the mainstream media. so the idea that they're not held accountable for what they say on air is ridiculous again. it's just i have joked on my blog about fox derangement syndrome, and i think it also serves as a convenient distraction from what's going on in this administration and really how disappointed a lot of these obama sporters are. >> host: one of the photographs is rahm e man emanuel, and it's from tony who said would you please comment on obama's chief of staff and his dual citizenship? the very nature of power attracts those who should not have it. citizenship of o'manuel? it doesn't bother me. host: good morning. caller: good morning. good morning. good morning. c-span i think you need to do a little better job. i meanverybody has opinions and this young lady need to be

on book tv not c-span. excuse me, hold up, let me make my comment. if she so worried about this and worried about that, write a book stating that hey, health are and a ok stating, hey, healthcare and all this other good stuff -- put at people and let them vote on it instead of going through all these changes. if you don't like anybody that's been in office all these years and doing all this crazy stuff, put it out there and let people vote on term limits. everybody has opinns. put me on. >> host: you're on right now. and we appreciate it. okay. did you have a question. >> caller: yeah. >> host: okay. john, thk you. >> guest: i think the first time i appeared on c-span i don't know six or seven years ago and

i'm still referred to as young lady. i appreciate that. >> host: this is also another tweet that says bravo, big fan reading your articles in town hall. how did you approach it and write it? >> guest: it was really after the the inauguration and not long after that i reallyust bore down. there was a lot of leverage between what i do in my syndicated column. i've been writing it twice weekly syndicated column for creators since 1992. and then i blog at michellemalkin.com. i've been doing that since 2004. and then my guys, somebody mentioned ed morrisy and they are bothonderful colleagues and they blog at hot air every day and that blog has been operating for a couple of years as well. and the synergy between everything i do made it very easy to hammer out the book.

you know, a lot of people that's the first thing they know even though mainstream reporters do this all the time. there were insta books on michelle obama and the obama administration in january. and so what i think was interesting was that up until the very last secon that it went to press, i was updating it. every day in the headlines there's a relevant story that i think -- that points to the deficiencies because i would see a story that sort of glossed over a lot of the conflict of interests or crony ties. and i see, we need this book. it definitely has filled a vacuum, i think. >> you were on with matt lauer earlier this week. reaction from that interview? >> guest: i was shocked at all that they had me on. grateful for that opportunity. and they graciously reprinted the entire introduction of the book on their website. but, you know, you got 3 or 4

minutes to try and get your point across and most of the questions had nothing to do with the book, which is fine. but i really think that there was sort of a game of trying to beat the clock and in the end i think matt lauer got beaten. it was a very entertaining experience. >> host: michelle malkin, thanks for being with us on c-span for a full half hour. we hope to have you back on again. the book is called the culture of corruption. by regnery press. come back again. >> michelle malkin began her career as a journalist at the os angeles daily news" before moving on to the seattle times. she's appeared on fox newchannel, "nbc nightly news" and 20/20 among others. she's the author of several books including invasion, and unhinged. to find out more, visit michellemalkin.com. >> here's a look at some upcoming book fairs and festivals over the next few months.

>> please let us know about book

fairs and festivals in your area and we'll add them to our list. email us at book tv@c-span.org. >> a "new york times" reporter presents on the ground reporting of the dramatic decline in the housing market while also revealing his experience in becoming part of the real estate story he was covering. politics and prose bookstore in washington, d.c., hosted this event. it's an hour. >> thank you very much. i'd like to start by saying i've sort of been on sort of a media tour for almost two months now. i've bn on the today's show and 20/20 and colbert. this is the hardest place to book. that means the crowd is the most elite audience to get here. it took me a long time to get here but i'm glad to be here. thank you for coming and hearing

about my book. i will give you, you know, kin of -- start with a quick summary of what the book is about, what the point of it is. and talk about some of the things that i've learned along the way as well as the reaction to it, which has been kind of a learning experience in itself. and then we'll opeit up for questions. so as mike said, this book is a highly intimate account of my own surreal descent into mortga mania at the height of the housing bubble. i think it's fair to say that i had a very unique vantage point as a huge swath of the country was becoming obsessed by the seemingly surefire opportunities posed by soaring home prices and exotic mortgages and ever more clever ways to borrow lots and lots of money. yeah, i am an economics reporter.

i had written actually about exotic mortgages a little bit in early 2004 in the course of covering the federal reserve and macroeconomic policy. i mean, at tha time it seemed to me that we were going to be looking at higher interest tes in early 2004. the fed was getting ready to raise rates and people were borrowing more and more and more to be able to keep up with housing prices or to drive them even higher. and it just seemed that there was something that was going to cause problems. so i wrote a couple of pieces on that and they were kind of cautionary articles, but as you know, you know, what a person knows and what a person writes about isn't necessarily translated into what a person does. and in my se, i was -- i was -- i had fallen -- i had

fall in love with patty, who's right here in the front row. fallen madly love perhaps in a way only a middle aged man can. i don't know. but i'm still in love with her. and -- oh, sorry, patty, you told me not to say madly in love. she's really sick of hearing it. but that's what happened. i fell very much in love. patty and i both have children, and i -- my children ere living close by. i s paying huge amounts of child support. and we wanted both to accommodate her children and then to have room for mine to come over. kind of a house fit into that picture. it was kind of a crucial link in king the dream come true. so in that environment, it turned out that it was really easier to buy a 450, 46 $500,000 house even in my situation than it was to rent. how bad was my situation? here's how bad.

it was -- and this sort of the starting pohnt -- this is the basic predicate for the whole adventure. i was not in a position financially to borrow by any normal mortgage-lending standard. i was paying out more -- about $4,000 a month in child support and alimony. which is not to give away the show here but more than half of my take-home pay, actually, substantially more. i had left basically just barely enough to make the mortgage payments on this house that we ended up buying. and yet, it was the easiest mortgage in the world to get. i mean, it really wasn't hard. i saw this house. i talked to my real estate agent who said, i'll give you the name of a guy who specializes in challenging situations. she did. his name was bob andrews, no relation.

and he basically checked one thing real quickly. my credit score. and at that time it was great. it was a good, solid plus 700 credit score, and on the basis of that and the fact that i could come up with a 10% down payment, we were good to go. so that's basically all he wanted to know. i had a job. i could come up with a down yment, a legitimate down payment of 10% and i had a good credit score. nothing else mattered. the rest could be wked out and so what i got was a mortgage that was not as you may have frequently heard the term, a liar's loan. it was better than that. it was a truly don't ask, don't tell loan. i didn't disclose my income at all. it's amazing, you know, but it was very, very easy. the whole thing went through quite smoothly. and i even at that time was kind

of astonished and kind of appalled by the fact that i could do this, but -- and i'm not trying to defend this on any rational ground. the whole point here is that it wasn't rational on my part. but you get into this mindset and everybody has their own reasons for going in and getting over their head into debt. in my case it really was about love and wanting to start this new chapter in my life. in any case, it was easy for me, too easy, to rationalize how this could work. it's kind of magical thinking. yeah, it's dicey but if patty earns "x" amount of money then we'll be okay. i'll pay the mortgage and she will pay everything else and it'll work out okay. when you're in a fever of any kind you don't want to hear about the obstacles to, you know, the practical prudent obstacles and you just want what

you want. it comes to a passage that i wrote very early in the book, just to give you a flavor for -- i think the emotion that goes into -- went into, you know, my own activities here as well as -- i think the emotions that drive a lot of people. in other words, home-buying is a financial decision but emotions can tend to -- can often override those sort of rational financial issues. and bottom line, we're often not as rational as we think we are. and so anyway, in chapter 1, i describe confessing kind of my plight in 2007 to none other than to alan greenspan.

i was interviewing him on why he shouldn't be blamed for the whole mess and he was explaining me why he wasn't at all to blame for the whole mess. and one of his arguments was that the problem with the rtgage bubble had largely been about fraud. and, you know, the fed was really not equipped as a law enforcement agency and that kind of rubbed me the wrong way. i had not defrauded anybody. i had played by tir rules and their rules were stupid, but i playedy them and nobody had deceived anybody about what was going on. and that, i think, was an important point. that the system really had been corrupted. it had been pervaded with corruption by this point. and crazy things were allowed to be possible for a whole lot of reasons. people at every step in the financial chain were willing to essentially delude themselves and others. in any case, so i had just

confessed to greenspan that i was in this mess. and my question to him was, shouldn't the government have stopped a lender from lending to somebody like me? and his answer was, hmmm, well -- his question was, have you defaulted yet? and at this point in2007, three years into the mortgage, i said no, actually, i haven't defaulted yet but i'm hanging by my fingernails. and he goes, oh, well, so these lenders made a judgment based on the fact that they decided you were the kind of guy who would do anything possible to pay that mortgage, and they were right. you are trying to do everything you can to pay that mortgage. bottom line, they probably already made money on you so by hess reckoning the system worked and self-interest still made sense and no need to have the government step in and stop people like me.

immediately after that encounter, though, you know -- in the process of that, he asked me, you know, why did you do this? and he was pretty horrified and appalled that he was hearing this from me. we'd inown each other for a couple of years. just reporter/public official. and i just it was astonishing to him that somebody like me would have engaged in this kind of malarkey. so his question was, why did you do it? and here's what i'd like to pick up. why did i do it? why did we do it? why did millions of seemingly sane adults suddenly take leave of their commonsense and load up on home mortgages that they couldn't possibly manage? why did we all jump off the cliff together? we all had our reasons. some of us were desperate to fulfill the dream of owning our first home, of arriving in the middle clas others craved a bigger house, a newer house, a better neighborhood and still others

were dazzled by the seemingly surefire profits from soaring real estate prices. i had to utterly two compelling reasons to take the plunge. the money was there and i was in love. the fever for romance and the speculate fever to get rich have a lot in common. both are driven by primordial hungers and the allures of both of a lifetime of opportunities. the first small and cautious. a sly flirtation or a low-ball bid on a condo but each successful payoff emboldens you to raise the stakes and if the conditions are right you can escalate very quickly from the harmless flirtation to the first kiss, the weekend and ultimately putting your future on the line. and the same can pretty much b said for flipping condos in miami or las vegas. each winning roll of the dice

confirms the strategy and provides more money to raise the stakes, prudent him pacemaker is dull and petty if you're on a roll, it's time for big ideas and heroic leap of faith. it's all about adventure, danger and fantasy and, boy, was i ready for that at that point. i think honestly that as we look back on, you know, the borrowers who got into trouble, my gut feeling is from having talked to many such people tha most of them would admit to you they had a feeli -- they had a sense that what they were doing was a problem. that it was not wise. that they were -- they were running very high risks. and for whatever reason, they decided to sort of override their sense of caution and plunge ahead anyhow. and we'll be debating for years if not decades why so many people took that plunge but i would argue at the end of the

day, that it wasn't human nature that changed in 2004, it was the financial system. the financial system had a -- was channeling an absolutely massive flood of money from around the world. it was cheap money. and they were looking for slightly higher yields, whatever way they could, riskier borrowers or more profitable borrowers and this was the last game in town. so what we had was a financial system that was encouraging, enticing and roping in millions and millions of borrowers who just went ahead. as i say, some people had no idea of the true nature of the mortgages that they were taking out. i think many had a sense of the risks that they were taking and figured that they were going to

get bailed out by the continuing rise, rapid rise, of housing prices and then some people were like me who said, this is crazy. but, you know, i've got a plan. it can work. whatever. many, many different paths here but i think the enabling was the key thing and at the end of the day you have to place the macrocatastrophe on what was going on in the financial institutionsand, frankly, with our regulators in washington, you know, we were asleep at the switch for sure.tñ this book has generated a lot of reaction. i'd say mixed. i've gotten flooded by emails from borrowers, troubled homeowners who thanked me for writing it and just sort of opening up because suddenly they didn't feel so alone, so

ashamed, so lost in their own troubles. and that's actually one of the most eye-opening experiences for me in -- after the book was published or after the "new york times" magazine published an excerpt of it. i suddenly realized, you know, the incredible array of people who had gotten into trouble and what kind of people they were because these people writing me -- many of them admitted right off the bat that they had made huge mistakes. some of them had terrible luck. some of them had lost jobs or had medical problems, all kinds of reasons. but most of them were very ernest, hard-working people who felt terrible about what they'd done. these were not greedy or self-absorbed yuppies who were spending their money snorting cocaine or, you know, buying that extra bmw. most of these people were middle

class folks, maybe lower middle class folks who, you know, wanted a house and they wanted something for their kids and they -- they eitherelt that it was possible, it was true what everybody was saying that this was the investment they couldn't lose or some of them were afraid that if they didn't buy then and that it would get worse and houses would be out of reach. i guess, you know, my own -- i never asked anybody to have pity on me for my decisions. you know, i knew what i was getting into. i was not in any way a victim of anybody but i do think there were a lot of people out there and i think it behooves us all to go easy a little bit on the judgmentalism when you think of the millions of people who have gotten in trouble because everybody has got a story. they're a lot more sympathetic

sometimes when you talko them in person. the reaion that i've gotten, though, as i've said s been mixed. i'll give you a sampling of -- i can't -- i didn't -- i don't give you the long extended rants that have come my way but trust me i've gotten a lot of them directly through my - through email and blogs fear. i've been called loser, nebraskaish, jerk, doofish, fraud, irresponsible, greedy, selfish,nd the complaint that i'm getting a lot lately is that that i don't show any remorse. i guess, they haven't used this word but i'm shameless. i think is what they're saying. people are really upset that i'm not saying i'm sorry for what i did. and they're not saying -- they're arguing thatçó i'm bein unaccountable for my own

decisions, and that i should -- my prtrate. my own feeling -- i have plenty of remorse for the decisions that we made. you know, i've had my credit scores shot to hell. i've blown my savings. i will have a very tough time retiring -- i'd be really happy if i could retire by the age of 70 on any kind of income and, you know, we may well lose this house. so there's a lot to be sorry about, but i don't feel -- and this is what makes people mad, i don't reallyeel like apologizing to the rest of the world for these decisions. whatever my bad my judgment was a borrower and however bad the judgment of condo flippers might have been it really pales in comparison with the recklessness that was undertaken by the biggest financial institutions in the country. and i have yet to hear stan

o'neal of merrill lynch o chuck prince, former of citigroup apologize for the recklsness that they unleashed but, boy, did they do a lot of it and the closer you look at what happened, the more outrageous it becomes. how much time do i have here? oh, okay. so what i'd like to wrap up with here in the remaining minutes is, the things i learned in the course of workingn this book that went beyond my own personal saga. all of the -- almt all of the public attention and debate about my book has been about whether i'm a creep or a irresponsible and did i do it right? did i do it wrong? all those kinds of questions. the real question is not whether i made horrendous judgments that's obvious. i did.

the real question is, why did 8 to 10illion or so people at the same time make horrendous judgments? it's always going to be the case that some people at any given time are going to borrow more than they should and they're going to get in trouble for it. but it's never been the cas that we have this kind of wreckage at one time. so many people, so overextended in such a compressed period of time. and that cldn't happen without the lenders and the wall street firms making all that money available to people regardless of the risks that they might entail. the question is, what were they thinking? what were they thinking? let's not assume that they are crooks necessarily. but what was the rationale for it? and here is where i actually learned a lot. what i did with this book was try to report out the stories of my own lenders and to some extent, the stories of some of

the wall street guys who were financing them. and the policymakers here in washinon like alan greenspan. much as i'd like to dump on washington policymakers, the bush administration, and greenspan, and i think that they all deserve a good measure of criticism and blame, especially, the fed, frankly, i think the real issu, though, are, you know, what was going on i our financial institutions and what i learned was really,eally interesting. in short, two of the -- i had three mortgages. i have had three mortgages. two of those three mortgage lenders crashed before i missed my first payment. they went out of business before my first payment went late. and the stories behind them were really interesting. the first mortgage lender is the one i'd like to dwell on here.

it's in chapter 3 here. my lender drinks the kool-aid. i go into the story. this is a company called americanome mortgage which was started in 1988 by a guy named michael strauss. a very bright mortgage broker type. he built it from a one-n operation in his apartment to by the time i came along, a nationwide mortgage lender that was doing 40 to $50 bilon a year in mortgages. it peaked at about a rate of about $60 billion a year in mortgages. they were the tenth biggest mortgage lender in the united states. not a countrywide but they viewed themselves as like competitors of countrywide and wanted to chase them. they were not subprime lenders. they were what is still known in the business is an alt8 member. they were looking for borrowers

who had good credit but didn't want -- they wanted to stretch. these were the borrowers who had good credit and were not going to disclose the messy details of their finances, for example, how much debt they might have or their debt to income ratios. so they were specialists in no-doc loans where you could state an income and not document it or in my case not disclose any income at all and based on the person's assets and cdit score. well, we know what happened to me. the interesting story about american home is that as they were growing and right about the time that i became a customer in 2004, they made a big shift from being kind of traditional mortgage lenders to normal traditional, relatively conservative mortgages to much more, you know, exotic, alt-a,

no-doc stuff and they also decided that it wasn't good enough just to make loans and then resell them to wall street. let them back up for just one second. the conventional wisdom -- and it's true to a great extent is that what drove this whole mania to a great degree was wall street firms buying up shoddy mortgages, turning them into -- pooling them into securities, mortgage-backed securities and then selling them off to investors around the world and the rating agencies would bless these securities with aaa ratings and so we had this enormous machine that got created. all o that is true. all of that true. but there's more to it because what hapned in american mortgages case, they decided, you know, it's not good enough that we're making the loans and selling them for a quick profit. we are making a good profit but that's not good enough. we think these loans are really actually worth a lot and so what

we're going to do, we're going to hold them. but the only way that they could hold them 'cause they weren't really a bank with lots of assets. the only way that they could hold them was to borrow money to hold th. and so what they did starting in 2004 was build up a huge leveraged portfolio of their own riskiest loans specifically something called option arms which are -- were by my reckoning the most evil mrtgages that were created in the entire boom. they're sometimes called pick-a-payment loans. you could pay lots less than the minimum interest and hold onto your house. what you might or might not know if you were doing that is that you were racking up thousands of thousands of dollars every month in additional debt or deferred interest any way. american home mortgage decided that they loved these loans so much and they we very

aggressive about making them that they were going to borrow tons of money in order to be able to hd them so they had a $15 billion portfolio of these loans that they were holding as an investment. and they were leveraged up about, you know, 10 to 1. no, i'm sorry. more like 15 to 1 at the height of things when they thought they'd really figured out how this stuff worked. so when august, 2007, rolls aroundnd the subprime market has begun tomplode because defat rates are zooming up, in august, 2007, as many of you will remember vividly, this is when the credit markets really did seize up. this is the binning of the financial crisis. it happened very fast. the rating agencies basically had acknowledged in mid-july that they d misread, you know,

billions and billions of dollars worth of subprime -- securities backed by subprime loans and everybody began to panic. it was sort of like the emperor has no clothes and people realized the jig was up. there was a widespread panic. american home mortgage was out of business in a week. they were out of business in a week because their lenders say you own us is couple billion of extra collateral because the value of these things is lot less. this is amazing. i really tught that what this was all about was really smart people figuring that they could game the system and make a profit and get -- and know how to get out. before the roof fell in. instead, it turns out, and this was a great example, they got sucked into the mania themselves. it's extraordinary. i mean, the smart money really wasn't that smart. it was self-destructive for them too. if you think about this, it happened all over the place.

i mean, merrill lynch andorgan stanley and other firms were buying up subprime mortgage lenders at top dollar in 2006, even in 2007. extraordinary. and getting more and more leverage levered up themselves. so that was really kind of an extraordinary thing that i learned and i still to this day cannot decide whether some of these institutions like merrill or citigroup or american home mortgage were corrupted and crooked or just stupid. i go back and forth on this in my own head. but i think it tell us something about the nature of aania that we all like conspiracy theories. we a like to blame the big

financial institutions at the top for being the mter manipulators. they are. but they can beceictims of their own chicanery and they bought their own propaganda and obviously paid mightily for it. the other startling experience for me in reporting out the story was not about me per se. it was -- i felt i needed to look at the question of how minorites and lowncomed people were targeted by lenders beuse it was pretty clear that lenders had gone very aggressively and systematically to black families and hispanic

families particularly toward the latter days of the how about bubble and ty were roped in bad stuff. what i did was i went out to just right here in the washington area to manassas, villager -- virginia which many of you is ground zero for foreclosures. they had a huge hispanic migration in and the foreclosures were all over the place by 2007/2008. i interviewed families -- i just could not believe what i was seeing. families -- one family in particular i met just as they were signing the papers to lose their house to a short sale. an el salvadorian families, naturalized citizens who had owned a house already, and had made a $200,000 or so profit on that house, was persuaded to sell it and buy a $700,000

mcmansion, $700,000 mcmansion with one of these option arm loans without knowing how they really worked. and when i met them, they were not only giving up the house, they had lost the $70,000 down payment that they had made. and all of their life savings. and they had to start over from scratch. they moved into a tiny little two-bedroom cottage in downtown manassas and are trying to recoup from there. it turned out there were lots of stories like that there. and in countle other commuities. it's a story we know but when you get in -- up close and personal, it's still shocking how horrendous this was. and it was, you know -- lenders recruiting in this case spanish-speaking brokers and giving them great incentives

for, you know, crazy loans and on and on but it was very systematic. and it turns out when you look into the academic literature or the governmen literature, about the pattern of subprime lending, not just in the last couple of years but since the late 1990s, study after study after study has shown that at any income level, for example, blacks are two to three times more than likely than whites to be in subprime loans. now, maybe some of that is about credit scores. but there are just too many studies coming up with the same results to let you believe that there isn't -- there wasn't something really nasty and concerted abt preying on the most -- preying on vulnerable people w were not in a positiono evaluate some of these iortgages well. some of these people were

struggling with the english language, maybe didn't have college educations, whatever. but the data on the disproportionate patterns in subprime lending, which is the easiest thing to measure,ot the only kind of bad loan but easiest thing to measure but the percentage of the loans going to people sort of outside the mainstream and vulnerable is really shocking. and it was ignored for years. people in the house communities, community advocacy groups had been complaining about this for years. it really wasn't a secret. an it was ignored. i just think that's really a dreadful, shocking, shameful piece of business that we hope we deal with. wow, i just ran out of time. so, please, let them open it up for questions.

>>i. i have two. >> yes. >> one is about the past. one is about the future. the one about the pas is, i don't understand how the federal government misd this for so long. we bought our first and only house in 1980. it was -- it was a development that was done in world war ii, 1800 square feet, small, not well done. small lot, well-located. weaid $150,000 for it and i thought that was the absolute top of the market. five years before that it had been $75,000. in 1940, it was 17. when it was assessed, not appraised, assessed for $850,000 an 1800-square foot brick house housing prices were going up and incomes were absolutely flat. so at some point there was going

to -- there were not enough people to afford the houses that wereut there at the prices that were out there and the prices will continue to drop until there are enough people who can afford to buy them. the big question i have is for the future. and that is, all this capital, the best use that could be found in it would be to invest in these subprime mortgages, basically, a nonproductive asset when there are jobless people and, you know, a billion poor people in the world, this was the best thing our system could find to invest in? i mean, that capital should have been going somewhere else. >> we were the best investment for the world to invest in. it wasn't just american institutions. >> that's right. >> this money was flooding in from around the world, from china - they were begging for someplace to earn a slightly higher return and this was the seemingly perfect game of secure lending at a slightly higher

yield. it w a figment of our imagination. >> and doesn't it suggest that there's something wrong with our capital allocation system that that's a, quote-unquote, free capital market? that's where the capital ends up. it doesn't produce anything. >> well, clearly, whad a huge problem in capital allocation in this country. how you try to fix that is kind of over my pay grade. [laughter] >> it's a ver important question. >> it's a hugely important question. i will just say one of the things you said also has struck home with me. it's something that really gnawed at me in the course of business. by any -- you know, by a lot of historical statistical measures, housing prices were getting way out of line with historical relationships to income starting in about 1998. by 2003/2004 -- i think by 2004,

surely, housing prices on avage had risen about 40% beyond inflation. and as you say, family incomes for the most part were flat through that period. so you had families being stretched more and the housing prices going up more. it couldn't go on. it couldn't possibly and there were people -- lots of people were pointing this out. merrill lynch, god help them, their cef north american economist david rosenberg published a series of pamphlets in 2004 and maybe even as early as 2003 -- one of them had a picture of a house with bubbles coming up in front of it. and he made the case, this is a bubble i 2004. nobody wanted to correct the bubble. the fed had a view that, you know, it was -- you didn't know a bubble until it burst. you didn't want to second-guess the investors.

and anyway, it would be easier to clean up the mess afterwards than to try to stop the excessive behavior in the course of it. i think we've now learned that was a bad calculation. and i'm guessing that chairman bernanke is revisiting it quite aggressively. in fact, i think he said that. but, you know, one of the astonishing things there is on some levels of it perfectly obvious that there was a housing bubble, which meant that this could only end in tears. and it was ignored. >> thank you. >> i first of all thank you for the candor in the book. it's what makes this analysis so compelling for many, many readers. i had a question not dissimilar about the previous one and it's about the future and about regulation. in this country when we talk about mortgages and personal finance, we're basically talking about consumer protection.

the sort of ralph nader air bags smoking kills you but everybody keeps doing it sort of stuff. a lot of politicians in this country seem tonjoy mocking or demonizing what they call the european welfare state or the nanny state to put it more succinctly. european attempts to protect consumers seemo be while massively imperfect much more thorough than a great deal of regulation in this country regards consumers in my amateurish look at politics. i wondered if you had a sense of whether america and europe are on fundamentally different paths with regards to consumer protection and whether that -- if that's true, if those paths could ever meet again? does america has a future as a

world leer in consumer protection? [laughter] >> i wish. you know, i have to admit i can't draw a good, accurate comparison between our attempts at -- or lack of attempts at consumer regulation and what germany or european countries were ing. geany did not have a housing bubble but a lot of other european countries did. i don't think it was fueled by the same nutty mortgages that ours s. my view -- i'm not big on financial education. there's a lot of talk about the need for greater financial education. that if people were more literate about the mortgages that they were taking out, then we wouldn't have these problems. i think that's probably wishful thinking. i think most people -- it's not rocket science to understand the basic natu of a normal mortgage. i truly think, you know, that

most people had a rough idea of what was going on with their mortgage. they were making engaging in wishful thinking but what was happening here was, i think, abt emotional excess, speculative euphoria, things like that. that you could have all the financial literacy in theorld and, you know, they didn't care at that point. they were just going to go for it. so what i think -- i think the lesson of this is you just have to havehe government be in there proactively to say certain kinds of practices are not allowed, period. they are just too dangerous and we don't care if you're an adult or not, you know, there are certain products that should not be allowed. and i d't really think it's that hard to draw the line on these things. the's a lotf kvetching among financial regulators, or there was during the bubble, especially, we don't want to stifle financial innovation. nonsense, the bedrock principle -- one key one is you

do not lend money to a borwe without a demonstrated kind of realistic calculation of that person's ability to repay the loan. and in a lot of ways, a number of ways we just completely jettisoned that concept. it was not just that you could get a loan without documenting your income. you could also get qualified for an outrageously big loan based on the teaser rate, the low teaser rate that you would pay for the first two years. well, that's nuts, you know? you know with those kinds of loans that your real monthly payment is going to get very high after a couple of years. option arms, a family i visited in manassas, virginia, were making -- they were paying $2800 a month, that was the minimum payment and they were racking up $3,000 a month in deferred interest, okay? and they qualified for that loan on the basis of the initial minimum payments.

this is inexcusable nonsense and it's very easy to just put a stop to it. you know, and so i think there's a commonsense limit to this that we ought to remember. that there's some -- jus that one principle, the ability to repay, invoking that principle would solve -- would have prevented an awful lot of this nightmare. and it doesn't mean that you really, really perfectly identify what this borrower can repay and what that one can't but you have some rough guidelines that are pretty valid. they're conservative. and, you know, the harm caused by lost opportunities and financial innovation is small compared to the harm that would be done by millions of people going bankrupt as a result. so i think -- and i think we're going too down that road.

the fed is actually already gone a long way toward putting the kabash on those kinds of mortgages. they don't exist right now. if you can't get one if you want one but eventually it will be possible and we have to address that issue. i sure hope that, you know, we get away from this notion that, you know, we don't interfere with consenting adults. i think we have to. >> hello. so i have a question. you said you interviewed alan greenspan. >> yes. >> so i'd like to quickly phrased the question. since you said he didn't accept fault for anything that's going on right now. because basically the way i want to fme this, housing prices are a function of two things, your salary and the interest rate, right, and here's a guy who controls both of those things. if the fed meets i'm sure everybody heard on tv that, you know, they meet and they can bump up a point or up a point

the interest rate and the market reacts to that, so he controls e interest rates that you can borrow at and the money supply. and i think he's been quoted as saying that credit default swaps actually decrease the risk to the market. and he admitted -- >> well, alan greenspan has in the past years said credit default swaps and those kind of derivatives should have been regulated and he admitted in a very heartfelt way, i thought, before a house committee that wh he thought was kind of an unshakeable truth that, you know, kind of a rational self-interest would keep things in line had been proven wrong at least in that kind of context. but to answer your question, i mean, again, alan greenspan will -- does not believe that he or the fed should be blamed for

much of e catastrophe. there are two lines of criticism. one that he fed during his tenure left interest rates way too low for too long, therefore, fueling more of the housing bubblen rising housing prices. and the other line of criticism is the fed had authority already to reign in and even ban mortgage practices that were -- that it considered to be unfair or deceitful. and it absolutely had the authority to block the kinds of loans that i'm talking about here. and the proof of that, of course, is that they proceeded to do that after the cafast if i had already happened. >> right. so he admitted -- so basically, he just said that from i guessing your answer is that the self interest doesn't work but he admits none -- >> in a narrow context. i still don't -- i still don't think that mr. greenspan is in any way a fan of regulation.

and i think he would avoid it in most cases. still. that's a debate we're going to have going forward. >> thank you. >> we have time for three more here, three people. you're to be congratulated for comi forward likthis. you should run for president. >> oh, there's a good idea. [laughter] >> the reason i said that -- you haven't mentioned the business schools and we had a president who had a business school education and that didn't seem tohelp. what advice would you give to people in the business schools to prevent something like this from happening? >> you know, it's funny you should ask that. about a month and half ago i was invited to speak to a conference of business school deans. the dean of sool of dartmouth

who was the one invited me got up there and he said, you know, the problem isn't that we were teaching them the wrong models for all of the these securitizations and risk practices. the problem was, they weren't understanding what our models were all about. so which i'm sorry and i like the man a lot -- i think that' baloney. i really do think that's baloney. the business schools, you know, were absolutely crucial in developing a lot of the squirrely models that were used to structure, you know, subprime-backed -- subprime-mortgage-backed securities. it was interesting in that experience. i was just shaking my head, again, denial of responsibility. i guess we all do that and, you know, a lot of people excuses me of denying responsibility, but

whatever. point well-taken. i think that they need to think about -- the point is that all these clever tactics that they develop in business schools are bad. but there is an aumption that, has a st of certainty to it f that it doesn't. and, you know, the true cautionness was never bred into it. everything about teaching, i think, was gravitating toward the idea we can come up with great ideas. and they're great. and not so much attention to the limitations. >> thank you. >> i wanted to touch on the issue you just mentioned actually a little bit about the angle of looking at consumer responsibility. you said that a lot of readers are frustrated with you and have been sort of commenting negatively to you. i think one of the issues that sparked that as i was looking at

what you wrote is that with respect to yourtories there were other spending decisions that you mentioned yourself that you yourself were a littl irresponsible and i think there was a trip to a beach house or something like that. >> right. >> and you indicated that you and your wife weren't quite on the same page about the seriousness of the problem. at one point or another. i guess, you were sort of bothering about money and she was stop bothering me about all the money questions. and so the question comes more to being a bit -- i mean, we see easy credit everywhere and we see it being manipulated and misused by borrowers in a lot of cases. and we see a sense of a perceived entitlement but i may not earn money for this but i deserve it. and we see it with cars. we can borrow for cars. we can borrow at best buy. i think 90% of all cars are bought on financing now. and a lot of times under very baterms for the borrower but simply because you can make the payment. and we've achieved an indebtedness that rivals thaof the great depression.

both in your own circumstance and as borrowers, shouldn't westbound pointing out a -- shouldn't we be chasing more with lore responsibility? >> i couldn't agree more. this crisis was not an isolated event. this was the culmination of a trend that had been underway for at least 25 years toward ever more clever and more extensive borrowing. and higher and higher indebtedness. and it's not to say that borrowing is bader se. or debt is bad per se but we had become more and more convinced as a country and our institutions were marketing more and more ways to borrow. so we got as a country clearly, you know, ovextended. and here's where i would agree probably with alan greenspan.

the solution is probably in the problem itself. that having been through this, we know right now saving rates have shot up to levels we haven't seen in a very long time, 5, 6%. and they might go higher. they'll probably stay high for a while. so having been through this, i think we are in a midst of a cultural shift right now. and that's a good thing in the long haul. very good thing. much-needed. it's a bad thing in the short term. i think we're going to have a very troubled economy for a long time because consumers really are retrenching, rebuilding, repenting. >> thank you. >> hi. i want to thank you for your candidss in the book and being so open about it. and now having written about the economy and having kind of experienced it yourself, there's

a lot of -- there's a lot of frustration among people about the fact that the people who are fixing the problem are some of the people who got us into the problem. and there's a lot of different competing theories -- >> we got to have the experts right? >> right, right. there's a lot different competing theories from people academia and paul krugman ces to mind. and they've been experts and there's a lot of kind of the -- that sort of academia versus experience question if you know what i mean. like which -- kind of which side do you fallon? do you feel like people who are -- who have been doing the research and have gotten like the education, you know, that they're more expert and they should come in and fix this or is this kind of the responsibility of the people who really know how it works now that you've kind of experienced it yourself and they -- you know,