i felt comparable he was going to support what we needed to do. but, i am@ap$s p 'ddsguka)hka )a

veiled threat. i read what you said-- spivak was when he came back. there was quite a scene when he interrupted his campaign to come back and i remember i was testifying at the time. michelle davis, who is here with me today, and was sitting behind him was testifying and handed me a note. my blood sorter brand cold right there. she said to me now, if someone asks you about john mccain coming back, just simply say i welcome the involvement of everyone in this and so one because i think she was afraid what might come out of my mouth. [inaudible] specie talk to me on the flight on the way down.

in any event, so but, as it turns out, and again, it was a couple of days of anxiety, but again, john mccain when he was back spent time with the house republicans rallying them and so, he did his part. and then even 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. the american people, and i'm proud of the fact that at one level the american people, none of us like bailout so again, i looked at a poll once sometime after the election but after we had done some of the things we had done.

i think this may be slightly exaggerated, but i recall that something like 93% of the american people opposed the bailouts and 60% opposed torture. [laughter] yet 70%, 70% were worried that we would go into something much worse from the 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 had these consultations with obama although i understand it's sort of ended after the election. >> leave out the sort of of parked. [laughter] speedboat the president and members of the administration have repeatedly said during the past year that they really didn't anticipate how tough things would be in the economy,

but from the message you were giving them, i mean you expected things to be this tough didn't you? or am i wrong on that? >> warren, i would ask you sort of what you expected, because i did not expect them to be this tough. i knew, when we went up, a scene in the book where we talk about than bernanke and chris cox and i went up september 18 to meet with congress and tell them we were going to need these authorities. and the difficulty we had at that time was as warren said much better than i could, the arteries of the financial system or freezing up, and so i knew with a certainty that business was going to turn down, because when you have companies that it is uncertain whether they are going to be able to raise their

short-term funding. most ceos are going to go to their ceo and say hey boss i may not be able to have all the funding you need for the next 30 days so what does the prudent company do? they started cutting back. but congress hadn't seen that yet, so they hadn't seen it yet in their district, so i knew what they 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. ..

room witnessing the both senator mccain and senator obama were there in the middle of the campaign where the congressional leaders not only did we not come together, it broke out people

didn't come to physical blows that there were verbal blows and it was chaos. and then the democrats assembled in the roosevelt room and i went in uninvited and i did it to break the tension and to get a smile or after and it didn't have its desired affect because i remember as i account in the book i said 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 know, you've got a great investment background. you've seen the government operate here and abroad. nobody has had a better perch

from which to view the economy and make judgments about the economy going forward. as i a understand when you were the 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 us the names of stocks although if you want to give you are free to do it. but give us an idea of the composition in terms of the bonds, stocks would ever of the portfolio which you had a chance to establish recently. >> well, first of all you are a great investor. you do very good and very careful work. one of the things i 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, the banking system is in better shape. i do believe clearly the recovery process has begun. you and i have a common worry about the fiscal crisis. >> we are going to get to that. >> one of the best lines i've heard as it relates to that. but anyway, so i am -- you need to understand also what we are looking to do, we are going to devote a balance of the career to conservation in 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 and so i'm not looking at 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 is what i believe in and if i was a young person i would be looking at companies who have a good, strong market positions for the longer term so i have a lot of what i have ase and fixed-income markets and money markets and cash because -- but the than the others i have attended in growth equity because i still believe the economy can go down and sideways and whatever the outstanding well-managed companies and particularly companies that know how to operate globally will prosper over a long period of time and that is the way you need to look at investments is over a period of time. i don't put too much steak into quarterly economic 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 longer period of time. islamic and interested you said you have a substantial fixed-income. does that mean you don't worry about the decline of the value of currency? >> well, warren contador not going to get a former treasury secretary talking -- [laughter] i really do believe that and i worked very hard the strong dollar is just very much in our interest and essentials to the success and pre-eminence of the united states of america and i believe that 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 am not going to give you a view of what i think is going

to happen with the dollar the next five or ten years but wine focused on because i don't get a lot of the money over a relatively short period of time. >> if i need you a trustee for my children and said you have to buy fixed-income would you prefer tips bonds which the treasury inflected type? >> 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 are going to go which is again which gets to the currency a little bit. i've spent a lot of time outside of this country and i've spent time. and believe me, every other

major economy, china included, has many more significant challenges and problems than we do. they really do. the we are the richest, strongest economy in the world but 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's not a crisis immediately. it is a challenge immediately. but one of the things i learned and one of the things i write about in this book is that it's very difficult to get government to act, to get congress to act and do anything that's a 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 we need. and again that is something that is absolutely critical. but, so i have no doubt that we will deal with this fiscal challenge at some point in time. but the earlier we deal with it a less costly it will be the greater the nation will become the stronger it will be and the less burdened the younger generation will have to bear. >> let's go back to fall 2008 again and the very fateful weekend of september 12th, through the 15th. the fri was in the extent of aei g.'s problems even though they were going to come cascading in a few days by you had a big problem with lehman brothers had called together a group of people on wall street and you thought you had our claves

signed up and they wanted to sign up they ran into problems with the british government subsequently but it seems to me for getting about lehman if you had@"d ka h !,hba"d gu $bvg " õa doozy. the excess is have been building up for a long time for a credit crisis and i told the president that when i came to washington

but i didn't expect anything of this magnitude that they had been building up and 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 but it'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 had on the same weekend we learned about the extent of aig problems on saturday and lehman, the run already started on lehman. it was merrill lynch was going to be right there so you had the three institutions, and as war and said we had washington mutual shortly thereafter in wachovia and over the next week's we had six european nations that have to step in and

recognize the institutions so this was coming at us pretty quickly from all sides. >> it's ironic that in effect a thing to talk about kenneth lee was having an appetite for deals, but if in fact he hadn't have made this deal which doesn't look like the necessarily greatest deal he offered a 70% premium on the day when the next stock might have been zero but didn't he save the system? >> i told you he was a confident decisive ceo and there is no doubt but that was very much of a stabilizing action. >> do you think we would have gotten to to stay on the morning of eight ayachi if there hadn't been action on the lehman that they? >> i don't know what would have happened because i don't think,

warren, i don't think we could have taken another big institution failure, do you? it's just the system is the thing that is hard for people to understand is we had ten institutions that had 50 to 60% of the financial assets in this country and they are 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. we are pretty fortunate. >> hank, the british had given you that the british like a warning about the situation a couple of days earlier. but in effect, they blocked the

barclays acquisition of lehman brothers. do you think the understood what the consequences were? >> i don't know everything they understood but remember, there is -- there was a requirement for a shareholder vote and they didn't -- >> we overcame a lot of things in this country. >> that's right. and -- but then what we needed was we needed a buyer that could do what jpmorgan did with bear stearns which was still in the capitol whole and guarantee the trading during the shareholder vote because there was no authority -- turning over every

stone to see what authorities we had. there was no authority to guarantee liabilities or to put capital into the institutions. but any event, i'm not sure but the british were -- i had said in the book i had used some rash language when i was disappointed but as as i reflected on it, they obviously have their own issues they were looking at and the regulator -- it was for them a very difficult -- it must have been a very difficult decision to let one of their banks to go ahead and in the middle of the ron, lehman brothers stepped in and make that acquisition and confident they had the

wherewithal to do that. >> hank, lehman did go down on that sunday. and barclays bought a limited part in a much smaller transaction and i think it was tuesday or wednesday of the british authorities said if you have an account with lehman keeping securities there you couldn't take it out. they froze the accounts basically, which i gather came as a surprise, came as a big surprise to me. >> that was i think that shocked the markets. my recollection is it was tuesday but i could be wrong. as i recall learning about tuesday that was actually the day that of the aig rescue.

what happened was the third party customer collateral accounts, but brokers and dealers were frozen for a while and investors needed to know that their accounts were safe and of course when they were not with lehman brothers then there was a big erosion of confidence in the investment banking model, the liability of the model. >> that wouldn't have happened in the united states. he would have access to your securities. as i remember that was -- it didn't get publicized much but it was a shock. did they consult -- >> if the date it wasn't with me. remember the fcc was the regulators of the fcc was the regulator for lehman brothers and was the one that had the lead in preparing for the

bankruptcy because we knew that it was caribbean in possibility and we hope to avoid it and they were the ones that would have been talking to feed various authorities during that period of time. but it sure came as a surprise to a lot of investors and a surprise to me. >> hank, you and i owned a huge investment banking and trading firm and it's our only family asset. we can't sell that and we've got all of these people making lots of money. you are the head of the compensation committee. what sort of arrangement you have? can anybody make 25 or 50 million a year? how will you treat these people so they don't leave and go someplace else? >> we have to talk about what it

is we are doing. >> let's say we are doing it today. >> well, today, warren, you got to know you and i as i say and write in the book and i would have these conversations with wendi all the time during the benign periods i think the compensation levels on wall street are on the wac. i believe that just in general during the nine times and you would, too. just in general in terms of how -- number one. and never to come today, in light of everything that is going on in the the fact of the tax payer came in and granted the reason the tax payer did was to prevent calamity that came and helped the whole financial system. so not just the big banks and

investment banks and hedge funds, everyone, i think that today restraint is very much in order by the top people and the anger is coming from hey, if you have losses you're supposed to bear the responsibility for those losses. so the way that i've talked about it is all i said i would like to see this anchor channel. i would like to see the congress feel pressure, and i know they are working on a very hard to get the regulatory reform we need so that you don't need to ever have taxpayers come in and bail out a feeling financial institution. we need a resolution of 40 so that any financial institution, any type of financial institution it is going to fail can be liquidated outside of the bankruptcy process in a way that

doesn't take the financial system down and the economy down with that. i would like to see the conagra's get that done and get the systemic risk regulator that can look at every institution the matter with the size is it to the tight and if they see risks that are imprudent restrain them. i would like to see that. now in terms of longer-term compensation clearly you need compensation. negative the same as yours, that they should be equity for the highest paid people in this should be something that rewards long-term performance but it's the only thing that counts long-term performance and aligns incentive sat the individuals with the company.