been doing that since 2004 and then my guys, somebody mentioned ed morrisey and then i have another pdit. they are wonderful, wonderful colleaes and they blog get hot air every day and that blog has en hammered out the book. resting was that up until e very last second that it went to press, i was updatin it. every day in the headlines there's a relevant story that i think -- that pnts to the deficiencies because i would see a story that sort of glossed over a lot of the conflict of interests orrony ties.

and i see, we need this ok. it definitely has fled a vacuum, i think. >> you were on with matt lauer earlier this week. reaction from th 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 of the book on their webte. but, you know, y've got three or four minutes to try to get your point across and most the questions had nothing to do with the book, which is fine. but i think there was a game of trying to beat the clock and in the end i think matt lauer got beaten. it was a very entertaining exrience. >> host: michelle malkin, thanks for being with us on c-span a full half hour. the book is called the culture of corruption obama and his team of tax cheats, crooks and cronies by regnery press.

come back again. >> meshaal malkin began her career as a journalist at the loangeles daily news before moving to the seattle times she's appeared on fox news channel, nbc nightly news and "20/20" amo others. she's thauthor of several bookincluding innovation and unhinged. to find out more, visit michellemalkin.com.

in "new york times" reporter preents on the grounreporting of the dramac decline in the hoing market while ao refueling his experience and become a part of the real-este store he was covering. politics and prose bookstore in washinon, d.c. posted this event. it's an hour.

>> thank you very much. i'd like to start by saying i had sort of been on a kind of dia tour for almost two months now. i'veeen on "the today show" and "20/20" and "colbert" and this is the hardest crowd to books of that must mean th crowd is the most elite audience. it took a long time to get here but i am glad to get here. thank youor coming and hearing about my book. i will -- i will give you kind of -- art with a quick summary of what the book is about, with the point is, and talk about some o the things i've learned ong the way and the reaction which as been a learning experience of itlf and then we will open up for questions. so as mike said( this books a highly intime account of my

own surbeal descent into mortgage media at the height of housing double. i think it's fair to say i had a very unique vantage point as a huge swatch of the country was becoming obsessed by the seemingly sure-fire portunities posed by soaring home prices and exotic mortgages and ever more clever ways to borrow lots and lots of ways. i am an economics reporter. i had written actually about exotic mortgages, a little bit eight early 2004 in the course of covering the federal reserve and macroeconomic policy. at that time it seemed to me that we were going to be looking at higr intest ras and early 2004. the fed was getting raise rates and people were borrowing more and more a more to bable 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 pces on that, andhey were kind of cautionary articles. but, as you know, you know, what a person knowand what a person writes about isn't nessarily translate it into what a person does. and in my case, i was -- i was -- i had fallen an love with patti, right here in the front row, falling madly in love perhaps in a way only a middle-aged man can. i don't know, but i am still in ve with her and sorry, patty, you told me not to say madly in love. she's really sick of hearing that. but in the case, that's what i felt, very much in love. patty and i both have children, and i -- my children were living close by. i was paying huge amounts of child support, and we nted

both to accommodate her children and have room for nine to come over, kind of the house to fit into that picture was a link in making the dream come ue. so, in that environment it turned out that it was easier to buy authority to 50, 460, $500,000 house even in my situatn than it was to rent. how bad was my sittion? re's how bad. [laughter] and this is sort of the starting point. this is theasic predicate for the whole lot venture. i was not in a position financially to borw by any normal mortgage lending standards. i was ping about $4,000 a month in child support and alimony, which is not to give away the show here but more tha half of my take-home pay, substantially more. so had left basically just

barely enough to make the mortgage payments on this house that we ended up buying, and yet it w the east mortgage in the world to get. i mean ireally wasn't hard. i saw this house, and talked to my real estat agent who saii will give you the name of a guy th specializes in kind of challenging suations. she did. his name was bob andrews, no relation. and he basicallyheck one thing real quickly, my credit score. and at that time it was great. it was a good solid plus 700 crit score, and on the basis of tt and the fact that i could come up with a 10% down payment, good to go. so thas basically all he wanted to kno i had a job, i could come up with a down payment of a legitimate down payment of 10% and had a good cred score. nothing else mattered. the rest could be workeout.

so what i got is a mortgagthat s not as you may have fruently heard the term eight wires loma prieta was better than that. it was truly a d't ask, don't tell well. i didn't disclose my income at all. it's amazing. but it was very, very easy. the whole thing went through quite smohly. 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 am not trying to defend this on any rational ground. the whole point is it wasn't rational on my part. but you get into this mind set, and everybody hasheir own reasons for going and getting in over their head to 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 rm x amountf money that we will be okay. i will pay the mortgage and she will pay everything else and it will work outkay. when you're in a fever of any kind you don't want to hear about obstacles, the sort of practical prudent obstacles to what you're doing. you just want what you want. and this brings me actually to a passage that i wrote a very early in the book just to give you a flavor for i think the emotion that goes into, went into my own activities here as well as i tnk the emotions that drive a lot of people. in oerords, home buying is a financial decision but emotions content to -- can often override

those sort of rational financial issues. and we are not -- bottomline we are often not as rational as we thk we a. a and so, anyway. in chapter 1, i describe confessing kd of my plight and 20072 none other than alan greenspan. i was interviewing him on why he shouldn't be blamed for the whole mess and he was explaining to me why h wasn't at all to be blamed for the whole mess. and one of his arguments was that the problem with the mortgage bubble had largely bee about fraud and the fed was really not equipped as a la enforcement agency and that kd of love to me the wrongay. i had not defrauded anybody. i had pyed by their rules and their rule were stupid but i played by them.

and nobody had the seat to anybody about what was going on and that i think was an imporpant point that the system had been corrupted. it had been proceeded with corruption by this point. and crazy thines were allowed to be possible for a whole lot of reasons. people a every step in the financial team 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 linder from lending to somebody like me? and his answeras well --is questionas have you stifel degette? and at this point in 2007, three years into the mortgage once it actuallx, i haven't defaulted it but i am hanging by my fingernails and he says wl, so

these lenders a judgment based on the fact they decid you were the kind of guy w would do anything possible to pay that mortgage and theyere right, yoare doing everything you can'tay the mortgage. bottomline they already made money on use of by their record it worked and no need to have the government stepped in there and stop people like me. immediately after that encounter though in the process of that he asked me why did you do this, and he was pretty horrified and appalled that he was hearing this from me. wead kwn each other a couple of years just reporter, public official, relationsp, and i think it was astonishing to him that somebody like me would have engaged in this kind of malarkey. so his question washy did you

do it? anhere is where iould like to pick up. why dii do it? why did we do it? why did millions of seemingly sane adult suddenly take leave of their common sense why do we aljumped off theliff together? we all had our reasons. somef usere despate to fulfil the owning our first home, others wanted a bigger house, better neighborhood and others were dazzled by the seemingly sure-fire profits from soaring real estate prices i d to utterly compelling reasons for takinthe plunge. the money was very and i was in love. the fever for romance a stick with fever to get rich have a lot in common. both are driven by primordial ponder and the bill were of once in a lifetime opportunities. both evolveshrough a series of escalating gambles. the first is small and cautious.

a slight flirtation owball bid on a condo but each successful pay off emboldens you to raise the stakes, and if the conditions are right, you can escalateery, very quickly from harmless flirtation to the dinner, first kiss, the weekend and ultimately put in your future of the line. and the same c pretty much be set for flipping condos inia or los vegas, each winning role the place seems to come for the strate and provide more money to raise the stakes. proceed patients become dole and pity if you are oa ll it is time for big ideas, bold decisions and hartwick leaps of faith. it is about that danger, danger and fantasy and why was i ready for that. i think honestly as we look back of the borrowers who got in trouble my gut feeling is from having talked toany such people most of em would admi

to you they had a feeling -- they had a sense that what they were doing was a problem, that it wn't wise. that they we running very hh risks. and forhatever reason they decid to sort oernight their sense of caution and plunge ahead anyhow. and they will be debated for years if not decades why so many people took the plunge. but i would argue at the end of the day that it wasn human nature that changed in 200 it was a financial system that the financial system had -- was channeling an absolute massive lot of money from around the world. it was cheap money and they were looking for slightly higher yield 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 encouraging, enticing, d roping in millions and millions of our borrowers who went ahead. as i say, some people had no idea of the true nature of the mortgages ey were taking. i think many have a sense of the risk they were taking and figured that they were going to get bailed out by the continuing rise, the rapid rise in @ousing prices and then some people like me who said this is crazy but, i have a plan and it can afford. whatever. different paths here but the enabling is the key thing that happened in this period, and at the end of the day i could you just have to place the blame for the catastrophe, the macrocatastrophe on what was going onn the financial institutions and frankly, with our regulators in washington, we were asleep at the switch for

sure. this book has generated a lot of reaction. i would say next to become mixed. i had gotten flooded by e-mail from borrowers, troubled meowners who thank meor writing it and sort of openg up because suddenly they didn't feel so alone, so ashamed, so lost in their own troubles, and that is acallyne kf the most by opening experiences for me after the book was published, after "the new york times" magazine published aexcerpt of that. i suenly realized, you know, the incredie array of people who had gotten in trouble and what kind of people they were because these people writing me,

many of them admitted of the that they had made huge mistakes, some of them had terrible luck. some of them had lost jobs had mecal problems, all kind of reasons. but most of them were very earnest, hard-working people who felt terrie about what they had don theswere not greedy or self-absorbed yuppie spding their mon snorting cocaine or buying the extra bmw. st of these glasswork middle class folks, may be lower middle class folks who, you kw, wanted a hou and wand something for their kids and they -- they even felt that it was pble,t was true with everybody was saying, this was the investment that could lose or some of the were afraid if they didn't buy it and iwas going to get worse and the house was going to get further out of reach. and i guess, younow, my own -- i ver asked anybody to have pity on me for my decisions.

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, d i think that it behooves us all go easy on the judgment plus some when you think about the millions of people who have gotten in trouble beause everybody has got a story, and they are sympathetic when you talk to them in perso the reaction i've gotten though as i said has been mixed. i will give you a sampling. i won't give you the long extended grants that have come my way but trust me i've gotten a lot of them directly through e-mail and in the blogosphere among the names i'veeen caed a loser, lawyer, and medish, jerk, dufus, fraud, irresponsible, greedy, selfish

andhe complete i am getting a lotately as i don't show. i guess they haven't used this word but i ashameless i think what you're saying. people are upset that i am not saying i am rry for what i did. and they are not seeing -- they are doing i am being accountable for my own decisions and that i should, you kw, i should like prostrate. i am plenty remorse for the decisions we mad i've had my credit score shoto hell. i've blown why savings. i will have a very tough time retiring -- i would be happy if i could retire by the age of 70 on any kindf income, and we may well los this house. so there's a lot to be sorry about, b i don't feel -- and

this is wt people -- what makes people mad idled like apologizing. however bad my judgment as a borrower was and however bad even the judgment of condo flippers might have been a appeals, absolutely pales in comparison with recklessness that was systematically undertaken by the biggest financial institutions in the untry, and i have yet to hear stan o'neill of merrill lynch port-au-prince, formerly of citigroup, apologize for the recklessness day on least. t we 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? okay. so what i would li to wrap up with here in t remaining minutes is the things i learned in the crse of working on this book that went beyond my own

personal saga. all of the -- or almost all of the public attention and the date about my book has been about whether i am a creep call me irresponsible, the light of it right, did i do it rall, those kind of questions. the real question is made horrendous jgment& that is obvious. i did. the question is why did eight to 10 million oro people at the same time make career this judgments -- horrendous judgments. the same people at any given time will borrow more than they should and get in trouble for it but it has never been thease that we have thisind of wreckage at one time. so many people, so overeended such aompressed riod of

time. and thatouldn't happen witht the lenders in theirms making all of that money available to people regardless of the rks they might entail. the question is what were they thinking. let's not assume they are crux necessarily, but what was the rationale and here is where i learned a lot. what i did with this book was try to report to the stories of my of lenders and to some extent the stories of the guice financing them. and the policy makers heren washington like alan greenspan much as i would like to dump on washington policy makers, the bush administration and greenspan, and i think that they all deserve a good measure of criticism and blame especially the fed frankly, i thi that the real issues are whatas going on in our financial

initutions and by word was really interesting. in short, two of -- i had three mortgages, i have had three mortgages. two of those three mortgage lenders crashed before i missed my first payment. they wt out of business before my first payment went late. and the stories behind them were interesting. the first mortgage lender is the one i would like to dwell on here. it is in chapter 3 my linder drinks the kooaid. i go into the story this is a coany called american home mortgage started in 1988 by guy named michael strauss. ve bright sort of mortgage broker type. he had built it up from a one-man operation in his apartment by the timi ce along with a lender bring aut 40 to $50 billion a year in mortgages. it peaked at about a rate of

about $60 billion a year in mogages. they were the tenth biggest mortgage lender in the united states. not countryide, but they viewed themlves as competitors to countrywide and wanted to chase them. they were not supplied lders. they are what was known in the business and still am alt-a lender meaning they were looking for borrowers to have good credit, but didn't want -- they waed to stretch and so these were t borrowers who had good credit and were nogoing to disclose the messy details of their finances for example how much that they mht have for their debt to income ratios. so they were specialists in no doc loans where you could state and in come and not documented or in my case not disclose the

income at all and just make the loan on the basis of the person's assetand credit ore. we know what happened with me. the interesting story about american home is as ty were growing and write about the time i became a customer in 2004 they made a big shift from being kind of traditional mtgage lenders, kind of -- norm conservatives too much more exotic alt-a camano dak stuff and they so decid that it wasn't good enough to make loans an sell them to wall street. let back up for just one second. the conventional sdom and it is true to a great extent what drove this mania to a great degree was wall street firms buying shoddy mortgages turning them into, pulling them into rities, mortgage-backed

securities and selling them to investors around the world and the rating agency'soard bless these securities with a ratings and have this enormous chine that god creat. all of that is true. but there is more to it because what happened in ameran mortgage casehey decide loans, we are making a good profit that isn'tood enough. we think these loans are worth a lot ando what we are going to do, we are going to hold them but the only way they can hold them because they were not really a bank with lots of assets tall the way they cou hold them is borromoy to hold them and so they did in 2004 is by a huge leveraged portfoliof their risky loans, specifically something called option arms which are by my reckoning the mostvil

mortgages created in the entire boom. sometimes known as period payment loans you could pay lots less than even minimum interest and hold on to your house. en you might or might not know is you are racking up thounds of dollars every mth in additional debt or deferred interest. anyway, american home mortgage decid they loved these loans so much and they were aggressive about making them they were going to borrow tons of money in ordero hold them said they had a 15 billion-dollar portfolio of these ans they we holding as an investment and they we leverad up about, you know, ten to one. no, i'm sorry. or like 15-1 at the height of things when they thought they figured out how this stuff worked. , when august, 2007 voyles

around and tha subprimal market has begun to include because desalt res or zooming up and in august 2007 as many of you will remember vividly this is when t credit markets did seize up. this is the beginning of the financial crisis, happene very fast. the rating agencies basically had acknowledged in mid july they had misread billionsnd billions, securities backed by subprimal loans and everybody began toanic. it was like the emperor s no clothes and people reized the jig was up so there's widespread panic. american home mortgage was out of business and a week. they were out of business and a weekecause the lenrs said you as an extra collateral here because the value is worth a lot less. this is amazing. you know, i fought with this was

all about was smart people figuring theyld gain the system and make a profit and know how to get out before the roof fell in and instead it turns out, and this was a great example, they got sucked into the media themselves. it's extraordinary. the smartoney was that smart, it was self-destctive for them and if you think about this, it happened all over e place. merrill lynch and morgan stanley and other firms or by an subprime mortgages lenders at top dollar in 2006 and eve in 07, eraordinary. and getting more and more leverage themselves. so, that was kindf an extraoinary thing that i'd learned d i still tohis day cannot decide wther some of

these institutions like merrill lynch or citigroup or american home mortgage were corrupted a crooked or just stupid. i go back and forth on this in my own head but i think it tells something about the nature of the media that we like nspiracy theories. we like to blame the big financial institutions at the top floor being the master manipulators they all are. but they can become victims of their own chicanery and in this case they did. they built their own propaganda and obviously have paid my plea for it. the other startling experience for me in reporting the story was not about me perce

i felt i needed to look up th question of how minorities d low-income people were targeted byendors because iwas pretty clear that members had gone very aggressively and systematically after hispanics and low-income black families as farorrowers have been ped into a very disproportionate share of b stuff what i did is went out to just right here in the washington areaanasseh said virginia which many of you may know is a hot spot, sort of a ground cero for foreclosures. it has had a huge hpanic migration and the forclosures were all over the place by 2007, 2008. i interviewed families. i just couldn't believe what i

was seeing. families, one faly in particular i met as they were signing the papers to le their house through a short sale. el salvador in family naturaliz american citizens had owned a house already. a 200,000-dollar or so profit on the housand was persuaded to sell it and buy a 700,000-dollar mcmansion, $700,000 mcmansion but on of these option arm loans not knowing how they worked. and when i met them, they were not only giving up the house. they had lost the $70,000 down payment they had made and all of their life savings and had to start from scratch. they moved int tiny little two-bedroom cottage in downtown

manassas and were trying to coup from there it turned out there were lotsf stories like that there and in countless other commnities. it is a story we know, but when you get up close and personal it is still shocking how horrendous this was, and it was lenders recruiting and i this case spanish-speaking brokers giving them great incentives for crazy loans and on and on but it was very systematic. and it turns out wheyolook to the academic literature or the government lerature about the pattern of some prime lending not just the last couple of years, but since the late 1990's studyfter study after study has shown any income level for example blacks or two to three mes likely than whites to be in subpar loans.

maybe some of that is about credit scores, but there are too manytudies coming up with the same rults to let you believe that there isn't -- the wasn't somethg really nasty and concerted about praying on the most, preying on vulnerable people whoere not in the position to evaluate some of these mortgages well. people who were struggling with the english language media didn't have college educations, what ever. but the data on the disprortionate patterns in sub prime lending which is the easiest thing to asure, not the only kind of baloan but the data othdisproportionate percentage of loanoing to people outside the mainstream and vulnerable it is shocking,

and it was ignored. it was ignored for years. people in the housing cgmmunities, advocacy groups had en complaining about this for years. it wasn't a secret and it was ignored and i just think that's a dreadful shocking shameful piece of biness iope we deal with. just ran out of time so please let me open up for questions. >> i have two questions. one is about the past one is about the future. the one about the past is i don't understand how the federal government missed this for so long. we bought our first and only house in 1980. anplus a developme down in world war to come 1800 square feet, small boutwell don, well located. we've had $150,000 i thought

that was the absolute top of the market. five years before that it had been $75,000, 1940 it was 17. when it was assessed, not appraised but assessed for $850,000.1800 sq. feet small brick house on a little plot that was czy. housing prices were going like this and in ces were absolutely flat. so at some pot there were not enough people to afford the houses that were held there at the pres that were ere and the prices will continue to drop until there are enough people who can afford to buy them. the qution i have is for the future and that is all thi capital, the best use that could be found plus to invest in these surime mortgages basically nonproductive assets when ere are jobless people and a billion

poor people in the wor this is the best thing our system could find to invest in? 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. this money was flowing from around the world. they were begging for someplace to earn a higher return and this was the seemingly perfe ge of secured lending at a slightly higher yield. it was a figment of our imagination. >> doesn't that suggest there is something all of the citol allocation system? that is a, quote, capital mket where the capitol ends up? it doesn't producenying. >> while, clearly we had a huge problem in capit allocation in this country. how you try to fix that is kind of over my pay grade. [laughter] >> a very important question. >> i will just say one of the

things also struck home with me is something that really knawed at me. by a lot of historical statistical measures, housing prices were getting out of line with historical relationshipso income starting about 1998. by two thus three, 2004, i think by 2004 shortly houses prices on average had risen about 40% beyond inflation. and as you say, family income for thet part were flat throughhat period so you have familier been stretched more and houses going up more. itouldn't go on, couldn' possibly and there were lots of people pointing this out. merrill lyn, god help them, their chief economist david rosenberg publied a series of

pamphlets in 2004 and mbe even as early as 2003. e had a picture of a hse with baubles and he made the case statistically this is a bqbb in 2004. nobody wanted to corre the bubble. the fed had a view you didn't know a doubluntil it burst. you didn't want to second-guess the investors and any wayt would be easr to clean up the ss afterwards the and to try to stop the exodus of behavior in the course of it. i think that we have now learned that was about calcutionnd i am guessing that chairman bernankes revisiting quite gressively. in fact i think that he said that. but one of the astonishing things here is th on me levels it was perfectly obvious there was a housing bill which

meant this couldnly en in ars and it was ignored. >> thank you. >> thank you for the account that makes this analysis compling for many rsons. i have a question similar to the previous about the future and it's about regulation. in this cotry when we talk about mortgages and personal finae we bacally are talking about consumer protection, the sort of ralph nader airbags smoking kills you but everye keeps doi it sort of tax stuff a lot of politicians in this country seem to enjoy a mocking organizing what we call the european welfare sta or e nanny state to put it more succinctly. european attempts to protect consumers seem to be while massively in perfect much more

thorough than a great deal of regulation in this country with regard to nsumers from the amateur knowledge of the topic i knowour background is in german covering macroeconomic policy for the times. i wondered if you had a sense of whether america and europe are of fundamental different policies regarding consumer protection and whether that, if it is true af those policies could ever meet again. does america have a fure as a leader in consumer protection? [laughter] >> i wish. you know, i have to admit i can't draw a good accurate comparison between our attempt or lack of attempted consumer regulation and what germany or other european countries are doing. germany didn't have a house in kabul but a t of european countries did. but i don't think that it was fuelled by the same kind of mortgages hours work. mauney view is i am not big on

financial education. there'lot of talk about the need for greater financial education if people were more literate about the moptgages they were taking out we wouldn't havehese problems. i think that is probably wishful thinking. i think most people -- it's not rocket science to understand the basic nature of a normal mortgage. and i think -- i truly think that most people have a rough idea what is going on with their mortgage. maybe engaging in wishful thinking but what was happeng here is i think about emotional excess, speculative euphoria, thin like that that you could have all the financial literacy the world and didn't care at that point, they were going to go for it. so what i think is the lesson of th is you just have to have the government be in their proactively to say certain kinds of practices are not allowed,

period. they are too dangerous and we don't care iyou are an adult or. there are certain products that should not be allowed. and i don't think it is that hard to regulators were there was during the apollo especially the don't want to stifle financial innovation. nonsense. the bedrock principle. one key one isou do not len money to a bar without a demonstrated realistic calculation of that persos ability to pay the loan and in a lot of ways a number of ways we completely -- it wasn't just he could get along without a documented in come. you could also get qualified for an outrageously biloan based on t teaser rate, the low teaser rate he paid the first two years. well, that's nuts.

you know with those kind of loans your monthly payment is going to get very high after a couple of years, option arms. a family iisited in manassas virginia they were paying $2,800 a month, that was the minimum payment and they we racking up $3,000 a month and deferred interest. this is, and they qualified for that loan on the basis of the initial minimum paymts. this is inexcusable nonsense and it's very easy to just put a stop to it. and so i think there is a common sense element to this that we remember there is just that on principle, the ability to repay, invoking the principal with salt, would have prevented an awful lot of this nightmare, and doesn't mean that you

perfectly identify what this war were can repay and wt that one can but you have rough guide lines that are pretty valid, conservative and, you know, the harm caused by lost opportunities andinancial innovation is sllompared to the harlem that would be done millions of people going bankrupt as a result. so, i think we are going to go down that road. the fed is actually already ge e way toward putting the caboshed on those and mortgages. you can't get one if you want one but eventually it will be possible and we have to address that issue, and i sure hope that we get away from this notion that we don't interfere with consenting adults. i think we have to. >> hello. so, i have a question. you said you interviewed alan

greenspan. i would like to quickly raise the question you said he didn't accept fault for any effort is going on right now. basically the way i want to frame this is housing prices are a function of two things. salary and here is a tight controls both of those things. so the fed, i am sure everybody has heard on tv they can bump up of the weight of thenterest rate and the market reacts to that. so if he controls the interest rates you can borrow the money supply and i think he's been quoted as saying credit the fault swaps actlly decreased the risk to the market and he admitted -- >> alan greenspan has in the pas year or so said credit be called swaps and those kind of derivatives should have been regulated. the need to be regulated and he admitted in a very heartfelt way before a house committee that

what he thought was kind of an unshakable tth. a rational self-interest would keep thing and had been proven wrong aleast in that kind of context. but to answer your question, again alan greenspan does not believe that he or the fed should be blamed for much of the catastrophe. there are two lines of criticism. one that the fed during the tenure left interest rates we too low for too long there for fuelling more of the housing bobble and rising housing prices and the other line of criticism is the fed had the authority already to rein in and ban mortgage practices that had considered to be on a fair or deceitful, and absolute we h the authoty to block the kind

of loans i'm talking about here and the proof of that of course is preceded to do that after the catastrophe already happened. >> so bacally he just said thatrom i guess in your awer basically the self-interest doesn't work but he admits none ofhat. >> in a narrowontext i still don't ink that mr. greenspan is in any way a fan of regulation and i think that he put of wade it in most cases still. that is a debate that we will have going forward. >> thankou. >> we have time for three more people here. >> you are to be congratulated r coming forward like this. you should run for president. >> there a good idea. [laughter] the reason i say that is you haven't mentioned the busines schools and we had a president

who had a business school education and that didn't seem to help. what advice woul you give people in the business sools to prevent something like this from happening? >> you know it's funny y ould ask that. about a month and a half ago i was invited to speak to a conference, business school deans. and the scho a dartmouth is the one who invited me and he said, you know, the problem isn't that we were teaching them the wrong models for all of these securitizations and risk. the problem is they were no understanding whatur models were all about. [laughter] which i am sorry and i like the man of what, i think that is bologna. i do thinc that is bologna. the business schools were absolutely crucial in a

developing @ lot of the squirrely models used to structure subprimal mortgage-backed securities, and it was interesting in that experience i am just shaking my ad at ain the denial of responsibility i guess we all dthat and a lot of people accuse me wt ever. but yes, point well taken. i think they need to think about the point i't that all these clever tactics the develop in business schools are bad but ere is an assumption that quantitative stuff has a sor of certainty that it doesn't and, you know, t true caution was never brought into it. everything about teachg i thk was gravitating towds the idea we can come up with

great ideas, and they e great and not so much attention to the limitations. >> thank you. >> i wand to uch on the sue you just mentioned a little bitbout the ankle. i think you said a lot of readers are frustrated with you and have been commenting negatively and i think one of the issues that sparked that is with respect to your story there are other spending decisions you mentioned yourself that were irresponsible and i think there was a trip to a beach hou or somethg like that and you indicated you and your wife were not quite the same page about the seriousness of the problem at 13 or another. i guess y were sortf bothering about money and she was like stop borrowing me about the mauney questions and so the question comes more to being -- we see easy credit everywhere and being manipulated and

misused by borrowers sense of entitlement like i might not earn money for this but i deserve it. and we see that with, you know, cars we can borr for cars. i think 90% of cars are bought on financing now and a lot of times under very bad terms for the hour work but simply because you can ma the payment you get there and we have achieved an indebtedness that rivals the great depression. both in your own circumstance and as farorse, shouldn't we be pointing out a cultural shift we need to make as a sort of consumers shouldn't we be chasing ourselves towards more responsibility? >> i couldn't agree more. my feeling is that we had -- this crisis was t an isolat even. this is the culmination of a trenunderway at least 25 years toward ever more clever and extensive borrowing and higher and higher in de but this --

indebtedness. it's not to say that browing is bad or that debt is that per say but we could 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 overextended. and here is where i would agree probably with alan greenspan that the solution is probably in the problem itself having been through this w knowight now saving rates have st up to levels we haven't seen in a long time five, 6%. they will probably stay high gear for a while. so having been through this, i feel we a in the midst of a cultural shift rightow, and that's a good thing in the long haul, much-needed. it is a bad thing in the short

term. i think we will have a vy troubled economy because consumers are rrenching, rebuilding, repenting. thank you. >> i want to thank you for your candid news in the book and being so open about and now having written about the economy and having kind experienced it yourself, there's a lot of -- there's a lot of frustration among people out the fact that the people who are fixing the problem are some of the people who've got us into the problem and there's a lot of different theories -- >> [inaudible] >> there's a lot of the race from people in academia, paul krugman comes to mind and yo have got people who have been in the field many years and may not have a noble prize in economics or ph.d. but you know they have been experts and anyway there is a lot of the kind of sort of

academia versus experience question if you know what i mean, like which, which sideo you fall one? do you feel like people who have been doi the research a have tten like the education, that they are more expert and should fix this or is this kind of the rdsponsibility of the people who know how it works now that you have experienced it yourself and people who have had their hands in the trenches so to speak? this that makes sense? >> it's a good questionnd it's a hard question because you are exactly right. that the people that are trying to deal with a crisis right now and x these problems were deeply involved in creating the crisis in the first place. they are the experts. they are the expts. they know where the bodies are buried and how these things work so you have to have somebody that understands what is going on here. it's a hard problem to get out of.

and -- but i think that t way that people could think about it is, you know, it's not actually that complicated. it is complicated on a granular level how the securities work. but the basic issue stirred ut to be not so complicated. the more you lk at how the rating agencies conjure up trouble agencies for all of these mortgages you reaze the conceptual areasre once you realize what they were a sth grad will understd them. okay, i think government and sort of public institutions because you have industry institutions and accountin board and people like tt don't need to be so timid about questioning what it is the industry is doing. and i think public officials

will no question about it be a lot more independent and rigorous and maybe even combative in questioning some of the sches coming up, but i'v got toell you one of the things tt might be a bad indicator is that the banking industry is i think having a lot of success protecting the derivatives market from too much regulation, and i am not, again, i am not against financial derivatives which to help hedge risk and so forth, but these products work -- d make the mess a lot worse and they were outrageous when we finally understood what was going on with the credit be felt swaps at places like aei