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coming up next, book tv present "after words," an hourlong program where we invite guest hosts to interview authors. this week a plant science writer james gleick discusses his latest work, "a history of information," beginning with the development of various alphabets and ending with what is expected next from the information age. the author of "chaos" chronicles the evolution of how faults and small which have been passed from one to another throughout human history. he talks with frank rose, a contributing editor of "wired" magazine and the author of "the art of immersion." >> host:

>> host: james, thank you so much for joining us. >> guest: thank you for having me. >> host: glad to be here. i really enjoyed your book. it's been great fun to read, and i must say quite informative. >> guest: thank you. >> host: now, one thing i was sort of fascinated by, the year 1948. i mean, clearly that was a banner year so to speak in terms of studying for the world we live in today the was the year the transistor was invented, the year that the came up with the information theory. what was it about that year? why did all these things come together than do you think? >> guest: that year is the starting point for my book because i start the book in the middle. but it's a pivotal moment and we are able to pick one year and

say this is the fulcrum around which the whole modern world has turned but i believe that about 1948, and you'd name the two things that apparently coincidentally came together with bell labs in the same year the transistor and the information theory. claude shannon is the central figure of my book because of this starting point, because in 1948 he published and of the obscure technical journal of the bell labs system to papers during the summer called a mathematical theory of communication, and then they became a book, the mathematical theory of communication. and it was the first time among other things the first time anyone used the word bit as a unit of measure for this stuff

come information. but what was it? he would go around reminding people are telling people that he was going to use this work in a scientific way and he needed people to understand that if wyler was related to the ordinary everyday sense of the word it was something different. he was going to make it something mathematical and quantitative. so, 1948 is i think not exactly the start of what we call the information age, but i would like to say that it's the start of the time in which we began to realize that all human history had been an information age. >> host: right. how did they come up with the term bit? where did that come from? >> guest: bit was as far as anyone can tell invented by a statistician named john to --

tookie. he was a wonderful guy and there was a lot of discussion at the time about this not yet invented mythical quantity. anyway, bit is short for bye and mary digit, and of course it is a nice little word that refers to something well, we know what it is, it's on or off, yes or no, true or false. that connection already lies at the heart of the computer in riga is also deutsch shannon who wrote a master's thesis when he was barely 20-years-old in which he was getting a degree in electrical engineering. and she wrote a thesis connecting the analysis of electrical circuits of georgia will symbolic logic from the 19th century, and these were the two ideas seem to any normal

person so distant from one another and different plans of existence. electrical circuits, most people who are in the terkel engineers are doing things to do with hardware and resistance come and claude shannon was thinking of them in a completely abstract way when a circuit could be on or off and he made this connection that on or off could be the same as true or false and then you could link the circuits together and you could have logic, you could have if then. all of this is second nature if we know anything about computers because computers are built on this. this equivalence between circuitry and logic but this is where it was invented and so it is the fundamental units, the binary digit. >> host: so the transistor, we know a lot about william, he has been quite a notorious figure.

but we know much less about claude shannon just in the popular imagination. tell me what was he like as a president back then. >> guest: he was something of a low-fare. he was shy. bell labs at that time had a big industrial building on the west street. the building is still there, downtown new york on the end of greenwich village. it's an artist collective now. in the old pictures you can see the high line railroad line running through the lower stories of the building. >> host: the pictures in your book i love those pictures. >> guest: right around this time after the war most of bell labs prove to the suburbs, and claude shannon who officially worked for the mathematics department kind of stayed behind

on his own in a cubbyhole and -- >> host: did he have a window? >> guest: i don't even know if he had a window. i know he was flirting with a young woman that worked across the street during the war in what was the old nabisco building they called it the cracker factory, and the microwave research group and he later married this woman, this was betty shannon. but because during the war he had done important and useful work he worked on cryptography especially coming and because bell labs was a really unique institution where they believed in the value of the pure research because of these two things, people left claude shannon alone. his managers didn't know exactly what he was working on, but he just was allowed to do what he was doing and what he was doing was apparently not particularly useful unlike the transistor.

the transistor, everybody knew was going to be a big deal, and when it was announced that same year he mentioned shockley, and his co-workers became immediately famous. bell labs' put out a press release. the transistor we now know replaced those bulky hot vacuum tubes and enabled the miniaturization of electronics almost immediately there were transistor radios, and then combined with it the technology of the integrated circuit it became the underpinning of our computer world. now we have billions of transistors, literally in our pockets. i can pull the device head of my pockets, that's billions of transistors right there. shannon's fury which came out at

the same time at first blush had nothing to do with that. it was a coincidence. he was thinking at least officially about telephone wires, old copper analogue telephone wires and his theory of communication was of great use in the coming up with techniques for compressing information and sending it efficiently over these analog wires for example the presence of malaise. but while he solved a lot of these problems in an analog way, he simultaneously sells them in a digital way meaning not just coming juneau, waves where everything is continuous, but in terms of what we now call bits and that is where everything is broken out. and its digital, and in our world that makes it suitable for storage on all kinds of new

devices instead of just vinyl phonograph records, with compact disks which store many times more bits because they are little microscopic pits engraved with a laser on some other material. by solving these problems both in amol terms and in difficult terms, shannon made us a great leap forward for a science that was just in the process of being born which was computer science. >> so, at what point did bits information theory and the transistor connect? if it was entirely by accident or circumstance, happenstance in 1948, when did they began to

intercept? >> guest: the path began to converge very quickly. the 1950's, the early 50's and then on to the 60's saw the birth of the digital computer. and right at the beginning you mentioned norbert wiener. he came into the picture very quickly, too. he was one of the people who early on recognized the power of these new machines. and they became a popular sensation, you know, wiener was on the cover of "time" magazine and life magazine in the early 50's, and people started to talk about a thinking machines. there's a lot of buzz about them. this is long before there was any such thing. computers in those days were so crude by modern standards. they were just a glorified calculating machines, but people could suddenly see some of the possibilities. in part because of shannon's work, in part because of the

predecessors of shannon like alan turing as i write about in some detail in the book. she was at the end of his career so he was close to his tragic death, but he was thinking philosophically about whether these digital machines could ever think and if they could think, how would we know and of course a lot of people were terrified by that prospect. a lot of people didn't like the idea. shannon was one of those who, for whatever reason, was entirely comfortable with the idea. he didn't mind. i think that he and touring both easily felt that we humans are more or less machines any way. they had a fairly materialistic view of what we are and so it didn't bother them to consider the possibility of the time sometime devotee electronic machines that could think.

but again, this was so far from the world we live and where you know, just this spring we saw on tv ibm's machine plea in the jeopardy on tv, and revised the whole line of conversation. finally, this genuine artificial intelligence here's the tasks solving these jeopardy questions that smells like something that involves the higher capacities of our brains. back in his time, shannon was thinking about whether computers would ever play chess, and you and i both remember when that was considered a real threshold question would machines ever be able to play chess as well as the human being? of her body had realized that

there are so many possible games computers wouldn't be able to solve the problem by brute force it wouldn't be able to list the possible moves. there were just too many. there were more possible chess games than atoms in the universe. so it requires something like intelligence to play chess. that ship has now sailed. estimate exactly. but what is it about this to you think -- you know, you mentioned in the book that in the 1950 "time" magazine had i believe the gang machines on its cover. and here we are, you know, 61 years later. ibm plays a recently good game of jeopardy and suddenly this jeopardy is the crowning moment of human achievement. never mind the question. it seems that we are very eager to, you know, the idea of the

power of thought to these machines at the same time we're kind of you know, terrified about it. >> guest: yeah. one thing that is happening as we move the bar, you know, something humans use to be good at was remembering things. even calculating numbers. it seems crazy now, but it used to require a lot of intelligence to remember things and compute. the first computers were humans. it wasn't really until the 20th century that there was such a thing as a decent mechanical calculating machine. well now, because computers do these things so well we don't have to remember anything and we certainly don't have to calculate arithmetic. we have machines in our pocket for the surfaces, and psychologically i think what we

do is we downgraded the value of the skills and we think well, calculating, that's not intelligence. [laughter] because you have a machine for that. we can relearn, you in dhaka, if we want to, i am pretty sure. memory becomes a kind of proof for some sort of thing. i mean, yes you can train memory and people go around competing to prove that they can do that, but that's a little bit of a parlor trick because in the day-to-day life, that skill is not required of us any more. we have so much help. before we had computers we had, you know, writing and notebooks, but now computers help us remember absolutely everything. you are at a dinner party have an argument with a bunch of

friends about who was the start of such and such a movie it's only a matter of seconds before somebody is going to go to the keyboard and get the absolute truth answer according to google. so what happens is the bar is moved and we need to look to other skills that only humans can do, writing poetry, composing music. it used to be playing chess, not any more until this spring maybe it was answering those wacky jeopardy questions. maybe we can leave it open whether that question has been sufficiently solved by ibm's machine. it's sad in a way because less and less is reserved to us exclusively and more and more is done by computers and so the result of that is people worry. they look ahead and they wonder whether anything is going to be left to us poor humans at all.

>> and others make us much more powerful. it gives us the power to look up a fact within milliseconds. something we were never able to do before. and that's, you know, that's been true with every sort of advance. i was fascinated by coming you know, very early in the book to you sort of step back from, you know, information theory and bits to look at the much earlier forms of abstraction like, you know, written language, and it seems every time we developed a new symbol system whether it is language or, you know, spoken language or written language, you know, which is obviously more advanced or mathematics that we move to a new level of

abstraction, and that seems to be ultimately what finally happened now with information. what does this abstraction give us? >> the connections you are making are exactly the reason that i can't 1948 is such a turning point. we are able to look at all of these things now and understand that there has been one story from the beginning. that all of these early technologies for technologies of information just like the ones we have today. we know the computer is an information technology and then we can look back and say well, the computer is a successor to the various other types of devices. in one way it is the successor to a calculating machine but in another way to the television and a phonograph record and maybe even to the book because we are using the computer to

help us make use of all these different forms of information as we now call it so that we look back and we can say that telegraph was an information technology and before that the printing press, and before that, the invention of writing itself was the creation of a technology of information. as you say, one thing all of these inventions have in common is new levels of abstraction. the point about writing is to take something that was already is of symbols, spoken language, and included in a new form. it can be encoded in pictorial form as in the writing systems that were invented in asia, where it could be encoded data bit later in alphabetical format

where the symbols don't refer directly to the words or the ideas or the images but refer to a smaller unit, a unit of sound. that's more abstract. a chinese character that represents the word cow is connected to the cowal may be a little more directly than of the three letters of the alphabet that spread the word cowal which don't refer to anything except for sound. and then in our world if we become good readers and we don't read the flout anymore they aren't even sounds. in another leap of abstraction begins, as it does in all of these technologies. the telegraph require coating. it's not an accident that samuel

morris's name is attached to his code. we talk about the morse code. he may or may not have been the inventor of the telegraph in fact, he wasn't really. but he was the inventor of the code, and it was a brilliant idea. it solved a problem that people were trying to solve all over europe. how do you take language, either spoken or written and convert it into a form suitable for the transmission over electrical wires? you could imagine a lot of ways of doing that. maybe it is hard for us to imagine now because we know what the solution was, it was powerful. the solution was just having, opening and closing the electrical circuit. but before that, the people involved, people came up with solutions involving magnets, the 2:00 faces and a needle moved and so you could move the need to let one end of the wire and would benefit the other end of

the lawyers sort of like a ouija board. >> host: i'm surprised that didn't catch on. >> guest: there were telegraphed that worked that way in england for a while. you can see that it's a little bit more clunky. on the other hand, you were just sitting down if you heard the systems described you might be forgiven for thinking anyone can use of the fingers of the needles but the other thing you have to learn an entire code. are humans actually going to be learned the more is coded as difficult an abstracted yet we know that they did. thousands, tens of thousands of professional telegraph operators, and i think right up until our era there were plenty of people who numerous code and now i think that it's vanished. we know that it's a vanishing skill. there might be a few people watching us who are jumping up and down but i don't.

>> host: how long does it take to learn the morse code? is it like learning how to type? >> guest: i never learned it, so i don't know. i take that you didn't either. but we know that it's a skilled people internalize and became second nature very quickly. you could listen to the clatter of the telegraph sound over the wires and just sheer it translated in your head fluently. people who were fluent were as good as understanding as a person in the foreign language. you could just understand the message. we also know that people had distinctive signatures. you could recognize the voice of a particular telegraph operator. all of that is vanished. >> that's fascinating the code

can be so abstract and it can also be so personalized at the same time. i find it fascinating your whole discussion of the code, the morse code and others, and in particular in light of the fact that both shannon mandatory during the world war ii were involved in the codebreaking which of course is something you touch on in the book, and, you know, i'm kind of particularly fascinated by that because, you know, of course the codes are a process of encoding information and it is essentially taking a simple system and making it even more abstract and complicated. what was the connection to you think between that and between shannon's later development of the information theory or what

touring ultimately did as well? >> guest: i realized early on that this was going to be a threat that was going to run for the whole story, this idea of the codes. for one thing it is a hefty word. computers, computer programmers are of coders. that's not a coincidence. at the same time that shannon was a kid growing up in northern michigan, he was fascinated by the codes. one of the books he read and reread was a book of edgar allan poe's stories and edgar allan poe and his term was fascinated by codes. there was a time in the middle of the 19th century in the u.s. when he was -- he was probably the nation's most famous cryptographer. he would come up with the challenges for cyphering that were published in the newspapers

again in retrospect we can understand why that is. there is this abstraction, this conversion of information from one language to another. shannon himself did become a professional cryptographer during the war because he had to. it was one of his assignments in particular a sort of he was assigned to the top secret ex system which was a telephone system, it was a hot line connecting president roosevelt and winston churchill, and shannon didn't invent the methodology the was used to code the system. on the one hand it was very clever and on the other hand incredibly clumsy system that involved phonograph records with random no is on them but identical phonograph records on

opposite sides of the atlantic and so randomize to oversimplify was to be one phonograph record over share while roosevelt would talk. and then it would be subtracted from the signal in london so that churchill could listen and then back-and-forth. but there was a theoretical problem of how secure this was coming and that problem was assigned to claude shannon. they wanted him to figure out whether this could be broken. in the course of doing that, she wrote an entire electorate mathematical theory of cryptography which was immediately classified stamped top secrets and not published for years, not published until after his mathematical theory of communications. we can see now we can compare the two things they have a lot in common, but in both cases shannon was thinking about

converting information from one form to another in the case of cryptography from a public forum to a private hidden secret form for concealment. but for the communication of was the same thing. it was converted to a different form not for the purpose of concealment, but for the purpose of efficiently sending it over the communications channel and yet the problem was very similar. >> host: it was all about communications. >> guest: that's right. so there was a moment during the war win ellen during, who was simultaneously a secret cryptographer in england traveled to the united states why would never vote was available, you know, weaving in and out past the u-boats and visited a bell labs for a few months and would have lunch with shannon and neither one of them was allowed to talk about the secret project.

so, turring was cracking the german code which was incredibly important. >> host: tell us about the enigma code. it's a fascinating story. >> host: it's another one of the stories that wasn't known until after the war because of its classified as secret. the germans had some leverage codes that required machines, john and, they look like typewriters with a lot of wires, the senate machines come and in a stroke of luck, some polish soldiers captured one of the german enigma machines and that in itself was not enough to make it possible to crack the code but it was a starting point. so the project was under way at the park in england, and alan turing was one of several

mathematician's involved in the codebreaking project and he was the one that really did the most to solve the code once and then continues solving it to construct machinery using electrical circuitry and vacuum tubes and a lot of mechanical year to crack the code in real time. every day the germans would change the code and the brits would crack the code again. it was incredibly important. it's arguable that this secret technological project did more to win the war for the allies and the manhattan project did in creating the atomic bomb. the answer to that isn't just arguable, it is true. >> host: obviously they had to -- they shouldn't have given

away that they knew too much. this could have to be careful how they use the information, and these were decisions that churchill was making all the time. they were rightly paranoid about letting the germans know. if the germans had known and i think they certainly suspect long before the war was over their still wasn't all that much that they could do about it. you know, they have their u-boats if they needed to send messages. still, the fact that on not a military historian also why can't give you the chapter and verse but you can go to the technical book and see many decisive battles hinge on the knowledge the commanders had that we didn't know at that time that is the public didn't know

at that time they were in the possession. >> host: destructive you but you're talking about turing and shannon at bell labs and was it 1943? >> yes, 1943 and 1944, before the war ended. you just wish well i wish i could have been flying on the wall, and i also wish they could have talked about the work that they were really doing because they're interested so much in common. but apparently, they didn't. on the other hand, they did start to speculate about the future of thinking machines because both of them were thinking about computers long before there were such things. turing in particular had invented a purely abstract mathematical machine that we now call the turing machine or in particular the universal turing machine, which is the computer that represents all other

computers. the machine existed only in his head because the transistor hadn't been invented yet so he imagines a paper tape, and a kind of device that would march up and down across the tape planting symbols or reading them back off of the tape, and this we could think of now has like the head of a tape recorder that technology hadn't been invented yet either. really turing had to imagine all this stuff that he didn't have. the one thing he had was typewriters. typewriters could plant a letter on to a piece of paper. and turing said the mention of that piece of paper is not to dimensional but it's one-dimensional, just a tape and the machine goes back and forth.

anyway, she invented a computer that using just these items, just the tape and the reading and writing and some mechanism of storage, storing the states of the machine could do anything that any other computer could do. any problem that could be solved by this machine by turing's imaginary machine could be solved by a modern digital computer and vice versa. >> host: was his machine his imaginary machine digital? had he gotten to the idea of what we now call bits? >> guest: the symbols were discreet so there was nothing analog about it. it was not by an area. and it remained for the next generation of mathematicians to look out whether you could make the machines with two symbols of zero and one and it turns out

that you can >> host: so turing and shannon more or less working side by side. do you have any sense of whether they knew or suspected or -- >> guest: i think they must have suspected. at least we know the common interests were apparent because they were talking about thinking machines. turing said something different about how shannon how he was defeated on just data to the mechanical brain, he wants to feed music to it. they were both each on its own way forward-looking visionary men and they must have communicated that to each other even though they then went their separate ways referring to england and shannon continue to work in his cubbyhole in new

york. >> host: did they ever meet again? >> guest: turing's story as you know is very sad. he should have been a national hero, and instead, she was a homosexual and dillinger in the 1950's, that was illegal. >> host: what happened with him? >> guest: he was arrested. he was entrapped and the sorted staying encounter. the we keep street as barbaric now. the theory of the day this is the 1950's and the idea thomas sexually was something that should be treated in the with the injections of estrogen, the female sex hormones which changed his body thrown into a state of depression it was humiliating as you can imagine

and he killed himself. >> host: of the things to get back to an abstraction, you mentioned that in order to make the word information work in a way that he wanted to shannon had to be essentially if i'm not mistaken rall bit of the community or the richness you make the point which i was fascinated by that newton had to do the same thing with so forth. what is it about slipping something of the meaning and making it more and more abstract that makes it more powerful with the same time? >> guest: in the case of newton, i know about him because i wrote a short biography of him about ten years ago and i remember going through his early notebooks and looking at most of

which are way over my head. i don't have the math to understand what he was doing technically. but i can understand enough of the problem he faced to watch him struggling with the meaning of words. this is when newton is in his 20s and he is working out of a farmhouse in the the english countryside of the plague years so cambridge university which he was attending was shut down. he was trying to create the laws of motion as we now understand them come and solve the problems that led to his appreciation of gravity. he was writing things down for which there were no words. for example, mast, an object has wait. people knew some things were heavier than other things, but

mass isn't exactly the same as the wheat in his equation. mass is tied up with a gravity and newton and needed a concept separate from gravity and he needed to feed it into the mathematical equations that involve force. force is another word. scientifically with a little bit about applying force for a stationary object or a moving object thinks to newton. but you see him struggling to come up with the words both in latin and english because he was using both languages. and finally, he just picked words that existed in the language like force. force was a military thing. and he would say okay this is going to be a mathematical terms and i'm defining it in this mathematical way. cut forward three centuries and claude shannon i'm arguing was doing exactly the same thing

with the word information. he had in his head not just shannon but other telephone engineers the idea that they were dealing with something real, they were dealing with it when they sent it up and down telephone wires and it wasn't exactly words, and i wasn't upset the characters. a typewriter use his characters. a scribe rights words. when you talking to a telephone, you are speaking in words but what exactly has gone up and down the telephone wires? shannon knew that there was electricity but it wasn't really satisfactory to say we are dealing with electricity there. there was something else coming of electricity, not words, not characters, what was it? we know the answer. the answer wasn't obvious. shannon was in the first person to start using the word

information. in the information wasn't the only word shannon used. sometimes people would talk about intelligence. there's an early letter where he writes to one of the teachers that he is noodling around to work on a general mathematical formulation of some ideas having to do with the transmission of intelligence. wrong word. they needed something, they needed a word and for better or worse they chose information and shannon announced he was going to measure it in terms of its and then made a quantifiable measurements laughing the scientists could work with. >> host: so, one of the sort of irony is high sense in your book was the idea that here we are we have a very analyzing

system and yet to there's these types of obstructions and enables us to look up the name of a movie star at a cocktail party to do anything we want to practically, and i'm kind of fascinated by that. and since there are limits and this is another thing you talk about there are limits to what this can do for us where does that leave us do you think? >> guest: there are a lot of ironies and we are either conscious or semiconscious of them. one of them has to with a question of meaning.

shannon explicitly removed the meaning from the concept of information. he would go around saying that it is irrelevant to the engineering problem that when he talked about information he was talking about the string of hits, symbols, and it could translate into something that was sensible or something useful or it could be sheer nonsense. welcome to our world. [laughter] >> host: right. >> guest: here we are and one thing we know is that information is everywhere and we have all everything we could possibly want. maybe that's not literally true. we are hungry for more but we know that there is lots of it there. we feel almost on the mission. we can get the facts and the data both things are cheap. in this world, paradoxically knowledge doesn't feel any more available or clear-cut or

comfortably in our possession. we are in a world where there are millions of voices and we wonder more than ever how to find the right ones to trust. t.s. eliot said where is the wisdom that we have lost in the knowledge, where is the knowledge we have lost an information, she said that in the 1930's. so why do a little bit of a double take but isn't a question that we are all asking now? on the one hand we are on mission and on the other hand we feel that we don't know anything. >> host: i felt like reading this book and you know, obviously some years ago the book "chaos" was essentially

about revealing the order behind the randomness and this book to me seems to be about three dillinger the randomness of the imperfections or the incompleteness behind what we think of as the tools we use to define our reality. is that the way you thought it sort of as you were? >> guest: there are definitely connections there. there are some technical connections that i know that you are aware of between the science of chaos and information theory and in fact i first heard of information theory when i was working on the chaos from some of the scientists i was getting to know. they were using this thing called information theory created by this guy named claude shannon to understand the behavior of the physical

systems, and in particular, one of them was analyzing the dynamics of the dropping fawcett, and he was doing it in terms of information theory, and i thought well, that's something. how does that make sense because information is something that is totally abstract. the connection is to deal with randomness, and the interweaving of the order and disorder. information it turns out is a claude shannon's vision of information involved in a way of measuring the disorder in a physical system which is what the chaos scientists are trying to do, and in exactly analogous way and perilous way measuring the disorder in the message of the telephone engineer will worry about the malaise in a message but also about the

redundancy in a message. so the tools converge, they converge in the aftermath of shannon's discovery of information theory when a new generation of mathematicians and extended them into this work has gone on to this day and this is what i think i'm getting to you're driving at. and in this technical world we're living in where we, too, are looking at a signal that involves a lot of malaise, and as individuals, trying to get past the randomness, trying to find the parts of it that makes sense that our orderly and meaningful. >> host: to the tsl yet.

>> guest: right. >> host: so, does this book about the work during for chaos? >> guest: for me it does. this is the year before amazon of course sending away for claude shannon's book the mathematical theory of communication which has never been out of print titled think so it's a university press book. it was possible to get it and some of it is very technical and some of it was way over my head. as mathematics. luckily it had a nice introduction by warren weaver than of the rockefeller university who had written about shannon for the scientific america and shannon himself was riding in a way that any of us

can read to some extent. if he watches with the equations every so often he says something that makes a little build a wall in your head, and the bill that goes off says care's the modern world being born. this is really the kind of thinking that leads to the way every computer scientist thinks today and not just computer scientists but all of us who use these machines. the knowledge is filtered down to us and when we understand that recorded music on your laptop or your ipad or you're ipod is in a way the same species of things as the words recorded in and e-book or a message that is being sent through twitter all of these are

related to one another. that is due to this book by shannon. so i carried it around for a while and i wrote these other books and finally i guess it feels as though this is the book i was always trying to write. >> host: fascinating. so the idea of the information age which is typically referred to the age we live in, the idea that the reality is defined by information and networks and the sort of by an eerie forms of communications, and in the same way that newton gave rise to the idea of the clock work universe or 100 years or more after that

you have the age of steam and power kind of defiance the human perception of free devotee, and now we have this sense that information and that works apply to the brain, apply and that as a metaphor to the brain that's what it's all about. do you think that's true or in my 20 years or so we will come up with some other perhaps entirely different metaphor? >> guest: i think this is it, the world really is made of information. a kind of interest to say that and in saying it i'm not saying we have arrived at a theory of everything or that science can now relax. fantastic discoveries lie ahead

and we only know that because the fantastic discoveries have always lie ahead. scientists will revise the way they look at the world, and discover a lot of the things that we took for granted here in the year 2011 were kind of stupid, and we only know that because that is what has always been. the only kind of prediction i'm willing to make about the future is the easy one where i say it's going to be like the past. but i really do believe that information is what our world is made of. when i started working on the book, there was no such thing as twitter, there was no such thing as facebook. these things are transom. they may or may not come and go. what is not transcend is the thing we call the internet. we may not continue to call it

the internet and maybe there is a slightly broader thing that you can call a cyberspace or maybe there is a thing that we don't need to name, we can just say that we humans are connected to one another by means of ever faster and evermore for reaching channels of information. that's not going to change. i refuse to believe that there is going to be a future. some horrible apocalypse in which people decide well, you know, i don't ever want to talk to anybody again let's go back. not that that isn't appealing. i don't want to sound as though i am saying we are heading for some cyber utopia we will want to be connected from morning to

night. i do think already we want to go back some of the time. we want to go to the beach and turn off our cell phone and we need to find a balance. you can't be connected around the clock and still engage in the activities that we call thought. what we've learned from information cannot be relearned. >> host: you mentioned a cyberspace, and obviously whether it is the concept of cyberspace or the science fiction of the matrix, and you know, science fiction writers who are revered by people in the world it's not a utopia, it is

quite the opposite they are presenting the will of the future as a very scary place. what you think? >> you are right. to give credit where it is due the science-fiction writer that invented the word was william gibson, and certainly to some extent this matrix movies are utterly in his debt and/or write it is a dystopian vision. we are about to think now even that we are living with the vision that it's not all apple pie. to use your fruit metaphor, personally i tend to be optimistic. there are genuine dangers about the world to deal with privacy, dangerous to do with a loss of

attention, to deal with fragmentation of the communities come and with over control. right now cyberspace is a surprisingly free kind of place in much of the world forever accidental reason the internet as it was created in the united states started as a very space space where everybody had a voice and to some extent it's still like that. anybody that wants to be a blogger or turing candian it is as powerful effects. it's frazzled to say that the movement for democracy in egypt this year was caused by facebook, but i think it's absolutely true the existence of the electronic communications

challenge help that movement enormously. that's not what it was about. it was about the desire for freedom but was about an enabling tool. conversely at this moment in china the state is struggling to exert control over the communication through the internet over google and other enterprises of the modern life and succeeding to a scary degree. i hope it's not succeeding absolutely. i don't think it is. i'm hoping that the internet will come of the pieces of the internet that tend to freedom will be strong enough to overcome the technologies of the internet that enable the state control. or for that matter corporate control. but i don't think it's clear who the winner is going to be. >> host: it is an open question at this point. >> guest: something we need to

pay attention to. ..

>> now, i booktv, author set

three talks about his book, "in the garden of beasts, but america's first ambassador to hitler's germany, williams at five. he spoke at the chicago public library for 15 minutes. >> it's terrific to be back in chicago, especially on an actual nice day. i was here last week. it was 45 degrees. strange. i have to tell you it makes me tremendously, tremendously for the days and nobody came to my talks. and i was like to tell the story that made very first book event, which took place when i was living in baltimore. it was just after i published a book called, the consumer. [laughter] exactly, exactly.

it is a book nobody thought. one guy read it and reviewed the book and hated it because he was a target of the book. the book was about, by the way, how corporations by individual consumers. so i did get a call up though when i was living in baltimore took a walk to lancaster, pennsylvania, to do a talk, not to do a talk, just a signing. i've since learned that sunday afternoon talks are attached, especially when you do a talk at lancaster pennsylvania on the first warm day after six months of hard winter. it's one of those things were stuck in the bookstore and you see these people, a table with about 40 books on the table. and there you are. mercifully someone at the bookstore had made a plate of chocolate chip cookies and put them next to mine. so i sat there for the first

hour and a half with nobody coming to talk to me. they were looking at the books all around me, but nobody made eye contact, nobody bought the book. at about the hour and a half point, i looked up in this woman is coming towards me with this big smile on her face. she looks like she's just taking the greatest delight in this event. i see her coming, take my pen out. now i know my career is on its way. she comes back to the table and says how much are the cookies. [laughter] so it is not what you would imagine it to be. let me first say here in this lovely venue, i am a huge fan of black areas. i am not just up when i say that. i like to think of myself as the

end it showed the viper or point on the 900 levels of the dewey decimal system looking for an interesting book, created by melville dewey, who is a rabid anti-semite. in fact, i love libraries so much combat if he were to give me a choice between a night with kate blanchet or a night walk to loud in the library of congress, i would take the night with kate lynn checked in a heart beat, but i too love libraries. so i thought her attack tonight about this new book of mine, except for in how it came out by you. i'm a little knowing that in the publishing company, crown publishing company, within the company who were apparently lazy, they call the book now exclusively by its acronym, which is it god, which sounds a

little bit by something your cat coughed up. but i've realized is if you say itgob law corralling companies on chase lake girl and the the exorcist movie. take it home with you. [laughter] at first glance, this may may not seem like my kind of book necessarily. this book is sent in 1933, 34, nazi chamonix, hitler, the whole deal. this is exactly my type of thing because it is about a period that people think they know an awful lot, but i would argue really don't. i certainly did not. there's a tense tense and see to do the period from 1933 to 1945 is one block off of machinists for, where in fact there were

distinct phases. here's how the idea came to me. the idea, and some of you may have heard me talk in the past, from this very hard time. my publicist and friend refers to it as dark country have no idea. one aim in the dark country of no ideas, i get very moody and annoyed at myself because i want to be dave and i don't never feel productive when i'm sitting around my thumb, thinking about what i'm going to do next. i was in this dark country of no ideas five or six years ago, wondering what i was going to do next, when i thought no, i am going to go to the bookstore, browse the history section and get a sense for myself of what books look interesting. what resonates me, what covers turn me on and would turn me off. so it was just a start timeline

thinking about stuff. i saw a book that was on my must-read list but it never read it because it is to intimidate and a prospect. 1200 pages, teeny type, no photographs. some of you thinking is the bible. in fact, it was pulling shares, rising all of the third grade. terrific book. i bought it, started reading it. it was like a thriller. in fact, i fell in love with the book. it really was a terrific book. i must be a little bit slow about things because it was only when i was the third of the way through the book that i've realized, wait a minute, william shearer had been marinating three common 34. he had come to berlin in 1934, pretty much stayed there is a corresponding until he was kicked out. suddenly started think, what with that of ben lake?

he met hillary and that is trained to, all these people he knows to be monsters. he met them when nobody knew what it was going to be the ending. he met them in nobody had an inkling the holocaust was coming in the second world war within relatively near future. so i started thinking, wouldn't it be interesting to capture a sense of that time? through the eyes of a couple of carrot juice, who were new to berlin, outsiders, ideally americans because they write for an american audience. so i very deliberately began to read. i went to my library, my favorite library on the university of washington campus and i began to read. i took out as many terrific

history says they could appear the korean history spicer and cure shot in a series by richard evans and alan pollack's biography of hitler and so forth. but also, i found a lot in the 900 levels, i found a lot of memoirs and diaries and so forth from that. and also before and after. i also came across the diary of a chicago man named william e. dodd and soon after mm wire by his daughter, martha. so let me try and set the scene. imagine that you are brilliant in dodd. you are 63 years old. you are a mild-mannered professor of history at the university of chicago, with a good national reputation. but in turn, you are william dodd, professor of history, struggling at this time with

financial shortfalls because this was the era of the great depression. you are tired of the engulfing demands of graduate students and all you really want to do is finish a book you have been working on, a multivolume series of books about the old south, which in fact, kind of ironically, you have titled, the rise and fall of the old south. suddenly one very high tension, you are sitting at your desk. this is 1933. you are sitting at your desk and in precisely the phone rings. the guy at the other end of the line is franklin delano roosevelt, the new president of the united states. one little note, he was president at that point since his inauguration in march. in 1933, inauguration day was still in march. it subsequently been changed to

cheney because the feeling was he didn't want to read president be a lame duck for any longer than he actually had to be. so, roosevelt is on the line and he asks you, would she be the next ambassador to germany? america's first ambassador to nazi chamonix, germany has been thinking at this point for about six months. here's the kicker. he gives you two hours to decide. what he does not tell you is one reason he has called you, apart from the fact that confident of his recommended you, apart from the fact that you know german, one reason he has called you is because nobody else wanted the job. [laughter] three weeks later, you find yourself on a ship to germany, leaving new york for homburg.

you've got your family with you. your wife, a grown son, and your 24-year-old daughter, martha. and martha is one heck of a daughter. she is the one who hope to me. she is smart,, a flirt and she has this thing. she's got it. she has a way about her that inflamed the passions of men both young and not so young. at 24, she is 30 had an affair with the poet and author carl sandburg. in fact, one of the delights of the research process, which is why always do my own research is when i was going to america's papers, in one file, i came across two locks of carl sandburg's hair and a clear plastic archival envelope, tied with the black coats and clerks

thread. it looked like a little broomhead. i'd tell you do with thick and coarse hair. it was a magical moment for me. [laughter] unjustifiably. but at 24 she has had this affair with carl sandburg and is booking to engagements and is in the midst of a divorce to escape a dead marriage to an earlier tanker. now, personally, i think any marriage to a user banker would be dead, but i don't want to cast any aspersions due to the late financial crisis in america, which is also close friends with thornton wilder. so she is a very interesting kind of circle. she comes along to berlin for the adventure and immediately falls in love, falls in love with the so-called nazi resolution. she finds an intoxicating at

first. and here's the thing. she was not allowed. this is a fairly common viewpoint and name 1033. the argument was you could quarrel the methods, but on the other hand, he was restoring the nation's pride, helping it get it back together, promising to drastically reduce unemployment and seemingly by year's end to be delivering on that promise. in fact, the night before the dodd's last for new york, they went to a dinner party at the very swank apartment of a fellow named charles crane of the crane plumbing dynasty. you've been out there. you may not have realized it, but i'm sure you have seen the crane logo staring at you from urinals around the country. i can't speak for the ladies room. so charles crane has this party.

my knee this is back in 1933. charles crane, as the party is winding down, charles crane takes the new ambassador aside and says to him, let or heads this way. he also advises dodd very directly not to have any social interaction with jews while he's in berlin. martha finds her self and violent charismatic scene. we always think of the world come at least a certain they did as draft, black-and-white, she didn't grace, mainly because that's the imagery we come across. we see black-and-white photographs, newsreels. there is some images that have purpose, but for the most part it seems like a black-and-white world and there wasn't a bright sunny day in germany until late 1965 when colonel calm became

the film of choice. she saw very different than this black-and-white world. she saw color everywhere. trends come and the brightly colored trams that breanna not the main streets just as perfect as tories. every balcony had a box of virtually man's. a christmas, and the city went blonde. their christmas lights everywhere, christmas trees and every square, christmas trees on every street corner so much so that he would almost think the nazi's believed in jesus. the records cafés that that hundreds of people set a time. dancing every night at the fabulous nightclubs like the roof of the hotel at egan, cheerios and that's very interesting establishment cardhouse spotters and in berlin. there was a five-story structure that had five restaurant/nightclub venues and

it. one of which was an american wild west bar. this is in nazi to germany by the way. germans in these huge cowboy hat would serve your cocktails and presumably somewhere part of the nazi party. these cowboys were serving the drinks. it appealed to me. [laughter] so here we have an ambassador, ambassador dodd arriving in germany as a professor of history. premises studies, he arrives at a certain expectation. he has studied statesman, but in the end of in the end the act like statesmen. there's a rationality even on the craziest people. he also arrives bearing a certain amount of pleasant package. in the 1890s, like many students, he traveled to germany to complete his education, to do postgraduate education. he went to work on his defense,

which i don't even want to think of, which was about thomas jefferson. he is a wonderful time. the germans are marvelous, worn, sweet people. every morning a young woman places violets on his pillow in his room. so he comes. this fond recollection. the world he encounters when he arrives is like nothing expected, were expected a certain amount of rationale. he finds now only pathology. not just pathology, but i am talking about organic technology. his counsel general rights in the dispatch about this time that the leading three in germany, hitler, goebbels and boring would be in any other asylum. and here is his daughter, dodd's daughter who in effect falls in love with pathology at first. i realize that the two stories

provided an ideal vehicle for traveling through that period. i would not have wanted to write about dodd allowed. i am not a fan of diplomatic histories. it would not have wanted to write only about martha. but the two together captured something much bigger think. and both sides provide a version of windows on the whole. and both undergo a very satisfying transformation in the course of that very first year tears in berlin, which is when most of the action takes place in the summer of 33 to december december 34 when something quite horrific occurs, that the united states and the rest of the world should have paid much more attention to, the field to do so. so i realize that the stories really showed laid if you are looking for a more fundamental

reason for doing this story. it really sheds light on why it took so long for america to lead the world to realize and why appeasement became the first path of dealing with these people. some of the things that surprised me. and this may not come as a surprise to certain people in this room. i don't know. to me it was a shock. the extent -- the intensity of anti-semitism in the united states and also within the upper ranks of the state department, the low level of secretary cordell hull. i was really startled by it. first a note about secretary hole. he tried to imagine the perfect guide to the secretary of state at this time, it would be cordell hull. but he has some quirks. one was his passion was croquet

and he had a speech impediment. he had a speech impediment that people around him like into the cartoon or, elmer fudd, which led roosevelt, who had a lively sense of fun, when the whole was not around, he was quite the mach this speech impediment. if he was referring to holes trade treaties, he referred to them as tweed treaties. buffalo had come to the top three guys in the state department all had a healthy, if knight are great hatred, certainly does taste for jews. weatherford and the man readily as headaches. god himself had expressed a certain whelchel of anti-semitism and one really kind of startling dispatch in

the state department after you've been in berlin fire a wild company complained he had too many jews on his staff, which was in. his ability to deal with the nazi regime. in particular, he complained about his receptionist who absolutely loathed the nazi's. there's this woman sitting as they came through. personally i get made. so you have dodd complain about there being too many jews on his staff. there is one strange conversation. two formal meetings during this time period. the second meeting, dodd tries to find common ground with hitler on the so-called jewish problem. the nazi have hijacked the debate by framing it as a jewish problem. words matter. when she frames sent of the jewish problem, what else do you

think about? had to solve solve that problem? said there was a jewish problem. dodd said we have her on jewish problem in america, but we have chosen to solve it in a more humane fashion, which is referring to things that university quotas and so forth. this byte array does not nullify hitler, surprise, surprise. he gets all steamed up again the loses it completely. he says, if the jews don't stop this, i will put an end to all of them. this is a 1934, long before the holocaust. the first whiff of what was coming down. i was also struck by how he knew everything was then. all the things today we know as absolute truths of the nazi area were unfamiliar back then. for example, that the state,

which went outside first saw it, he was astonished at how to predict who they seemed. as it was the, which was so new at this point, then in the beginning it was referred to as the broken cross, which is the literal translation. the hitler salute. this thing. i'm not going to do it because it still has a jarring effect also. it would be a little concerned if i did it that that would be the moment that somebody with would take a digital photograph. last night it would go viral and suddenly i would have a lot of new friends they don't necessarily want. [laughter] the salute was so novel that dodd's counsel general in berlin, a man named george

message name -- messersmith hated the nazis. messersmith treated the third reich the way they would treat an aboriginal tribe, as in he wrote in detail at length about all kinds of things because this is brand-new. the swastika itself is not a brand-new thing. i personally found the works of roger kipling in the 1890s and every book has a swastika because as a political symbol in the modern age. back to the hitler salute. so messersmith, who by the way wrote so long on so many subjects was nicknamed 40 pages storage. he wrote an analysis, a series

of observations about what they hitler salute because this is such a novel thing. this is the only thing i'm going to read. the salute he wrote had no modern precedents. furthermore nearly requires salute of soldiers in the presence of the peer officers. or maybe practicing a conservative is expected to salute even the most mundane encounters. shopkeepers and customers. children were required to salute teachers several times a day. at the close of theatrical performances, the demand audiences stand and salute and thinkers the national anthem and second the storm trooper at them, the so-called horse vessel song. the german public has so avidly embraced and make the act of incessantly saluting almost comical, especially in the corridors were going for the lowliest messenger to the loftiest officials saluted and i'll put another, turning a walk

to the men's room into an exhausting affair. [laughter] my hope was to capture a sense of gradual darkening. i had this vision of the dodd suddenly as two characters in a nonfiction grimm brothers tale. he entered the dark wood and things get darker and darker and darker, cue the "wizard of oz" on, lions and tigers and bears as you move into the darkness of their right. so i talk about, for example, how dodd saw this given secret draft of future nazi laws, drafted things coming, including one that shot and in the little translation of this document into law for the killing of the incurable.

another of the foreshadowing of what was. i else to talk about martha's menu of last, including her affair, who i think it encapsulates the complexity and nuance that this period. this is a very complex. this guy was rudolph deals, the first chief of the brand-new agency called gestapo, the first chief of nazi. he held a job for all of one year when he was replaced with a really optical carrier errors, himmler and his high-pitched protége. deals with an initial character. he had caused the imprisonment of thousands of communists and social democrats and political party area and the jews who had

resided over an agency that had tortured hundreds of these people and likely murdered in this early phase scores. and yet, the diplomatic community, dodd in particular thought it had as a good guy. he had a lot of integrity as third-rate official site. if you guys wanted to get an american, you would go to rudolf diels and he would oblige. he was a very interesting guy. he is the one who agitated for the christmas amnesty of 1933 that left a lot of prisoners out of camp and so forth. that was one of the quietest moments of his career when he got to choose who gottfried. so he was a very interesting carat dirt remark that seemed

very clear at this point had a physical relationship. it's a charming photograph, where martha and the chief of the gestapo are sitting at a table in a lovely outdoor country restaurant, having the greatest time. i find that kind of magical. here's his evil or with the daughter of the ambassador, the american ambassador. one other thing about rudolf diels. just as whole was the perfect embodiment of the secretary of state, if you were to try to imagine what kind of villain would run something like gestapo, you would imagine rudolf diels to a point. rudolph diels, dan, dark, need, with a horribly scarred face. scarred by practice a lot of students in this area engaged in, which was tooling.

the point being that a doctor sitting on the tool would call it everybody get stitched up and that was the end and they would bear the scars for the rest of their lives and these are sort of a badge. the thing about diels busy was a real catch, handsome in a dark, scarred way. look at the photograph. i'll tell you. you might believe me. he was said to be charismatic, a charmer. i had sold this picture to a number of women in seattle and everybody looks at the sky and goes, yeah, not god, not bad. i learned in taking a look at gestapo, that one greatly would

summon people for interrogation was they would do it by postcard. said they would get a postcard saying, could you come to gestapo headquarters on such a such a date that such and such a time, we'd like to talk to you and you had no choice. if you didn't go, they cut you down. the reason there a lot of these postcards going down was because the german populace had become so anxious to fall into line to become, the term was coordinate, to fall in line with the eat those of the nazi party. they would denounce neighbors who would not like ways seem to act to behave in a coordinated faction. they would denounce neighbors to resolve petty personal disputes. if you didn't like the way your

neighbor was keeping up his or her house, you drop a time on him or her with gestapo and they would either send a postcard or, do you visit because they came and followed up on just about everything. in fact, people were batting out friends and neighbors so much, that even hitler complained. he said in a quote, this is what he told his justice minister. he said, we are the enough present in a sea of that the nations and human dignity. adolf hitler. [laughter] anyway, i am very happy to report that early readers get it. what i am finding that there is this narrative tension that you will bring to the book, this idea that we all know what is happening and hear the people you just want to say don't go into the basement. a domain name? like horror films. my favorite reaction to the book is from a friend of mine who

read it just before going to sleep one night. he read it before going to sleep one night and since he woke up we been from a night air in which she was being pursued by nazis and all she had to protect her was her little purple, plastic analogy and water bottle. [laughter] i have to say if i can give somebody nightmares, i consider that from a narrative standpoint, if it very. and i am going to stop there and take questions. i hope you have a lot of questions. if not, i have questions for you. [applause] >> thank you. questions. by the way, i think the point is you have to go to the microphones, so that is going to add the pressure.

come down to the microphone and speak because we have c-span folk recording. these people are either leaving or they are going to ask me a question. okay, you first. >> my name is tracy. first of all, i was curious as far as all of your writing, has there ever been in a get you started researching, raining for about an all of a sudden decided this isn't going to work. and if so, what was it about quite >> yes. second question. >> no, that was a period >> i won't tell you what it was about because you never know. just recently having been and still am not their country of new ideas, i had an idea does seem to level the right elements. i was looking into it, looking into it.

it's a place in california and i didn't know about this tonight had all these great characters and stuff, but there was just something missing. i worked on it for a long time until they realize they think the best way to put it is that a black t.a.r.p. so i killed it, much to my agent sorrow. good question though, thank you. >> i read the book yesterday evening. >> did you wake up crying? >> no. what struck me was the fact that there was less than 1% of jewish people in germany. the impressionist this was was an overriding issue. and also the five that dodd was not reporting all the attacks on americans. i had no idea -- [inaudible] those things surprised me. what surprised you at the research? we think we know this area, but we simply don't.

>> just the fact that it's there for anybody to know. i think it was sir ian kirsch of who first made the point that only about 1% of germans were in fact jewish. it's probably not well known and should be well endowed most of the victims of the holocaust were not germane. only about 1% of germans were jews. most germans, and germans, and so anti-semitic thing was kind of an abstract concept because typically, the average german over no contact with jews. they're concentrated in big cities. they had either no contact with jews or limited contact is almost invariably find. so anti-semitic thing was meant for the lake in believers, party

members and so forth. anybody who wants to look them over, check out some of your shows work it's fantastic. so i was impressed by that kind of thing as well. the level of anti-semitism in the state department is what i found most startling. dodd's efforts to keep these from making a press event startling. the point was he was trying not to antagonize the germans in his 90s leave that he could actually use persuasion and reason to help hitler find in the government find a more moderate way to go, which in the course of their first year, he relies at the end he was not going to happen. thank you. >> i am curious about the obstacles he might have encountered in your research. and you speak german? you know, access to the

archives. >> yeah, she obviously is asking about obstacles. sherman, as it happens is not an obstacle. i don't speak german. i did have a translator works me, including rudolph diels biography called lucifer predicates. he didn't mind being called lucifer. he thought it added to his mystique is so i did have a translator for those. what i mostly wanted to concentrate on com exclusively really was the point of view of my two and a sense, made to americans entering this world. and that led to tremendous strips of documents in the national archives and wisconsin historical society in madison, wisconsin of all places. but the main obstacle is the same obstacle they face in any book, find the material.

he got to go the distance, find the material. i love going to berlin and seen what is there now, but also getting a feel for berlin. little, subtle things. for example, one of the things i didn't know it didn't appreciate, wouldn't have known, is how close of the action in this book takes place around the central part in berlin, which is called the tear garden, which is literal translation is called in the garden of use, hence the title sub were. so while the place is important to the action are around the eastern corridor around this part. but i learned that go in there with everything was so close together, just a matter of a 15 minute walk from gestapo, the race dodd building. out of the if it's important. everything was so compact in a very flat city.

first time i open my hotel window and looked out over berlin and the tear regarding, the first thing that popped into my mind is corpus christi. i don't know. dishes very flat. anyway. >> and a very big fan of yours. i know we all truly gifted to partake in your stories. we feel truly gifted to partake in these stories. [laughter] >> i'm sorry. >> i have the feeling at the 21st century dublin the white city will be one of the new century's greatest books. i just started reading your new

book and i just wanted to ask you as a writer, you have a very engaging manner i feel just listening to utah. the story comes naturally to you and how difficult is it to be a really good writers such as yourself? have you encountered discouragement along the way? you talk about selling the cookies at the table. they think we all know about that. what did you feel like i know we can do this. i just know we've got a period of the great storyteller. along the way, did you encounter doubts within yourself? i am just curious -- >> my middle name is solved out. >> your stories are selling cagey. i feel like you're attacking me when i'm reading the book. it's a wonderful feeling. it's a great end to pick up the

book and say your might waste. i just love that. have you encountered discouragement along the way quite >> yeah, i'll address that appeared in fact, are going to let my daughter dress that. would you step it there please tell the audience to reality. this is my daughter goes to the university of chicago, laurent larsen. [applause] >> i live within. what he does is he works from four to eight in the morning and then he worries for the rest of the day. >> thank you. that's enough. [applause] it isn't that true that sells debt is something that i had to deal with all the time. i like to think that it drives me to really hunt for stories

that are the kind of thing then i'm going to like and other people are actually going to light. but i sure as wish there was some elixir i could take there would give me one day where i wasn't afraid that something was going to be a bomb. case in point, would devil in the white city, on the eve of its publication, i was convinced that my career was over because this was a book that had two narratives that never intersect it. it broke all the rules. and so, there you go. i actually similar fears for this one. so there you go. yes. >> you touched a little bit on anti-semitism and i wasn't aware that the ambassador was a professor of history -- i guess

my question is, did he have any kind of historical and clean the anti-semitism in germany? you go back and read martin luther and he doesn't have nice things to say about jews in the 1600s. does he kind of has any sense -- the history of anti-semitism in germany? >> good question. here's the weird thing. yes, he did have a sense of the fact that anti-semitism had been prevalent. >> i get the sense a lot of times in terms of anti-semitism, not that they drop down from mars. >> they did drop down from mars. but it has nothing to do with anti-semitism. anti-semitism had any theme as dodd pointed out in germany for a long time and other cultures

as well. what was interesting was dodd newest content be to be anti-semitic. we today would be blatant on his purposes and his era and ambient pm but a lot of people expressed and saw no reason to be uncomfortable because you see evidence in this and the fact that some of these guys in their diaries, knowing that they might one day become public are very clear and very direct about their dislike of jews. another question. you over there, yes. >> thank you very much for your time in the presentation. i was just wondering, do you think ultimately dodd is the right person for the division and you find yourself sympathizing with his struggles and maybe lack of otherwise action on confronting the nazis.

>> that's a good question. starting with the idea was kind of a position that nobody could have done anything terribly productive and nobody could have really persuaded her to do otherwise. i do have to say given its mandate, roosevelt sent him there with the fundamental mission to serve as a standing love american liberal values and dodd did that. he never sought up to the non-nazis. he held true match to the absolute annoyance of the third-rate. he really ticked off the germans, just by refusing to give him the fundamental principles that ultimately, i don't want to throw out any spoilers in terms of the book.

so i do think there's a tendency by historians to overlook the five as a failed ambassador. i don't think that's at all correct. if i had to give him a letter grade, given the circumstances, i would give him the curve. i would give him a b+. yes. one-word title. >> this better be good. i don't know if it's a great question, but i really loved your book, devil in the white city. one, what is your level of involvement in making the film and if you work there and about how often they make movies out of books, particularly nonfiction, they tend to hollywood guys. >> the option was spotted by leonardo dicaprio and he apparently played things to get

off the ground. it's going to take a while. my involvement is going to be minimal because i espouse -- i'm going to paraphrase this badly, which is you bring your boat to the fans can take the bag of money and run. [laughter] [applause] because -- because hollywood if you're a writer who wants to have any control over your hollywood will, hollywood will break your heart. so really it comes down to when you decide to sign over an option and can you make a decision at that point, do i want this to happen or not? and yeah, i think it's going to be interesting. at this point i want to see what talented filmmakers and actors who make up this book. i'm particularly interested in

what the music will be that goes with the nucleus of the dems. i'm voting personally for scarlett johansson and kate blanchet always. [laughter] so anyway, that's really the level of involvement, which is essentially none. so anyway, thank you all for coming. [applause] >> up next on c-span 2, authors gretchen morgenson and train to discuss their book, "reckless endangerment" about the 2008 financial crisis.

>> a look at the causes of the 2008 financial crisis. gretchen morgenson and joshua rosner are co-authors of the book "reckless endangerment," which highlights the roles of fannie mae and freddie mac. the authors spoke of politics &e prose bookstore in washington d.c. in june. this is a little over an hour. [applause] >> thank you so much, david.

we are really thrilled to be here tonight at politics &as prose, as you know, an iconic institution in washington.l and it is just a thrill to be here with you and engageeally customers, wow, that's really fantastic. it's really wonderful to meetine david and see in person this incredibly digestion that everyone loves so much in enshington. and ihave be now, josh and iok tour. he book have anyc little among the questions that we et frs get or often bit interviewers, by years of the book, e-mail and my e-mail count at chaim what surprised you the most about your reporting and the investigation that you both did to come out with this book. we all know that there have been a lot of books about the financial crisis.

many of them recount the events during the crisis in the heat of the panic of 2008. some of them go back a little bit further to describe some of the groundwork that was laid to create a crisis but it josh and i decided to go back much further into the 90's to tell the tale because a debacle this large really didn't haven't been over night. and unlike some of the book's conclusions, other book's conclusions that it was nobody's fault, sort of day concatenation of events that couldn't be helped we really believe that there were actual parties involved laying the groundwork. but as far as what has the most surprising to me in this exercise is the number of paradoxes that emerge from the

story. the paradox of the powerful participants in the event leading up to the crisis who continue to this day to be in positions of power or are even in positions of greater power than they were. a second paradox that trillions of dollars of losses being endured by the investors and borrowers, yet no one involved in the mess being held accountable. but to be the most perplexing paradox of all is this. how did it happen that the drive to expand the rate of homeownership to the first-time home buyers many of them minorities, immigrants and other low-income individuals, how did it happen that this partnership, this push will not trapping them in loans that they could not

afford and putting them squarely on the road to the financial ruin? in other words, how did the dream of homeownership become such a nightmare for so many first-time home buyers? it is an awful paradox when you think about it. government officials and the belief that the homeownership was a win-win for everyone opened the door to the predatory lenders who lured the least sophisticated people on to the most poisonous loans. these included loans with prepayment penalties of high interest prepayment penalties or high interest rates. a report by the center of the irresponsible lending looked at 1.8 million loans in their early 2000's. it showed that from 2000 to 2000 for the borrowers and the minority neighborhoods received a disproportionate number of loans with prepayment penalties.

the center found that the bar was living in the code areas were more than half of the residence represented minority groups the odds of reseeding prepayment penalties were 35% of those of the solar lee situated borrowers in this of course where the minorities comprised less than 10% of the residence. the study controlled importantly from the ki borrowers property and loan characteristics such as the borrowing credit scores to ensure that the results were not, repeat not based on the differences in the risk factors. now, we move on to the apex of the boom and the center made another study of 177,000 loans in 2006. and i concluded that the odds of receiving a higher rate, fixed rate purchase loaned or 71% greater from african-americans than for whites. african-americans or 15% more

likely to receive a higher rate adjustable rate mortgage than if they had been white. and african-american borrowers were 44% more likely to receive a higher rate on their fixed rate refinancing alone and similarly situated whites far worse. latino borrowers were similar. receiving a higher rate, fixed-rate purchase loans favor 60% greater than a similarly situated white borough were. this data supports what i found in my reporting about countrywide financial, one of the biggest said prime lenders before it was acquired in a sale by bank of america in 2008. according to a former broker who spoke to me from the los angeles area where he worked for countrywide, it targeted low-income borrowers with high-cost loans. instead of receiving the best loans possible as countrywide's

advertisements promised, the borrowers were let high-cost loans that resulted in rich commissions for countrywide's smuts talking salesman. these loans also contained outside fees to the company's affiliate's providing loans services such as appraisals and insurance and also carried punitive prepayment penalties or interest rates that were set low at first only to skyrocket in a few years of time. countrywide financial founder angela talked enthusiastically of wanting to help the minorities and low-income americans secure a mortgage. during its part to democratize the home loan business, countrywide became the number one lender to both hispanics and african-americans. in february, to those of free w her

..promised to devote $600 billin to the mortgage loans for the underserved communities through 2010. and yet according to company insiders, countrywide systems were designed to increase costs for precisely these types of borrowers. .. >> but in areas that were predominantly minority, because company executives knew borrowers in the neighbors had few in any alternatives. the former employee told me, i'll put it this way, at countrywide in the santa monica branch, they lost one to two percentage points on a loan. in they broke earn, they were lucky. in black areas, the average

pointed charges per loan was anyway from two to four percentage points. and reprimanded if you did not charge more. countrywide's entire operation from it's information technology to it's insent i have pay was designed to ring maximum profits out of the mortgage lending boom. no matter what it costs borrowers. the company's computer system, for example, defaulted to a setting that automatically excluded a borrowers cash reserves from his or her financial statements. this had the effect of making the borrower appear to be less financially sound. and he or she would be steered away from lower cost loans into those that were more expensive and more profitable. now countrywide, of course, was not the only lender that appears to have targeted minority borrowers. a recent lawsuit against wells fargo over loans that it made in

tennessee found that its foreclosures rate in black neighborhoods of memphis are almost 18%, 5 times the rate in preno, ma'am didn'tly white city neighborhood, and seven times in the predominant white counties. according to mark taylor, mario taylor cited in the lawsuit, the prevailing attitude was that african-american customers weren't savvy enough to know we were getting a bad loan. we would have a better chance convincing them to apply for a high cost loan. of course, high cost loan make it is that much harder to build up equity, which has been the biggest source of wealth for many people over the years. and these punishing loans obviously increase the odds of foreclosure. a study by the atlantic constitution of foreclosures in that city found that

african-american neighborhoods delineated and had higher foreclosure than white neighborhoods. that's because the newspaper said african-american borrowers were more than tight as likely to obtain subprime loans than caucasians. it certainly gives a whole new meaning to the push for the american dream of home ownership. yet as we turn to the after math of the crisis, these are the very people who are also not getting any help from washington. while we throw billions of dollars at the lending institutions that created this problem, main street is really left to fend for itself. unfortunately, this is created a view, it's very pernicious view that there are two types of rules. there are those for the rich, powerful, politically connected institutions, and then there are

the rules for the rest of us. now i'd like to turn it over for josh. for insights and interpretations and his views on how much fun it was to write a book together. [applause] [applause] >> it was wonderful writing a book together. i think it was largely because we had been involved in the area, her from the writing side, me from the wall street side. we're early in warning about the crisis to come. it's probably worth taking a step back into the early chapters of the book. because the crisis, i don't think we've contextualized. i don't think anyone wants to have the honest dialogue that needs to be had in order to move

past it and start rethinking our public policy on housing. we talk about home ownership rates, but we don't define home ownership. that is the root of the crisis is a problem of definition. we had the crisis began as a result of the recession of the '80s. we came out of the resession of the '80s with home ownership rates stagnant at levels they were at in the early '80s. we had home prices rises and get wages were flat. washington in its wisdom recognized there were two options. either figure out a way to increase wages stainable, or lower the standards to increase home ownership rates. they chose the latter. we embarked upon the largest public/private partnership ever in the history of this country.

it had all of the parties. it had treasury, hud, fannie, freddie, realtors, home builders, community groups and special interest groups. all of them were involved in the push to increase home ownership to intended record levels by the end of the millennium. and they created a platform that would carry that out. that includes reduced down payments, changes in building quality, innovation of new mortgage products, and all of these were stated goals, implemented as part of the policy, part of the plan, part of the notion of wrapping ourself in a culture of ownership. ownership society without ever having a discussion about what it was. and we forget that all of the benefits that historically have been conveyed by home ownership are real. there are greater ties to one

communities. they are a better place to raise a family, more stable neighborhoods, typically neighborhoods with more focus on educational obtainment of the children in those neighbors. but we never stop to ask what it was that really drove those as part of the social policy discussion. and history has shown that it's actually down payment and the monthly payment of principal and interest in what has been a forced saving plan, a forced investment where money is paid in and trapped and difficult to extrap. the benefit of home ownership was one that resulted for most of the postwar period in people buying a mortgage in formation, making monthly payments of principal and interest such that at about the time of retirement,

they could have a mortgage burning party, have the largest retirement asset, and wealth transfer, and we have cutted that. we have talked about achieving record levels of home ownership. which we didn't, because there wasn't equity. there was phantom equity. the home ownership rates were created for consumption by politicians, by trade associations, by capturing congress and pressuring regulators to pay less and less attention to safety and soundness. and we watched as home ownership rates climbed from the historic 62-64.5% which they had been at since world war ii, to 1995, to starting to rise, to 69% by the end of the millennium. then we think about the crisis. and the reality is home ownership rates peaked in late 2003, early 2004.

where's the crisis of 2004, 2005 , 2006, 2007. that's the story. that's the story of the fact that we perverted all of our definitions. we watched the industry, fannie and freddie, and later the mortgage bankers, the realtors, the home builders, the community groups really push this notion that we needed to put more and more people into homes, but what we were doing by 2004 was giving people incentives to take the more and more risky mortgage products on homes that they already had as a way of extracting the equity that they already had built up in their homes and create incentives for people to build and buy second homes and investment properties, which is another piece. part of the crisis that we are living through was a crisis that was driven by the reality in 2004, 2005, 2006, and the early

part of 2007, between 36 and 39% of home sales were second homes and investment properties. okay. that's over hang that's not going to be touched by any of the current government initiatives to stabilize the housing market. that's part of the reason that the banks who we had put through the troubled asset relief programs still have the troubled assets on the bank balance sheets. okay. we don't want to really stop, step back, look at what our housing policy did, what our financial service policy did, and that really we've been subdeuced. we've been you seduced by tax policies that insent leverage rather than the building of equity. and that leverage benefits not the consumer, but the lender. that really is what the crisis was about.

even as we are starting to talk about dodd-frank and the implementation of rules that go with it, and the building of more rational standards for housing policy, we're still not willing to have the larger discussion about what rational housing policy should be, who it should benefit, how it should be implemented. does tax code have to be considered as something we need to address with it? and instead, we've got right back to where we were. this comingling of social policy with financial markets. and that's a very toxic brew. when you start handing the opportunity for social policy goals and subsidies to be delivered through private market players, there's going to be money that doesn't meet it's intended target. where historically, the lending for first time home buyers, buyers who had limited access, special buyers were sometimes

delivered directly through government programs. and if you think back to the g.i. bill; right? and ginny mae and fha. the goal was to have the government recognize that there's some value in insent ihome ownership, but in doing so directly, there's greater control and less likelihood for seepage of profit-taking behavior. and fannie and freddie really were at the front end of comingling the social policy with financial market policy. and that really is the departure point that i think is very important. because in 2001 i wrote a paper called housing in the new millennium, a home without equity is just a rental with debt. in that paper, there was no -- there really was no private label mortgage-backed securities market. i had been part of the creation

of what we call subprime 1.0 in the 90s where we saw a large number of small subprime originators come. and really what they were doing, they were making loans that were still relatively traditional mortgage products. 15 year, 30 year fixed rate, traditional arm products to borrowers with blemished credit histories and that industry, therefore, had a small market that it could tap into. ultimately, that market went away because of prepayment rates accelerating after the russia debt crisis and accounting games that were found to have occurred at that industry. and it disappeared. and with that, wall street investment banks realized that if only they started innovating new products, they could expand that borrower class and increase the home ownership, and sell this dream to a larger number of people. fannie and freddie were a

partner in that. as much as fannie and freddie were at odds in many ways with the investment banks and the private market, they also had a partnership with them. and so what you saw was fannie and freddie by 2000 was innovating low down payment programs, was innovating the move from traditional underwriting where you would walk into a bank in your community, you'd look that banker in the face, he would look at your credit history, he would look at your employment history, we would look and think about the regional economics of the community in which you were borrowing, and where your job was, and he would make a loan decision. fannie and freddie realed for efficiently, we could move to automated under writing and appraisal processes. we could really change the structure and the dynamics of the housing and mortgage finance system. and they did.

and we're here. even know as we're watching the discussion under dodd-frank, there's a rule on risk retention. where any securitizations the issuer or originator are supposed to hold proportionally 5% of the structure. unless the loans that are in that pool are what's called qualified residential mortgages. and out comes the regulators with their proposed rule on what a qualified residential mortgage is, and you end up seeings same group, the same partnership, the same unholy alliance of the home builders, mortgage bankers, banks, community groups say hold on. if you were to make this the qualified residential mortgage rule, there would be minorities who would be kept out of home ownership or for whom the cost of home ownership would rise.

haven't we learned we're not helping people if we put them into product that is are not sustainable? perhaps it's time that we think about really a functional housing policy that doesn't transfer the benefit to the banks or issuers, and instead to the borrower? we have a mortgage interest, which is supposed to benefit home buyers, but really only helps the taxes. really it only benefits the middle and upper income in wealthy, which we could turn on its head and turn into a principal equity tax credit which would be therefore be progressive; right? it would give incentive for people to pay down every year as much principal as they can and build real wealth and real savings. we couldeeuate 529 accounts so that mortgages for people that can save for a down payment on a tax free basis if we believe in housing policy as an important social tool for savings.

but washington in all its wisdom and relationship that is we talk about, between the trade association and both sides of congress. this is not a left, right issue. this really has become unfortunately a senate banking committee, housing financial committee, they both compete for the same dollars and the people in the room broadly as individuals have very little involvement in that process. and very little to win in that process. so our hope in writing the book was to help educate and illuminate what has gone on here so there would be a little bit more public out cry for holistic policy, transparency in policy, and understand who is funding the policy that comes out of the government, intended to benefit us. and usually not benefiting us.

so i think with that -- that rank -- i would like to turn it back over. [laughter] >> thank you. [applause] >> we're going to begin the question hour now. and so please come to the microphone. with your questions or comments. and try and ask questions without many semicolons. [laughter] please begin. if you are comfortable saying your name, please do that. and gretchen and josh will answer the questions. >> i think you are going to have to get up. >> he can come up. >> yeah. >> hi, i want to play devil's

advocate to both of you. there are federal agencies that regulate. let's supposed you were both invited to administer that agency. what would you do in your implementation? >> yeah, sure. first of all, the regulator that is were charged with regulating fannie and freddie and the years leading up to the crisis when really all of the ground work was being played was neutralized. fannie, especially the top executives, understood well how to defang it's regulator. how to co-op congress and make congress it's regulator and they could buy congress, have everything under control. for years the regulatory infrastructure over fannie and freddie was a 98-pound weakling. okay. and was punished whenever, you

know, they tried to talk about safety and soundness issues, it was, you know, drummed out of town. congress would get up and say we don't have a safety and soundness issue here. we need housing. it was not regulated well and aguessively because of the very proactive tactics of fannie mae and freddie mac. looking back, you can't say you had a glad regulatory structure. what we would do now, i think you have to have a somewhat adversarial relationship with the companies that you over seeing. when we interviewed barney frank, we asked him, why were you taking the side of the company all of the years whether you could have really helping the regulator do its job.

he said i felt like this was becoming an adversarial relationship there. we said that's what it's supposed to be. we're not supposed to be friends and colleagues here. they are supposed to be over seeing. so, you know, go ahead. >> no, i think gretchen -- you know, if i were to summarize the book in a sentence, that doesn't mean you don't have to read it -- [laughter] >> it really would be how fannie and freddie taught the financial service industry, if you captured congress, you captured the regulator. the industry learned that lesson. fannie and freddie is a perfect example. you have the director of the regulator in 2002 write a white paper of the possible future stemmatic risked posed by fannie and freddie and the white house asked for his resignation within 24 hours of that. okay. you had the regulator after an accounting scandal that it didn't do because frankly in my

mind, there was a captured examiner, who was in charge, but in the after math that have accounting scandal, the regulator started doing an investigation and a senator called the hud inspector general to do an investigation of the regulator to try to stymie that. okay. frankly, there was the arms in the air. i think most the financial regulator. i'm not excusing the behavior. it's the reality of they don't want us to regulate. what are we going to do? that was with the view of people do what's in their self-interest. none of these companies are going to intentionally drive themselves off of a cliff. we'll trust them to do the right thing. >> thank you. >> in the spring of 2008, i taught a under graduate course in math of finance. where we did present value

analysis, duration of a bond which measures interest rate risk, formula for pricing options, capitallesque, and pricing models. value at risk, and how you measure the risk of an investment. thank god the course end in may of 2008, before lehman brothers went bankrupt. not a single principal of finance that i taught wasn't violated by the people who were running these major institutions. it was incredible. let me just make one comment here, then a question. the course announcement was posted on the web site of gw in the december of '07. this was an under graduate course. i was amazed that i got letters from three staffers at the federal reserve whomented to take the under graduate course. i couldn't believe it. there's no way they couldn't get

an mda degree. they knew something was brewing there. looking at your book, i looked at references to goldman sachs and here's my question, behind almost every shady deal that was exposed, for example, they ripped off gadhafi in the "walll street journal." the college said if we could get the major investment banks in china, russia, and japan, we could cut our defense budget by $500 billion. there's not a single economy in its world they couldn't bring to its knees in five years. my question with goldman sachs is this, given the deals, where -- why would anyone in his right mind take the opposite side of the trade with goldman sachs in

according to classical market economics, if a person is a shady banker, people stop doing business. there they are, bigger and better than ever. >> but that only holds where there's a real free market. where there's an assumption that there's an informational or asymmetry of information between buyers and seller. you are always going to side with the one that you know as the asymmetry in their favor. that's gone on in the crisis. there's the understanding that there are those that are always in the know, always given advance information, have access at the levels of government where they know the outcome, and you are right. in a closed system that was free market, you are right. you couldn't take the other side. i'm sorry, in a free market you might take the other side.

everyone can't be right all the time. there's not a free market operating here. there's an assumption and understanding that it's not working fairly. so right now you are right, all i think you are saying is that this is corporate cronyism and we haven't done anything to address that. >> well, in your own books that you mention that goldman sachs was responsible for managing the earnings of the fannie mae. >> absolutely. >> and they were involved in all sorts of the structured finance deals. >> well, you know, -- >> and always benefited goldman sachs and no one else. fine. why are they still in business? that's what i don't understand. >> it's also -- i always feel uncomfortable with that question. only because the goldman sachs because unfortunately, i think focusing so closely on goldman sachs actually helps us to forget that there are a number of other institutions that are

equally culpable, that have gotten equally too big, intertwined, and too dangerous frankly for the public good. we're not really addressing those, nor are we doing much bigging into what goes on, has gone on, or what they have been involved with, because there's a favorite whipping boy. >> thank you. >> but he's not defending goldman sachs. >> no, exactly. >> just so you know that. >> what effect if any did repealingglass-steagall have on the crisis? >> just a tiny little bit. [laughter] >> well, glass-steagall was the depression era law that served us very well for 66 years, i think it was. of course, they were, you know, big financial institutions for chipping away at it for years.

finally succeeded with the help of robert rubin to annihilate it altogether in 1999. there's a picture in the book of the signing of graham-leach-bliley, which was the repeal. everyone is smiling and laughing. greenspan is there clapping, it's all a big love fest. and it really was the beginning of the end. if you look, there's a wonderful picture of president roosevelt signing glass-steagall into law and nobody is smiling. everybody looking very grim, and it's the deep, dark depression, and putting those two pictures, we don't have that one in the book. putting them together with such an interesting juxtaposition. it absolutely had everybody to do with the crisis. it allowed the wall street firms to vertically integrate, to expand their operations, it was part of this idea again that

josh mentioned earlier that allowed them to take even more risk with the misguided notion they could never risk the bank because they were too smart to do that. it also fed into this regulatory view that regulation wasn't necessary. regulation was a, you know, an evil that bankers could be relied upon to do the right thing, could be relied upon to come up with the own capital rash yores to determine those kinds of things themselves. it was a real sea change, i think. but it had been, you know, being degraded over a period of years. it had everything to do with it, and unfortunately it's very difficult to put the geneny back into the bottle. >> i think gretchen's spot on, you know, it also created this opportunity frankly for the banks to compete with the gses

when it came to the mortgage world. so fannie and freddie had certain benefits, including the fact that from a regulatory capital perspective, their mortgage-backed securities had low risk waitings. and we saw the basel committee of the view that the gse should be a lower risk waiting, really at the banks and lobbying. once they did and all of the sudden that the notion was all mortgage-backed security with equal waiting should have the same risk, you ended up seeing the banks that had branches become very aggressive in pushing mortgages through their own pipeline. but the investment banks had to figure out another angle. that was vertically integrated in many cases. their lending channels. it was using third party originations, and then buying servicing and starting to build all of the information in advantage, includes the relationships which we haven't

talked about with the insurers. which were again part of the crisis. both the private mortgage insurers and the bond insurancers who were integral and central to the crisis. part of the goal of that financial super market that was intended with the repeal of glass-steagall. >> thank you. this is such a rich topic. no pun intended. i don't know where to start. by saying first of all, i really don't belief this is so much a financial crisis we're in as it is a cultural crisis. i think we are all culpable. because nobody has asked for any head bound pikes in this. we are all willing to go around and have wall street said this was a normal business cycle and repairing this for the next 15 years. it's going to happen again. what you've described is not capitalism. what you've described is

economic tyranny. we are all victims of this. i appreciate you writing your book. i think you should look at people that put a lot of their money into wealthy major failings. i wish you'd write a book about deportation. if they don't want to pay taxes, then live in sweden, don't use my public schools, go where your money is going. thank you. >> you don't read my e-mails. there's so many people looking for heads on spikes in my e-mail. there are a lot of people who are in that same -- on your wavelength, absolutely. i mean i think there is a sense, and a colleague and i louise story at "times" have been writing articles. very interesting question. why the dog didn't bark.

hard to come one the authoritative answers. when you compare this crisis to the s&l crisis in which 800 some executives went to jail for a crisis that was far smaller in number, losses, pain, agony that has been endured by people who you had actual ceoed going to jail. you know, we found that one the key reasons that this occurred was because the regulators in the years when the -- when things were good in the years leading up to the mania and in the mania were not doing their job, reigning in the practices, taking names, doing investigations, so that when the bubble burst, they had no information to bring cases. so again, it's this regulatory capture, not only had the initial problem of not reigning -- of failing to reign in, you know, really perverse practices.

it then had the secondary impact of contributing to the notion that it was nobody's fault, we can't bring a case, therefore let's just all go quietly and forget that this ever happened. so i hear your pain, i feel your pain, you know, i think we are trying to get to the bottom of that. but it's a very complex issue. i also think it's a social question. i agree with you. >> yeah, and actually, you know, i agree that -- we both agreed that was part of what drove us to agree to write the booking together, this is a cultural issue. the heads on spikes would serve some value. but it still doesn't address to my mind the more fundamental problem. that's one that we are still loving those people in power in charge of redefining the system going forward. and forgetting the fact that to my mind, as a housing analysis, the largest impact of this

crisis has not yet been felt. the largest impact of this crisis is going to be felt over the next 19 years. as the largest generation in american history retires with less than equity in what is historically been the single largest retirement in intergenerational wealth transfer as we have a senior homelessness problem as a result. as we end up with a failure to fix the system, to insent the paydown, and the growth of the paydown of debt and growth of personal savings. that becomes a real piece of this coming crisis, because it's going to happen likely at the same time that our u.s. treasury is forced to accept austerity and cuts in the social safety net. >> elaborating a little bit on something that you've touched on. to what do you attribute to the utter passivity, of the department of justice. i asked that as a former federal

prosecutor. >> i'm going to ask you. >> i don't know. i could write an indictment in 30 minutes. i could convicting these people would be like shooting fish that a barrel. >> politicalization, frankly, it's the politicalization of the department of justice, the attorney generals offices, the lack of inagainst of the regional offices, to bring cases. it is, you know, frankly on the other side this political pressure that comes from a notion that we've unfortunately had to learn to live with. i don't agree that we have. but we've had to. which is, gosh, if you do anything like that, you'll risk destabilizing the same institutions that we've spent so much effort trying to make look like they are solvent. >> this has never guided the fraud section to the department of justice in the past. i want to know what's happened now is is the fix in? is that what you are suggesting? >> well, it's hard to draw any other conclusion, honestly.

i don't know the answer. i'm not a party to these e-mails going back and forth. you know, it was -- but it's difficult to draw any other conclusion that a debacle this large, this much pain, and this trillions in losses that it was nobody's fault. and that there wasn't a crime committed. it's very difficult to -- you have to suspend your disbelief for far too long to draw that conclusion. so again i think it is an appetite to prosecutor that isn't there. i think there is a fear factor of losing the case, they say these are complex cases, paper cases, these are not -- you don't have a victim to point to. you know, who is dead on the ground. i mean there are many, many excuses given. i buy none of them. i can only -- >> there's also been no real investigations. >> yeah, that's the problem. the regulatory infrastructure leading up to this had no investigation going on to really find the culprits and when you

did get a case, such as the one against angelo brought by the fcc, it appears to have extremely damming, e-mails in which he's saying the loans are poison, toxic, these kinds of descriptions. at same time, pucklily crowing about how good his company is doing, financially sound, and, you know, providing the best loan for all of their customers. that'sthat's -- and selling stok throughout. that seems to me to be a lay up. but i am not a prosecutor. i'm not a lawyer. so unfortunately, i'm going to have to -- >> you could send him to the slammer for life on the bases of that. i cannot understand why that hasn't been done. >> i want to make sure that all of those who are in line will get a chance to make their point, ask their question, so we are going to end with last woman in line. >> no point, just question or

two. my glass-steagall question got asked. i'm left with what do you think of dodd-frank, the response to this crisis, and any heros? >> dodd-frank in my view really missed, whiffed the big one which is too big to fail. did nothing about cutting down the institutions to a manageable size, to a size that does impair all of the taxpayers. that is the key failings in dodd-frank, another failing, i think, is that it has left hundreds of rules to be made by regulators, so therefore provide ing a second manipulation possibility for the industry. so they got their first chance when they were talking about the legislation, writing the legislation, they got their first chance to manipulate the regulators. >> any better than nothing? >> i think there are part that

is are good. 3,000 page law. glass-steagall was 32. it's way over done and not effective on the crucial issue of too big to fail. >> i agree with gretchen. why wouldn't you have added a photograph that says any institution that has to rely on debt purchases more than 60 days will have the senior management barred from employment as consultant or otherwise at a regularred entity for a period of five years. if you did that, companies would choose to shrink themselves to the point to manage their risk, or spend money on increasing the risk management to the point where they were ameal rated those concerns.

we didn't want to do that. because they did. they left everything to the regulators to define. >> we had heros. there were some folks at the cbo, congressional budget office, we have a wonder vignette against fannie mae in 1995 where they were part of the congressional and congress act in 1992, which was the safety and soundness that created a new regulator, asked for studies from treasury, gao, hud, and cbo. cbo did a masterful job of analyzing how rich the subsidy was from the government that fannie mae achieved. they were visited by fannie mae, the head of the cbo. she said they felt like they were being visited by the mafia. she was pressured to try to water it down, not to produce

the report that was explicit about how much the government guarantee was worth to the company and how at all costs they had to protect it. we have cbo people who were, you know, standing up against the pressure from fannie mae. there were other people who saw what was coming, people in georgia area who were first to wave the flag and call out the rating agencies for inserting himselfs in a process where georgia had the most most -- tot law. the rating agencies said we will not rate any securities that contain georgia loans, and so all of that predatory lending law had to be gutted. because the ratings agencies said they would not rate those loans. we had people along the way jumping up and down and warning. there some heros in the book i'm glad to say. >> thank you.

>> you make a very strong indication for the federal role of housing policy and the behavior in factors to the crisis. i have never been able to under how policy leads investment banks to go bankrupt. it seems to me when bear and lehman went bankrupt, seems like there was a lot of incompetence and malfeasance in the behavior and many others that contributed to the failures of those institutions. i see no obvious cause of connection from the housing policies to the mistakes in investment banks. >> certainly bear stearns was a huge player in the mortgage market. the fact that the leverage they

were allowed to take on, it was something they allowed. it was to increase the leverage. that really led them down the path. because only a small loss really was magnified by the leverage that they had. there was a tremendous amount of profitability and risk taking related to mortgages on wall street. look at countrywide, look at bank of america, it's in trouble now because of its lending practices. >> yeah, i mean -- >> you also have to remember the mortgage-backed security -- well, the residential mortgage, was the lower risk asset from a capital perspective. okay. and that's a big piece of why the banks went head first into this. why they leveraged it, why they took mortgage-backed securities, and you took them and leveraged

them into more leveraged, and multiplies that further and further. if you look back in the e-mail fails even of the financial crisis inquiry commission, one the things that you find is that there were other institutions that would have gone down because they retained risk which is one of my biggest problems with dodd-frank. you have the risk retention which says we should have the institutions retain risk on the notion that certainly if they have to drink the poison, they are not going to feed it to others. the reality is the institutions often didn't realize what they were serving up was poison. and what you saw was in 2007, you saw an e-mail fails institutions bear was ignoring it, merrill didn't realize the size of the exposures that he had until he was in hot water. where goldman and deutsch and others and still many had problems, were quickly trying to off load what they had as

remaining risk as quickly as they could. the instruments, the murkiness, leverage, inability of regular regulators to look in because they weren't qualified institutional buyers with the right to are very central to the crisis. >> well, i think you've explained why there were severe temptations presented to the corporate executives. you haven't explained why they yielded to those temptations. after all, they played to make money and they lost money. >> a lot of them made a lot of money on their stocks and they did not lose ultimately. >> well, that line of argument i think is another kind of missing line of argument. the question is alan greenspan famously commented on this. can you trust the executives of these institutions to have the interest of the institutions as such at heart? because it would appear in episodes that the interest of the institutions might have been

sacrificed to those of the executives. and i think, again, going back to the question of heads on pikes, i think that that phenomenon also deserves a lot of attention. >> agreed. >> hi, looking forward and thinking about the next election, i'm assuming the answer is no. what do you think is the possibility of there being some kind of discussion of housing policy going forward in the next election? it would seem like the obama man, and the eight plans that republicans are talking about. >> host: it's what we need to do by housing or population. renting versus owning, mobility because we have changing social

reality. do we need to change the tax incentive structures to meet whatever they decide as social policy goals or housing policy goals? do we want to have the social policy transmitted through private corporations who will deliver subsidies or on the governments balance sheet? that's a housing policy discussion. we're not having that. really what we're having is a very narrow discussion which is a political discussion still about do we put a stake through the hearts of fannie and freddie? and what do we replace them with? that's not a housing policy question. do i have any expectation that either of those discussions, the one that we are heading down, or a real substantive discussion of housing policy is going to be part of the election. probably not. so you are right. even in terms of what do we do with the gse, there's a fest -- i think there's an understanding on both sides that we want to kick it down the road until after the next presidential

election. >> don't forget we're still in the debts of housing crisis. foreclosures are still massive, people are massively under water. there's a sense that we can't deal with this right now. >> although that's an opportunity. that's an opportunity to use as a catalyst far real housing policy and also for the solution to the ongoing crisis to define what the housing policy can transmit or can change into and transform into. >> speaking of housing crisis, i wanted to ask about the programs to help borrowers who are in trouble. and my reason for this is personal knowledge and experience where two mortgages. one is the mortgage that my husband and i hold on the house in washington which is in a neighborhood where house prizes have risen. we have plenty of equity within we are not the people that need

to be helped by the government. nonetheless, last year or loan servicers called us up one day because your mortgage is held by freddie mac, you qualify for this program. and within a weak we had a no appraisal, no cost, no documentation of income refinance at a lower rate. it was wonderful. i mean it was the best refinance identify ever done. >> you must know somebody in high places. >> no. no. wait, anyway, the other mortgage though is that of my contractor who is hispanic, lives in alex andrea ya, is under way, as an arm which was originated by countrywide and now it's serviced at least by bank of america. they are not expecting him to

default, but he wants to refinance this and a second mortgage to get a fixed rate mortgage before rates go up. they have been trying for a year now to get the paper work for the hud program, through bank of america, and they have gotten the run around over and over and over. and then last week somebody said, everything is fine. you really are going to get this. and let's have you talk to mr. sanchez. and mr. sanchez told them everything was going to be fine. as my contractor said, they were going to move heaven and earth. only the next day when mr. sanchez sent the documents and talked them into signing the documents, it turned out that mr. sanchez is is a leasey lawyer who was getting them into a contract to spend something like $2500 to negotiate the mortgage that they've been refinancing -- they before trying to redo with no guarantee

of success. fortunately, they were savvy enough and -- >> thank goodness. >> also my contractor talked to me and i'm a lawyer. i said you cancel now. it seems to me my feeling is maybe freddie mac is trying to rise the figures and looks like it really is is helping lots of people who need help by putting through mortgages, refinancing mortgages like ours and then in the meantime people like my contractor who really could be being helped by the programs aren't getting the help they need. >> i would say the treasury program was badly conceived, it really was almost the worst possible combination of people coming up with an idea of how to not help people is how it ended

up working. bank of america, you know, again my e-mail box is filled with stories where they do -- they lose the paperwork, they don't, you know, allow the modification, there just does not seem to be a real sense either in the private sector or the public sector to make a rational, intelligent decision about who should be helped and who should not be helped. and so i just think that the government has done a woeful job. and again, i think as i said at the outset, i've contributed to the idea that main street really got it in the neck and everybody else walked away with a lot of money. >> i also felt the experience and my contractor was a real failure of regulation. because it's clear that someone at bank of america was in collusion with the sleazy lawyer. that seems outrageous. >> unfortunately again, we don't

have a housing poll is -- policy, and we don't have a holistic housing system. not making excuses for one orr the other. i don't know the basis for the the background on your equity in your home. but the other side is freddie mac subsidizing not necessarily in your case, some borrowers who won't be able to stay in their home, getting them to pay cash into a house where they haven't done the appraisal as you said, they haven't done an income verification. that's back to the other practices. there's a big difference though on top of that between the two we're comparing apples and oranges. fannie and freddie are government guaranteed. bank of america, the contractor mortgage is not held. it's held by a mortgage-backed pool. those investors have to be considered. now the problem is bank of america is a servicer who also owns really the largest

portfolio of second liens in home equity lines and so there's risk so them on that depending on what they do on the first mortgage. and so, you are right that this is a problematic situation. and government isn't interested in deal, it. one the things they are not willing to deal with it before you can have in that example, bank of america treat borrowers well, they need to be unconflicted in the relationship between the second liens they hold on the balance sheet and the first liens they service for people like the contract. >> thank you. first, thanks very much for writing the book. i have a couple of questions. right now it looks like fannie and freddie might be profitable by the end of the 2012, maybe going into 2013, setting aside the 10% dividend they owe the treasury. at that point, i'm sure there

will be frosh bring them out of conservatorship. they have patented most of the mortgage business. they hold over 40 patents and they are continuing to get patents. they are patented everything from mortgage to securitization. and they also own a lot of technology and information on everything single homeowners in the country. at this point -- i'm not sure that those patents should have ever been granted. do you think they will ever be put in the public domain along with information and technology? what do you think will happen? are we going back to business at usual? >> go ahead. i think i know the answer you are going to give. >> well, there's the great divide right now no washington between those who are afraid if we wait too long to address it, i wait until after the next presidential election, there's going to be a push because their profitable just to let's put them back out there. let's bring them back into the

public markets. everything is okay. we'll tighten up regulation around the edge. then you've got those who are saying, you know what, let's get rid of them. i am agnostic. there is value to the franchises. there's great value in the pat end and information that they have. which i think could if you could figure out, but private. i think there's value, or our offer it to the entire market. open it up. the debate is fannie and freddie as fannie and freddie or the mortgage banks as the next. i think really is the question is should either of those groups be the mechanisms for social policy delivery, or should they really be nothing more than mortgage market structure,

financial market intermediaries to the mortgage finance system? and, you know, the likelihood that fannie and freddie at this point is going to come out the other side, it seems. not with the same names or structure. i think some of the franchise value will be retained. it still unclaire as to what matter. >> thank you. >> thank you very much, gretchen and josh. it was a marvelous evening. >> coming up next.

>> this weekend, holiday weekend on booktv. former new york's mayor of the storms after the storm. harvard law professor looks at the influence of racial politics on the first african-american president. and live sunday, three hours in depth. former editor and columnist on race and the media. look for the complete booktv schedule at booktv.org and sign up for booktv alerts, weekend schedules, in your inbox. >> every weekend it's american history tv on