in addition, i think it's very important the state has been great at creating myths and if they become very destructive over longer-term and the myth that they create a relation in the financial crisis is that it was caused high by the deregulations in the industry and agreed on wall street. the fact the banking industry will send the regulated under the bush administration had a

massive increase in regulation. the patriarchs act, the privacy act and sarbanes oxley. we were less regulated, we were not be regulated. second while there's plenty of greed on wall street working for 40 years there wasn't a sudden plague of greek swept out of the norm on wall street. no, there was nothing new, nothing different. that isn't what caused the financial crisis. in my book i talk about six themes. the financial crisis of the government policy. we don't live in a free market in the united states, we live in a mixed economy. it varies by industry. technology which by the way has done very well, the most regulated industry in the world this financial-services. that's where we had our biggest problem, not surprisingly because that's where we had our biggest problems. second of the policy created a massive disinvestment. they got focused on the residential real-estate market.

the global burst as all due. at the large financial institutions that calls wall street and made serious mistakes. if i had been in charge of a but let the institutions fail. however the states were secondary and in the context of an incentive by government policy. almost everything we've done in the financial crisis started was a long time period even things that might be helping a low but in the short term will dramatically reduce the standard of living in the long-term. fifth point even though there's and a lot of economic financial causes the real cost to the real cure philosophical, and i'm going to focus on that in my presentation, and then finally if we don't change the direction economically the united states faces some really serious long-term problems. we are doing some really bad things to our children and grandchildren.

what happens? we built too much residential real-estate. we invested in the $3 trillion maybe be as much as $8 trillion in residential real-estate. we have to many houses in the wrong place, we should have been investing in the technology, manufacturing, the education. we should have spent less and save more. we should have borrowed a lot less from foreigners. one of the things a lot of people don't get, housing is consumption because people think that they invested in the house they think it's an investment. it's not. we consume a house just like an automobile if you over invest in housing what you are doing is over consuming. so a massive over consumption. it's analogous to the agricultural example. and in that process, we taught millions of people how to do the wrong thing. we taught them how to be

mortgage bankers, residential legal attorneys, those millions of people are trying to learn to do something new that is productive and a global economy which is one reason it's been so it difficult to deal with what i imply that. in addition, construction is competitive with manufacturing rates. if you drive of construction wages you try to find a factor in wages which we do with an artificial construction boom and that drew millions of manufacturing jobs overseas to places like india and china. initially the people in india and china didn't know how to do that work very well, and we were having a really difficult time getting those jobs back. how did we make the mistake of that kind of magnitude? interestingly enough, the markets are constantly making mistakes, constantly in the correction process, but they never make a mistake of that magnitude. it takes the government policy to create that kind of mistake and in this case the big culprits are the federal

reserve, the -- fdic and the housing policy. in a fundamental context because of the financial crisis are errors made by the federal reserve. something many people know they don't really get what it means. in 1913 when the federal reserve was created the monetary system in the united states was nationalized. there is no private monetary system. the government owns the monetary system. if you have problems in the monetary system which is what this financial crisis is about, by definition they are government policy problems. if interstate highway bridges are falling down you would say the government owns the highway the bridges are falling down that is the government's fault that is exactly true with monetary bridges falling down. the government owns a monetary system. that's the the federal reserve does. the federal reserve was created in theory to reduce volatility. in practice what they do is reduce volatility in the short term and increase problems in the long term.

in the free market they are constantly correct. new businesses are being created and old businesses are failing. the process is actually as important as the creation process. its resources, its human capital, its physical capital cannot be redirected to more productive use when you stop the downside correction process all you do is create bigger problems in the future. it would be analogous to what discipline in the 13 years and be surprised they had bad behavior when they were 16. that's exactly what the federal reserve does. it keeps the corrections from happening. in addition to leading u.s. government can run its massive deficits is because the federal reserve's ability to plant money. today the federal reserve couldn't print money. interest rates i don't think it wouldn't be creditworthy if it couldn't print money, and that creates a huge temptation for politicians, right?

republicans and democrats. i don't think that we will never disciplined fiscal policy until we deal with a monetary policy. the we had a specific errors that led to the recent financial crisis. in the 1990's, early 2000, alan greenspan was head of the federal reserve to the it he'd been there for a long time. hughes and maestro getting ready to retire. so greenspan wants to go out on a good note so he starts lowering interest rates, which is the effect of printing money and he creates negative real interest rates. you can lessen the inflation rate and barrault dramatically less on the appreciation rate on housing which in scented a huge investment in housing which you could borrow at such a low-interest rate. and then it's right at the end of his term greenspan realizes that he screwed up and he and his successor started raising interest rates very rapidly and created something called a man inverted yield curve which is an

unnatural phenomenon. never curves and markets. only the fed can do it. with the inverted curve it means short-term rates are longer than long term if you are going to make an investment, if you're going to invest in the long term debts riskier the markets never do that only if the federal reserve can do that. while that matters is why the banks make money by borrowing short and long. that is their whole business and if you create inverted curve is the banks have - margins, so it amounts for $10, not a great business model, right? the banking business is quirky and that you can get higher interest rates by taking more in. so most of the bad loans, the long-term trend went exponential under this inverted interest rate which is the longest in u.s. history. and one reason that happened is the same time the bernanke had interest rates he was claiming the federal reserve was complaining there wasn't going to be recession that they would

go on forever so we created a huge investment for the bank to take enormous risks and claim good times would go on forever. in a certain fundamental sense, we could have mathematically had the fed printing the money. where did the money come from if the federal reserve didn't provide. the second factor is the fdic insured bank deposits that sounds like a good thing use the simple example they operated now and how we compete with a number of community banks and took over on of the community. they'd been in the hotel business and motel business and got together and they started a bank and put in a little bit of capital and the leverage it radically by volume the certificates of deposit for average consumers at very high interest rates since the government guaranteed the deposits to the consumer didn't care about the risk in the bank

the bank took that money and land that to the cronies who then went broke in the hotel business and the fdic on the dollar. bigger factor was the large financial institutions that failed. country wide, washington mutual, all financed high-risk loan portfolios using the government's deposit insurance. there is no way the market would have financed country wide in its high risk business without the government guaranteeing the deposit insurance comes a deposit insurance was a major distributor of the allocation account. the third factor, and i would call this a proximate cause is the government housing policy. this goes back a long time. the government has tried to raise homeownership above the national market rate. under the homeownership is a good thing. owning a home doesn't change human behavior. it is the opposite to read it

savings of discipline that allows you to own a home that results in better behavior. and encouraging people to buy homes they can't afford it doesn't end of well as pc. the government subsidy started with, you know, the tax credits deductions people get from housing and then in the early 70's we start on the path of the community reinvestment act, which forced banks to go into the low-income high risks of prime lending business and banks had no business being in that business with the people's money. the banks shouldn't be in the high-risk lending business. that got the minimum going, but the big event actually happened in september of 1999. remember, bill clinton who was president of the time made it really mandatory, although it had actually gone back up for two years but he said okay, the great american fannie mae, the government sponsored enterprises, you are going to have at least half of your loans and affordable housing lending.

and that was a really dramatic because of the size of freddie and danny and a number of economists actually an article in "the new york times" of all police identified the risk involved in this issue and they said less than, fri and fannie are so big that there is no way that they can meet this goal without radically reducing the lending standards in the home mortgage business because the legitimate housing market is in that big. if they achieve that goal they are going to take so much risk fannie and freddie could get in financial trouble and that could happen in ten years, and they are so good to become big ticket to get the system. nine years later it happened. when fannie and freddie failed the owned $5 trillion they had $2 trillion of subprime mortgages. even before they feel they were leveraged 1000-1. would be like you had a net worth $10,000 being told to

borrow $10 million. the only way you can do that is the government guarantees your debt which is exactly what is going on with freddie and fannie. this is something that is we underestimated. we have a dominant player that has over half of the market share driving down the lending standards and everybody into that hole. people would go out of business or they would get sucked into the hole and this is a government driven entity setting a limit standard for the whole industry under the congressional loans and some prime lending i was personally on the committee of the financial service round table which is the largest in the u.s. and we were trying to do something about freddie mac and fannie mae. we were running the numbers and was mathematically certain that they were going to run. everybody in this business i would argue 15-year-old what say we met with congress and with wonderful people like chris dodd and barney frank.

yet he wouldn't look at the facts. why did he obey? because he had a religious belief and affordable housing, and freddie and fannie were huge political contributors. there were contributors to the republican party and the biggest contributor to the democratic party. some of congress he dated and freddie and fannie sucked the housing market's down the tubes to give lots of bells and whistles but fundamentally we had a massiveness investment because the federal reserve printed too much money and it ended up in the housing market in freddie mac and fannie mae. there are lots of other things like the negative amortization mortgages and the issue of the derivatives market, which i really do cover in my book and would be glad to talk about in the q&a but i wanted to focus on something i think is more important. i want to focus on what i really

believe caused the financial crisis because it is a continuing problem, and what i really believe the cure is. i think the crisis was primary cause by philosophical ideas. as a combination of altruism and pragmatism that caused the financial crisis. and altruism is not benevolent. benevolence is a good thing. altruism is other isms that basically says everybody is more important than you. as interpreted by the state that means the collective is important and the individual doesn't matter. everybody has the right to a nice house. provided by who? everybody has a right to free medical care, provided by who? my right to free medical care is my right to enslave a doctor to provide me that medical care were to ms leave somebody else that they have to pay for that doctor that is exactly the opposite of the american concept of rights.

in the concept of rights you have the right to what you produce and when you create. you don't have the right to what somebody else produces and what somebody else creates. if you think about business to do a lot of lip service about the altruism but in the globally competitive environment if you are, you can run some ads but you are not going to be altruistic. there's a bass that that philosophy and that's what we teach in the backup schools and the basic rule of privatism as to what works. here's the dilemma. lots of things work in the short term that are incredibly district in the long term. the amortization mortgages, said prime lending worked for years and there were economic disasters. it's one of the biggest problems coming you can't be rational because rationality demands a long-term perspective. you can't act on principle because pragmatism has no principles. it's not surprising we have so

many ethical violations in business because people don't act on principle, and you can't be principal if you don't believe that you have principle. you have to do what works. with pragmatism it's the mentality. and we are releasing that right now in that debate that we are going on in the country to the we have massive deficits and the social security, medicare and every body knows it, and nobody really seriously wants to do anything about it. and that free lunch mentality leads to a lack of personal responsibility. the lack of personal responsibility is ultimately the death in democracies. in fact i would say by far the central issue in our society today is personal responsibility. are you responsible for yourself or argue entitled to what somebody else produces? that is the fundamental issue in our society. the founding fathers talked about hearing of the majority and they were concerned about

the freedom of religion, but they also realized there were 51% of the people that realized they could benefit from the 49%. pretty soon the party is over. they will send 50% and the 40% and finally if of 30% correct. just like the call is a philosophical so was the cure. the cure is expressed by thomas jefferson and the declaration of independence. life, liberty and the pursuit of happiness. the individuals have a moral right to their own life to each individual's right to pursue their happiness. each individual's right to the product of their labor. if you produce a lot, you get a lot including the right to give it anything you want to on whatever terms you want to. if you think about that prerogative, it demands personal responsibility because there is no free lunch. it demands and rewards

rationality. it demands and rewards self discipline to the life, liberty and the pursuit of happiness. let's talk about liberty for just a minute. you know, a lot of defenders and liberty think of liberty as a nice thing to have. it's a nice thing to have, but it's a lot more important than that. liberty makes human progress possible. there is only one real natural resource that is the human mind. you know, 10,000 years ago oil was used for human beings is used today to somebody invented deutsch and 15 years ago that the communication with tales made of copper and leader days ago to fiber optics made of silicon that's made of saying somebody invented fiber optics. there's only one true natural resource and that is the human mind. the interesting thing about human beings in order to be productive, you have to be able

to think for yourself and pursue what you believe is true. if somebody forces you to act that says to plus two is five, you cannot think productively. you cannot contribute to human progress. many government rules and regulations, and i know this for many business, they force you to act and no wonder you can't beat productive. in addition, reflect on this fact, all she and progress by definition is based on creativity. unless somebody does something better, which will be different there can be no problems. creativity is only possible to an independent thinker to treat somebody like thinking outside the crowd cannot be innovative and true to the human progress. freedom is an essential for human well-being, not because it is nice, but because man's nature is a thinking independent being to the if you look at human life expectancy from whenever human beings evolved

from a 50,000, 250,000 b.c., up to about 1750 come 1700's, human life expectancy advanced almost non-to read and since the late 1700's until today, they're has been a radical improvement in human life expectancy across this whole planet. there was an invention of the late 1700's that allowed that to happen. the invention as the concept of the rule of law. of the individual rights of capitalism. that was a human invention that radically improved the quality-of-life and life expectancy on this planet to get it was a big deal and it did that because being free is essential for human productivity how about the pursuit of happiness coming and this is an interesting thing. the figures of the enlightenment, everybody existed for somebody else's good, nobody existed for their own good, jefferson said an interesting thing each of us has a right to

pursue our personal happiness, not a guaranteed success in that pursuit but we have the right. that was a role changing idea. creep the most successful and most benevolent society in history. people have a right to their own life. in a communist and socialist society at the end of the theater begins appearing each other because they are all slaves to each other and i agree with jefferson each of us has a right and the pursuit of our personal happiness and here's an interesting thing about that idea. it's a very selfish idea. you are pursuing your own personal happiness but it's selfish in the proper context of the term that sometimes we forget and i would call it in the context of pursuing one's rational self-interest properly understood. it's not about taking advantage of the people with so about actually taking advantage of people because presume nobody is interested. also if you don't have time, you're going to do a lot more damage to you than you did to me

and a lot of psychological damage to yourself, so it isn't about taking advantage of other people it's self-destructive, but it's also not about self sacrifice a question i teach a lot of students and university students and the question i asked them to ask themselves, and i would ask you this yourselves and if you could ask your children this question, do you have as much right to your life as anybody else has to their life? do you have as much right to your life as anybody else has to there's crux of course you do. why would you think anything different than that? still pursuing anyone scrivener debate congressional self-interest and what is happening this isn't about taking advantage of the people and it's not about the sacrifice. there is a moral code however that underwrites the free society and free markets on the principle it rises about trading value for value to the heads about getting better together. in our business in the banking business they let us make a

profit doing it and we got better together. it's about figuring out how to treat all you for fallujah and getting better together to read and only to a stable relationship conditions we win and lose whenever you get greedy and set up the louis win and see the sense of all relationships it ends up being a lose lose. when you get self sacrificial and you set up a losing winning you will get better and in devotee lose lose relationship so any relationship in your life that matters you should ask what is in it for you but you should also ask what is in it for them because of the end of the day there is nothing in it for a bomb and there will be nothing in it for you. of course it is in our national self-interest to invest in the quality-of-life in your community because you have to hold the context and ask what kind of world war i like to live in and help create that kind of muddled? so, asking your rational self isn't some linear view taking advantage of other people, but it's about having a purposeful,

meaningful life. i will say this, if we are not willing to defend the pursuit of happiness and the context of the rational, we cannot defend free markets, we cannot defend the free society or capitalism as a fundamental philosophical issue. and there was a part of the genius of the founding fathers and a lot of what this fight i believe is about it can also make some personal response of the because if you can't pursue your own happiness why not be responsible? what follows from that? a couple faults on economics. i'm a trained business dhaka and economic production is impossible. we always ask about. i do think we are in some kind of an economic recovery to be a day and i think people better conservative that act like we will have an economic disaster while that is possible is unlikely coming and we can look like you know, a boy crying wolf. we still have a bigger and drizzle the economy. it's going to be slow, it's

going to be way below what the growth rate should be. we are going to be stuck with higher unemployment than we should have and face detonations' like the 1970's and it's unfortunate the compound difference between the 1.5 to 2% growth rate and 4% growth rate or 5% we have over ten to 15 years is huge. so we are probably not going to have in the short term we may in the long term and i will talk about that in just a second, but we are setting up an environment for way below the growth which has significant long-term consequences. i do get really worried about ten colin 20 years on the road that kind of time we have a recipe for economic disaster in that, and if we don't change from altruism and pragmatism and free lunch mentality and restore the principle that made america great, the numbers are staggering. the unfunded liability under the social security, medicare, the new obamacare is the government

on funded pension plan was $100 trillion. that is a stunning number. we are running over $1 trillion, and if we had an act -- if we get our act accounting of the the businesses to we will run the annual profit statement from the united states government. we have a dysfunctional foreign policy, we have a big problem with demographics and the retirement of the baby boom generation as a non-trivial problem, and we have a field of case triple the educational system by any kind of economic stance. we have the potential for really bad times if we do not change direction. this is good news, it isn't too late because the skill exponential and about eight years but we have about that kind of time frame in order to start moving. if we don't move in the next four or five years it becomes almost impossible mathematically to fix a problem without some kind of a social real upheaval that wouldn't be fun i don't

think to date i happen to be even with the recent election results i happen to be fairly optimistic, and i know that sounds strange. i do think there are two things. i think for the american sense of life is a protector to the degree that americans fundamentally in some level don't like big government. they don't like big government, and when times seem to be going the wrong direction and get positive surprises like we did in 2010 when the american pushback said we really don't like this direction and i think that is in on caveat but the biggest thing that we have in the reform is that we have the best ideas. the good news is that the status on doesn't work. it failed over and over again. people tell me how surprised they were when the soviet union failed. as an economist it didn't surprise me at all. communism always fails what they

will do, they might do something crazy but it always feels, and state and some always fails and the question is when it fails will we be there with the right ideas to move in the right direction and that is heritage, the work of cato, and we do have bright ideas. and so i -- even the why not saying is that we couldn't get back, i think we will win because we have the right ideas. i want to share one last thought that relates to the american sense of life and it has to do if individual ethics we had problems in philosophy and a lot of my company did much better in this financial crisis than any large financial institution in the u.s. given the nature of the business etc and people ask me why and we had some great people and a good strategy but mostly we had the right kind of culture

and ideas and we got ten core values and i think those are great we have a real sense of purpose and our employees and our employees wanted to do two things, they wanted to make the world a better place to live but something for themselves become bind our energy that people have about doing good work in the world, but doing it personally because you have to have the right to your own life. second, we had the highest respect for the rational decision making, making the logical decisions based on the fact, not invading the fact, been very thoughtful, very thoughtful process, but most importantly i think we can get a clear sense of purpose and use your capacity to accomplish the purchase you get to do something important. you get to raise your self-esteem. ..

i want to share one thought with you. for everybody in the sermon the vast majority of people on this planet, the single biggest driver of self-esteem is your work because you spend a disproportionate amount of time and energy at work. that's what makes work important. that's why this issue about unemployment underemployment is way more than economics. it is actually a very spiritual issue because work is spiritually important.

i've said many times, it's really important that you do your job well. as far, more important. you'll never fool anyone. if you don't do your work, the best you can possibly do, given the level of knowledge, skill, but to the best work you can do, you will lower slopes team. if you're a college student at, don't you avert the best you can do commutable yourself esteemed even if you make a good grade. the flip of that is also true. if you do your work best you can do it, given your level of skill and knowledge, you will raise your self-esteem that's more important than promotion or money are great in college because it's about character. it's a fundamental human need. these interesting societal and

occasions. take a bricklayer, a tough, hard grinding job. my granddad had a job like that. but he and his wife are successful. they raised their children, they be his granddaughter becomes ee have a publicly traded company, maybe not. he's very successful in that context. very interestingly, he could something very powerful from his work. he gets to be part of themselves yet he gets two of self-esteem. he may be better off, but he loses some incredibly important. he loses his pride, his self-esteem. all political persuasions are really involved in this discussion to create security. it defaults discussion, but an interesting discussion. while americans care about security, this is not the land

of security. people didn't get on a boat and come to jamestown to be secure. the united states is a land of opportunity. opportunity to be great, opportunity to fail and try again, but most importantly, the opportunity of a bricklayer to live life on his own terms to pursue his personal hat is, given his beliefs and his values. that's what people came to the united states, to first do a happiness given their beliefs and their values as free and independent. but american senses with nader country so great and is what is so precious. thank you very much. [applause] >> i was really, really

terrific. i'm always glad to hear another optimist here in washington and. you've all seen the book or perhaps you've had a chance to read it already. i encourage you to do so. it's full of great insight. both have a few questions. >> huck win this thing is further in the direction you've talked about having people do more for themselves as opposed to depending on the government? >> that's a great question. i wish i had the total answer to that. the reason i talk about philosophy, is what's happened to the united states how we philosophically live in the wrong direction. policy follows from ideas. so i think we have the ideas that made america great, including responsibility, but

she can be entitled to a someone else produces and creates. that's a very important idea. in the long term the long term, the most important thing is to recapture the education in. the left took over the universities. they took over the elementary, because they teach other teachers and that got to get the system back because for having the wrong ideas. the ideas in washington are toys and school systems universally today. the rate to do that is to totally privatize education vouchers or tax credits. what that would create his competition in education. since our ideas are better, this idea certainly not they could come he, so long-term the biggest fight is over the education system in privatizing education. and it's interesting to me, minorities and low-income people and our education system. it's not designed to deal

effectively except for people in college and that none of their effect of consequence. once once your site is that education. the fight in the short term we have to combine and this is something heritage does. this got to impact opinion leaders across the room by world-class research because these experiments have all been tried, so if we really do it right, we might not come in people on the far left that were right, but we will convince them to be less confident in their ideas. so we have to preach to people who don't agree are too old for us to change ideas. it got through world-class research that refuses the consequences they claim will come from their good policy.

>> yes, ma'am. >> i thank you so much for your remarks. you say american don't want the government. in any of that, let's assume it is, then why do we keep electing the government? >> that's a fair question. and i don't know. i was a little surprised. but when you answer the question, they don't. they over and over say they don't want government. but unfortunately, a lot of people can integrate what that means. they don't want the consequences of not having big government. what they want is a free lunch. they don't want to pay taxes on all these understood. so it's an intellectual disconnect, lack of integration.

and i think that is the fundamental issue. that's where the objective argument is more important, we show them this doesn't work. and i particularly think we've got to show older people how bad it is for their children. i don't think many grandmothers want to do bad things for their grandchildren. they've done a good job of letting people rationalize that that's not true. so an article in "the new yorker" were social security had no problems. you have to know it's her to take them seriously. but what they're doing is reinforcing the rational belief people want to hold. they want to think there's no problem, even though the facts are there. so how you do that in key people inspired at the same time it's a lot easier to say there's no negative consequence to it. so that this philosophical fight

and this hate this the worksite. it's a harder message because they're so much -- everybody in here knows when your kid 13 it's easy to let them get away with a lot of stuff and it's harder to be the disciplinarian. my wife did not and that is our challenge, how to make a discipline. >> just interested in your new permit policy in his on what happened with the gic issue right now, where we have this big government conservatorship that can tenuous. the housing market hasn't recovered. how do we move onto a bus government centric system will not letting the economy back into itself. >> i haven't been in the banking

business to remember one thing i can pretty make played no role in was rational. we did not have a problem. it was 20% down. bosses and housing finance for a very commensurate mall. the loan industry was destroyed by government policy. during the 60s and 70s, politicians during the great society. it'd want tax people, so the contemplation might today. picture of interest rate to 22%. 80% fixed-rate and is suddenly paid 13% for the money in the industry that wiped out. that's when freddie and fannie fell into the god. thanks at home finance. the private market for home finance is a market to develop overnight. figures the plan announced in one year for another close. that's it. though the market solutions

enhancing b. allocated more rationally. it is a rational economic to subsidize consumption anesthetizing news. it reduces t. is subsidizing housing in any way, the recent fannie mae and freddie mac is that they're doing economically rational. if it were economically rational, other people would be doing it. fha is even more economically rational. if you had to subsidize homeownership, do it so everybody knows what you're doing. i'm opposed to that, that there's a certain integrity and not personal subsidizing institution fannie mae and freddie mac were people can't figure out. a lot of demanding the end of the day presenting the housing business like the biggest supporters of freddie mac and fannie mae are pushing this thing who do this stuff. crony capitalism of the ultimate

kind. they're closing in one year from now. easily developed in that period of time to improve the well-being of the united states with this investment consumption. >> john, when we were speaking the folder your talk, he mentioned to me the extent of the fred's involvement in the micromanagement. just give us a couple examples. it was so mind-boggling. >> people do not realize how bad dogfighting case because it is i believe a very conscious effort to take over the financial system in the united states. if you want to control an economy, control the allocation of capital. the way to do this safely is in the background. socialism does not work if everybody could see the government run businesses fail. if you can blame somebody, then it's a great way to do it.

credit allocation in the united states, like the federal reserve acyclic controlling. they haven't made any big as yet, but the rolling them out. the so-called consumer compliance is credit allocation. not only can they make banks, keep banks that can make you offer products, kind of like subprime lending. you're going to see subprime consumer lending so the government can force allocation. they can also stop allocation. they control capital ratios for the banking business. before the crisis, people don't realize a bank making a subprime high risk mortgage had to have half as much capital as making the loan to exxon. that's exactly if they want green energy, they can subsidize green energy racing green energy is a social purpose and passing the capital for green energy

long, whatever that means. so they set up a number they can control the allocation of capital in the united states. they've also set up and i blew this is intentional, but going to have community bank model does not work. a group is a community banker. the community banking is very important to our country. the regulatory structure is much worse for small and dictation savings. where's the? a big institution it's frustrating, makes you angry, but you can hire other people. a few in the community bank and i was there monday, you've got to do it. instead of being able to think about things for a given creative to allow printer business, you have to make cover bureaucrats happy. community banking, basically going out of business every day. there's been no innovation. the micromanagement today we

have to have programs approved by the federal reserve. we might enter tellers. at a hollywood do that, that they have to be approved. so you've got micromanagement. but they're going to do, and i believe this is the intent to consolidate the industry and i can control them. i'll never say that, but the library consolidated industry they can control. there's also the lending standards, the worst in a 40 year career. bias that? they had this obsession with standardization. here's the problem with standardization. the group is a small small business lender. totally customized process. you have to judge people. are you going to pay me back or

not? numbers are helpful, but at the end of the day, a lot of small business lunch be made based on the numbers. they are made haste on this guy has a great idea but somehow he's going to get it done. you can't do that anymore. it's under what they call disparate treatment. if use judgment and discrimination. so if you have to do? get to standardize process. what does that mean? it has to be tighter standards. so they've take the lending standards for small business more than anytime in my my 40 year career small businesses have huge job creators don't have much today. you know, some of the things you argue didn't attend them. if you want to control the economy, control the banking business. >> last question.

>> back to the issue of people believing they not need to rely on the government, i read recently articles about the baby boomers and what they have and have not saved for retirement. it is such a stark contrast with the world war ii generation who didn't carry balances on their credit card and now between different hobbit and recent financial hits, they're very unprepared. so to me that creates a psyche of i don't want to sever the state do not because i might need a n. i wonder from their banking days if you had pretty strong change.

>> there's no question my generation this way under saving. a relatively small percentage of people, not just income. the save for their retirement. then there's a lot of people that basically haven't saved. they got this letter the way because they thought their house this evening. we create these bubbles into a lot of time in the initiative diverse. they thought their house baby was less anyhow, so they don't have the savings and they haven't developed a self discipline for savings. that is the real economic challenge. what is bizarre is this everything we can to distance and punish people that are safe. we get lots of older people, particularly older ladies or

maybe there has been dyed and he and she together worked hard for money in the bank account. a 75, edn of the repair that on the interest on that savings. bernanke, head of the federal reserve's assault on the interest rate below the market rate. he is stealing from those old people. they don't really have -- they should. at that age you really shouldn't be doing anything risky. you should be living off the interest. and i probably could've the federal reserve was holding down interest rates. there's this massive redistribution of wealth. probably the biggest in u.s. history from savers to people that will spend money and buy houses. for some reason it didn't work out. people are. they figured out there's a huge disincentive to save and something's wrong with this and it reduced their confidence.

super punishing the people that did the right thing, which is kind ethical consequences. i don't think federal reserve has the moral right to take people to save and work hard and give it to people so they can spend it on a bigger house. that's one thing that's wrong with government. >> john, again -- [applause] as president of the heritage foundation, you want to say to you as mcauley, president of the cato institute, there's not a word you said that i disagree with. [applause] >> ladies and gentlemen, if you have a copy of john spoken like assigned and he'll be doing it right up here. we are returned. thank you, john. >> we are here with john avlon

for music and "the daily beast." they written the second volume of the book, "deadline artists: scandals, tragedies and triumphs," this one on scandals, tragedies and triads. >> and we didn't even know about the petraeus scandal, but we can say, the latest is the best that here because we didn't write it. >> we actually went up collected dozens and dozens, richer hundreds to put together for people who like newspaper columns. you can't buy them all in one place, so we did the picking for you. it's a great american art form. ernie pyle, murray cantin. this is literature, an american art form and its history written the present tense and gives you did on our own scandals, tragedies and triads.

>> you can read it a try what about earthquakes or floods or political scandal or you can read the way people were talking about it. writing about it at the time. >> we think of contemporary terms that no precedent. close in on scandals like the 30s, 40s or 50s that would make something that came. >> one of the things if they give us on our own problems. so when you read about any scandal trials, we've got the lewinsky scandal. with kathleen parker rating on that. go back to david runyan writing about the al capone trial with the death of john dillinger. we got 9/11, beautiful columns is steve lopez and peggy noonan, but then you read jack london about the 1906 earthquake in san

francisco and it does create a sense of perspective. we been through a lot of this stuff before and it's great storytelling that creates perspective on our problems. the instruction of galveston outside of texas puts to shame i just have been in new york with hurricane stan knee. hundreds of thousands of people affect it, destroy to see there were people on the ground who knew about it, cared about it and were even wondering at the time, will anyone remember this? will people remember what happened to this town. it's important for people to get that data. thematically balanced tragedy to triumph as well. when you need surely povich on john larsen's perfect game, damon runyon's column where he calls cinderella man, later made into a movie. we found it in the new york public library, see her get

these inspiring stories across with this scandal, tragedy and triumph. the new cycle right now involving a scandal really does show you we've been through this stuff before. every generation replaced ephemerality's tory. >> for people who like to read through 200 or 300 comments after some blog posting, maybe take a look at what other people have to say about the human condition, politics come in the way things go. >> you can read it on the go, too. >> would look at the current landscape and thinks it's fractured to his very columns everyone agrees with it to the point where we have very small niche is and who we tune into on the web or cable television in the late go back and have her discussion. >> one of the points we make an

intro of the book is just beginning to be possible to the outlines of the newspaper area in the way walter pitman has been for example, that particular this might be gone. proliferation of voices, democratization of opinion is healthy in the long run. with this book shows us is the folks who approach today for my harshly partisan perspective was very predict bowline almost reads like a talking points memo that this will not last. storytelling, telling people stories, characters, those stories into her. without this focus journalists shows the importance of the endurance of the reported columns. we do depend on it to have the ballots of objectivity and

subjectivity. storytelling with more purpose than personal perspective. >> now is always we've got a couple of columns in here and you can rate them in "the boston globe" received a nine morning show. it's not as if newspapers are completely divorced from the rest of the media at this point. we appreciate people who know how to tell a story. they're not necessarily writing for the big papers. these are short stories that really happened. >> final question. the subtitle is scandals, tragedies and triumphs. hasn't always been that case clicks away always loved scandals and watching others fail? >> some of us have a tablet background. our third coeditor and i used to write for a rival tablet.

we gravitate towards scandal and tragedy. this is the second time we've done this and as we look through, always a lot of scandal, tragedy. but we did want something uplifting as well. something john insisted we have. you do want to tell the story. you ought to talk about success. >> this is always been the stuff of forgiveness. skinless, tragedy and triumph. what's great about this book, this is art but not deadlines. it's still being done everyday. i do think it's important to add the something we don't did a positive. that sort of our moral compass north that will really stick the paper to find out the leeches scandal or tragedy, triumph its

redemptive at the end of the day and it's important win on that. >> john avlon, arrol louis, author of "deadline artists: scandals, tragedies and triumphs." thanks so much.