.. >> 'cuz i got the gavel, and i'm either pounding chicken, or this court now comes to order. that is right. [laughter] ladies and gentlemen, members of the jury, the diverse jury, very good to see you, wonderful to be here. we're gatt erred here in the

great southern state of nevada to decide the fate of wall street as an american institution. in this hearing we hope to discover its on-net balance if it is worthy of praise and respect by the general public and the taxpayers of this great nation, or should it be consigned to the dust bin of history as a barbarous relic of capitalism. does wall street in its many forms serve the public interest, or is it a nuisance that does more harm than good, and, therefore, should it be punished and severely regulated and taxed and, perhaps, even nationalized? [laughter] [inaudible] in the past year, we have seen spontaneous, smelly pro pests o -- protests occur under the general banner occupy wall street. the prosecution will attempt to show that in instruct him with

these -- sympathy with these protesters wall street has shifted from being a vital source of capital investment and entrepreneurship to a perverse shell game of excessive risk taking, insider trading, excessive executive pay and undeserved bonuses, special tax breaks and casino-like gam will being -- fun -- that lavishes benefits on insiders and big business at a time when main street is unfortunatelying. as a result -- suffering. as a result, wall street has been a destabilizing and risky sector of the american and world economy and partly, if not coally responsible for the latest financial crisis and unfairly bailed out by the taxpayers. in short, wall street is no longer a beneficial model of free enterprise capitalism. we have brought before this court mr. stephen more, detend ifer of -- defender of football

institutions -- financial institutions everywhere. mr. moore, will you, please, stand? very good. you're already wonderful at taking direction. [applause] let's hear it for his standing. [applause] you as a representative of the financial services industry and wall street in general have been accused of greed, corruption, excessive compensation, social inequality, unnsse risk taking, not paying your fair share of taxes and causing the financial clay sis of -- crisis of 2008. how do you and your supporters plead? >> not even close to being guilty, your honor. >> oh, no, you didn't. all right, well, we're going to begin the proceeding with a fife-minute -- five-minute opening statement from mr. henry frank. best of the darwin economy, he's also the co-author of "the ben

bernanke textbook, the principles of economics." he earned his ph.d from uc berkeley -- [laughter] go bruins. and was a peace corpse volunteer in rural nepal. fun. after the opening statements, each attorney will call two witnesses who will be the subject of cross cross-examination, afterward the jury will rule on the case, and if the defendants are found guilty, i will impose a judgment. let me give instructions to the jury. are you listening? very good. you guys look so excited and sweet, very optimistic. at the end of this hearing, you'll be required to determine whether there is sufficient evidence beyond a reasonable doubt, reasonable doubt that mr. moore and his wall street supporters are responsible for public malfeasance. is that understood? oh, that's great. very good. all right, mr. frank, you may

begin with your opening statement. [applause] go ahead. >> thank you very much, judge kennedy. it's an honor to be able to present the case before this distinguished group, and i want to say we have a very mixed bag of opinions on our side of the issue. i am a registered democrat, my two principal witnesses are registered republicans. we come at this case in a way you might not have anticipated from our affiliations. you will hear john mackey cry greed and malfeasance, and you might have more likely expected a message like that to come from mr. combs on the fox network. [laughter] >> go, fox. >> i will try to guide the case towards what i regard as the core issue which is that wall street may have committed malfeasance and be guilty of

greed, but those are things we expect, after all, from enterprise, the invisible hand theory does not require that executives be altruistic or public-spirited. they're in it to make money, and the whole theory is predicated on the notion, and this is the theory that animates all of your faith and enthusiasm for free markets, that under certain conditions we will get very good results for society as a whole from letting markets do what they do. adam smith, however, didn't belief that markets give you good results no matter what. anybody who doubts that need only go to somalia and watch truly free markets in angst. action. smith argued that markets work well when certain preconditions were met. there were certain preconditional institutions that had to be met, trades of character that were expect inside the main participants of markets. when we had the right

institutional framework of property rights, laws and regulations and the right people in the positions, we could expect in the many cases very good results from people seeking their own ends in the marketplace. it's not from the butcher or the baker, the -- >> candlestick maker? >> the candlestick maker or anyone else that he wrote we look for our dinner. we wouldn't look for our dinner from the candle stick maker in any event, but we look to them for our dinner because it will serve their interest to provide it. so it may be correct to observe that wall street is greedy, but that's almost beside the point. we expect that in executives. the real flaw in the wall street industry has to do with the laws that shape their behavior. those laws push them to act in ways that our side will argue have made wall street an unambiguous albatross around the

neck of the nation's economy. it wasn't always believed to be so. alan greenspan, who's familiar to members of this audience and who was a very enthusiastic supporter of financial deregulation, said in 19 -- excuse me, 2005: increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and, hence, resilient financial system than the one that existed just a quarter century ago. when he spoke those words, there wasn't clear evidence to the contrary, although many people suspected that he was wrong about that point. since then, of course, we've seen the financial industry blow up in our faces, and many more people are receptive to the notion that the rules that govern the financial services industry weren't on the malley crafts -- optimally crafted for the problem at hand. when you press observers to name

useful innovations that have come from the financial industry, many of them seem nonplussed. their responses contain scarcely a single item in common. that would be atm machines. the other innovations, chiefly financial derivative instruments, are mainly seen as instruments whereby insiders are able to slough risk off on unsuspecting bystanders and often create catastrophic instability for the financial system as a whole. the way we got here was by a very hasty system of deregulatory -- >> you have ten seconds -- >> in the 1980s. those steps, our side will argue, led us to a much worse spot, and it would be much better for the country as a whole if it shed this albatross. >> thank you very much, mr. frank. very good. prison.

>> well, now we will hear from mr. stephen moore, the defending attorney. mr. moore is the distinguished member of the wall street editorial board and author of many books and several co-authored with art laffer. he received his ma from george mason university, he is a strong advocate of the flat tax, social security privatization and free trade. he is considered one of the premier supply-side economists in the united states. mr. me, will -- moore, will you give us your opening statement? >> thank you, your honor. >> very good. >> thank you, members of the jury. i would like to start by saying i believe this trial is a farce and a miscarriage of justice. i work for "the wall street journal" so, of course, i'm going to defend wall street. i would submit and our defense,

your honor, boils down to this: that it is the wrong people and the wrong institutions that are being put on trial here this afternoon. now, let me start by making some admissions about some the mistakes that were made by wall street. we were all angry about what happened in 2008 and 2009 and the massive losses. we're all angry at the excesses of wall street, the -- i'll acknowledge the fact that mr. frank made that there was excessive pay to ceos, that there were gaudy parties held by many of the members of wall street, that there were criminals and crooks like bernie madoff. by the way, they are in jail where they belong. but i think it's important to understand that wall street plays an incredibly constructive role for our economy. in fact, i would say that wall street is the central nervous system that provides the seed

capital that makes our $15 trillion free market economy operate and grow. what does wall street do? what makes it such an integral part of our economy? a lot of people can't answer that question. i would simply say the role that it plays, your honor and members of the jury, is to allocate capital, scarce capital to the highest value-added companies so that they can grow and create jobs and create profits. and i would submit that despite all of the mistakes that have been made by wall street -- and, by the way, not just by wall street, i would submit everyone in this room. we all made mistakes, we all lost money, we all got carried away in the frenzy of the runaway markets in the late 2000s. but for the last 30 years, we'd all have to agree that wall street has done a tremendous job of funding the vital companies in this economy. thinking of companies like apple and steve jobs and thinking of

companies like microsoft and bill gates and thinking of walmarts and home depot and google. and without wall street if we put wall street and shut wall street down, what we're going to do is deny the funding and the essential capital for the next general ration of googles -- generation of googles and the next generation of walmarts and home depots that not only provide wealth but also create hundreds of thousands of jobs. and i would submit that no other country in the world has a more, a more well-functioning capital system and financing system than the united states of america, and that happens with the investors in wall street. so we should remember that, that they are extremely important for our economy. now, who is culpable and who is guilty and who should be on trial here? and who is responsible for the $11 trillion of losses? well, let me tell you who i

think that should be. on trial should be barney frank, barney frank -- [applause] who is the man who said that we should roll the dice on the housing market, and we went and did roll the dice, and americans lost trillions of dollars. i would submit that chris dodd, the former senator for connecticut -- [applause] should be on trial for having cozy relationships with the very types of people at countrywide that he was supposed to be regulating. i would submit that fannie mae and freddie mac should be on trial for providing 100% guarantees -- [applause] taxpayer-backed guarantees for mortgages, and, ladies and gentlemen, of all the bailouts we did, the two institutions that never paid back any of the money that we lent them as taxpayers were fannie mae and freddie mac. and they should be on trial here. i would submit that the 435 members of the united states house of representatives that

voted for a $700 billion bailout of the banks, they should be on trial here -- [cheers and applause] and shoshed the people who voted for the $800 billion failed stimulus plan, and most importantly, nancy pelosi should be on trial -- [cheers and applause] for running up the national debt by $5 trillion and putting our nation is financial peril. i would submit that s&p and moody's should be on trial for giving us -- [applause] to mortgage-backed securities. these are the people, ladies and gentlemen, that should be on trial. i would submit to you that ben bernanke should be on trial -- [cheers and applause] for his money policies that have debased our currency. >> all right, thank you very much. >> don't put -- >> all right. >> wall street on trial. >> hey, hey! how dare you! >> they're the ones who lost our money, and they're the ones who should be put behind bars! [cheers and applause] thank you, your honor.

>> okay. all i'm saying is if they were the jury, you would be in so much trouble right now. but they're not, they are. all right, thank you very much, mr. moore. >> thank you. >> take a deep breath. [laughter] mr. frank, you ready to make it rain in here? would you like to call your first witness? >> it's time for us to hear from john mackey, the chairman of whole foods. [applause] mr. mackey, would you, please, take a seat? we'd like you to take an o oath to to tell the truth, the whole truth, and nothing but the truth. would you like to swear on "the wealth of nations" or "that is slugged"? [laughter] okay. do you swear o tell the truth, the whole truth and nothing but

the truth? >> i do. >> can i ask you one thing? have you seen the price of arugula lately? [laughter] so expensive. >> that was good. you're pretty funny. i just need to say one thing, i'm -- mr. frank, you need not insult me by calling me a registered republican. i only voted republican one time in 40 years, and i deeply regret that decision. >> i'm apologetic for the miscalculation. [laughter] what i did recognize you to be was somebody with a sincere appreciation of the magic of free markets and very deep libertarian sentiments -- >> okay. work it out in couples' counseling later on. let's get on with the trial. [laughter] >> so i thought it would especially interesting to hear your perspective on adam smith's notion that character counts in the marketplace and that we expect certain things of business leaders other than they

ruthlessly try to take as much out of the enterprise as humanly possible. do you have some experience or thoughtsing that you want to add? >> are you asking me whether i think business people are ethical? >> that would be a starting question for you, yeah. do you think a business owner has a responsibility to obey the law even? >> yes. >> if he can't get caught and his business would do better by not obeying the law, where's the greater responsibility, to the shareholder or to the law? >> he should obey the law. >> [inaudible] >> unless the law is unjust, say says one of the members of our audience. well -- >> they get feisty, by the way. there's no controlling them once they get frothy. go ahead. >> if you see things on wall street that troubled you, what would they be? >> the way i see business is i see business people as, basically, the heroes in this world because business people are the value creators. we create value -- [applause]

for customers, for our employees, for our suppliers, for our investors, for our commitments. indeed, for the whole world. it does trouble me sometimes that i think wall street forgets that it's a value creator. i do think sometimes -- my company's been public for 20 years, so i've been dealing with wall street for 20 years, and it's a little bit of a love/hate. i do think they have created value, but i also sometimes think they have forgotten why they exist, what their purpose is, what they're supposed to be doing, and that troubles me. >> and what about in the domain of executive compensation? i know you have strong views about that in terms of your own business. do you think the people who head up financial firms on wall street are on the right track there, or what would your assessment be? >> i think, ultimately, those decisions need to be made by their board of directors and the shareholders who elect the board. sometimes think they're maybe

not doing a good job in corporate governance there, but i don't think that's something the government should be involved in. but i do think, i do think sometimes some of those salaries would seem to be higher than market rates. [laughter] >> and is that something for collective action, or do you think the government really should just keep its hands off problems like that? >> ask him to define collective action. go ahead. >> the judge wants me to -- >> no, ask him like it's from you. go ahead. [laughter] >> i don't think i'm supposed to ask the questions. >> it's totally fine. [laughter] >> i do think it requires collective action, but i do think reforms really need to come from within the business community, from within the shareholders of companies, within the boards of directors. they're the ones that ultimately have to be responsible. and i do think they're not always doing their job well, and

i basically a lot of the corporate governance reforms that i'm seeing, i don't like all of them, but i think a lot of them are very positive. >> the last question i want to ask you about is about a fundamental distinction between the kind of business you run and the kind of businesses we see on wall street. so just imagine yourself in the role of baker, that's one of your roles at any rate. when you sell someone a hoe of bread -- a loaf of bread, the price the consumer pays you for that is a reasonably close track on the value the consumer receives, or else the consumer would go elsewhere. it's enough to cover your costs, so that's one of the preconditions adam smith describes for market incentives and social incentives to be in close alignment. so that condition seems met for your business -- >> you have 30 seconds. >> do you think the condition is met as well for the financial services industry? >> not always, no.

>> so, for example, if, if a financial services firm is confronted with a decision with whether to invest in millions of dollars of computer equipment to make a forecast two minutes earlier -- >> why don't you wrap it up so he can answer. >> excuse me? >> you've got no more time. >> well, let him answer. he can answer quickly. >> i'll give you an example. when my company went public in 1992, there was no price competition on wall street. they were taking a 7% cut of every dime they raised, and that was not -- you couldn't go out and negotiate 6%, you couldn't negotiability 5%. -- negotiate 5%. i thought that was a type of price collusion by the investment banking firms, and as far as i know that's still kind of the clubhouse rules there. >> all right, very good. >> thank you very much, mr. mackey. [applause] >> your witness. >> mr. mackey, um, you mentioned

the housing bubble, and i wonder looking back on what happened with the massive overinvestment in housing that happened in this country who do you think is most responsible for that happening? obviously, wall street took a lot of excessive risks, and banks made excessive loans. but would you say that this is a result of wall street, or would you say that when the federal government was providing 100% taxpayer guarantees that these mortgages, many of them which were incredibly flimsy and many of which people had no intention of ever repaying, when the government is telling these banks that they will provide a 100% guarantee, who do you think is more culpable for creating this crisis, fannie mae or the bankers? >> i think they're probably both a little guilty, but if you're asking me, i think fannie mae's a little more -- >> fannie mae is a little more.

so maybe fannie mae should be on trial here. [laughter] >> i didn't set the parameters of the trial. >> second question i had for you, do you believe ceos are overpaid on wall street? is that your contention? >> i mean, these types of decisions ultimately are -- you can look from the outside. their compensation, seems to me, to be at times excessive, correct, yes. >> now, let me concede the point that mr., for a minute, that many ceos of companies and banks are overpaid. then the question becomes, who do you think, in your opinion, is responsible for that, or that is to say would you favor the government coming in and telling companies what they can pay their ceos, or is that a matter for boards of directors and shareholders? >> it's a matter for boards of directors and shareholders. >> thank you. the top 1%, are you in the top 1% in income in this country? you're an incredibly successful

entrepreneur. >> i plead guilty. [laughter] >> you plead guilty. so we've heard a lot of this, a lot of this condemnation of my clients is based on the fact that a lot of these people got rich. just, by the way, as you did. you got rich, people on wall street got rich. is it a crime to get rich in this country? >> it appears that it might be becoming so. [laughter] >> so could i ask you if you makeover a million dollars a -- make over a million dollars a year? >> do i have to answer these? [laughter] >> well, let me rephrase the question, sir. >> because that would be super awesome if you did. >> how much money do you make a year, steve? >> there are people in congress who feel they want to be so punitive, my clients, that they want to basically have a law that says no one should makeover a million dollars a year. is that the kind of thing you'd favor? >> i think that would be very

bad for the national basketball association. [laughter] >> well put. very well put. [applause] but which leads me to a question. if lebron james can make $40-$50 million a year to play basketball, is it excessive to pay a ceo of a major company that employs hundreds of thousands of people and has control of billions of assets $40 or $50 million? >> not if he's as good as lebron james. [laughter] >> very well put. and finally, this is most important, you started whole foods when? >> about 32 years ago. >> how did you get the initial financing and capital to grow your business? >> begged everybody i knew. [laughter] >> banks? did you ever go to wall street? >> to start the business? no. >> ever? >> oh, yes. oh, yes, of course. but not when we started out. >> here's my question.

if we put wall street behind bars and say shut these people down, wouldn't you agree it would be extraordinarily difficult, almost impossible for a business like yours that hire tens of thousands of people to get the money that they need to grow their business? now, look, i mean, how are we going to run a capitalist-free market system if we don't have wall street? >> clearly, we need ways to raise capital. that's the purpose that wall street has. unfortunately, it doesn't always follow that purpose, and that's why so many people are angry with it. wall street and the financial community need to remember what their purpose is and why they exist, and i think sometimes they've forgotten that. >> finally -- >> you have 30 seconds. >> are you more angry right now at wall street or big government? [laughter] >> let's see, i'm going to go with big government. >> remember, sir, you are under

oath. [applause] >> thank you, sir. no more questions, your honor. >> all right, very good. you may be excused, thank you. [applause] >> he just wants me to move the witness chair. is that okay with the rest of the jury? great. very good, mr. frank. would you like to call your next witness? >> yes. may we have mr. george gilder come to the stand, please? [applause] >> please be seated over here. mr. gilder, sit down. i have a copy of the latest edition of "wealth and poverty." [laughter] >> the bible. >> do you swear to tell the truth, the whole truth and

nothing but the truth so help you wealth and poverty? >> i do. >> thank you for being with us today, mr. gilder. as you know, the prosecution's case is focusing on the fact that many of the deregulations that occurred during the '80s and '90s led to behaviors that nearly bankrupted the nation. is it your view that if we go back to the legislative era that preceded those deregulations that companies would not be able to get capital from the capital market as has been alleged? >> i believe that during the heydey of venture capital and private equity and hedge funds that the united states led the world in industrial creativity, in job creation. we were the pioneering, exemplary capitalist force in the world, and today wall street has gone off a cliff.

and epitomized by charles prince, you know, head of citibank saying he has to dance as long as the music plays. but the music he's listening to is the government georgia haven't, and that's true of all of wall street, and wall street has stopped funding the kind of companies that steve moore cited and is now involved in all sorts of currency speculation on the dollar and whoring with the fed. and unless it's entrepreneurial, it's not capitalist! [applause] >> okay. thank you, mr. gilder. i think mr. moore's concern, as i understand it, is that companies be able to get the capital they need to expand and

create jobs. i don't know if you read an op-ed published in "the new york times" in 2006 by calvin trillin analyzing the problem on wall street. it was his view express inside that piece that the real turning point came when the smart people started going to wall street. it used to be the c students from harvard who ran wall street. they were happy with a four-bedroom home in greenwich, but then the smart guys came to wall street, and the people in charge didn't know what they were doing, and before anyone knew what happened, the whole system that collapsed in a heap. do you think if we went back to the system of regulations that made derivatives outside the legitimate field of play we'd be closer to a system where the main job of the financial services industry would be to match up good business plans with people with money to lend? >> i doubt it -- [laughter] i notice that the companies that

bet against all the fake scam securities and subprime mortgage concoctions were mostly hedge funds. and hedge funds, 80% of hedge funds flee the u.s. regulatory structure and register in the cayman islands, the u.s. is so hostile to creative finance that they, that people have to go outside the united states seeking better regulatory structures. so i don't think that we're underregulated in the united states. i think we're overregular lated, and this overregulation -- [applause] transforms what would be entrepreneurial capitalist institutions into extensions of government. and you get corzine as sort of the epitome of the corrupt,

incestuous capitalists who, unfortunately, has come to present wall street. i'm for venture capitalists and private equity people. i think what mitt romney did was superb, and michael jensen, incidentally, has studied the effects of private equity during the 1980s and early '90s and finds them overwhelmingly positive. this was a time when u.s. was creating 40 million jobs. and this was a time when wall street managed some 43,000 m&a transactions. it wasn't bad for the economy then. it's bad when it's all embroiled in government shuffles and -- >> 30 seconds. >> -- and housing finance. >> do i have time for another question. >> if you can do it in a couple seconds and let him answer.

>> so the prosecution has not proposed putting wall street behind bars. what we're exploring is the possibility of a different set of governing rules for washington. if you have ten seconds, what would you say those should be? >> put corzine in jail, i guess. [applause] >> all right, very good. thank you very much, mr. frank. mr. moore, your witness. >> thank you. mr. gilder, you have written eloquently in your bestselling book about the virtues of capitalism. i learned, i learned my respect for capitalism from reading your book many, many years ago. i wanted to ask you this, can our system of free market capitalism and entrepreneurship that you talk about, you've been talking about for 50 years now, can that really happen? can that continue to flourish without wall street? >> i think wall street's a place, and it's come to epitomize a series of great big

banks too large to fail and increase white housely 'em -- incestuously embroil with the the fed and the white house. and that system should act. [applause] i think that they should have been allowed to go broke. [applause] >> let me interrupt you right there, sir. so you talk a lot about this, and i will concede the point that there is too much of an incestuous relationship between wall street and the people who are supposed to regulate them and the congressmen who were supposed to oversee them. is the solution to this incestuous relationship more government and more regulation? >> absolutely not. >> thank you. now, the next question i had to ask was about this looming tax increase. you know, um, part of this attack on wall street is because people get can rich on wall street s. there anything

villainous or that is -- that we should disrespect about people getting rich on wall street? >> yes. if they extract it from the taxpayer. >> right. [applause] well, wouldn't that be a result of the fact -- let me ask you this, were now favor of the bailout of the big banks? >> no. >> of the auto companies? >> no. >> of the bailout of aig? >> no. i was in favor of keeping greenberg head of aig. i mean, he could have offered actual oversight and prevented the $2.7 trillion of credit default swaps. >> it seems to me -- >> that was overregulation of aig, not underregulation. >> well, will raising taxes on rich people, raising the capital gains tax make our capital markets operate better? [laughter] >> no. >> will raising the dividend tax make our economy work --

>> no. >> will imposing a 3.2 excise tax on medical instruments make our -- >> right. no. [laughter] okay. last question, if i could. we were supposed to overcome all of these problems with wall street that we've been talking about, the problems with my climate with the dodd-frank bill. in your opinion, did that bill accomplish what it was supposed to do, or has it actually made wall street a worse place? >> no, it makes increst legal. >> thank you. thank you very much. [laughter] [applause] >> and with time to spare. wow. you guys should take it on the road. that was like vaudeville. [applause] >> all right, mr. frank, do you have any further witnesses? >> no. >> did you think that he helped the defense there? >> we're going to make the best case we can in summation. [laughter] >> okay, very good. thank you.

mr. moore? >> your honor, i would like to take this right to the jury right now. >> really? [laughter] >> no, i'm just kidding. [laughter] i would like to call my first witness, the great, honorable steve forbes. >> very good. [applause] >> mr. forbes, will you be seated there, please? i have a copy of "how capitalism will save us: why free people and free markets are the best answer in today's economy," by steve forbes. would you, please, put your hand on it, sir? do you swear to tell truth, the whole truth and nothing but the

truth, so help me my best book? >> well, i've got a better book coming -- [laughter] it can be ordered on amazon. [laughter] >> mr. forbes, thank you for being here. i'm under the understanding that you own a yacht. >> yes. >> does that make you an evil person? >> i think it makes me a person that other people would like to be. [laughter] >> would you please tell the -- >> as my father liked to say, money may not buy happiness, but it sure helps. [laughter] >> now, let me ask you this question, do you think that getting rich is an evil pursuit in this country? >> i think real entrepreneurs get rich by providing to the needs and wants of others, by providing services. you get rich that way. i have no problem that way. if you get rich through crony capitalism, that is a problem. >> do you think that wall street has, that there was a period of excess in wall street as the

prosecutors are alleging and that people are overpaid on wall street and they are a bunch of greedy people? >> to say that greed caused the crisis is like saying gravity causes airplane crashes, doesn't explain very much. here we have a situation, yes, there were excesses on wall street. the question is, why did it suddenly happen? and it happened, and you hit on it this your beginning of this trial because of excess money creation by the federal reserve. you could never have had a housing bubble without that excess money. [applause] and it's government that failed here and wall street being entrepreneurial responded to the crazy alice in wonderland conditions that washington created. so if you want wall street -- if you don't like wall street, you want lower salaries there, not so many smart people going there, start by having a

gold-backed dollars, a lot of trading profits and opportunities go away. [applause] >> so do you think people who are on wall street who make millions of dollars, in some cases even billions of dollars, do you think that's excessive? do you think that we should have some kind of a policy in america that restricts the pay of ceos of banks and wall street firms and major companies? >> in free markets, absolutely not. i don't want politicians determining who gets paid what because at the end of the day -- >> well, who should decide that, sir? >> -- they get paid more, and the rest of us get shafted. what should be determined is what does it teenage to get the talent needed. sometimes you get the talent and it doesn't perform, we see that in sports all the time. but to get talent that can run these organizations, some of these organizations, you are going to have to pay up for it one way or the other. and many of them do it not for the pay, but because they want to get something done, they get rewarded, so be it. john mackey, whole foods, done very well. i don't begrudge him at all.

i like going to his stores, at least until i get to the checkout counter. [laughter] >> we heard a -- one last question, sir. we heard from a witness for the prosecution making the case that, you know, it's more difficult now that the great companies that i mentioned, the walmarts and the googles and the microsofts and the apples that mr. gilder said that it's just, you can't get those kinds of companies financed anymore on wall street and that this kind of era of great american entrepreneurship has almost come to a close because of that. do you agree with george gilder on that? >> i don't think it's come to a close. it's had a detour. if you want to know why we have more ipos, start with something called sarbanes-oxley which came out of the government, not free markets. [applause] and in terms, again, what wall street did during this whole period, the massive rise of derivatives and the like, these

seemingly crazy instruments came in response to chronic instability in interest rates, in currencies caused by mistakes made by the federal reserve and others. of when you have chaos in the markets, people are either going to take the chance to make money offer of it, that's what markets are about, or try to hedge themselves against it. and one of the things that's wonderful about wall street, what i mean by that finance as a whole is the extraordinary adaptability and creativity george gilder mentioned, hedge funds and the like. they were able to provide gains to pension funds at a time when markets were stagnant, and you see free agents creating new instruments all the time. but the crazy instruments created in recent years were in response to the chaos created by government. >> so is wall street or government, should wall street or government be on trial here today? >> 30 seconds. >> oh, that's easy. big government. >> thank you. [applause] >> your witness, mr. frank. >> thank you.

mr. forbes, i wonder if i could follow up, please, on the issue of crony capitalism by focusing in on one particular example. i refer today the goldman sachs purchase from aig of some $12 billion of credit default p swaps to insure against mortgages that they would get a payment in that amount if the mortgage bonds went belly up. now, goldman at the time knew or should have known that the only way those mortgage bonds would go into default would be if there was a radical decline overall in housing prices. and it also knew or should have known that if that happened, aig -- which was unregulated in the sale of those credit default swaps -- had no reserves to pay out the insurance that goldman sachs would stand to collect. and yet they paid a lot of money for those insurance policies. do you think that was because they knew that treasury

secretary paulson would be presiding over the decision about how much they should be reimbursed in the event that aig was threatened the bankruptcy? and in the end they received 100% payout on those. is that an example of what you mean by crony capitalism on wall street, and if so, what should we do about it? >> well, it's two parts. should goldman sachs have gotten 100 cents on the dollar on that? absolutely not. they should have been treated by any other creditor, cents on the dollar. in terms of why you had this crazy thing with these default p swaps and the like is because of hubris, not greed. they thought, they actually thought that by with these fancy financial instruments using these complicated mathematical equations they could do away with risk. and, therefore, even if you had defaults in those packages of mortgages, they had enough reserves because of their

sophisticated instruments that they would be covered. but what happened was it's like looking at that exit sign over there, everyone says if something happens here, we don't care, we go for the exits. they forgot the fact that so were 2,000 other people going for that exit. so it did not work. they should have learned that from the long-term capital management disaster of 1998. but they went back to their drawing boards and thought they could insure totally against risk which is why they had these 40 to 1 debt to equity ratios. so that wasn't badness, that was they overestimated their brilliance, and they should have been allowed to pay the price for it. >> are so in your estimation then the problem isn't a structural one, it's that they're slow learners, that -- >> no. it's precisely that they are innovators and not all innovations work. some do and some don't. some have to be refined. you take, for example, commercial paper which allowed

medium and large companies to get out from the banks in the '60s and 'p -- '70s. in 1970 when penn central went down, paper commercial market dried up and scores of companies nearly went under. that didn't mean commercial paper was bad after that crisis, what grew up out of that was if you want today sell commercial paper, you had to have a bank line of credit in back of it so if there was a problem in the market, you could get bank credit and cover it. so new things come along, and you learn how to deal with them like highways, when cars came along. we had to learn about speed limits, car inspections, insurance and the whole array of things. innovations. talk about what the web has done to video and audio distribution. we're still trying to figure that one out. >> so i take it then that you disagree with mr. greenspan's assessment on reflection 2349 wake of -- in the wake of the financial crisis when he testified before hen waxman's committee in the house, he said, and i'll quote him here: i made

a mistake in presuming that the self-interest of organizations was best capable of protecting their shareholders. >> he, he should have amended that statement, i made a mistake by not doing what i knew when i was a young man but forgot when i came to the federal reserve, and that is have the dollar backed by gold. we never would have had these excesses in the crisis in the first place. [applause] >> 30 seconds. >> one last question. do you acknowledge the existence of situations in which private actors' incentives lead them to act in ways that are in conflict with the public interest? >> depending on how you define the public interest. if somebody commits fraud, you don't need new -- >> here's the example i had in mind. [inaudible conversations] >> sorry? [laughter] >> is it quick? >> society decides to invest hundreds of millions in a

computer program that will execute stock trades just seconds more quickly than existing methods s the gain theyer perceive privately on par with the -- [inaudible] >> well, if they all make the same investment, it's like early 1980s, everyone went into pcs, and and most of them, like atari, did not survive to tell about it. so in terms of this case if you think you're going to get something by being two seconds quicker, go out and try it, and then we'll be writing about you being on the lecture circuit talking about your new career opportunities. >> so i take that as a no. >> i'm going to wrap it up, thank you very much, gentlemen. thank you very much, mr. forbes, you may step down. [applause] mr. moore? how you doing? >> i'd like to call my next witness, peter schiff. [applause]

>> welcome, mr. schiff. if you will sit in the witness chair, please. if you'll, please, place your hand on "the real crash: how to save yourself and your country." do you recognize this? >> yes, i do. [laughter] i'm swearing an oath to myself? [laughter] >> on your book. do you swear to tell the truth, the whole truth and nothing but the truth as you've tried to do in this book? >> absolutely. [laughter] >> proceed, mr. moore. >> peter, thank you for being here today. let me ask you this question. is it a crime if wall street loses money for their investors? >> well, it's not a crime. it's unfortunate for their investors and, you know, i think a lot more money is lost on wall street because of government regulations. >> let me ask you this, you were involved with, you had some

interchanges with the people from occupy wall street. these were the movements that actually helped bring my clients to trial. >> yes. >> and i wonder whether you agree with the sentiment of the occupy wall street people, or do you think that they were misguided? >> well, i thought they were misguided, that's why i went down there as, i think, this trial is misguided. it's not the investment banks on wall street that should be on trial, it's the federal reserve banks. it's the federal reserve. [applause] they're the biggest counterfeiters of money, the big destroyers of capital. they are financing this massive growth in government spending, and it's the federal reserve working with congress that has corrupted wall street, that has resulted in all the crony capitalism that we're talking about. and so i wanted to let the people at occupy wall street know that their anger was misplaced. i shared their frustration, but it was with government and central banking and central planning, not with capitalists. >> and did you, did you get that message across to these people?

this. [laughter] >> sadly, i don't think so. but i think i did get it across to the hundreds of thousands of people that saw the encounter on youtube. [laughter] >> now, what about -- [applause] maybe it might, if i can follow your logic to its, to its extreme, maybe these people should occupy washington, not occupy wall street. >> well, that's what i said. you saw the clips. [laughter] but, yes, they should occupy pennsylvania avenue, the white house, now they should probably occupy the supreme court too. [laughter] [applause] but there are a lot of institutions that need to be occupied, but not wall street. and, yes, of course, you know, wall street made a lot of mistakes. how could they? because they were all liquored up on alan greenspan's alcohol. and i've said this many times, you know, president bush often accused wall street of getting drunk, and i agree. they were drunk, but so was main street. the whole country was drunk. but where did they get all the alcohol? alan greenspan was the bartender. he liquored everybody up.

[laughter] and, of course, people act stupid when they were drunk. you should have seen some of the people were acting last night over at tao. [laughter] >> so let me ask you this question, my final question -- >> i wasn't at tao last night. [laughter] >> well, you missed out on a pretty good party. la. [laughter] >> the essence of my defense of -- >> at least the hangovers you get from that alcohol wear off. >> so this is the question. at least when wall street makes bad decisions, the people who lose money, right, are the investors and the people on wall street themselves. and isn't that the way it should be? >> well, that's the way it should be but, unfortunately, that's not the way it is. >> so this is the point i'm getting at. we've created this kind of protective bubble over wall street and over the big banks with too big to fail and all of these bailouts, right? and so now we have a system that wall street has almost incentivized to take the big risks because of fannie mae and freddie mac and the too big to

fail. and isn't that what is really putting investor money and taxpayer money at risk, not the behavior -- >> well, absolutely. it's something called moral hazard and, in fact, all of the too big to fail banks instead of failing are now even bigger. >> right. >> and do you know what? they're still going to fail, but now it's going to cost us even more because we've taken these troubled banks, and we've made them even more toxic. we've simply numbed the pain with the stimulus novocain, but it's going to wear off -- >> so if we got rid of too big to fail, if we got rid of wall street bailouts and big bank bailouts, wouldn't wall street be a healthier place, and wouldn't investors even make more money, and wouldn't mom and pop stores get access to more capital? in other words, isn't government the protection that they provided what george gilder called this incestuous relationship between government and wall street, isn't that the core of the problem here? >> well, absolutely. and part of the problem is

there's so much money, wall street isn't really pull filling its function -- fulfilling its function as an allocator of scarce cappal. it's been turned into a casino by the federal reserve. that destroys capital because capital comes from savings, it comes from underconsumption, and no one's going to save if the return on savings are zero. so instead of having legitimate savings, we just counterfeit money out of thin air and feed it to the economy through wall street -- >> do you think the rich -- >> you only have ten seconds. >> i think they pay too much taxes along with just about everybody else. >> and -- >> but particularly the rich. [applause] >> do you think the rich pay at least their fair share, or is the allegation true that they don't pay their fair share? >> no, they pay a lot more than their fair share. >> thank you. >> all right, very good, gentlemen. mr. frank, your witness. [applause] >> thank you, mr. schiff. is it your view that the high paydays on wall street have lured the best and the brightest

to go there in disproportionate numbers? >> yes, although i don't know that they're as bright as they think they are, but they're there. [laughter] >> 44% of presenceton's graduating -- princeton's graduating class took positions in the financial services industry in 2007, and they're very bright. whether they're as bright as they think they are is a good question, i agree. can you think of anything useful that having all all that talentn wall street has englished for our society -- accomplished for our society? >> well, sure. we've mentioned some of the great success stories. >> and what were those? >> companies like apple -- >> [inaudible] >> well, they're able to increase their scope, their scale because they're able to tap into money through, you know, public offerings. but i would say that, no, i'd say that we're wasting a lot of talent because the government is subsidizing wall street to the detriment of the real economy. and those subsidies need to end, and, you know, when that happens

if there's not so much government money and federal reserve money flowing through wall street, you know, one of the things that the occupiers were so upset at was they perceived that government was for sale because the rich were buying influence. and that's true. but the problem is, once you give the government the influence to peddle, you can't blame the private sector for trying to have that power used for their benefit instead of by their competitors to their detriment. but the solution is to take the power away from government. [applause] and if we do that, then there won't be these oversized profits on wall street, and maybe we'll have more people from princeton or our alma mater, uc berkeley, maybe they'll start doing something more productive with their lives. [laughter] >> do you think it would be better if more of them went into engineering, medicine and research than cooking up currency -- >> yeah. and i think we'd be a lot better off if a lot of people just

skipped going to those universities altogether. [laughter] i don't think -- look, i think you can learn more on the job from people who are doing things instead of from people that weren't competent enough to do things, so they ended up teaching. [laughter] [cheers and applause] >> well, that would be me. [laughter] so let me see if i understand your responses to the questions correctly. it's government who has given wall street the power to write the rules in their own interest which in turn as resulted in enormous paychecks for them. that in turn has drawn a lot of talent into wall street whether or not the talent needed a fancy degree to get to be smart is an interesting question we'll put to one side, i agree. can we then agree that you're, in effect, a witness for the prosecution whose case is based exclusively on the idea that government needs to take away

the power that they've given to wall street to create these enormous rents that are drawing all the talent into the industry? >> not quite. [laughter] we need to take the power away from government, and then the power will leave wall street. >> we've got a deal. >> but, but the people that should be on trial are the government operators that made it all possible. wall street is just playing the distorted deck that it was dealt. of but if we stop that, if we level the playing field and have a free market and take away all the subsidies and guarantees and go back to sound money and let interest rates go up so that there's real capital funding, productive uses of resources and, of course, if we get the government out, if we get the federal reserve out, then congress can't run these huge deficits if there's no one there to print the money to finance. >> thank you. >> all right. thank you both very much. you may be excused, mr. schiff. [applause] ..

we learned that with wall street. i think and what we've learned in the last hour or so is that yes, wall street made mistakes, and just there were excesses on wall street, and the people should pay for those mistakes of the people who invested in these banks and the people who made

mistakes themselves. a government stepped in and became so involved in everything that wall street was doing that it corrupted wall street. created them as eisenhower basically said, beware of the military-industrial complex. we have become a government wall street complex, and that does not work for taxpayers. it has not worked for investors and it has not worked for companies. what i've submit to you is the villain here is government, and the villain is the politician. and i'm not the only one saying that. even the prosecutions own witnesses have said that the government is the root of the evil. if we can get rid of what george called the incestuous relationship between government and wall street, we can solve so many of the problems that we can see a bull market expansion that we've never seen before. i truly believe that, and i believe if you hold my client

guilty, and if you'll but the problem in america is wall street and not big government, you'll be doing a great disservice to the future economy of this country. because we will have government directing the investments in this country, right? we know what happens when government directs investment. just look at what happened with solyndra. we will have 10,000 cylinders if you politician select kabul rather than the people who are on wall street. i'll make one last point if i may. the root of this financial crisis obviously was the collapse of the housing market. but what brought down tommy of these banks in so many of these insurance companies and so many of these financial institutions was over investment in housing. you have to ask the question why did that happen. why was there such a massive over investment in housing? the answer to that is again because of government. because of fannie mae and freddie mac and the federal housing administration, and federal rules, federal bank regulators, members of the jury,

where the bonds who commanded that these banks owned mortgage-backed security. the worst possible investment that they could make, federal regulators commanded those banks that they had to hold those mortgages. those federal regulators and the federal rules are responsible for being -- bringing the big banks down. if we can restrain government and we can bring a muzzle on government and we can get rid of dodd-frank and get rid of all of these regulations, if we can get rid of all these tax increases our economy will flourish again. mom-and-pop investors will make money. we will all get rich and government can be small enough you can drown it in a. thank you very much. [applause] >> now your three minute closing statement. >> ladies and gentlemen of the jury agreed with the defense contention that government is a big part of the problem.

government so vividly to make rules that benefited wall street enormously and enabled them to turn them to turn it essentially into a casino. there were huge pdas available -- paydays. that to a lot of held away from other useful sectors of the economy. and the government really does need to be reined in. i think they deserve a full measure of blame. a practical question is a pragmatic one. what should be the rules that govern financial services? you i think is very important that you understand clearly that the house and bustle wasn't an accident caused by big government stupidity exclusively, although it played a role. completely without fannie mae and freddie mac there would've been housing bubble and the financial crisis. the roots of that were when deregulation permitted mortgage-backed securities that enables lenders to bundle the loans into securities and sell them to other investors. once they had sold them in a will have a very strong stake in

whether the loans state solvent, if people defaulted on their mortgages or not. they had already gotten their payday out of it. cylinders became much less vigilant in their scrutiny of borrowers. they made loans to people that should not midlands to. that was because they can sell their mortgages and bundled securities downstream. once that happened, banks who thought the derivatives securities kept them from risk start taking much more risk in their lending practices. when i bought my first house i had to put 25% down. my kids buy houses with nothing down. they get low interest teaser loans. and balloon payment after a few years. many people were critical of homeowners for borrowing too much in getting in over their heads, loans they couldn't repay. john mccain in particular was sharply critical of homeowners in the bucket. i think that underestimate what was confronting homeowners to step back and recognize that the

main goal of a young family is to send its children to the best possible schools. a good school vote is a relative concept. it's one that is better than other schools in the area. and were although schools? they're the ones of the more expensive neighbors. the simple application of the chair logic is that if you want to send your child to a school with quality got to outbid 50% of other families for house in a meeting quality school district. if banks make it easier to get money, other families did more than they were for housing. you have two bad choices. you can sit idly by and watch your kids go to schools of with metal detectors in front with the students for an the 20th percentile in reading and math, or you can borrow in over your head, and hold your place in the education queue. i think it's a very seize mistake to blame parents for choosing that latter option. almost all of us would've chosen that if that event our choice when we made a decision. so it's very important to recognize that no industrial

country has unrated financial sector. when you turn them loose there's always excessive leverage. there's always asset bubbles. there's only financial crises that result in protracted theories of depression in their wake. the question is what should the rules be. i think the governments largely at fault for the explanation for why we have such bad rules, and we need to get smart people sitting down at a table, but to allow wall street to continue business as usual as if there's no problem there i think it's missed one of the most important economic handicaps the country faces. thank you very much. [applause] >> and now, ladies and gentlemen of the jürgen hubert expert witnesses and the statements both the prosecution and defense, it is now up to you as well to describe the guilt or innocence of the supporters of wall street, it is your job to determine whether the preponderance of evidence supports the prosecution, that

is that on balance wall street and the financial services industry, have missed the it's officially turned on our financial crisis, and they're guilty of greed, corruption, excessive compensation and doing influence in washington and other forms of malfeasance. the formal tally the vote, or the four-person, angel announce the verdict. the jury can be by majority vote. it does not require a unanimous decision. is that clear? does anyone have any questions? all right, very good. while, i. [inaudible] >> [inaudible conversations] >> you have two minutes to answer the question i make a decision a most yourself spent prosecution charged in is worth buying a set of regulations at

were bad for the country. >> should we start pacing? >> start doing handstands, whatever you want. >> [inaudible conversations] >> all, don't leave. the best part is yet to come. [inaudible] >> did you hear me last night on the street? it was good. ♪ ♪

♪ >> is this an anonymous vote? i'm just wondering how much pressure people might feel. [inaudible conversations] >> ten seconds. you guys can exchange names, addresses and facebook friends information after this proceedings. i can't even touch those the you have to give them to the foreman. >> inform, have you reached a

verdict speak with yes, we have. >> and it is? >> unanimously not guilty. spent a unanimous decision. even more for the win. >> and i'm not even a lawyer. >> are you okay? >> i will get over it. [laughter] >> a very. go drown your sorrows. that's what i do. mr. moore, you and your wall street brothers, steve forbes and peter schiff have been found not guilty but your therefore free to go enjoy a night in the city of las vegas. you can enjoy all the pleasures of insider trading, actually considered him and they go to borrow interest-free up to $1 billion from the federal reserve discount window for any losses occurred over the next 24 hours. case closed. goodnight. [applause] and thank you very much.

thank you very much, men and women of the jury. a fine job. >> ladies and gentlemen, of the jury, please clear the stage. you are all dismissed. judge kennedy, thank you so much. [applause] >> you're watching booktv on c-span2. 48 hours of nonfiction authors and books every weekend. >> what i found again and again and again while researching this book was that not only was garfield's life and nomination and brief presidency full of incredible stories, but the people who surrounded him were also unbelievable. he just couldn't make them up. first of course there's garfield's would be assassin.

he was a deeply dangerously and delusional man, but he was very intelligent and highly articulate. if you read nearly any other account of garfield's assassination, he is described as a disgruntled office of speaker. but that doesn't cover the smallest part of it. he was uniquely american character. he was a product of this country at that time. a time when there's a lot of play and usually know what to understand what he was up to. and hold him to account for. he was a self-made madman. he was smart and scrappy. he was a clever opportunist, and he would probably have would have been very successful if he hadn't been in saint. guiteau had tried everything, and he had failed at everything. he had tried law, evangelism, even a free love commune in

1800, and he failed even at that. the women in the commune nicknamed him charles get out. [laughter] but he survived on sheer audacity. he traveled all over the country by train and never bought a ticket. he took great pride in moving from boarding house to boardinghouse, slipping out when the rent was due. and even when he occasionally worked as a bill collector, he would just keep whatever he managed to collect. after the republican convention, guiteau became obsessed with garfield and immediately after the election he began to stop the president. he went to the white house nearly every day. at one point he even walked into the president's office while the president was in it. he even attended the reception and introduced himself to garfield's wife. he shook her hand, he gave her his card and how