he understood that money isn't everything. he understood the pieces of paper are 12 and that what we can really acquired is the true measure of our standard of living with our scarce labor. he's really got a lot >> guest: let's take three specific rings which i suspect perhaps unusually rough and i may agree on even on specifics. he is a criticism of the balance of trade, the doctrine of the balance of trade which seems to me he was dead on them and is set on now. he understands the importance of education and the importance of education for everyone. and he understands the wastefulness of work. understand the wastefulness of whether could've come out of the de debate. >> host: samuel fleischacker, this tweet given that i want you to respond to. in your view, what would smith think of the great society, affirmative action, welfare? >> guest: that would take a

very long time to answer. >> host: you have 13 seconds. >> guest: i've written two books on it. the short answer is those are all issues that were not remotely on the table at the moment he died at some of them were on the table within ten years after he died. that was a huge debate about poor law, with the government who should aid the poor which he didn't get to participate in because he died a little too early. my own view is that among the things that our government could do and should do if they could do a while was help the poor reaches condition in which they could participate on the same level as everybody else in the market. in my view would be that he would support something like universal health care today for instance although their many scythians who would disagree with me. >> guest: you're crazy, sam. >> guest: he can be read in

both ways i think because he wasn't really addressing those issues. >> host: health care. >> guest: i have no idea what his position on health care policy as you he would be skeptical of a top-down single-payer tape solution. that's a long debate for another time, sam. i'm shocked by how much we agree on so far. >> host: both of our guests are also authors as well as professors. c. beltran went, one of his book is on adam smith's wealth of nations. and rest roberts most recent book is called the price of everything. you can see it there on your screen. who published it? to >> guest: it is about emergent order. hayek particularly focused on the role of prices. it's a novel by the way. it's written for a general audience and it's very smithian and its flavor. >> host: munro, louisiana, paul. >> caller: good evening,

gentlemen. initial collegiate career studying economics at auburn university, the name of adam smith was very rarely spoken without thomas malthus coming out. and the contrast between the smith's optimism and now fusion pessimism and the different schools of positivism and normative economics. and we see this today where we see central planning being looked to for global warming. and maybe we're better off with individuals deciding what could have been better with adam smith's approach to people looking after their own interests and taking care of

things that way. >> guest: well, i'm not going to pretend that adam smith would be interested in a private solution of global warming. i think you'd be worried as i am about centralization of power in the hands of bureaucrats. i think of something to be concerned about in any solution of any social problem. i think the more general point is that smith wasn't out aware origin have to deal with what modern economists call externalities. and that's a case of pollution, global warming would be an example of that. in private solutions to those although they often made progress, they may struggle and there may be able for government and their incident or hobbes would have recognized, maybe not, he would've been worried as i am about about centralization of power in steering people's lives, not because so much essential if howard fully understand what's on the ground, which was sam's earlier point. but also the power corrupts and smith understood that very clearly. >> host: samuel fleischacker,

did smith have much to say about monetary policy? >> guest: well, that's the one i would throw back a rustle actually. i think he does have some things to say. but some of us aren't much more technical and better handled by professional economists. if i could just say something about centralization of power going back to the prior question for a second. i think one reason why python i can agree in principle and disagree and specifics about some of these issues is that smith basically has to broadview's about politics and economy. on one hand, the government should do everything that is important to be done in this society and individuals can do for themselves. that's very broad and very vague, but he does say that should happen. he mentioned public schooling, especially for the poor is one thing that might fall into that category. on the other hand, he is definitely worried as russell is an im and as russell says about

the centralization of power. and so the question is, how do you balance those things? how do you have government take care of problems that individuals can't handle on their own, if that the case and global warming might be such a case. health care may be such a case. without, on the other hand, contributing to the dangers of great centralization. one difference between smith and mouse system on these issues is a different capacity with historical events between the time smith wrote in the time office wrote there was a great famine and things look darker than they had an smith's lifetime and there was also the french revolution and the dangers of government and governmental reform. and so that's one reason for a contrast. >> host: were going to get professor roberts very quickly to address craig pardo's tweet. >> host:

>> guest: the party want to mention that particularly interesting for a current situation in scotland between a think he was 17 and 1870, for over a century, scotland had banks issuing the road money. they private currency in circulation. ..

the ways in which government can help society and the need for government in administering justice they agree on a lot of economic issues and some small ones. it's very hard to tease them apart. one difference for the purpose of this discussion is smith put all his thoughts about economics and government into one large systematic discussion and that's

not something that he did. >> host: ed, baltimore. good evening. >> caller: yes i have a question concerning spending and saving. what do you say about the government's spending today? what would happen by economists could address? how much of total gdp is all government spending and if we cut out most of the spending except the necessaries of let's say the war, annie war or we will call it a defense what would employment be liked with large amounts of government spending on national or state and the local levels i mean how what capital keep enough employment going? because at this moment business

is and spending, individuals are barely spending and if the government doesn't spend where does the spending come from? >> guest: i think he would reject as many economists to but not all the i.t. we have to keep spending up, the economy afloat. that is a common keynesian view and it is a mean streak view among economics but there's a lot of people who think that is the wrong approach to take. he wasn't an economist in that sense. the part smith would have a lot to say about today would be the example for example bailing out general motors aig or the money that flowed into investment banks that made alladi lousy decisions. he would realize that is money will spend not for the good of society at large. it's good for the people who get it and he would be skeptical about its value. that's the most important lesson also the size of government is a concern in terms of the power of the state. the question is what are they spending?

sam print of smith was an advocate for the government doing things people couldn't do for themselves. people are not going to buy lousy cars for themselves. the government has to do that for them and that is an enormous mistake. >> guest: we have about five minutes left with our guest. in chicago a philosophy professor of the university of illinois at chicago and russell roberts an economics professor at george mason university, a discussion about adam smith and the wealth of nations. kansas city missouri. >> caller: thank you for taking my call. i love watching booktv. i watch all weekend. i tried to read adam smith at do times. i was on a will, i don't want to see comprehend but it appears some of the undermining in this book is the consumer it's almost consumer driven market as it should be, the merchant should tailor their products so the consumer can buy and which would

help the economy as far as the government to bailing out the banks and did not being consumer driven. i curious how the underlying doctrines and adam smith's book would actually see the results of that. >> guest: smith talks about the natural tendency of producers, people in business to gather together to try to exploit consumers and he's all competition as a great way of preventing that and he also saw the world of commerce as a way of enhancing the virtues that by as you said earlier cough making sure you provided for people like you have to put yourself in the shoes of consumer and figure out what the consumer wanted and that force is extremely important in smith and missing from some of the public policy of the last two or three years. i think we've made disastrous mistakes and in particular the consequences of those mistakes whether you thought they were good or bad or whether there wasn't a better choice and some

people argue i disagree but if you felt there was a good choice we certainly now have to deal with incentives that has for the future and that is something smith had a lot to say about. >> host: i want to start with you, professor speed for you to answer quickly if you could, but would smith say about the american economic system if he were alive now? has government intervention replaced the invisible hand? >> guest: well, again, we live in very different circumstances, and this is an issue -- it's a very difficult question to answer, and i think resisting answering that question is important. jumping in and saying one knows what smith would say today is i think quite dangerous i do have a section at the end of my book called learning from smith today in which i suggest that there are ways to use for both right and left-wing approach to contemporary policy. i don't think the government in

the united states is activist enough in some areas as i indicated before the would include health care for me on the other and again, russell i am surprised how much we agree. i entirely would agree we shouldn't be allowed the banks and i would agree that is something smith would say. it's very important businesses failed when they make bad decisions. that is something smith says and that is a kind of government intervention that he opposes. coming in to prop up industries because you think that particular industry is necessary for the economy. i think smith would have been worried by our very large defense establishment. as i said before, he worries about the government expenditure on war that there can be too much of that. i don't think he would have been as worried as spending on the welfare policy. i do think it's quite clear he would have opposed government intervention to prop up specific industries. >> before you answer, professor,

we want to get more data and we are almost out of time. go ahead in lansing michigan. >> yes, this is to make profit from summer to afford and i do not believe that it is as complicating as it sounds. i think it is a matter of physics is the way we are looking at the situation of the consumer and the business >> host: professor roberts, you get the last word. >> guest: this is proper capitalist society which is businesses that want to thrive in a profit lost system have to make customers happy but as smith would remind is milton friedman often reminded it's a profit in the loss system so businesses that don't do well serving the consumer or make bad investments have to take losses. if we don't put businesses take losses we don't get capitalism we get crony capitalism and that

is the road to a very unhealthy world. >> host: that will have to be the last word. we are out of time. russell roberts of george mason university, one of his many websites is econtalk if you would like to communicate directly. samuel fleischacker, also the president of the international adam smith society in chicago. adam smith society .net. a gentleman comes before both very much for being on book tv in prime time. >> guest: my pleasure. >> guest: thank you very much. >> host: we have two more hours of programming coming up tonight, and every night this week we are going to have one of life hour from eight to 9 p.m. eastern. we have to couple of books out of influence the american political system. tonight we looked at the wealth of nations with adam smith. friday night we are looking at silent spring by rachel carson written in the early 60's. we will have her biographer and another gentleman on to talk about silent spring and the will be friday night. now, tomorrow night we are

having to current economic authors on to talk about the current economic situation, and the shlaes and dean baker from eight to 9 p.m. to take calls and e-mails and then on thursday night we will be talking about the afghanistan war that the to afghanistan authors, said the jones and mark moyer will be here to take calls and tweets. but two more hours of prime time this congressional week. coming up next is henry paulson in conversation with warren buffett, just this past week on his new book on the brink and after that is an after words we taped with joseph, national editor, kevin mer of the, but now here is henry paulson and warren buffett.

first full i want to thank you for coming and i should to clear off the bad that i am a friend of hank's and have been so for some years. i admire him before he took the job. i add my durham a lot more after the job he's done as the secretary of treasury. the name of the book is on the brink and that is exactly where we were in september and october 2008. at that time, our economy, our financial world went into cardiac arrest and we had four people in the operating room we were fortunate as a country to have in place. we had hank, ben bernanke tim geithner and sheila bair the head of the fdic.

i know a lot of people in finance and a lot of people in business and government. and i can't think of for that would have done a better job of getting us through that. now it's kind of fashionable to look back and pick at one aspect or another of what was happening and our country's financial system froze up during that period. some of you in this room were at a party i was at in september of 2008, one to talk was the money market funds saved. if we have 3.5 trillion fun missile by 30 million people who on is and they might are worrying about whether they can get their money that was half of all the process held by u.s. banks at the time you have a panic. you had commercial paper frees

up entirely in the biggest companies of the united states and some are described in this book that worried whether they were going to meet their payroll and a short period of time to read the sixth largest bank in the country in terms of the domestic deposits, washington mutual failed over a weekend. you had the third largest bank, wachovia that needed a shotgun marriage on a monday morning to survive. most interestingly the book starts in early september when freddie mac and fannie mae essentially broke. here are two institutions the guaranteed 40% or so of the residential mortgages in the united states whose debt was held all over the world very significant in younce including the foreign governments that would not have taken kindly to the default, freddie and fannie. you had them owning the very large portfolio of mortgages themselves, and like i say in early september they both work

broke. it's worth noting for those who take shots at some of the people who were operating during september and october that institutions freddie and fannie were chartered by congress and were ruled by congress and for those who have heard them criticize the leverage in the banking system it should be also noted that the allowed them to operate with 40-1 with rich ratio and they let them guarantee over 100 times the amount of capital they had in mortgage guarantees. so the two institutions which were vital to the mortgage market were vital to the integrity of the united states and which had received in this complicated hanks problem and in a short period because of timber they botched all agency congress established to watch the two agencies had given a clean bill

of health and a clean bill of health might be fun to go back and read now. let's get on to hank's book and when i got this book i got a little early and expected to learn about the financial crisis and i did. but i didn't realize i will also learn something about how to attract women. it's a little late on realize. but hank had a sure-fire approach which when he took wendi out on their first date in boston i would like you to describe a few even want to elaborate a little bit by bit like to hear about it. >> let me say before i do that first of all i'm delighted to be here in iowa and the other personnel would be like washington and again, i have

been a longtime friend and admirer of warren and he was a pillar of strength and source of strength for me during the credit crisis. bordon was referring to something in the book and i was not a model of maturity when i was a senior at dartmouth college. my first date we were at the boston and she wasn't very impressed when i made my program and jay peter plan and sailed it. >> did you hit him? >> no. she gave me another chance. >> didn't she go home early that might? >> she went home early that night. >> hank, tell a little bit about -- hank says in the book i and a tough guy. i forget what point you said that but he was all i.t. at

dartmouth as a tackle but when the president asked him to become secretary of treasury and hank's initial reaction was what to do it but he decided to do it but he had one big worry and i think the crop might be interested in knowing what makes a grown man trumbull and warren is talking about my mom quite close to my mother she's a strong woman, three engaged in the interested in politics and policy and she was very unhappy with the war and very interested in women's issues and so on and so there had been a fair amount of speculation in the press i might go to washington and i turned down the opportunity a couple of times and i had assured her i was not going to go because i had no intent of going but then when i reversed myself and decided very suddenly

it was the right thing to do not to say no to my country i was in l.a. where we live and still have our primary residence and i was there on memorial day weekend because the president was going to make the announcement tuesday after memorial day weekend so i was going to see my mother. unfortunately at church we were at church together i had a longtime friend asked me about what i was doing next and i told her as of course she went to my mom and citizen this great and mom didn't think was great to tell my mom she had already known about it and i didn't see her sob that much but she was sobbing and very angry and crying and said to me i started with nixon and now i would end up with bush and i deserved everything i got. [laughter]

and i was jumping on a sinking ship but i will say this at the and i say that time i finished in washington my mother had a different opinion of george w. bush. but it was -- it's not a good way to start off and when he wasn't much happier with me. >> one of the interesting things i found in the book and i've not heard a word about this before was your account how some top russian officials had gone to some top chinese officials with the suggestion essentially that the start dumping the bombs of probably freddie and fannie at that time and that almost sounds like a rage. something the evil guys of wall street bid but tell me about that >> it never happened. but barry concerned about

stabilizing freddie and fannie because there was $5.4 trillion of securities that were either insured or issued directly by these institutions and highly leveraged institutions and these securities were held about 1.7 outside the u.s., the biggest portion was inside the u.s. and i had been trying to get reform legislation from congress beginning in 2006 and to get the kind of reforms we needed but we were unable to get action until they were just on the image, so we were able to go to the commerce and get the authorities and then we needed to spend time poring over the books understanding the financial situation. well, i had in the book on a

recount i was and china for the olympics, and there i was given to understand the chinese had been approached by the russians with a suggestion that maybe they could sell some of the securities to get there may be to test the resolve, who knows why -- i would say probably just i don't know why but we had so many conversations with the russians, the chinese and everyone else i just knew like any kind of sudden selling who would have spooked the markets and i would say it never happened but it was a -- some people say to me just about everything bad that could happen did happen i say not quite. it felt that we sometimes but i

worry about another possibility in the sudden decline of the dollar or anything the never happened and one of the biggest concerns i had was getting freddie and fannie stabilized and we tell the story how suddenly we put them into conservatorship which was essentially guaranteeing the debt because it was in essence an implicit obligation by the united states of america. it was sort of like the banks had the conduits and off balance sheets with implicit guarantees. that was a bit like what fannie and freddie were and we were racing against time to stabilize those before we knew bad earnings were coming from the banking sector and particularly lehman brothers losses so that was a race against time and i

was fortunate -- we were fortunate we were able to get it done without the markets becoming spooked or on settled so that's why when i heard in which china got my full attention. sprick there's a front-page story in the journal this morning about freddie and fannie and it's very much worth reading and they said there's 111 billion that's been put in by the federal government but it's expected much more well so in effect it presently looks like the federal government will lose more money than pretty and fannie than a aig by some margin. >> as we look at the program's overall we will get every penny we put into the banks back with a profit and i think we'll get the other programs we may be surprised what we get back and actually even on a fannie and

freddie i thinking the federal make a lot of money but by holding the securities. but you're right in terms of the losses and to me the important thing about fannie and freddie is right now the u.s. needs playing a role they are playing. but one of the things that got us into this problem is not just freddie and fannie but if you look of the weight of all of the programs to stimulate housing it is going too far. and freddie and fannie are not going to be able to stay in the present for. their mission it needs to be shrunk. the need to be restructured in very fundamental ways. but right now we need them where they are but i think how we unwind the situation is going to

be very important. >> when you were getting grilled by congress and they would point out how there was too much leverage in the banking system did you get tempted to say the institution they ran had the most leverage of all? >> i was tempted to say a lot of things, warren. [laughter] but i resisted the temptation because one of the things i am pleased about was i was able to build enough relationships on both sides of the aisle the congress did act before the system collapsed and if i had collapsed we would have easily had 25% unemployment in this country. it would have been a terrible situation and the crisis, the book is to a large extent the story of the collision of market forces and political forces and the crisis came in many ways of the first time with an election on the horizon so what i needed

to do was get action from congress and what we got on freddie and fannie which was on the limited authority of any use the word on the specified. it sounded better. but like to keep reminding people that i didn't design this thing and didn't create. >> to have relations with the chinese long before those and use them to good effect during the crisis and you've been to china maybe 70 times or something, would be the american people's greatest misconception about the chinese and economic system? >> i believe there's a lot of misconceptions the americans have even about our own economic system, and so but i think the thing that we all need to keep

in mind is we are operating in a global economy, and so when the other important economies don't do well it hurts us just like when we don't do well hurts others so the worst thing that could happen to us and could have had and during the crisis would be to have the chinese economy faltered and stop growing and looking ahead of. we try to do well. it's in our best interest to have them keep doing well. there are plenty of differences and there are differences in the economic area and other areas. but i think the most important things for americans to understand is there is a relationship we are both to a large extent dependent upon one

another. we of course in the u.s. -- excuse me, can you hear me okay? so in the u.s. we don't save enough. we have a tendency to save too little as a people and as a nation. we borrow too much, and so the chinese savings and capital are very important to the capitol markets. now chinese save too much and they need to continue to open up their economy. and continue to open up to competition to move forward with the reform process to reform their currency to move quickly to a market-driven currency. also listings. so there's very important differences and but we just need to remember this is a relationship we need to get

right and work hard to get it right. spec for he would tell them that in general terms time to time. what response did you get when you talked about spending more? >> i would simply say to them one of the things the started with george bush was a strategic economic dialogue which is being carried on and what i generally said is we agreed principle, so they agreed and they needed to open up their economy to competition needed to continue to move their currency so it was to a greater extent determined by the market. but we agreed in principle and in the philosophy but it was a matter of speed, so i would be thinking the need to move it this far into this period of time and they are thinking the

need to move it this far in this period of time, but we talked very directly about it and i think the thing you need to remember is in dealing with the chinese or any other sovereign nation we need to put it in terms of what it means to which china and their people so i was totally convinced to the extent they sped up the process of reform it was only going to benefit them and help them get to where they want to get over the longer term and i would say to them i believe in free trade and open markets but it will make it easier for me to fight to keep our markets open if you speed up the process of opening up your markets but i felt we got very good results if you look at the history and what happened to the currency when i

had the dialogue with the chinese i think the record will show that it moved. i was very proud of this ten year framework on energy and the environment because again, we are not going to solve the issues of climate and some of the environmental issues we have and energy issues unless you get the two biggest, among the two biggest importers and the two biggest emitter of carbon to work together and there is a lot we can do working together between the two countries and again i am a big believer of engagement because there is very little you can do in this world that's important globally that's done on a unilateral basis.

sprick you mentioned president bush. i'm a little bit like your mother. in fact, i want to get her to me turn now. [laughter] remember, she's changed her mind >> maybe when i'm through with her she will change back. [laughter] the for the book i got more appreciation for what he did in this particular situation. in fact i have read various economists, eloquent once, adam smith or david ricardo and all that but i really have never heard a more elegant statement that succinctly summed up the economic world than george bush made in september of 2008 when he said in a memorable ten words he said if money doesn't loosen up with a soccer can go down the -- this sucker can go down. [laughter] it was like the gettysburg

address, short but to the point. [laughter] as i read the book again and appreciation for the fact she understood what was going on and what needed to be done. was there every time you went to him with proposals he sean you down on? >> no because he wasn't -- he was only surprised when i was surprised. and i was surprised more than once. [laughter] >> what was the biggest surprise? >> but i will say that i spoke to him -- one of the things i learned from my previous career is no matter what you negotiate i can have all kind of understandings about the relationship we would have been if i didn't have the right relationship with president it wasn't going to be his fault, it would be my fault so i had a year before the crisis to get to know the president to work with

him and remember he went to business school and had a good understanding of the markets and economic issues and he cared about them. and the conflict he dealt with was the same conflict i dealt with or anybody who watched markets. we believe in the united states of america that risk takers should bear the responsibility for their own losses so the big interventions one awesome thing -- i didn't go to washington to do that and he certainly didn't. but from day one the financial markets he understood they were about the economy and jobs so repeatedly i would be coming to him and i wouldn't have to sell him halfway through the conversation he would back me up and say less than we will get through this, we are not always going to look good. these are going to be

politically unpopular but we are not going to let our economy go down. we will do what it takes to save jobs, to save the economy and the was his point of view and you talk about my mother and sometimes he was almost like my mother to me. he would be telling me i needed to work out and get more sleep. [laughter] is to make in terms of the other people on the political stage, it seems about to the election you probably felt that barack obama was both more knowledgeable and more interested in what was going on in the financial crisis than john mccain. does that if you to be fair assessment? >> it is no doubt we'll i had the conversations i had with john mccain which is frequent as they were with barack obama and they were more difficult and

i certainly -- he certainly gave me more anxiety about all of that. president obama was attentive, engaged and i felt comfortable he was going to support what we needed to do. but what i'm quite grateful to john mccain because and have real respect for him because let me tell you is the election six weeks when we went to congress and there's no way we would have in my judgment gotten the t.a.r.p. of john mccain pulled out against it and if he played the populace card we would have been left defenseless. as i look back i am increasingly grateful of the way he handled himself during this period.

but during that time i lost a few hours of sleep. >> you describe that one place you got something you issued a veiled threat. i read what you said it, and failed to mikey and peery of [laughter] >> that was when he came back. there was quite a scene. he was interrupted in the campaign to come back and i remember i was testifying at the time and michele davis here with me today sitting behind me that i was testifying in handed me a note and my blood sort of ran cold right there and she said to me if someone asks you -- excuse me, about john mccain coming back simply say i welcome the involvement of everyone in this and so i think she was afraid

what might come out of my mouth. [laughter] she talked to me on the flight on the way down. but any event, so as it turns out again, it was a couple of days of anxiety but john mccain when he was back spent time with house republicans rallying them and so she did his part and after we got the t.a.r.p. he did not jump on or criticize some of the things we had done which again were very unpopular. american people, and i'm proud of the fact on what level the american people, none of like bailouts and so again i looked at the poll once at some time

after the election but after we had done some of the things we had done and i think this may be a slightly exaggerated but on a recall something like 93% of the american people oppose the bailouts and 60% oppose torture. [laughter] 70% worried we would go into something worse than a bad recession. so we have never been able to explain to the american people this wasn't for wall street this was for them. >> hank, you have these consultations with obama although i understand it ended after the election. >> leave out the sort of part. [laughter] >> boasts the president and members of the administration

has repeatedly said during the past year they didn't anticipate how tough things would be in the economy but from the message you were giving them expected things would be the stuff or am i wrong on that? >> i would ask you what you expected because of a didn't expect them this tough. i expected them -- i knew when we went up there is a scene in the book where we talk about ben bernanke and chris cox on september 18th to meet with congress and tell them we are going to need these authorities, and the difficulty we had at that time was as warden said better than i could the arteries of the financial system were freezing up and so i knew with certainty business was going to turn down because when you have

companies that it is uncertain whether they will be able to raise their short-term funding most cfo's are going to go to the ceo and say i may not be able to have all of the funding you would like the next 30 days so what is a prudent company do? the start cutting back but congress hadn't seen this yet and so they hadn't seen it yet in their district, so i knew with certainty it was going to get worse. i'm not sure i knew it was going to be 10% unemployment but i knew it was going to be bad so then -- i knew if they didn't do something in the collapsed then the businesses wouldn't be able to find themselves, wouldn't be able to pay for the inventory and pay suppliers and what the employees go and that would ripple through the economy and we would have armageddon.

but so than when the economy did turn down we had this terrible situation as congress saw because congress saw the way the american people had seen we went up and said give us these authorities and if you don't we are going to be in deep doo-doo and it's going to be bad. they gave the authorities and we were in deep doo-doo and as barney frank said it's hard to get credit for preventing a disaster people never saw or could see. >> did you get on your knees to plead with nancy pelosi? >> i did. [laughter] but you have to understand why was in the cabinet room witnessing when both senator mccain and senator obama were there in the middle of the

campaign where the congressional leaders were not only did we not come together the the people didn't come to the physical blows but they were verbal and it was chaos and then the democrats assembled in the roosevelt room, and i went in uninvited and i did it to try to break the attention or get a smile or laughter and it didn't of its desired effect because i remember as i recount in the book i said please don't go out and blow this thing up. the speaker said to me we are not the ones pulling it up and she was right.

>> you have a great investment background and have seen how the government operate here just a broad. nobody has had a better perch from which to view the economy and make judgments about the economy going forward and when you were a secretary you have to have your money in a blind trust and now the blind trust presumably is over. i don't want you to give the name of the stocks also if you want to do it -- but get an idea of the composition in the bonds, stocks, what ever of the portfolio which you had a chance to establish in recent months. >> war in, first of all, you are a great investor. and you do very good and very careful work. one of the things i learned during my career is i'm not a

great investor and i need to find great investors. i believe the system, the financial system is stable. banking system is in better shape. i do believe clearly the recovery process has begun. you and i have a comment worry about the fiscal crisis in this country. >> we are going to get to that. you have one of the best lines i've heard as it relates to that. i am -- you just need to understand also what we are looking to do we are going to devote the balance of the career to conservation and the environment and that is where our money is going so i am not looking to make more. i would like to keep what i have

so i am not looking at it with a long-term horizon because i continue to believe with a long-term horizon the best way is to invest in high-quality companies and stocks. that's what i believe in and if i was a young person on would be looking at companies that have good strong market positions for the long term so i have a lot of what i have is in fixed-income markets and money markets and cash because i -- the others i have attended in growth equities because i still believe that the economy can go down and sideways and whatever but outstanding well-managed companies and particularly companies that know how to operate globally will prosper over a long period of time and that's the way you need to look at investments is over a

period of time. i don't put much stake in a quarterly economic data what happened to the stock market today or tomorrow. i think the right way to look at it for younger person is over a long period of time. >> you said you had a substantial income. does that mean you don't worry about the decline and value of currency? >> welcome you are not green to get a former treasury secretary talking -- [laughter] i really do believe that and i worked very hard that the strong dollar is just very much in our interest and a central to the success and pre-eminence of the united states of america and i believe the best way to have a strong dollar is again looking at it over a long term view,

have a strong economy and have fiscal discipline. now i'm not going to give what i think is going to happen to the dollar in the next five or ten years which is why not really focused on because we tend to give away a lot of the money over a relatively short period of time. >> if i need you a trustee for my children and said you are going to buy fixed-income would you prefer bonds which the treasury inflation or the street bombs? >> i would go to you. [laughter] i would ask you and take your advice. but i would ask myself the question which gets back to where your going to go which is that again it gets to currency a little bit.

i've spent time out of this country and also for the major economies. and believe me every other major economy, china included have significant problems than we do. they really do. we're the richest and strongest economy in the world but have to deal with a relatively few very important challenges, and the biggest one is the fiscal crisis and i shouldn't call with a crisis because it's not the crisis immediately it is a challenge immediately but one of the things i learned and write about in this book is that it's very difficult to get the government to act and congress to act and do anything that is

big and difficult and controversial unless there is an immediate crisis. we had an immediate crisis and we still haven't got the regulatory reform whinnied, and again that is something that's absolutely critical. but, so i have no doubt that we will deal with this fiscal challenge at some point in time but to the earlier we deal with it the less costly it will be the greater our nation will be in stronger our nation will be in the the new less burden the younker generation will have to bear. and so that's -- >> let's go back to the fall of 2008 again and that very fateful weekend of september 12th through 15th. at that point on the friday it wasn't only the extent of aig even though they would come

cascading in a few days but you had this big problem with lehman brothers and called together a group of people on wall street and thought you had bar cleaves signed up and i think they wanted to sign up but they ran into trouble with the british government. but it seems to be -- for getting about lehman brothers evin -- if you have merrill lynch that followed the lehman bankruptcy i think we agree that lehman brothers would have gone instantly. what would have happened if they hadn't made the deal on that sunday? >> that in my judgment wouldn't have busted a week. what people miss and it's easy to miss is this was a doozy.

these successes have been building up for a long time. i knew that we were overdue for a credit crisis and i told the president that when i came to washington but i didn't expect anything of the magnitude but it had been building up in the united states and europe and as you can see from reading the papers it is still working its way through the european system that's been building up for a long time and the institutions have been sitting on losses. we've been pressing them to recognize losses and raise capital. so, simultaneously we have on the same weekend we learned about the extent of aig's problems on saturday. and the run had already started on lehman. merrill lynch was great to be right there, you had these three institutions, and