until they were just on the edge, and so we were able to go to congress, get the authorities know why, but we had had so many conversations with the russians,

the chinese and everyone else. i just knew that just any kind of sudden selling would have spooked the markets and i would say it never happened, but it was-- when some people say to me, just about everything bad that could happen did happen, i say not quite. it felt that way sometimes, but i worried about another possibility of a sudden decline in the dollar or there were other things that never happened. and, one of the biggest concerns i had was getting fannie and freddie stabilized and in a sense, we tell the story of how very suddenly we put them into conservatorship, which was essentially guaranteeing their debt because it was in essence an implicit obligation by the

united states of america. it was sort of like the banks had their lives in conduits wittes were off-balance edn with implicit guarantees. that was a little bit like what fannie and freddie were. we were racing against time to stabilize those before we knew some bad earnings were going to be coming out from the bank sector in particularly the lehman brothers losses so that was a race against time. we were fortunate that we were able to get it done without the markets becoming spooked or unstable, so that is why what i had heard in china got my full attention. >> there is a front-page story in the journal this morning about freddie and fannie, and it is very much worth reading. i believe that said there is now 111 billion that has been put in by the federal government, but it is expected that much more will so in effect, it presently

looks like the federal government will lose more money and freddie and fannie vanden aig by some markets. >> when i look at these programs overall, we will get every penny we put in the banks back with a profit. and i think when you look at all of the other programs, we may be surprised at what we get back in actually even with freddie and fannie i am thinking the fed will make a lot of money by holding the securities. you are right, in terms of the losses. to me, the important thing about freddie and fannie is right now, the u.s. needs them playing the 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 at all of the weight of all of our programs to stimulate housing, and it just has gone too far,

and freddie and fannie are not going to be able to stay in their present form. they need to be, i think their mission needs to be sure. they need to be restructured in very fundamental ways. at right now, we need them where they are, but i think how we, how we unwind the situation is going to be very important. >> when you were getting grilled by congress said they would point out how there was too much leverage in the banking system, did you ever get tempted to say the institution they ran had the most leverage of all? >> i got tempted to say a lot of things, warren. [laughter] but i resisted that temptation because one of the things that i am pleased about was that i was able to build enough relationships on both sides of the aisle that congress did enact before the system

collapsed, and if it had collapsed, we would have easily had 25% unemployment in this country. it would have been a terrible situation and the book is very, to a large extent, the story of the collision of market forces and political forces. and the crisis came in many ways that the worst time with an election on the horizon, and so what i needed to do was to get action from congress and actually what we got with betty and franny-- fannie which was unlimited authority. i used use the word in specified it sounded better, but we needed those. but i had have to keep reminding people that i didn't design this thing it didn't create it. >> hank, you have relations with the chinese long before this and you used them to good effects during the crisis and i think you told me you had been to

china may be 70 times or so. what would be the american public's conception about the chinese and their economic system? >> well, i do believe there is a lot of misconceptions the americans have even about our own economic system. but, i think the thing that we all need to keep in mind is we are operating in a global economy, and so when other important economies don't do well, it hurts us, just like when we don't do well, it hurts others. and so, the worst thing that can happen to us and could have happened to us during the crisis would need to have had the chinese economy fall through and stopped growing. looking ahead, we need china to keep doing well.

it is in our best interest to have them keep doing well. now there are plenty of differences and there are differences in the economic area and in other areas, but i think the most important thing for americans to understand is that there is a relationship where we are opposed to a large extent dependent upon the other. we of course in the u.s.,-- excuse me. can you hear me okay? in the u.s. we don't save enough. we have a tendency to save little as a people and as a nation we borrow too much. and, so the chinese are very important to our capital markets. now, the chinese save too much,

and they need to continue to open up their economy, and continue to open it up to competition, to move forward with the reform process, to reform their currency, to move more quickly to a market-driven currency, all those things. they are very important differences, but we just need to remember that this is a relationship we need to get right and we need to work very hard to get it right. >> you were telling that in much more general terms from time to time. what sort of response did you get when you talked to them about spending more? >> i would simply say that one of the things we started under george bush was this strategic economic dialogue, which is being carried on, and what i generally said-- we agreed on principle, so they agreed we

would-- they needed to open up the economy to competition and needed 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 they needed to move this far and this period of time and they were thinking they needed to move this far in this period of time, but we talked very directly about it, and i think the thing that you need to remember is that in dealing with the chinese or any other sovereign nation, we need to put it in terms of what it means to china and their people, and i was just totally convinced that, to the extent they sped up their 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 but 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 you look at what happened to the currency. when i have a dialogue with the chinese, i think the record will show that it moved, that we-- i was very proud of this 10 year framework on energy and the environment, because again, we are not going to solve the issues of climate and so many environmental issues we have an energy issues unless you get the two biggest, among the two biggest importers of oil and the two biggest emitters of carbon

to work together. and there is a lot we can do working together between our two countries. again, i am a big believer in engagement because there is very little you can do in this world that is important globally that is done on a unilateral basis. >> you mentioned president was. i am a little bit like your mother. in fact, remember she has changed her mind. >> but, through the book, i got more appreciation for what he did in this particular situation. in fact, i read various economists, eloquent ones, adam smith or david ricardo or keynes and all of that but i had never

heard a more eloquent statement that's distinctly summed up the economic world than george bush made in september of 2008 when he said in a memorable 10 words. he said if money doesn't listen up, this is going to go down. [laughter] i mean, it was like the gettysburg address, short but to the point. [laughter] as i read the book, i really did gain an appreciation for the fact that he understood what was going on and he understood what needed to be done. was there ever a time he went to them with proposals that he shot you down on? >> no, he was only surprised when i was surprised. >> what was the biggest surprise?

one of the things i learned from warren is no matter what you negotiate, i can have all kinds of understanding about the relationship we would have been if i didn't have the right relationship, it wasn't going to be his fault, it was going to be my fault so i had a year before the crisis to get the president to work with them. remember, he went to business school. he had a good fundamental understanding of markets and economic issues. he cared about them, so the conflict he dealt with was the same conflict i dealt with or anybody in the markets. we believed they united states of america that risk-taker should bear the responsibility for their own losses. and, so big interventions are not something-- i didn't go to

washington to do that and he certainly didn't but from day one, he understood the financial markets were about our 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 lock me up and say listen hank, we will get her this. these are going to be, this is 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, save the economy and that was his point of view. and you talk about my mother. he would be telling me i need to work out, need to get more sleep. >> and terms of the other people on the political stage, seem to me that going up to the election , you probably felt that barack obama was both more knowledgeable and had more

interest in what was going on in the financial crisis than john mccain. is that a fair assessment? >> let's say, it is no doubt fair that i had the conversations i had with john mccain were just as frequent as they were with barack@ "auaã@

had come out against it. and if he had played the populist card, we would have been left defenseless. and so as i look back, i am increasingly grateful of the way he handled himself during this period. but during the time-- i lost a few hours of sleep. >> you described at one point in there, you say you issued 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.

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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 stro i