. we really not looking to clean this up. i feel almost like you're very much correct in bernanke has done a brilliant job of managing this crisis and moving us towards a short-term recovery. he is doing so by taking the can down the road. the underlying policy of asset inflation continues to do you a green? >> i agree with about half of what you said. i do think the culture on wasser was to blame and i don't think we've done enough to fix it. but i don't -- i don't have a problem pausing and saying wow, these guys did a great job pulling our chestnuts out of the fire. that's really the only -- that's
the point of my book. i'm not trying to say that i have the solution for everythi everything. i think i've made quite clear that i'm concerned we're not doing enough. i do think -- i don't think what going to do without wall street. i don't think abolishing wall street is the right answer, but i do think if we allow people to take risks, either knowingly or unknowingly, that they get the upside and we get the downside. if we let that happen, then shame on us. >> over the years, the security industry has developed more and more sophisticated product. over those years from cmo's and so forth, it's made markets more efficient. the situation in this case was that they came up with these tranches on the basis of risk, and there were credit default swaps that were supposed to insure against this. what i'd like to know is what
happened to the proceeds from the credit default swaps? were the obligations and nullified because we put off bankruptcies? >> know, what he's talking about, credit default swaps are insurance that somebody buys and someone else is going to pay akamai delivered. and it's something that has involved over the last couple of years. in the beginning, it seemed like a good idea because it would allow banks and others to make more loans than they might otherwise have made because they could lay off the risk or default on some investors want to hold that risk. but like in a lot of markets, it became a way to speculate in and of itself. people were placing bets on companies left and right. this was a problem with aig. aig had sold so much of this insurance that the government decided that if they didn't save aig that people would get -- it
would upset the system because so many people have relied on those injured. most other credit default swaps of people have been paid off and there's a process for selling them. so you get what ever your loss as you can come you get paid on. so some extent credit default swaps have helped protect some of the people on this thing. the problem is the house of cards on which they were built was bigger than some of -- the people who are writing the insurance could afford to make the claims. that's basically the short and to. people so injured to didn't have enough money to make claims, if they couldn't pay the claims the world to come to an end. so you and i are making good on those claims. >> last question. >> you said earlier that the great misconception that sort of led to this whole financial crisis was the false assumption that housing crisis would never go down. do you think today there is a similar misconception amongst everyone in this room, american general, of our inability --
sorry, our ability to keep on borrowing money in order to deficit spend, run debts, etc.? >> i think it's a good point. we had a problem before this crisis that we have basically promised more in benefits than our current tax system can afford. and we have gone for a number of years running our economy on the kindness of strangers, many of them chinese who are saving their money and lending it to us so that we can buy their products. and it didn't look sustainable, but it went on for quite a while. and now we have made the problem worse. we have barred all that much more money. and i think one of the dilemmas we have now is that we don't want to rush to solve the deficit problem, because it would rush to do it it could be 1937 and we could put herself back into a depression. but we also can't avoid it much longer. after all, we used to talk about the imminent retirement of the baby boom.
it's starting a. we haven't dealt with medicare and we haven't dealt with social security. so i do think that there is a bit of complacency among people in general that because we been able to borrow unlimited amounts of money at very low interest rates for the past couple of months, that we can continue to do this industry to. i think the president is very eloquent on this when he chooses to be. so far he hasn't found a way way of doing this. thank you very much. [applause] >> author and cultural about a year into the obama administration. grade is. >> i would say worse than carter on foreign policy, and worse
than clinton on domestic policy. so other than that i think it's a great job. >> in what way worse than president carter? >> i now understand a look at my father's face when carter was president. everything obama does is the wrong thing to do. you don't know what's going to happen, but he is pouring gasoline all over the world. russia, iran, and iraq, in afghanistan. in china, and where the match will be lit we don't know where it's going to be, but you can count on obama to do the wrong thing here and every president is basically living off the foreign policy of his predecessor for the first year. right now we're still living off bush the way bush was living off of clinton's foreign policy, the first year. we're about to move into the obama foreign policy. i think if there's going to be a disaster and i don't know where or how or what it will be, but i know obama will do the wrong
thing. >> congress? >> well, congress -- is there something below and ask? the only good thing is they are not really getting things done. date passed that crazy cap-and-trade bill. it went over to the senate that this is just ann coulter speaking that even the senate look at that and said this is insane. so that may not get past that and i like it not been passed. but i mean, and the bill of a recession, in the middle of a housing bust, they have this massive energy taxes on homeowners, many factors that you would have to have an epa inspector of some sort come to your house to make sure it is green before you sell it. this is all in the cap-and-trade bill. this is why when it went to the senate, which is oddly the more sensible body right now, they said i think we wait. the health care bill i think is a disaster. they have a majority in the house and senate and they have the oval office.
so the odds are it will be passed, but i had a nickel bet running on it not being passed that because i don't think americans want a. their premiums are going to go up. their taxes are going to go up. and most importantly perhaps the chinese don't want it. and they are keeping this country afloat. they're the only ones paying for our deficit. so they don't really like the spending under this health care bill. that's why the obama administration keeps talking about bending the cost or. because they have to say that the chinese. the chinese are going to stop buying our treasury if we don't get the spending under control. they don't want this big spending program unless, as you keep hearing from the obama white house, don't work him we're going to bend the cost or. okay, bending the cost curve is hell trashing. >> your most recent book came out and 2008 --
>> in paperback. >> already in paperback. >> there is no update but it's a lot cheaper. >> was your next book? >> that's top secret. that will probably include my award winning below frisbie. so stay tuned. >> ann coulter. >> pulitzer prize-winning officer has a new book out, "a fiery peace in a cold war: bernard schriever and the ultimate weapon." what is an icbm. >> it is a rocket when a hydrogen bomb in its warhead. it is fired up into space and traveled through space in 16000 miles an hour to six at 7000 miles and then it would come down on its target. it crosses -- there's no way to stop it. they've never been used here can all point of view and i would probably be not having this conversation if it wasn't for these people.
they build his weapon not to make war with, but we say over and over again this is the first weapon of humankind which is being billed not to use in war but to deter war. i want to start with an icbm was because i think that tells the story of bernard schriever and the scientist who helped create a. do you want to tell me a little bit about bernard schriever? >> he was sick chisel when he came here from germany during world war i. his mother brought him here. too much before we declared war on germany. he grew up down in texas, got into the army air corps and was a protége of general arnold who was the founder of the u.s. air force during world war ii. then went to work on scientific -- brings science into the air force. he utilizes science and saw this weapon would guarantee the peace, because if we had it, we could deter the russians from
doing anything that would trigger a nuclear war. and then we ended up with -- he ended up creating a nuclear stalemate. in other words, neither side could get a surprise attack on the other because they would destroy themselves in the same process. >> in the book you talk about the resistance that mr. schreiber and his team had putting this together can you talk about that resistant? >> this is a book not about hardware but about people. there were some tremendous resistance from curtis lemay, who was the head of the strategic air command, the great bomb earlier from world war ii. who went over the edge in his later years, and he became the model for the general in doctor strangelove, jack the ripper was the general's name.
and schreiber and the people who work within that tremendous resistant that they had to overcome it. and they did. they got the eisenhower and eisenhower understood what they were trying to deal and gave them carte blanche just in time. he signed off on september 13 and had his heart attack 10 days later. >> how long have you been researching this book? >> i worked on the book for 14 years altogether, but didn't intend to jeers. i did 50 interviews with tranninety i interviewed another 120 people. everybody was alive who worked with him chasing the grim reaper because these were all older men and i had to catch them before the grim reaper did. they all cooperated with the. schriever told me everyone he worked with heat set to work with this meant that he gave me all his papers and his diaries. all of which were terribly viable, but this is not -- this book was not written as an academic history. is written as a past case
narrative and. i believe regrading history for the reader. brings the reader into history. and that's what i do here. >> fifteen years of research as a longtime. did your views on the cold war changing any point during that time? >> i realize, yes, because we all think of the cold war as one long ice age. and i discovered through writing this book that it was not. that at the beginning it was overlooked which is one of the reasons i wanted to write this book that in the beginning of the cold war, it was a very warm confrontation between the soviet union and the united states, with both sides jockeying for power. and by the site had made a misstep at that time, we would have had nuclear war and the end of the northern hemisphere. these weapons don't just destroy cities. they create ecological, they block out the suns, you can nuclear winter. you destroy the whole northern
hemisphere in a war between the two sides. and schriever and company prevented that from happening. >> arthur bernard schriever's in the's in the military right now? >> i would also. i don't know they are but i would hope they are. i think the air force -- this man was very famous in air force and he became the father of the modern high-tech the logical air force. this is not a book, not about technology. it's about people. and when he died, there are 10, four-star generals in the u.s. air force. nine of them marched behind his coffin. the chief of staff at the time said we're not going to bury him as a four-star general. we are going to bury him with the chief of staff it was quite a moving occasion. >> the author is nil she had. the book is dreadful. thank you. >> thank you. >> here's a look at some upcoming book fairs and festivals.
"the black book," 35th anniversary edition, the daughter of noncombatants and journalist. barnes & noble in new york city host the hour-long event. >> good evening, everyone. i am portia and i am the editor of the 35th anniversary edition of the black book. in 1974, toni morrison was a senior editor at random house and "the black book" was her project. and she described the purpose of the book to create something that might last, that would bear witness to the quality and the variety of black life. well, thank you all for being here. doctor bill cosby's original introduction opened, supposedly command, a 300 euros blackmun had decided to say when he was about 10, to keep a scrapbook, a record of what it was like for
himself and his people in these united states. well, this is that a scrapbook, and everyone associated with it has been inspired by the more than 500 articles, photographs and posters data contained. from doctor morrison, who was inspired to write but love it from an article on page 10. it was written in 1856 entitled a visit to the slave mother, killed her child. the esteemed collector's morris levitt, roger berman, an obvious he burnet smith whose daughter rebecca, we're lucky to have you tonight. it inspired their production team in 1974 who kept such detailed records that 35 years later i can still taste the right holders. it inspired our senior editor who brought this project to my attention to years ago. and our production team headed by richard, so inspired that
they made this addition even crisper and cleaner than its original. using just film. and of course, our publisher who recognize what a treasure this was and published it in hardcover. this book touches everybody who touches it, and that includes all of you who inspired him to be her today and our panelists who i am so tired to introduce. up first is doctor roscoe brown. [applause] >> the list of doctor brown's a competent are really enough to fill a book of their own. boatbuilding he is president emeritus of bronx community college and director of the center for early education policy at the city university of new york. he sits on the board of several community organizations including the boys and girls club, the fund for the city of new york, the urban issues
group, the arthur ashe foundation and 100 black men and. doctor brown has received the naacp freedom award, and the congressional gold medal for his service during world war ii. as commander of the 100th fighter squadron of the 332nd fighter group. better known as the tuskegee airmen. [applause] >> ilyasah shabazz is an author, educator and lecturer dedicated to preserving the shabazz member. her father, widely known as knock him ask, remains globally revered as one of the most important human rights leader. her mother, dr. betty shabazz, was a nurse, educator and
activist and an international advocate for women's rights. today, she is committed to developing educational programs that foster self empowerment to expanding the role of governme government, to encourage individual responsibility for improving society. and to capitalize among the arts and entertainment to encourage an understanding of culture of history and of self-expression. she's corporation president of the malcolm x and dr. betty shabazz memorial and educational center, and we are honored to have her with us. [applause] >> a renowned journalist and author and cultural critic, he is curley on the morning meeting at msnbc and hose to show on pop
shot at on the record that he is been featured in the newer time, "the new yorker" and several other publications, and he is also offered his own three books, the celebrated collection never drinking kool-aid, the short story collection, portable promised land, and the novel full city. and he is curly at work on a highly sophisticated fourth book about the current state of black america. thank you for being here today. [applause] >> and last but far from least we have rebecca sando who is the daughter of ernest smith, one of the original authors of "the black book." nesters that wasn't avid art collector and teacher, and he shared his love of the arts with his children. rebecca has carried his exhibit at the museum of natural history and has been a friend to some of new york city's finest chefs and restaurateurs. she is an activist in the fight against hiv aids and we are honored to have her as part of our panel.
[applause] >> so we are ready to get started. and continuing the theme about the inspiration of the black book, i will say my. one of the things that inspired me most about this book was its incredible sense of heritage and legacy. made me wonder what if we all had our grandmothers grandmother's photo album? or if we could inherit the letters and diaries of generations past? imagine if we all had our ancestors physical memories and could interpret for ourselves what heritage and what our legacies were. so to my panel is, what is the importance of heritage and having your stories and generations told? >> says i am old enough to be porscha's grandfather, and i'm working on exactly that point, how do you send things to one