over the world. he was a public figure. he used that platform to advocate for social justice, women's rights commercial justice. a big fan of mccarthyism. he signed lots of petitions advocating good causes. because his research was instrumental in creating the atom bomb, he later felt someone responsible for the bombing of hiroshima and nagasaki and he later was part of a movement to try to end nuclear testing and end the nuclear arms race. it was quite a remarkable figure, and albert einstein was camino, known as a great scientist. he was also quite an outspoken radical. one or two more things. there are lots of people in the book who i knew something about,

but it was a great labor of love to learn more about them. people often ask me, how did you pick these hundred people? one of the great -- one of the things the was the most fun about the book was reading about these hundred people. i recently analyst to a 250 people. i contacted friends and others that did not know out of the blue from historians, journalists, like our first, and ask them for their recommendations of people. and then made a point of trying to identify people, some of the more famous and many of whom were not well known. there are three kinds of people in the book and the three categories of people. one group of them are organizers and activists, people like eugene debs and the socialist party, the early 1900's. people like alice paul, the

great suffrage leader it was probably more responsible than anyone else for women getting the right to vote and a leader of the women's suffrage movement in the early 1900's. she was also an advocate of civil disobedience. she and others which in themselves of the white house fence and get arrested in order to draw attention to the cause for women's rights. up until now, more recently, schneiderman it was an immigrant , one of the leaders of the current workers' movement in the union movement in the early 1900's, particularly after the triangle fire tragedy in new york, there were people who built these great movements for labor, women's rights, a gay-rights, environmentalism, civil-rights, and for peace.

the second group of people were politicians and judges. and this is probably the most controversial, because of politician that some point have to make compromises. and so progress of this don't like compromise. we don't like to learn to live with compromise. my view of compromises that some compromises are stepping stones toward greater change. some compromises are part of what progressives need to do to understand the difference between a sellout and a stepping stone when you're compromising. when we were debating the health care bill a couple of years ago in 2010 there was a lot of debate about what moves us forward in what is a sellout. and is really important for us to make that distinction. some politicians are always, always making compromises, but sometimes they're making compromises as allies on behalf of social movements.

so the politicians include hiram johnson, the great governor of california who is is possible for the first minimum-wage law, a workmen's compensation law, the first major regulations on the railroad industry, corporations. his counterpart in the 1930's, radical governor of minnesota. marcantonio, the great congressman from new york who is a protege of someone also in my book, the mayor of new york. and the great paul melson who died more than ten years ago in a tragic airplane crash was a great hero and the principal politician. the great feminist and peace leader who was in congress before that had been involved in the women's rights in peace and civil rights movement as a lawyer. of the 100 people, about 20 of

them are people who either ran for office or who were elected for office. of the renter of the -- ran for office like upton sinclair. almost one on an end poverty in california platform but did not win. eugene debs was never elected to anything. victor berger was a member of congress. and so the library of politicians and the people who are most controversial in my book are theodore roosevelt who was a military stand imperialism but also a strong advocate of labor rights and consumer rights. responsible along with upton sinclair for the passage of the first consumer rights legislation, the meat inspection act of 1906 and the food and drug act of the same year. and some other people who ran for office but did not win. the third category and the one that was sort of the most fun to read about or musicians.

everyone from paul robeson and pete seeger who should win the nobel peace price before repasses. we find a way to get him the nobel peace prize. bob dylan, the most recent one is bruce springsteen, riders and playwrights like arthur miller and tunney kirschner it is the author of the film playwright and the author of the film lincoln . photographer like lewis hine, an unknown figure among most americans who is as responsible as anyone for ending child labor by being a great photographer who did incredible documentary photographs of the abuses of children working in factories and mines and other dangerous workplaces. he really held a mirror up to america and said, these are your children. these are the conditions there working in.

and the child labor movement really took off with the help of people like jane addams and florence kelley and other people . and the national consumers league, which was a leader of that movement against the child labor. we have sally in the room tonight who is our current leader of the national consumers league. and figures like abraham joshua, the great theologian, wayans -- wayne coffin to my mentioned dr. seuss, langston hughes, the great negro poet. northwest -- w.e. dubois who was a sociologist and an academic, but also a propagandist and a writer, most famous for black folks. and people who were in the arts and in the humanities and who inspired us to think about a

better world, think about a different kind of society, to think that people organizing together can win victories that make society more livable, make it more humane to make it more democratic. and so we had activists and organizers, politicians and judges, supreme court judges in my book, including thurgood marshall. an activist of civil-rights before it was on the supreme court and then the thinkers, riders, the legends, musicians, and artists. and in coming up with that list i realize that it was going to be controversial. and i have gotten lots of feedback on the book, and there are two kinds of feedbacks that i get. one is, how dare you include that person in your book. did not deserve to be in the book. the other is, how do you leave office person who should be in your book and isn't. so i have to admit, i cheated a little bit. in the intersection to the book

their is a list of 50 people who would have put in the book if i have more room. so there's sort of the kind of second-tier or the pinch hitters to would come up to bat if i had more room in the book. and the last part of the book is about the future. the last chapter of the book is called the 21st century so far. i think what is important is to realize that the book is a book of social history and a book about great, heroic figures to change america, who raided a better society. there are people today, probably some people in this room, people who will be watching this on c-span to are the florence kelly's and the walter groups and the martin luther king's and the john lewis's and the myles horton and the upton sinclair's of the 24 century. and so somebody someday is going

to write a new edition of this book called the hundred greatest americans of the 21st century. and the last chapter of the book says that it nominates and describe some of the people who are active today in the women's movement, the gay-rights movement, the immigrants' rights movement, the labor movement that has had better days but is revitalizing itself as we speak. the movement for a living wages and the movement for environmental justice, fighting the same fights kamal those standing in the shoulders of the people in my book. if there are any lessons from the history of these 100 people and the movement that they represented, i think there are three things that i learned from this -- from doing this book. number one is the importance of

an inside-outside strategy. all progress happens, as frederick douglass once said, when there is protest, there are people in the streets mobilizing, when there are people very great and expressing that anchor not at themselves, not inward through violence, but through non-violence, protests, and activism. but they're also need to be people on the inside it are the allies of these great social movements. and so, franklin roosevelt, a great story is told about african roosevelt had a meeting in the oval office with an activist during the depression. he listened to they're grievances and demands for change and said to them, i agree with everything you just said. no, go out and make me do it. create the conditions and make it easy for progressive liberal allies of yours to pass these laws. i think that is a lesson that obama is learning right now.

he learned from the first four years of his presidency where he did not encourage active movements. even during the health care debate. now in his inauguration speech he said, we can do this within the white house. can't do this from just the inside. we need the outside. that's where he was talking about some of the falls and stonewall. we will see whether on the gun-control issue, and grant rights issue, issues for climate change were the movements around the country really build up to a point where president obama would say, like roosevelt, go out and make them do it. the political climate of protest and here that will make it possible. the slauson number one. the second lesson i learned from writing this book is the social

change doesn't happen overnight and have the long view. we have to force it to ban further and further. michael harrington, the great socialist writer and activist was my ahoy mentor once the you have to be a long distance runner. you can be a sprinter. the seneca falls convention was in 1848 and they did not get the vote until 1920. victor berger proposed social security in 1911 and it did not pass until a 1930 s. there are people fighting. we don't want to be to patients. too much patients can be paralyzing, we have to realize

that the fights continue in that we never win everything now wants and we have to have the long view. the third, we have to be part of the movement. individuals and single issue groups can't when things on the rhone. the thing a learned about the upheaval in my book is a almost all of them are defined with particular issues that it would sell themselves as part of broader movements. the mosaic, the interconnection, the web of all these movements coming together. there is a movement today, an environmental movement, a gay-rights movement. they're all in it together fighting for more social justice she was a founder of the naacp,

the founder of the settlement house, a feminist, a pacifist, one of the founders of the women's international league for peace and freedom. a leader of the child welfare movement. .. to make america and the world more humane and more socially just and more democratic. here is my quiz.

and i want to and with this. the people in the early 1900s that fought for and believed in the possibility of social security and women's right to vote, civil rights, consumer rights and government protection of workers against unsafe and unhealthy workplaces. they were thinking for the ages. they were thinking beyond their immediate battle but they fought immediate battles of the same time. so for those of you that are here, think about 50 years from now. think about your children or your grandchildren and when they look back, on their society and they think about the ask their granddad or mom or dad, what was life like that when you were my age? you can tell them well, that and we had this but that was

considered people fighting for a better world, the things you take for granted back in 2063, 50 years from now, things you take for granted were considered radical ideas way back then in 2013. what are some of those things that your children or grandchildren 50 years from now will look back on and be taking for granted then but will look back on these ideas that today we consider radical? any ideas? >> i was thinking of -- that american should have a right to a job and should be able to have to sue the government if the government fails to provide enough jobs enough jobs. >> so in the year 2063 you believe that we -- people might take for granted that everyone

has a legal right to a job? okay. all right. anyone else? >> global warming. >> will we have global warming and 50 years? >> we are going to have a movement but what was your generation doing when the rest of the environment was going to hell? you did absolutely nothing about it? i think that is this generatiogeneratio n's big issue. they will look at us and say you guys sat around and did nothing about it and we are angry about it. >> i don't want people to be angry about it. i want them to take for granted in the year 2063 that there'll be an end to global warming so what would that actually mean waxy don't have to answer that but what would it mean for our children or grandchildren 50 years from now to live in a world where global warming is no longer problem but has been addressed and solved by what is

happening, by the environmental and other movements between now and then? any other ideas? >> i remember new zealand being -- [inaudible] >> so in the year 2063, it will be kind of like same-sex marriages. people will take it for granted that a woman has a right to an abortion is no longer a controversial issue as opposed to right now where even it's the law of the land we are still trying -- the right-wing is still trying to fight against it. i don't see any other hands. anyone else? >> health care. >> what about health care? >> everyone will have free health care. >> universal high-quality comprehensive health care. okay. that is what our grandchildren will take for granted.

anything else? >> everything you buy in the store will have exactly what's in it and they want bna fudging. >> that consumers will no the products from medicine to food to automobiles if they still have automobiles in the year 2063. anything else? a couple more. [inaudible] >> incarceration will be replaced by education and mentoring. >> there'll be an end, so our grandchildren will say daddy, granddad kind of like my kids as me, did you ever used a typewriter? i can't imagine what a typewriter look like and i can imagine what a prison with the like where we stop the prison industrial complex that we have now that so destructive of human

lives. anything else? >> no one will spend more than 30% of their income for housing. >> housing will be a human right and people will not pay more than one third of their income to afford housing is posted now when people sometimes paid 40, 50 or 60% of their income for housing. one or two more. [inaudible] 's. >> okay so when my grandchildren asked me when you went to college, did you really have to go into debt? that would be a crazy idea. like in many other countries, public higher education would be free and high-quality and people won't have to go into enormous debt to pay for their education. i can think of a few more that i will end with. one is the end of the death penalty.

i would like to say to my children or grandchildren when they are older they will look back and say how barbaric it was that back in the year 2013 they still use the death penalty although it is true -- carol still have the death penalty and one that often comes up when i asked this question, some people wonder whether there will be, whether we will still have automobiles. whether there will be other forms of public transportation as both a condition of changing the way we move in our cities but also changing the problems of global warming. so, all of these things and many others are today considered radical ideas that are outside the box, that are considered, many people would say that's an impractical idea. that's unlikely to happen but that's exactly what jane addams, lawrence kelly and john lewis

and opeb dubois and many other people in my book when they had these ideas including victor berger when he introduced social security and old age security, they thought they were crazy. they thought they were impractical. so the lesson i take away from doing this research which is really a labor of love is the radical ideas of one generation are often the common sense of the subsequent generations and of the next generations but it doesn't happen inevitably. there has to be movements for justice and people have to fight the fight and they have to engage. they have to get off their buts and be part of the social movement. that is the case the martin luther king idea, the arc of history towards justice, we will have a new generation of park vendors who will move the society in a more democratic

direction. my book is really about the great heroes of the 20th century and some of the ones that are today in a 21st century move the country in that direction and i'm sure that many the the of the people in the room today watching on c-span were part of that movement and it's a great tradition to be part of. i hope that whether or not you buy the book if you were in that history on people whose shoulders we stand because our democracy really depends on it. thank you very much. [applause] >> before 1990 american -- were controlled gulf waters but had little presence in the ground following the iranian revolution of 1979 and lebanon 10 years later. washington held a limited defense at rhee with a rain but no one else.

there were for example no u.s. troops in saudi arabia in 1990 are any in that kingdom or kuwait. in fact on the eve of the iraqi invasion but tensions grew american policymakers staged the idea that perhaps this will be a good time for joint military. let's show saddam we were in this together this together. about the gulf states only one, the united arab emirates even agreed to the limited demonstration of solidarity. they feared more than saddam a public backlash from cavorting with what the iranians routinely called the great great state and in fact is saddam hussein directly told the united states ambassador before the invasion quote, he felt secure, secure in the belief that no arab government would ever allow the united states to lose -- to use their land for that purpose. defending kuwait.

why was he so secure in his belief? well for two reasons. first because of his few muslim states that reject american troops on their soil and second because in practical terms no one had ever done so since 1979. of course the shah of iran had but that was not a model that other arab leaders wish to follow. saddam therefore believe that muslim states would reject direct american aid and more specifically the station of american troops on their soil. in retrospect there were strategic miscalculation but it was hardly an irrational one. for america to influence the persian gulf was offshore rather than on site. this was not the 30th parallel in korea. this was not the gap in germany. where american church or station directly in harm's way as tripwires american resolve. on the contrary american policymakers for decades at this point have long hoped to influence the gulf and keep its oil flowing with as little

direct involvement as possible so long as the soviets didn't interfere in the region themselves president carter declared in 1980, so long as the iranians didn't stop the gulf president reagan declared a few years later american planters were by and large contested. ultimately didn't matter as long as it will continue to flow in this is the bush administration 's first line as well. in unseating the fact a year before saddam's invasion ,-com,-com ma enunciated in the latter part of 1989 and national security directive 26 which laid out the full scope and rationale of american involvement in the region. this document which you can get in the archive if you would like does not use the word freedom. it does not use the word democracy. it does not mention particular leaders and it doesn't talk about regime types are radical islam and it certainly doesn't mention wmd. it says instead quote access to

persian gulf oil is vital to national security interests. period. memories of hostages in iran destroyed erikson beirut is reason enough to be wary and this context matters to understand the widespread american reluctance to do more in response to iraqi's vision. to not threaten that long range destruction of oil. moreover the middle east was not particularly an appealing place for those american politics in the sense of short medium and long-term history. take told secretary of state james baker who had advised presidents for decades or for years but more importantly among his closest friends for decades. he was secretary of state and upon hearing this news contemplating it and getting back to washington, he told the president in the oval office, close the door and told him quote i know you are aware of

the fact that this has all the ingredients that is brought down three of the last five presidents, a hostage crisis, body bags and a full-fledged economic recession caused by 40-dollar oil and quote. indeed, we need recall that bush's decision to move american troops to the gulf was hardly embraced across the board in american politics. at the same time we should call curt congressional opposition to the war was far from being partisan. it was was conducted rather a richer sense of concern. concern. as senate majority leader george mitchell argued the risk of active american intervention is great. he said quote using an unknown number of casualties at this billions of dollars spent a greatly disrupted supply in oil price increases of war possibly widen to israel turkey or other

allies, the possible long-term occupation of iraq increasing's instability in the gulf region long-lasting arab and american embassies and and a possible return to american isolationism end quote. looking back on mitchell's mornings we can see that few of those things occurred in in the immediate aftermath of the persian gulf war but arguably all of mitchell's fears untold casualties, billions of dollars lost disrupted markets disaffected allies ever american hostility and isolationism all returned to haunt the united states. >> can watch this and other programs on line at booktv.org. >> in "bad history, worse policy" peter wallison takes a critical look at the dodd-frank wall street reform and consumer protection act and argues that it is based on a false nerd of what led to the 2008 economic collapse. he spoke about his book at the american enterprise institute in washington d.c..

this is just over 90 minutes. >> ladies and gentlemen, welcome to our discussion of my distinguished colleague peter wallison's netbook, "bad history, worse policy". let's start with a quotation. quote this legislation will safeguard and stabilize america's financial system and put in place permanent reforms so these problems will never happen again. will never happen again, a quote from then-president h.w. bush and 1989 after the passage of the financial institutions reform recovery and enforcement act. president bushes prediction was of course a very bad one as we

know and needless to say similar and no doubt equally bad predictions have been made about the effects of the dodd-frank act which we will be discussing today. the predictions highlight a predictable cycle in the wake of a financial crisis. there is an inevitable political reaction based on political not necessarily economic or financial logic and the political logic goes something like this. i is a politician must do something. what can i possibly do? well i can always expand and reorganize regulatory yurocko sees, even if viewed over time it doesn't work or indeed is perverse to do so. a famous military -- cause of fix talked about the fog of war and the financial crisis. we have the fog of the crisis

followed by the fog of legislation. but it's even worse in the voluminous legislation not only reflects the fog but is based on a wrong idea, a faulty understanding or as peter persuasively argues, a flawed ideological narrative. peter wallison is the arthur byrnes fellow on financial policy studies at aei and his latest insightful book entitled "bad history, worse policy" how a false narrative about the financial crisis led to the dodd-frank act is what we are here to discuss. in addition, to these constant flow of instructed commentary on financial issues and regulations, peter is also the author of ronald reagan, the power of conviction and the success of his presidency. a great look which should be

read by every student of competitive equity. a better way to organize mutual funds, privatizing fannie mae freddie mac and the home loan banks. we are still working on that one. the gap gap and optional chartering regulation of insurance companies. here is our book. i hope you read this whole book, but in case you are intimidated by the thickness of it, please send in any case read the closing chapter on the burdens and blunders of the dodd-frank act. it is a succinct and compelling case for the prosecution with dodd-frank in the dock, to which the jury of time will surely respond guilty and the judge pronounced sentence, spring --

string him up. peter will present his book and in 25 minutes we will have three expert discussions who i will only introduce after peter's remarks and we will give peter a chance to respond and some discussion among the panel and then we'll open the floor to your questions. at at 11:45 unless we run out of questions sooner we will adjourn to a coffee reception. copies of peter's books are available at no cost. should we run out and you don't have one yet you can sign up to get a free copy and he will be glad to sign books during the reception. thanks to you all for being with us today and peter looking forward to your comments. >> thanks an awful lot, alex. the reason for the free books, i thought i might explain this.

this book was written with a grand which we received a generous grant to publish my financial services outlooks, the ones i have written over period of eight years. and when it was published we learned that the active publisher had placed a very high price on the book of $90. i generally refused to speak at a conference to sell above for $90. it's not worth it. but, we thought well okay we can buy the books from the printer as part of our arrangement and then we can buy them for much less so we might as well give them away. we did not advertise that the free books were going to be given away today because i was afraid that would draw a crowd. i am happy to see that actually people came not knowing that so i appreciate all of that.

thank you. now that history -- "bad history, worse policy" makes a simple point. that every major public policy is based on a narrative, a description of how at problem came about and what changes are necessary to resolve it or prevent a recurrence. in cases involving major national issues, there is a debate usually about the substance of the narrative in which differing views are heard and evaluated. an example of this process is the current debate about whether human activity is causing global warming. there is an ongoing controversy about the facts in which each side understands but disputes the arguments of the other. eventually a decision will be made. not everybody will be reconciled but everyone who wanted to have a chance to speak or to express an opinion will have had that opportunity.

other examples that are a similar process of resolution or immigration, gun control and entitlement spending. in these cases the issues have been joined and in the debate will eventually produce an outcome. the abortion issue as an example of what happens when this process is not followed. they are, the matter was decided by the supreme court or for any kind of public debate and the result has been continuing turmoil and even violence. in the book, i argued that there was never any significant debate about the causes of the 2008 financial crisis. although there were two narratives about why it happened, only one of them was accepted and propagated by the media. in effect the necessary competition and ideas never occurred. as a result in the policy that was adopted, the dodd-frank act, is not soundly based on any

political consensus. this will leave the village is made of the act in question for the foreseeable future. the dodd-frank act is based on a narrative developed entirely by the left in places responsibility for the financial crisis wholly-owned the private sector and particularly on the large wall street commercial and investment banks. to the extent the government had in the world in the financial crisis it was in failing to regulate adequately either those institutions or the mortgage originators who profited by selling mortgages to people who could not afford them. the book traces the influence of this narrative into the specific revisions of the dodd-frank act. i argue in the book that this narrative is false. it was bad history and it produced worse policy.

it is certainly true that the private sector had some role in the financial crisis but this was relatively minor when compared to the government's effort throughout the clinton and in part of the bush administration to degrade mortgage standards in order to increase homeownership. this contrary view was never put before the american people in time for its implications to be considered in the debate over dodd-frank. if that debate had occurred, it's unlikely that the dodd-frank act would have been enacted in anything like its current form. now why did this debate not occur? why it was there no competition in ideas on this matter? that is what i will largely talk about today. for those not familiar with the argument that than financial crisis was caused by government policy, but the state is as

succinctly as i can. before 1992, the vast majority of mortgages in the united states were prime mortgages with down payments of 10 to 20% and made to people with good credit records. fannie mae and freddie mac were the principle enforcers of these rules, delinquencies and defaults were few. in 1992, congress adopted legislation that required fannie and freddie to meet what we will call a affordable housing goals. the legislation initially required that at least 30% of the mortgages fannie and freddie made had to be made to people who were at or below the median income in the places where they lived. the hunt was given the authority to increase the quota and it did so, raising the quota to 50% by the end of the clinton administration and 255% and the bush administration.

statements by hunt throughout this period make clear that the agency's intention was to reduce the underwriting standards that were prevailing in the market in order to make mortgage credit available to a larger number of our worst. there is no ambiguity about this issue. it was difficult for fannie and freddie to find prime quality mortgages among borrowers who were at or below the median income especially when the quota had been raised to 50%. so in the mid-1990s they began to reduce their underwriting standards, accepting 3% down payment by 1995 and zero down payments by the year 2000, acceptable barro fico scores credit scores were also reduced. because fannie and freddie were the dominant players in largely set the standards for the housing and mortgage market,

these lower underwriting requirements spread throughout the market, not just to those mortgages that qualified for the affordable housing goals. the availability of government support for low quality mortgages and the easy availability of mortgage credit substantially increased demand for housing and build an enormous bubble, nine times larger than any previous bubble between 1997 and 2007. by 2008, half of all mortgages in this bubble, that was 28 million mortgages, were sub prime or otherwise low-quality. of these, three quarters were on the books of government agencies such as fha or other entities controlled by the government such as fannie and freddie. this shows in controverted way

in my view where demand for these loans came from and why these mortgages proliferated. when the bubble finally deflated in 2007 and 2008, these loans defaulted in unprecedented numbers driving down housing values and weakening financial institutions in the u.s. and around the world. when lehman brothers collapsed, a financial panic ensued with banks and other financial institutions hoarding cash and refusing to lend to each other, and that was what we know as the financial crisis. it's not as though these facts were unknown or unknowable. fannie and freddie were two of the largest financial institutions in the world and were taken over by the government before lehman brothers failed. you don't become insolvent by

acquiring and guaranteeing prime mortgages. included in this book is an essay by charlie, professor at columbia and you probably all know him that he and i wrote in september of 2008, the same month that lehman failed. outlining fannie and freddie's role in the crisis. ..

you can and show come and i were once accused in the new york column he and his of using the

big lie technique for suggesting that the government had a major role in a financial crisis. it doesn't get much worse than being compared to joseph. [laughter] most americans have no idea that there is an alternative view of what caused the financial crisis. the result is an odd issue on public discourse. when i'm interviewed about financial crisis is, i am also asked why no bankers have been served personally or tried criminally duty causing the crisis. i usually respond by saying that i don't think that they have actually caused the crisis. this appears to interviewers -- to leave the interviewers dumbfounded. they have no frame of reference with which to interpret this response. i then have to explain my views about what were the actual causes of the financial crisis,

and they and other listeners have to take it in comments rather, it's rather complicated description of an event that in many cases they have heard for the first time. this would not happen, for example, in an interview about climate change. if i were asked whether the u.s. should reduce reliance on climate change, many would understand that there are two views of the subject. those who believe human activity is causing climate change, and those who are skeptical about it. before we take steps that will hinder economic growth, most listeners will understand the views underlying my remarks. even if they disagree. it occurs the narrative that if we reduce fossil fuel at use, we will suppress economic growth. however, because most americans have not heard anything about an alternative explanation for the

financial crisis, they have no frame of reference court other than the disaster that caused -- that was caused by the wall street banks. when we have this, public knowledge that one of the significant economic events? there has been a major flaw and the reasons are not hard to discern. it is no secret that the media is dominated by the left. the left has always had suspicions about capitalism as an economic system. not only is capitalism regarded as darwinian, an enemy of equality, it is also seen as inherently unstable and prone to crashes. that is why immediately after the default and result in chaos, this is why people said it was the end of capitalism.

it has revealed itself as too dangerous to be able to function without from government control. the fact that the default ensuing chaos agreed so completely with the last view of the u.s. economic system allowed many on the left and the media to view it as a confirmation of something that they had always believed and not a debatable issue. other explanations or were dealey tory and a waste of time. and it also served the interests of another group with a loud voice in the subject, the national regulators. we are familiar with the fact that regulators, and alex was talking about this before, they get more power when they fail. i won't go into a to be things meme, because many of you have studied banking and financial law will know it. each was a new set of powers for

regulators who had recently failed. in the case of the financial crisis come in the national regulators were quick on the crisis coming. they fought for power is coming to be an uber regulator with a potential eventually to regulate large insurance companies, finance companies, hedge funds and money market mutual funds as well as banks. if you read the speeches from those around the world, they easily can get control of the securities market. the codewords are shadow

banking. it is a result of a sufficient supplier of funds to the real economy of banks. it is simply less costly to sell bonds and notes and commercial paper to investors than to borrow from a bank. since the mid-1980s, by intermediating these transactions, the securities industries has supplied 15 times more financing to the real economy than banking. and it has done so without government regulation. bear stearns, lehman brothers, heavily regulated banks whitelock cobia and washington

mutual. so it is hard to see that more regulation is the answer. what we are watching in the name of prudential regulation is the government gradually squeezing the life out of the banking industry the way the interstate commerce commission squeezes the life out of the railroad. if we let the government insurer and provide regulation to the securities business and some regulators have proposed, we will pay a heavy price in lost economic growth. finally, even natural supporters and members of the financial industry were shaken by the crisis and slow to resist the tide of commentary within the media. without an alternative explanation of what happened, other institutions had to admit

that they did many of the things that were now being cited as the cause of the crisis. these confessions came because although they had no idea that they had securitized subprime mortgages, the government had done the same thing with three times as many. that was not reported in the media. without this information, it was possible the private actions could have been responsible for the financial crisis that they saw all around him. a good example of this phenomenon is the chief investment officer at jpmorgan chase. he circulates a newsletter to friends and clients, and in 2009, he used it to plain banks like his own for making irresponsible and risky mortgage underwriting decisions of ron the financial crisis. this was to be expected. the only information he had was

what he has read in the newspapers or saw on television. he did not know what the government rule have been. one day he ran across the majority report of the financial crisis commission, to which i argued that it it was the government's housing policy, and the affordable housing requirements that were imposed on fannie mae and freddie mac that drove down standards and built an enormous bubble and caused the financial crisis. he then looked further at the data assembled by ed pinto and concluded that he had been wrong. it is not the jpmorgan had not done the things that he had initially sided. it is just that the contributions of the banks were only a small part of a larger picture. once he was aware of the larger picture, he used his newsletter to issue a retraction of his

earlier judgment. with the regulatory apparatus all coming from the same instance. the very few people were willing to question the claim that the financial crisis was not caused -- excuse me, was caused by the private sector. even if there were voices in defense of capitalism, their views were seldom given attention in the media. i had a remarkable experience with this problem will member of the financial crisis inquiry commission scheduled several public hearings which were televised on c-span. the media was almost always present, overarching the proceeds on television. i asked witnesses whether or not they were aware that there were 25 million on subprime and other

low-quality mortgages in the financial system in 2008 for the financial crisis. that was the number that i had at the time. since then, it has shown that there were 28 million in private mortgages in 2008. all the witnesses who were asked this, they were people that should have known, and they said that they should have heard of such a thing. again, almost half of all mortgages was news. it had never been reported before, and it is a shocking thing. and i never recall a call from a reporter asking me where i have

come up with a number. publication would have led to questions immediately about how so many of these mortgages got into the financial system in the first place and where they were located. i would have been able to show that only a minority of these on banks or other private financial institutions. and that most of them on the books of government agencies. yet my statement never evoked the slightest media interest, and of course, was never covered in the report. at the time the report was published, i issued a 43,000 word information, showing that this had caused the crisis. the substance of the defense got no more than one sentence in any major newspaper and was not

covered at all in any of the major broadcast or cable media. only fox news interviewed me about my view of the financial crisis, and that was part of a program that to the credit of fox, included a lot of material that also pointed to private sector responsibility. i was never interviewed about my words on the other channels and pbs news hour. despite the fact that the same data i had included had persuaded republican senators and members of congress to vote virtually unanimously against the dodd-frank act. it is no wonder that the american people still believe that the banks and other financial institutions were the sole cause of the financial crisis. there still has been no

competition in ideas. if it does nothing else it's collected essays, but that history and policy shows that from the beginning there was a competitive and competing narratives, before the opening bell had sounded, the referee had declared a winner. thank you very much for your attention. [applause] [applause] >> thank you, peter. i have three expert people who are going to it discussed this book in various ways. let me introduce them. the first will be john allison who is president and ceo of the cato institute. before that he was chairman and ceo of the 10th largest u.s.

financial services holding company, which during his two decades in tenure as ceo grew from $4 billion to $152 billion in assets. he has been recognized by the harvard business review is one of the top 100 most successful ceos in the world over the last decade. he also serves on the board of visitors at wake forest university, duke university, and the university of north carolina at chapel hill. the second discussion is hester peirce. she served as a senior counsel to the staff of richard shelby on the senate banking committee. has counseled to commissioner paul atkins at the securities and exchange commission and is a staff attorney in the sec.

and she has recently released a working paper on the lack of economic analysis by regulators who are entrusted by implementing the dodd-frank act. finally we were here from wayne abernathy, whose financial institutions, policy, and regulatory affairs at the american bankers association, exists where he oversees policy development, and general counsels, securities and investments, and risk management he was previously secretary of the treasury for financial institutions and a member of the board and staff director of the senate banking committee. needless to say, he was not staff director when dodd-frank was enacted. we are looking forward to all of your comments. i yield the floor.

>> good afternoon, it is a pleasure to be with you. i want to begin by congratulating what i think is an outstanding book. i think the theme is very important. he has done an unbelievable job of creating a mass. the bank industry was not deregulated, we had a massive increase under george bush, the privacy act and the whole idea that there was greeted on wall street, there has always been great on wall street. but there is no evidence that there has been more greek than usual. i must acknowledge the real debt to peter and to alex and add.

i also wrote a book about the financial market and i use a lot of information that peter had given in my book and i open it up for that because he's the one person that has seriously put together the numbers that we have needed. his work has been very valuable to me. i very much agree with the arguments presented in these individual papers. reading the book is easy for me because i already read his papers. i did so when i was running this and they helped me make good decisions. we intuitively knew something was brewing, but it was helpful to have facts to encourage us not to do the kind of things that got others in trouble. my company did do better than others in the united states for a variety of reasons. but one reason is the argument that peter was presenting that was influencing and reinforcing what we knew was not good.

some of these things are particularly important. the role of the housing policy going back a long time, particularly in the 1990s, and the impact on the economy. the role of freddie mac and fannie mae along with the community reinvestment act and some things that are nontrivial but that are academic. things like tell fair value accounting and the shadow banking system. there is nothing shadowy about it. this created things one by one. he also talks about the role of regulators and that it is destructive nation. very negative causes. in all of these things, i think

that his work is very important. if you think about the fact that he was writing this while this was happening, in many cases you can see him projecting where we were going. in every case it turns out to be true, which i think makes a much more powerful argument. when you do this kind of feedback, you talk about where you would differ with peter. i don't know that i differ, but my own belief is that the fundamental cause of the financial crisis were errors made by the federal reserve. we don't have a private monetary system in the united states, a government own monetary system. by definition, they are caused by government policy and the federal reserve has been very creative and in this case allen greenspan made bad mistakes

because he wanted to go out a hero. we were having a minor economic correction, he created negative economic rates. then ben bernanke created a new yield curve, because we suddenly had a negative spread, which is a whopping reason this has lasted several years. the context in which the mistakes were made were really federal reserve policies and they got deflected primarily in the housing market, specifically fannie mae and freddie -- freddie mac and fannie mae. it was destructive for housing and consumption. people don't think about it, but if you consume it and a massive overconsumption, which is one

reason we have had such a hard time getting the production process going again. we have taught millions of people how to the mortgage bankers and learn new jobs. this housing, investment, the federal monetary reserve problems is particularly destructive from an economic perspective. the other thing, i don't know that we disagree on this because is because peter doesn't talk about this, but i guess i am for a more radical solution. i do not believe that it is naïve to believe the risk being created by the system itself. it is not big banks. it's the federal reserve. what they are doing today is incredibly real to our economy. if the federal reserve is leveraging itself, then the

system is risky. it is riskier today than it was in crisis. if the individual institutions cannot manage risk, i am for using market-based standard. if we aren't doing that, my own recommendation is that a least a step we could take is to require banks to have more capital than they do today as they did when we had a private banking system. and then kill 95% of the regulations, including 100% of dodd-frank, let the market take care of allegations of capital. i think we will get a better solution than what we are working on today. it is hard for the average person to realize the banking

system is very much controlled by the government today. if you want to control the allocation of capital and if you can put do it if things don't get blown up, this is what has happened with subprime lending. then they can blame the banks when it doesn't work. it is more powerful in a much more interesting solution. the reason why the left jumped on this issue is because it gives them justification. they had so much fear about any attack on us. they really depend on this matter. anytime you bring up an alternative solution, it's not that they just argue with you, they get emotional because if you undermine this, everything that has happened since this

crisis doesn't make any sense. it is a real threat. they really want control of the system. but this is a big and important issue because controlling capital controls and economy. i would congratulate peter on a job well done. thank you. [applause] >> hester peirce? >> thank you, john allison, thank you for the chance to discuss this. it differs from dodd-frank in several ways. one is well-written. [laughter] one is argued and one does not attempt to deal with what is unrelated to the issues at hand. but there are some similarities in dodd-frank.

i would catalyze them both as tearjerkers, meaning that they make me cry at the state of our financial regulations. the third similarity is that neither of them would have been britain or put together if we had just listened to peter earlier. he was one of the first voices and people to really shine a light on the gse. as he points out, it was so essential to crisis. in the book he talks about the rise and the power that they exerted, the ability that they had to shut voices down. and then the attempt to stave off the political consequences of that. he talked about the early republican senate efforts in the bush administration efforts to rein in the gse and he talked about the situation now where the gse's were not dealt with in

dodd-frank. in fact, they took under the private securitization market and we end up with a much more heavily concentrated government presents with fha being the next bailout candidate and the market is unable to restart. i think it lays out a model for what we will see what the future that dodd-frank has created for us, the gse in dodd-frank is systemically important, which include any additional entities that the financial stability oversight council designates. institutions will have an

implicit guarantee from the government. they will be in partnership with the government. the government will tell them what to do. they will respond. as peter points out, this will lead to a funding advantage that will then drive competitors out of the market. regulators will have a real incentive to come in and rescue them. the failure of one of these entities would reflect failure of the regulators. ..