horizon. so what i needed to do was get action from congress and actually what we got on friday and fannie was on the limited authority. i use the word on specified. it sounded better. but we needed those because it was -- i had to keep reminding people i didn't design this thing and didn't create. >> hank, to have relations with the chinese long before this and used them to could affect during the crisis and i think you told me you'd been to china may be 70 times or so. what would be the american public's misconception about the chinese and their economic system? >> i do believe there is a lot of misconception the americans have even about our own economic system and it is -- i think that

the thing we all need to keep in mind is we are operating in a global economy and so when other important economies don't do while it hurts us like when we don't do well it hurts others and so the worst thing that could happen to us and could have happened during the crisis would be to have had the chinese economy falter and stop growing and looking ahead. we need china to keep doing well. it's in our best interest to keep having them do well. there are plenty of differences and differences in the economic area and other areas as well but i think that the most important thing for americans to understand is that there is a relationship where we are both

to a large extent dependent upon the other. we of course in the u.s. we don't -- excuse me, can you hear me okay? 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 borrowed too much and so the chinese savings and capital are very important to the capitol markets. now the 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 and reform the currency to move quickly to a market driven currency so there's very important differences but we just need to

remember this is a relationship we need to get right and work very hard to get it right. >> you would tell them that and much more gentle terms from time to time. what sort of response did you get when you talked about saving more and so what we're spending more? >> i would simply say that one of the things we started with under george bush was the strategic economic dialogue which is being carried on and what i generally said cbe agreed on principle and we agreed they needed to open up their economy to the competition and the need to continue to move their currency so it was to a greater extent determined by the market. but we agreed in principle and philosophy but it was a matter

of speed so i would be thinking the need to move this far and this period of time and they think they need to move this far in this period of time, but we talked very directly about it and i think nothing you need to remember is dealing with the chinese or any other sovereign nation we need to put it in terms of what it means to china and other people and i was just totally convinced that to the extent they stood up the process of reform it was only going to benefit them and help them get where they want to get over the longer term and i would say to them i believe in free trade and open markets and you 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 look 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 the environmental issues we have and energy issues on less you get the two biggest, among the two biggest importers of oil and in letters of carbon to work together and there is a lot we can do working together between the two countries and again on a and a big believer in engagement because there is very little you can do in this world that's important globally that's gone on a unilateral basis.

>> you mentioned president bush. i am a little bit like your mother and facto want to get to meet her mouth. -- meet hurt now. >> [inaudible] i did for the book and got more appreciation for what he did on this particular situation. in fact i've met various economists, eloquent ones, adam smith or david ricardo were cannes and all that apply have never heard a more eloquent statement that succinctly summed up the economic world than george bush made in september of 2008 when he said in a memorable ten words of money doesn't loosen up this soccer can go down. [laughter] that really hits -- it was like

the gettysburg address, short but to the point. [laughter] as i read the book i gained appreciation for the fact that he understood what was going on and he understood what needed to be done. was there every time he went to in with proposals that he shot you down on? >> no, because he was only surprise when i was surprised and i was surprised more than once. [laughter] >> what was the biggest surprise when we get into that. >> i spoke to him -- one of the things i learned from my previous career is no matter what you negotiate i could have all kind of understandings about the relationship we would have but if i didn't have the right relationship with the president it wasn't going to be his fault, it was going to be my fault and 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. he had a good fundamental understanding of the market's and economic issues. he cared about them and so the conflict he dealt with was the same conflict i dealt with or anybody who watched the markets. we believe in the united states of america at risk takers should bear the responsibility for their own high losses and so big interventions were not something i didn't go to washington to do that and he certainly didn't. but from day one, she understood the financial markets were about the economy and jobs. so repeatedly i had been coming to him and i wouldn't have to sell him halfway through the conversation he would back me up and say listen, hank, we will get through this. we are not always going to look good.

these are going to be some -- this is going to be politically unpopular. but we are not going to let the economy go down. we will do what it takes to save jobs, to save the economy and that was his point of view and he was -- you talk about my mother and sometimes he was almost like my mother to me. ou get more sleep. [laughter] >> in terms of the other people on the political stage, it seemed to me that going up 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. is that a fair assessment? >> what i would say is it is no doubt fair that the conversations i had with john mccain weren't as frequent as they were with barack obama. they were more difficult and he

certainly gave me more anxiety about all that, and now president obama was attentive, engaged, and i felt comfortable he was quick to support what we needed to do. but i'm quite grateful to john mccain because -- and have respect for him because let me tell you with an election six weeks away when we went to congress there is no way we would have in my judgment got the t.a.r.p. but john mccain can out against it and if he paid the populace card we would have been left defenseless khan. so as i look back, i am increasingly grateful of the way

he handled himself during this period. but during the time he gave -- i lost a few hours of sleep. >> you describe at one place in their something where you say you issued a veiled threat and i read what you said. it didn't sound very failed to me to john mccain. [laughter] >> well, that was when he came back and there was quite a scene when he interrupted his campaign to come back and i remember i was testifying at the time and michelle davis here with me today was sitting behind where i was testifying and handed me a note and i -- my blood ran cold right there and she said to me if someone asks you about john mccain coming back just simply say i welcome the involvement of everyone in this because i think

she was afraid of what might come out of my mouth. [laughter] she talked to me on the flight of the way down. but in any event, so as it turns out again, the -- it was a couple of days of anxiety but again, john mccain when he was back spend time with the house of republicans rallying of them and so she did his part and then even after we got from t.a.r.p., he did not jump on or criticize some of the things we had done which again we are very unpopular. the american people -- and i am proud of the fact on one level the american people none of us like a bailout's so again it was

-- i looked at a poll once and sometimes after the election but after we had done some of the things we'd done and i think this may be just a slightly exaggerated but i recall something like 93% of the american people opposed the bailouts and 60% opposed torture and soviet -- [laughter] 70%, 70% were worried that we would go into something much worse than a bad recession. so we've never been able to explain to the american people this wasn't for wall street, this was for them. >> you had these consultations with obama also why understand that sort of ended after the election -- >> leave out the sort of part, yeah. [laughter]

>> both the president and members of the administration has repeatedly said they didn't anticipate how tough things would be in the economy from the message you were giving them you expected things this tough or am i wrong on that? >> welcome warren, i would ask you what you expected because i did not expect them to be this tough. i expected -- i knew when we went up there is a scene in the book where we talk about ben bernanke and chris cox and september 18 by went to meet with these authorities and the difficulty we had at that time was as warren said better than i could is the arteries of the financial system or freezing up and so i knew with certainty

business was going to turn down because when you have companies that it's on a certain whether they are going to the will to raise their short-term funding most cfo was are going to go to the ceo and say i may not be able to have all of the funding that you would like the next 30 days so what does the prudent company do? they 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 am not sure i knew it was going to be 10% unemployment but i knew it was going to be bad and so then if they collapsed the businesses wouldn't be able to fund themselves or pay for the inventory and pay suppliers and let in please go into that would ripple through the economy and we would have an armageddon,

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

obama were there in the middle of the campaign with congressional leaders where not only did we not come together, it broke out people didn't come to physical blows but there were verbal blows and it was chaos and the democrats assembled in the roosevelt room and i went and uninvited and i did it to try to break the tension and get a smile or laughter and it didn't really have the desired affect. i recount in the book please don't go out and blow this thing up and the speaker said to me we are not the ones pulling it up and she was right.

>> hank, you have a great investment background. you have seen the government to operate here and abroad. nobody has had a better perch for which to view the economy and make a judgment about the economy going forward and as i understand when you were secretary you had to have your money in a blind trust and now the blind trust presumably is over i don't want you to give the names of the stocks of the what you want to do if you are free to do it. but gives an idea of the composition in terms of the bonds, stocks, portfolio which you have had a chance to establish in recent months it >> well, first of all, you are a great investor. you do very good very careful work. one of the things i've learned during my career is i'm not a

great investor so i need to find great investors. i believe the system is the financial system is stable, banking systems are in better shape. i do believe clearly the recovery process has begun. you and i have a common worry about the fiscal crisis in this country. >> we are going to get to that. >> you have one of the best lines as it relates to that but anyway, you need to understand also that what wendy and i are going to do is develop careers to a conservation in the environment and that is where the money is going so i am not looking to make more i'm going to keep what i have and i'm not

looking at it with a long-term horizon because i continue to believe that a long-term horizon the best ways to investigate and high-quality companies and stocks. if i was a young person i would be looking at companies that have gotten good strong market positions for the long term so i have a lot of what have is an fixed-income markets and money markets and cash because i -- others on tend to be in growth equities because i still believe that the economy can go down and sideways and whatever but outstanding well-managed companies particularly companies that know how to operate globally.

that is an angel good investments is over a period of time. i don't put too much steak and the data, what happened to the stock market today or tomorrow. i think the right way to look at it for a younger person is over a long period of time. >> i'm interested to said you had a substantial fixed-income. does that mean you don't worry about the decline in the dalia of currency? >> well, warren commodores certainly not going to get a former treasury secretary talking. [laughter] because i really do believe that and i worked jury hard the strong dollar is 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 fiscal discipline. now, i'm not going to give you a view of what is going to happen with the dollar the next five or ten years which is what i am focused on because we tend to give away a lot of the money in a relatively short period of time. >> so if i need to a trustee for my children and said you have to buy fixed-income would you prefer tips, bonds which the treasury inflation predicted type or st. bonds? >> i would go to you, warren. [laughter] >> i would ask you and take your advice. but i would ask myself the question which gets back to where you're going to go which is again which gets to the currency a little bit.

i have spent a lot of time outside of this country and i've spent time at all the major economies. and believe me every other major economy, china included, has many more significant challenges and problems than we do. they really do. we are the richest and strongest economy in the world we have to deal with a relatively few very important challenges, and the biggest one is the fiscal crisis and i shouldn't call it a crisis because it isn't a crisis immediately is a challenge but one of the things i'll learn and write about in this book is that it is very difficult to get the government to act and congress

to act and do anything that's vague and difficult and controversy lummis there is immediate crisis. we have immediate crisis and still haven't gotten the regulatory reform that we need and that is something that is critical. so i have no doubt we will do with this fiscal challenge at some point in time of the earlier we deal with the less costly it will be in the greater the nation will be, the stronger the nation will be and the less burdened the younger generation will have to bear. >> hank, let's go back to the fall of 2008 again. and that very fateful weekend, the september 12th, 15th and at that point on the friday it was in the extent of aig's problems

although they would come cascading in a few days, but he did have a big problem with lehman and called to the people on wall street and had barkley signed up and i think they wanted to be signed up but ran into problems with the british government subsequently. but it seems to be forgetting about lehman if you had merrill lynch that followed a lehman bankruptcy i think you and i would agree that merrill lynch would have gone almost instantly. what would have happened if the b of a haven't made that deal with merrill lynch on sunday? >> it wouldn't have lasted in my judgment, you know, wouldn't have lasted a week. what people miss and i think it is easy to miss was this was a

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

shortly thereafter and wachovia and we had over the next week's six european nations have to step in and recognize so this was coming at us pretty quickly from all sides. >> it's ironic that in effect i think you talked about can't always have an appetite for deals or something but if in fact he hadn't made this deal which doesn't look like the greatest deal he offered a 70% premium on the day that the stock might have been at cero but didn't he in effect kind of save the system for us? >> at times he was -- he was a confident, decisive ceo. and that -- and there's no doubt thought was a very much stabilizing action.

>> do you think we would have gotten to tuesday on aig if there hadn't been that action at merrill? >> i don't know what would have happened, because i don't think, warren, i don't think we could have taken one other big institution failure, do you? >> no. >> the system is -- i think the thing that's hard for people to understand is we had ten institutions that had 50 to 60% of the financial assets in this country and they're so interconnected it's just i think in many ways we were as bad as this is and it's terrible, but we look at what could have happened and we were pretty fortunate. >> and hank, the british had given you that british like a

veil warning about the situation a couple of days earlier but ineffective a block to the barclays acquisition of lehman. do you think they understood the consequences were? >> i don't know everything they understood but remember there is this -- there was this requirement for a shareholder vote -- >> but we overcame a lot of things in this country's requirements. >> about the -- and then what we needed was we needed a buyer that could do what jpmorgan did with bear stearns which was fill the kettle hole and guarantee the trading during the shareholder vote because there was no authority to do this in