>> as dorothy put it to me, i truly bought into the idea that the education is the way out of poverty. it just seemed like basic commonsense that the nicer areas would have been better schools. it doesn't take a rocket scientist to figure out if your kids are going to school with kids who are preprogrammed to go to college, that's what they will expect. dorothy succeeded and her oldest daughter actually got a masters

in education and is now a public school teacher in hawaii and her youngest daughter began college last fall. but dorothy ended up paying a really steep price for how she went about this. she fell behind on some bills and in 2006 she was driving through san jose california and a cop pulled her over and noticed she hadn't paid a $10 fine on her car. towed her car and without her car she lost her job and without her wages she couldn't pay her rent so she had to move out of san jose and into a dilapidated rental with a friend in oakland on a street they called crack avenue and they didn't realize it but the landlord there wasn't paying his bills. they realized that when their water and electricity was turned off and the foreclosure notice came and by the middle of 2008, dorothy thomas, the mother with

two girls was living in a homeless shelter. when i first met dorothy in 2008 she was going to a job center in oakland trying to figure up if it was worth coming up with the train and bus fare to get there in a time of soaring unemployment because now the financial crisis had spread far beyond subprime and wall street. it was hitting everyone. and even healthy companies were terrified that they would lose access to credit or that their customers would lose access to customers and they were trying to cut costs as quickly as they could and they simply were not hiring so dorothy who had never lacked for a job was sending out applications and not getting any responses and starting to grow really depressed, beginning to fear that she might never work begun. -- again. at one point she got a job and her would-be employer checked her credit and discovered she had bad credit and turned her down on that basis.

dorothy made some bad choices. there was some very bad judgment which goes into explaining how this happened. and, in fact, in almost recounting of any individual financial disaster, it seems pretty obvious that we can quickly find decisions that should have been made differently, poor judgment. but the real question is, how did so many americans come to land in such trouble? how did so many people come to confront these terrible choices where almost any choice would have been a bad one? and how did so many people end up in such disastrous circumstances? well, the answer is, that too many people long before this recession were living in close proximity to disaster and let me throw one other number at you. heading into this recession, nearly half the country had liquid assets of $5,000 or less. you think about that for a second. that means that nearly half the country went into what has proven to be the longest,

nastiest economic downturn since the great depression in a position where one bad unexpected piece of news, a divorce, an illness, a lost job amounted to not just a hard circumstance but a catastrophic circumstance. and even people with means had come to rely on credit to a unhealthy degree through a combination of economic insecurity and the seemingly bottomless availability of easy money. the neverland credit bubble of the last decade was more than an economic event it really saturated our culture. it made work and budgeting come to seem almost like anachronisms for people who weren't collude in, you know, to the ability to go to a dinner party and come home with a nasdaq stock tip in 1998, buy it on monday morning and sell it on monday afternoon and, you know, book 100% profit or later, you know, the glories of flipping a real estate. one major character in my book

an mba in boston and she nearly lost her home to foreclosure last year. she'd used up her stock portfolio which at one point reached $1 million and she borrowed so much on her home that she was under water. she owed the bank more than her home was worth so she couldn't refinance and the payments spiked on a mortgage that she really didn't understand and she found herself no longer able to make the payments. she'd spent all of this money as she recovered from a series of surgeries which required her to miss work and she paid for expensive after-school programs for her two sons who suffered learning disabilities and for high quality produce at whole foods. she had never bothered to square her outlays against the limits of her income because it had never seemed necessary. as she put it to me, the money was always there. and not just for her but for millions of other americans.

so much so -- so that again the cultural norms shifted and in a time in which you could trade stocks and tap your stock portfolio seemingly infinitely at a time when home equity lines of credit offers were coming into her mailbox day after day, who could turn down help for a child who was having a hard time reading? who could fail to put good food on the table when everyone you knew seemingly was turning the cash in their home into cash in hand and when people like alan greenspan who were telling us variable rate mortgages was good innovation, why would we waste our money making higher payments on 30-year fixed mortgages. this is where the culture was. and it would have taken real willpower that most of us lack to go against the grain when there are needs and wants combined and the money is there. and let's remember that living on borrowed money had become the

organizing principle of american economic reality, not just in ordinary households like fran and dorothy's but at the capitol and the treasury. american society had depend on the continuing largesse of our foreign creditors not least on china. we've been able to spend far more than we earn as a society because the american consumer has been the engine of growth, not just here but around the globe. and, in essence, we've saved too little and we've spent too much. we bought up a lot of chinese-made goods and that's create a lot of crucial factory jobs in china for chinese workers. china has kept this going, this co dependence because it worked for china. and they sent the goods back to us to finance our goods, buying up a stock of treasury bonds and other dollar denominated assets that are worth about $2

trillion. this money has been a crucial means of allowing americans to live far in excess of our incomes. chinese purchases of american debt have kept interest rates in this country much lower than they would have otherwise have been and it enabled all these funny money mortgages it drove prices high and allowed people to borrow against their home prices so they could go to the mall and buy more chinese-made goods, among other things. but the world has changed in crucial ways as a result of our crisis. and so has the american place in the world which means we've got to figure out a way to break this cycle of codependence and grow our way out of this mess ourselves and not simply depend upon the continued largesse of foreign creditors as if we as a country are too big to fail. confidence in our financial system and our regulatory structure has been shaken in what looked like enviable financial innovation in many financial centers around the

globe. now looks increasingly like never land. financial voodoo if you will enabled by a gross abdication of regulatory authority. for those who have been financing our debts not just the people's republic of china but also central bankers of saudi arabia, in japan, and elsewhere, while the u.s. still remains perhaps the dominant preserve or national savings but it no longer seems quite the unshakeable paragon that it once did and this suggests that we may see a continuation of a marginal shift, a marginal shift away from the dollar into other currencies into investments elsewhere. there are also significant forces at play inside china that make it less likely that we can just simply depend on the money continuing to flow this way and continuing to bail us out of our credit excesses, not along the coast the fact that so many american households are now so strapped that we're not going to

the mall buying as many chinese-made goods as we used to and that means china has fewer dollars to send back to us by buying up our debt. but also china is increasingly focusing on its domestic needs. and three decades of marketing-embracing reforms have delivered staggering growth but they've en sown economic insecurity turning a country in which everything was once socialized into one where individual wealth is possible but layoffs are also rampant and healthcare and education are for those who can pay. now, china may not be a democracy but it has domestic, political pressures the same as any country and it has not escaped the notice of china's people or china's policymakers that many of the fruits of the labor of chinese workers have been essentially exported abroad. i mean, in using the american treasury as a kind of safe deposit box for their national savings, chinese's leaders, in essence, have construct empty

waterfront condos in florida or in the pearl district for that matter while neglecting the often delap dated the apartment blocks in which hundreds of millions of chinese people live. that simply can't go on forever. we simply can't imagine a circumstance with a still developing country continues to export the product of its labor, its savings, its capital to a very, very wealthy country. and for that reason, china's likely to begin directing more and more of its capital to developing its own country. i want to be careful. i'm not predicting any kind of dollar when we're talking about other countries. but the marginal change can also be meaningful and what i am saying is that we best prepare now on our own terms for how we're going to wean ourselves off of this credit arrangement and grow our way out of our troubles for ourselves. we have to make plans to grow our way out by designing new

products and crafting new services that we can sell at home and around the world to sustain us going forward. peter pan never leaves neverland, but americans don't of that luxury. and we've run out of fairy dust or we may soon run out of fairy dust on somebody else's terms if we're not careful. we have to replace our ceaseless pursuit with hard work, patience and innovation. how do we do that. how do we best exploit this crisis extracting from the function of our country with an opportunity to come out stronger? in the short term, we're going to hear debate over the potential need for another dose of stimulus spending, perhaps one that's focused on large scale construction job. this is classic keynesian economics when demand for goods and services is weak, the government steps in with public dollars to substitute for that demand. this was the rationale for the new deal. after the great depression, this

was the rationale for the $800 billion stimulus package that we got earlier this year. that package included an extension of unemployment benefits, food stamps, tax cuts for businesses and aid for states and local governments which have been hit hard by shrinking tax revenues. well, when the white house put together that package, it told us without that spending, the official -- excuse me, with that spending, the official unemployment rate might reach 8.9% by the end of this year. well, here we are not yet through the year and the unemployment rate is already in double digits. the highest level in 26 years and among the worst hit groups joblessness is at depression levels with african-american men suffering an official unemployment rate of 17%. for all working people the so-called underemployment rate which counts people who have given up looking for jobs, people who are working part-time jobs for lack of full-time jobs, people who have seen their hours

cut, that's 17.5%. which is the highest level on record. so clearly over the next few months as we run the risk of the worst recorded unemployment level since the deposition we're going to hear more voices calling for more stimulus spending and here too one can argue that the obama administration has helped pin itself in in terms of of the available measures by talking up fears of growing federal budget deficits with some analysts forecasting deficits that could swell by $9 trillion over the the next decade. the deficit is a terrible problem. there is no question about that. it's one that has to be addressed. and if we don't get a handle on our deficits, the government could be forced to print too much money to pay its bills which could eventually lead to inflation, foreign creditors like china could grow fearful that we can't really pay them back and we'll reach a point where they don't want to send us

intrinsically useful things like electronics with these debatable useful things with groan pieces of paper with pictures of dead presidents on them and that could be very bad. if our foreign creditors quickly lost confidence in our ability to pay them back, they could demand much higher interest rates to refinance our debts and those interest rates would ripple through our economy and put a real break on economic growth and we'd be in a tough spot. so shrinking the deficit is almost certainly going to mean limiting our government spending at some point and likely raising taxes but the question is when and how? and some economists argue that if we focus too much on limiting spending now, fearful of exacerbating the deficit, and we hold back on spending more public dollars to generate jobs, then we run the risk of many years of weak economic growth. which could ultimately lead to bigger deficits down the road which could put us right in the same pickle where foreign creditors could say well, if you're not growing, how are you going to pay us back?

whereas, if we stimulate the economy and we increase business opportunities that employ more people more quickly and those people go out and spend money, then that could lead to greater tax collections down the road and that could limit the deficit. in signaling concern with the deficit, president obama in retrospect appears to have handed the republicans a tool to use against him unwittingly impeding many of his champion programs from expanding healthcare to the debate over stimulus spending. had the president simply signaled that he would be willing to do whatever it took to get the economy moving again in the short term, he might have noticed the deficits are largely the function of an iraq war that was unpopular that was run off-budget and tax cuts handed out to some of the very richest americans while arguing that we're spending money now to put people back to work so that we can shrink the deficit later. so that's the debate over

stimulus which we're going to continue to hear. but the ultimate question, the one i want to end with, how in the years and decades to come can we create the many jobs, the sorts of jobs that are needed to limit the temptation to once again avail ourselves of fairy dust? and in simplest terms we have to identify what we do well. we have to expand on it. we have to identify our core strengths in the global economy and this really represents a healthy return to reality. i mean, we've lost touch with our core strengths. we used to take our hard work and our innovation and our natural resources and devote them to creating things that were intrinsically useful. and we paid workers in factories to make appliances and cars and you paid them enough so that they could enjoy their things in their own lives and now we've essentially taken those same cultural attributes and we've made credit default swaps.

we need to get back to focusing on goods and services of real intrinsic value, public dollars have to be targeted at research institutions to increase our know-how in promising industries and incentives have to be given to private entrepreneurs who are still the key to the deal. so that they will take the ideas that come out of our research institutions and turn them into ventures that will employ people. we already have examples of how this public/private partnership can work. consider the internet which despite the technology boom clearly has changed our economy in many ways for the better and has generated real sustainable businesses giving us things that we really value. where are the next such advances? certainly renewable energy is among the most promising areas given the rising concern of global warming, many states demand utilities by increasing shares of their energy stocks from clean suppliers such as coal and wind power and that creates a market and you have to build this gear somewhere.

wind turbines are big, expensive to ship them and some places have already succeeded in replacing lost rust belt jobs with new jobs, building things like wind turbines. in my book i detail the case of newton, iowa, which is a little town east of des moines where maytaged was headquartered, you know, for decades providing precisely the sorts of jobs whose loss is most striking to us today. jobs where people only add high school diploma could work hard, make something of value, earn enough to buy a home, have a car, have a retirement, go on vacation. and when maytag shut down two years ago, that took about 2,000 jobs out of an economy of roughly 16,000 people. well, within a year, newton had found 700 new jobs. they exploited the fact that iowa was on the great plains, the so-called saudi arabia of wind. recognized that a lot of wind farms were going to be built

within a 5 or 600-mile radius of their town and there was good transportation and they enticed a maker of blades to come in and a maker of towers to hold the turbines above the ground and, you know, pretty quickly there were some good jobs in that town. the life sciences, another promising area. consider the case of north carolina, which is in recent years lost a lot of textile and furniture-making and tobacco jobs. and has directed a lot of funding to research institutions creating one of the largest and most important bio tech centers in the centers. i met a woman named rerega whitiker who right out of high school went to work in a textile plant and as production started to shift to latin america and asia, she started to get nervous that she was going to lose her job and she took advantage of a new training program that north carolina created for workers like her to train her for an entry level job in biotech and when i met her she was working

as a lab technician at a company, a biotech company spun off from rj reynolds and now they're using it and repurposing it to use the term of art to try to attack alzheimer's. well, this is precisely the sort of transformation that our whole country has to go through. and i want to note, though, that we don't necessarily need the next big thing to be a big thing. and we should remember that constantly looking for that next big thing is partially how we got in this mess that we're in. it could be that the next big thing involves simply taking our innovation and directing it at areas of our economy that we're already familiar with and we're already like making them better. portland where we're all sitting tonight has proven particularly

successful at doing precisely that. if anyone goes out to search for a microbrew can attest or look for the value of agricultural real estate like the valley which produced commodity crops -- i was talking to an economist actually in portland a couple months ago, you know, think about what you would pay if you went into the grocery store and bought a bottle of usda standard american red wine. but will you pay for pinot noir grown in the valley, considerably more. that's the transformation that we could apply to lots of other areas from, you know, how you connect -- excuse me, how you connect to your computer to your music library to your stereo system to improving the aesthetics of green lighting to our transportation networks. so there's no question if you've been chastened by this crisis and our values have been challenged and our weaknesses have been exposed.

the traditional promise of american middle class have been upended for millions of people and economic insecurity is certainly the dominant motif in many households. but it's also true that we still possess considerable resources. we are no less creative, hard-working, or resourceful than we were before this crisis. and if we can get our incentives straight, if we can bring some sensible introduction bear on our financial system. if we can invest in the sorts of innovative industries that offer potential for job growth and get back to our traditional focus on goods and services of genuine value, we might come out of this crisis stronger than before. well, thanks very much for listening. [applause] >> thanks again to peter -- am i on here? am i on? flip these on.

hold on a second here. i need to turn two mics on. the other one is on. so again thanks very much. copies of peter's book -- he was nice enough not to point out for sale outside after the election and we're going to end about 8:30 and give peter a few minutes to speak one-on-one and give opportunities to sign a few books. so as i said already, if people would be willing to line up stage right and so people over here will have to move around, i'll take the moderator's opportunity to ask the first question while people move in this very tight seating arrangement. so peter, you paint a compelling portrait of alan greenspan as peter pan and larry summers as his lost boys. and there was a slightly different picture. a particularly vicious business cycle that we're in right now.

and, of course, he did lay much of the blame in where we are right now on the chicago school of economics write went as an undergrad i might say and some overly complex financial models which aren't working very well. but i do think that he thought the current version of larry summers perhaps like robin williams in the more recent version of hook is now much more grounded. he has a family. he owns a house. and he doesn't believe anymore in pixie dust i'm wondering do we believe your own version of larry summers or do we believe the other? >> i think larry summers has certainly had his views altered by the crisis. and, in fact, at the conference that i was alluding to earlier, he said, if i remember this correctly, he likened it to the impact of the cubin missile crisis on the need for serious nuclear disarmament. so there's no question that

larry summers has been frightened and is now out making the pitch for reform of the financial regulatory system. i just think that it's also true that if you look at the details of what's coming out of our treasury, and if you look at what the administration is saying about the bills that are on the table in washington, there's still some vestiges of the market fundamentalism that we should have lost by now. this idea that, first of all, the business cycle functions the way it's always functioned and we don't need to do too much because, you know, simply by labelling what we've gone throw a recession that means soon we'll come out of it and jobs will come back but in terms of financial regulations in particular, there's still this willingness to heed the warnings of the people running financial institutions that, you know, don't hit us with too many of

these rules or we're not going to be able to compete in a global arena. moreover, i haven't heard larry summers say anything that dismisses that financial services should continue to be the key piece of our economy while things like manufacturing, which certainly are not the answer but are part of the answer are, you know, dull and old-fashioned and dirty, and that's -- that mindset, this reverence for financial services in this view that sort of innovation, you know, can't be interfered with, that could get us into trouble because the details matter, you know. whatever congress passes, there are going to be very well paid, very smart lawyers working for financial institutions that are still playing with trillions of dollars that are going to look for loopholes. so we better make sure we get the details right. a question over here. >> yes, so my question is

there's evidence that all of the -- well, identity possible that all the messing around with the finances of the united states is -- all the countries might not finance the debt of the united states. but from the recent crisis it's evident that china was hurt, seriously hurt. europe was hurt. and they step out and give us the money. sort of in the same way that aig got the money. so -- i mean, from the crisis china was -- the unemployment grew and, you know, their g.d.p. slowed down seriously. so the world kind of like has shown us that they are willing to bail us out the same way that the government showed to aig they are too big to fail. so i have a problem here and i just don't know -- i haven't made up my mind, but i think, you know, why to change their behavior of the -- why to lower our income and ability to buy

things if that is going to, you know, evidently that's going to hurt china if our -- you know, you're suggesting that we should kind of slow down our consumption. that's not in the best interest of a lot of countries out there. china depends on us -- >> i'm not suggesting we can't count on, you know, an unlimited supply of credit from china. what i'm saying it's somewhere between here and infinity is a point at which any rational creditor will say, you know, that's just too much. now, that point could be far off. that point could be decades from now. how much are you willing to bet and are you willing to bet our living standards against the possibility of a shock if -- you know, just to give you an unlikely but not impossible example. china decides that -- china owns $2 trillion in assets. so there's no question that china will not see it in its interest to the anything that

risks, you know, a precipitous plunge in the value of the dollar. however, let's suppose there's an act of terrorism that convinces the saudis that they face the threat that fundamentalists in their own country will continue to ratchet up the pressure so long as they continue to bankroll the heathen in america and china processes this and says, you know, it now seems possible that the saudis are going to start selling the dollar, well, we better get out in front of it. now, i'm not saying this is a likely scenario at all. i'm simply say that you can't rule out that sort of scenario. and given that that's so -- and given that we're sending china fewer dollars to fold into our treasuries because we're not consuming as much, we are vulnerable on some level we are vulnerable to a crisis. not of our own choosing. and that argues for figuring out a way to limit our dependence. now, you also say, you know, china has suffered, too.

well, i do want to point out that china earlier than anybody came up with a $586 billion stimulus in large part because china doesn't suffer the problem of having, you know, pundits on foxes saying you are you guys are communists. that's not a problem in the republic of china. we have a political problem -- >> i understand. i'm from cuba and i understand what the communists -- how it works. but my question is more about how -- i mean, i think it's safe for -- it makes sense from a rational point of view for the united states and their finances, their financiers not to change their behavior because the world eventually would like the americans to keep consuming the way they are. and they kind of like the idea and it has been for -- you said it, the united states has been the engine of the entire world's

economy. >> so it made sense for people with bernie madoff to find more investors in the fund because as long as the ponzi scheme worked it worked well for everyone. i'm not suggesting our entire economy is a ponzi scheme but i am suggesting. [laughter] >> that we better find out on our own terms not to live at the behest of our foreign creditors. >> i understand you're an economist and not a sociologist. >> and i'm not a ph.d. so i better not call myself any of this. yeah. >> but how is it that you can convince americans who for so long have been used to the whole -- the next big thing will get me a lot of money and i can buy the giant house up on the hill that all my neighbors will envy. how do you tell that person or these people that that isn't going to work anymore. and that you have to actually budget and you have to get an education and go where the jobs

are and convince them again, i guess, that they have to work more to get their money as opposed to just assume that money is there for them for the taking? >> i guess for that sense i guess i'm with the laissez-faire proponents that the market is working. the market is depriving a lot of people by credit to buying things they are accustomed to buying that they can't really afford. that's happening. i guess i object to this frame that we're here because lots of people went and bought the house on a hill. yeah, that happened to a degree but what happened that was much more important was people who knew fully that they were signing off on mortgages that, you know, didn't really make a lot of sense, paying housing prices that didn't make a lot of sense to them felt like, you know, my kids are of school age. i got to get my kids in school. this is what house prices cost because, you know, if you were in san diego or miami in 2006 and your kids got to be school

age and you had to go out and deal even with the rental market, you are looking at asset prices that were wildly inflated by, you know, cheap interest rates, courtesy of alan greenspan at the fed, by all of these funny money mortgages by the inflow of china that drove asset prices up to the wild levels where the only way you could buy them was an interest-only mortgage or a variable-only mortgage and there was awareness not in every household, obviously, but there were certainly an awareness of some households that could make sense but what was the alternative? and so ultimately it's about fixing the alternatives. it's about enabling people to live within the confines of a paycheck at the same time that the culture does change in reaction to, you know, the tighter credit that we're likely to have going forward. thank you. >> we have the next question.

>> yes, regarding the ratings agencies, you were mentioning they were bribed and i was wondering -- i've also heard the alternate perspective that they -- their value at risk bundles simply were too short term in assessing variance similar to long testimony management, black box, do you think that was intentional? >> we know that large financial institutions were annual to go in moody's and s & p -- i mean, to pick two large credit rating agencies and actually have their people participate in the structuring of the securitized investments. i mean, the pooling of mortgages, many of them subprime mortgages, mixed with other mortgages, sliced into tranches, sold around the globe as these, you know, mortgage-backed securities that we heard so much about. and the people working at the rating agencies were actually

hired, you know, paid for by the sellers of these bonds to, you know, help them. how do i get a aaa rating? well, we'll show you? i mean, there's an engineering going on. there wasn't a real, you know, merits-based attempt to get to the bottom of risk. now, one of the things that's kind of surprising in the debate about financial regulatory reform is that nobody has discussed -- you know, we heard about the public option in healthcare debate. what's the public option in the credit rating agency for me? i mean, we're having this debate well, who should pay for the credit rating agency? shouldn't we follow a model where the buyer of the bond pays because they'll have a greater incentive to, you know, really pay attention to the risk. maybe. there's one thing we've learned from this crisis is that nobody on wall street gets paid for saying no. you get paid for finding a way to say yes. so you could be a buyer of the bond so that you could finance whatever deal you got going so you could put out a press release saying you've done a deal so your stock pricing can

go up so you can sell your stock options and make money and you want to come up with a reason to buy that bond. now, we're all exposed to this financial system whether we like it or not. i mean, we're exposed most of us through our 401ks or if we're lucky enough to have a pension, we live a state in the united states where, you know, state finances are tied up in complex finance and ultimately we're all connected because when there's a financial crisis, it hits the job market which is the one place where everybody hopefully participates and that's an argument for having a government entity actually looking at the risk that's inherent in the stuff that's being traded. it struck me that -- i just find it really interested that's not something that seems to have gotten any traction. >> i'm just wondering if the silver bullet of 100% cost credit for net new employees to

spur job growth seems -- >> yeah, i mean, it seems like something like that has a good shot. i mean, we're hearing a lot about job creation now from the obama administration and given what i was saying earlier about the deficit, that's one way to spend a little bit of money to maybe get a little extra hiring, though, there's -- there's real debate over how well that would work and how sustainable it would be. yeah. >> regarding the markets that you were mentioning a few minutes ago, i'm wondering about the activity by the federal reserve as well as the stimulus funding and what you think about what an appropriate way of unwinding those positions would be to avoid either a market crash versus, you know, concern of creating a new bubble based off again easy money? >> yeah, in that's a great question. the fed does not seem particularly concerned yet about inflation. i mean, in the immediate term. there's still concern about

deflation, you know, too much excess capacity in our economy and not enough money chasing the capacity to generate goods. and so that argues for -- and i think chairman bernanke's comments the other day about the medium term picture consistent with that, that argues for the fed not unwinding those positions anytime soon but certainly the day is going to come where the fed decides, okay, this recovery is now sustainable and we're going to have to remove these trillions of dollars from our balance sheet, these dollars that we created basically to shore up the finances of our large financial institutions or we run the risk of too much money cycling through the system in a bubble. but that day still seems fairly, you know, not remotely far off. there's already a real discussion about how to do that. and we're not there yet. when that happens we'll see higher interest rates and we'll see the fed start to pair down its balance sheet by pulling

some of the credits by the financial institutions back. >> thanks a lot for coming. i'm writing a thesis about smoothies and i find it really interesting. >> great. >> one of the things i found doing the research is that the notion that the securitization system which allowed for the purchasing of a lot of these things on credit, houses, cars, student loans, et cetera -- i mean, not only was it a way to sustain this sort of fake prosperity but it was also -- but it was also a way to belay a more fundamental, you know, like social conflict over like the distribution of resources in the united states. so i guess what my question is, is, you know, with -- you know, with your character saying the money was there and, you know, the system saying yesterday that tuition was going to go up 32% across -- >> that's really extraordinary.

>> what do you see is the potential for this crisis to lead to, i guess, a kind of politics that the united states hasn't seen in probably decades, questions about the distribution of resources and money and credit in an age where credit isn't easy to get anymore? >> that's a great question. certainly there's more conversation now about inequality than there was before as we understand that inequality was one of the driving forces of our economy for reasons i've already elaborated on. clearly, president obama took office with something of a mandate, you know, to address this tradition, through talk of increasing tax rates for the wealthiest americans. but there's also a debate about how to generate economic growth. most quickly. and, you know, today secretary

geithner when he was on capitol hill said specifically, you know, the most important economic indicator we can point out is that the g.d.p. is growing again. now, is g.d.p. growth important? yeah. but it's better than it's growing than it's not growing then we can at least hope that increased corporate profits translate into an increase desire by corporations that are profiting to hire people and then those people go spend their wages and other companies hire more people -- i mean, that's a hopeful sign. but the g.d.p. is growing and unemployment is at the highest level in 26 years. so we don't see the sort of political shift that you're asking about right now. could we get there from here if the unemployment rate stays this high? absolutely. though, what seems to be happening is that opponents of the stimulus are getting the upper hand with the message

that, you know, well, the stimulus was wasted. we basically built a bunch of boondoggles and we haven't saved anybody's jobs and there's a real debate about how much we the taxpayer got in exchange for our $700 billion bailout and, you know, every day reading about another bailed out financial institution paying lavish bonuses and cashing out stock options that were granted back when the stock was in the dumps and got bailed out by the taxpayer. this exacerbates this kind of populace backlash to these policies and that cuts against the sorts of policies that we expect to see if we had more of a redistribution mindset. that takes us more to the camp of simply, you know, opposed the initiatives of this administration. >> hi. i suppose it's easy enough to understand why people on wall street would keep on going on

with things like credit swaps and certainly understandable that so many of us just kind of accepted the fairy dust. there were however a scattered few particularly in some academic communities like at yale who identified what was going on before the crash. >> you're talking about bob schiller. >> you bet. what's curious to me that no one -- it's not obvious that anyone took advantage of that. you could have easily not only hedged your position but you could have taken huge profits from perceiving what was going on and yet you look at the yale endowment or the harvard endowment and, of course -- >> you mean in terms of betting of a crash? >> you didn't have to bet on a crash. you could have protected your position. or you could have done more than protected your position. you don't have to buy short. i mean, you could buy options that would have put you in a very significant position.

but that didn't seem to happen and i'm curious or it didn't seem to happen in a large manner. and i'm curious as to why not. you had seen -- it would seem to me that's one aspect where you would expect at least elements of the market to be kind of -- >> that's a good point. you know, the warren buffetts of our society are rare. they're few. the kind of consistent value investors who say i don't understand this so i'm not buying it. i mean, what's much more dominant is, you know, chuck prince the former ceo of citibank who famously said, well, when the music stops, i'm paraphrasing now -- he said something like when the music stops it's going to be ugly. there's going to be a reckoning but when the music is still playing you got to get up and dance because the citibank shareholder is going to have a hard time, you know, accepting that you're leaving money on the table that's there for the taking.

while, you know, this momentum investing thanks to easy money and believing in these fantasy is going. people made a lot of money in the tech bubble buying stuff they didn't understand but didn't pencil up and went up. >> but there are some people and i'm specifically thinking about, for example, college endowments where there is a security, a safety aspect involved. in fact, there are a few college endowments that did much better than others in the crash because of their philosophy. but what i don't understand is why there weren't any groups even though they plainly had warning of it because they were like schiller was saying we're in some great exposure here. and yet nothing was done to protect against that. and they weren't in the same positions in the people on the wall street who made -- >> well, i mean, the norm shift. the appetite of work shifts.

think of the hyman minsky our tolerance of risk is cyclicalal and as we get farther in a boom which start to convince ourselves which essentially what happened collectively that risks that unacceptable but acceptable but desirable. and there's so much money involved that you have to go further out on the risk curve just to get a little more spread. now, some people are smarter than the market. that's always going to be the case. but in the main, we all fell for it. and let's remember that, you know, alan greenspan said back in 1996, i'm a little concerned that the market is being governed by excitement and that's nice but he didn't back that up with an increase in the interest rate and moreover, there was exuberance and it went on and some said thanks for the

warning, mr. greenspan i'm going to sell my stock portfolio and buy gold would have left an awful lot of money on the table when we're in the midst of a bubble it tends to make things that would otherwise seem irrational seem rational or, you know, i'll give you another example. this comes out of my book. at&t, a relatively responsibly run company back in the '90s that was mostly a long distance telephone company engaged in what in retrospect seems like disastrously crazy policy of buying up a bunch of cable television companies and trying to use the cable wire to re-engineer the phone network to compete with the local bell companies because worldcom that was cheating was quarter after quarter growing even faster and the people at at&t said, what's the deal? we're hiring the same consultants they're hiring and we're buying the same technology and somehow every quarter they are growing faster than us and that, you know, caused them to tolerate much greater risk.

now, i think it's certainly fair -- it's a fair point if somebody has managed your money and managed it badly whether you're at the university or any other institution to say, what went on here, guys, and get a full accounting but in retrospect it seems pretty clear what's happened. is that this thinking, this tolerance for risk in buying into these fairytales really saturated our culture. >> you stated efforts in congress to reform the credit of financial institutions had been frustrated by lobbyists who had said we will make ourselves less competitive on the world seen. -- scene. how can we counter those arrangements? and secondly, what is the rest of the world doing about this problem? >> well, that's a good question. the u.k. is taking a much different approach. i mean, the u.k. is actively pursuing a regulatory framework that would, in fact, give the regulators the power to break up financial institutions deemed

too big to fail before they get too big. china is happy to have the same controls on capital that they had before the crisis for a second time, you know, feeling vindicated after the asian financial crisis, china was largely immune to the asian financial crisis in the late '90s buying into the fact that the financial system is not that modern and money can't move around that quickly and that once again have seemed to helped china and has slowed the push for reform that, you know, once upon a time hank paulson would go to china to lobby, you know, open up your financial system. that no longer seems to have the merits that it once did. in europe, there's a feeling that many institutions weathered the crisis better than ours buying into the fact that there's some stabilizers in the economy. there's much more of a developed social safety net in europe than we have in the united states, but there's still a continued push in europe for global i

mean, through the g20 and affect the derivatives trading. we're still trying to figure out how that one plays out. >> so peter, no one seems to be asking the real important question here. how do you convince professor seigel and caps to let you take a thesis topic that allows you to travel to the beautiful islands of the pacific? so i'll have to leave that one for book talk. i expect to see you there soon again. please join me in thanking peter goodman for his appearance at the college today. >> thank you very much. i really enjoyed it. >> peter goodman is the national economics correspondent for the "new york times." he's previously worked at the "washington post" covering telecommunications and economics. for more information, visit new yorktimes.com. >> we're at the national press club's author night and we're here with jason killian meath author of the new book,

hollywood on the potomac. you talk about los angeles and the beltway and the connection between presidents and celebrities. you want to tell us a little background about your book. >> sure. washington and hollywood have a love affair going. it's been a long time love affair between the two cities. one has fame, one has power, and one wants what the other one has. and, you know, when i went into this book, there's a lot of talk about president obama coming to washington and really attracting lots of celebrity attention and having all sorts of people from everyone from j.lo to george clooney to the white house and i found out through this book that really this has been going on for a very long time. i have the first photo in the book actually is of charlie chaplin stumping for world war i bonds. so if you start with charlie chaplin our first film star and go all the way up until oprah

winfrey and obama, you'll find that hollywood and washington have always been involved with one another. in some way, shape or form. >> we're lucky enough to have a couple of photos from the book right here. and it looks like this crosses party lines. this goes republican and democrat. and we'll start with richard nixon here and sammy davis, jr. >> absolutely. this is -- this is -- any photo with richard known is comical, you know, when you have a hollywood star standing next to richard known. he was never really comfortable in front of the camera and so he has this sort of fascination of being surrounded by celebrities. and this particular picture has got some historic significance because sammy davis, jr. was disinvited by frank sinatra who produced the show which was surprising to me. but it was his interracial marriage that was at stake and politically they decided that wasn't going to be the best thing for the country to see at the inauguration. >> in your book you say si-nat

came jfk an honorary member of the rat pack? >> sinatra did that. jfk was one of our most charismatic presidents. you have to really sort of count him even more charismatic than say a ronald reagan who was an actor. and, you know, he was not only a member of the rat pack but peter lawford, who's on the cover, was in the rat pack and married into the kennedy family and it was really considered the first marriage of politics and hollywood. >> i want to go back to the sammy davis, jr., very quickly because you said sammy davis, jr., was the first african-american to sleep in the white house; correct? >> that's correct. known rolled out the red carpet for sammy davis, jr., to have a dig at kennedy because he wasn't at kennedy's inaugural so he invited sammy davis, jr., set him in the queens bedroom and

made it a night to remember and that became as far as the research that i pulled up at the library on the national archives the first african-american to be a guest at the white house. >> three more here. let's go to the next one. it's pretty iconic. i think most folks have seen this one. this is richard nixon and elvis presley. >> a great photo of elvis and nixon. the most requested photo from the national archives which out of every -- when you think of everything that the national archives keeps in storage, this is the one that people want to see the most over the years. >> is it true that elvis had asked richard nixon to allow him to carry a badge of some sort. i've heard this story many times. >> he did. he rolled into town in washington and he was concerned of the hippy culture at the time. and wanted -- he actually rolled his limousine right up to the westgate of the white house and asked the guard to see richard nixon and wanted to be made a federal marshall at large to help with the drug problem of young people. of course, he was turned away

but only for a few hours because when the word got to nixon that this kind of incredible request had taken place at the west gate, nixon reconsidered, hmmm, bring him over. let's do this. he called up his director of narcotics and had a badge sent over and that day elvis presley became a federal agent at large. >> the next one here. and we have the late michael jackson with ronald reagan and nancy reagan. >> well, this photo in some ways inspired this whole book because when i was 16, i wasn't very interested in watching the news every night like most 16 years old, maybe. but i remember one night watching ronald reagan and michael jackson with his sequin glove walking out of the white house on nbc news, and i was shocked. i thought it was the most bizarre thing i'd ever seen in my life. and i think from that, that kind of put an idea in my mind, well, gee, what is this sort of taking place here when these stars are

visiting our elected officials? what are they doing? you know, why are they there and what are they accomplishing if anything? >> what are they accomplishing? >> i think in the end you have celebrities and actors, entertainers who are americans after all. and they really want to influence policy and decisions or in the case of michael jackson, it was a great p.r. publicity stunt. >> this last one i really like and it's totally bizarre. it's andy warhol and president jimmy carter and it looks like a warhol portrait of carter; correct? >> that's correct. you know, andy warhol painted these portraits of limited edition portraits of jimmy carter and the carter presidential campaign basically traded them for political donations around the country. and, you know, it was the wise thing to do politically speaking because the country had just gone through watergate and

really they were very distrustful of anyone from washington or anything that represented washington. and i don't think that you can get any farther away from washington than andy warhol so this was tremendously effective in carter in raising money. it actually was credited -- he credited himself as being one of the financial turn-arounds of his entire presidential campaign selling these andy warhol prints. >> your day job you're a political strategist. do you ever tell your clients to invoke a celebrity endorsement? >> no, i really stay away from that. but, you know, we live sort of in the age where obama and opera were a team and mike huckabee and chuck norris were a team. it doesn't matter whether you're a democrat or republican, both sides are involved in hollywood and celebrity. >> jason killian meath, author of hollywood on the potomac, thanks so much. >> the nielsen company announced the sale of its publishing

>> richard ellis explains the reasons the u.s. government refuses to list the polar bear on the endangered species list and why he believes that decision must be reversed. the american museum of natural history in new york city hosts this hour-long event. >> what's happened, unfortunately, for me, but what happened is we have been given certain instructions vis-a-vis the timing of this. it seems that people are -- should be interested in the wine and cheese and the book-signing part and not necessarily the part write stand up here and talk for several hours. so there is somebody standing in the wings here with an old hook, and they will yank me off the stage if it looks like i'm carrying on too long. also, i have to do something i'm not necessarily used to, which is stay here. i tend to wander around a lot. i'll fall off the stage or whatever, but i