there was an argument that credit card companies were charging some poor guy 25% interest on overdrafts. if we can get that same guy. that same guy owns a house. he has equity in a house. we can justify limiting to him at a much lower rate because our loan is secured by the house. it will be good for everybody because he can pay off his credit cards. >> who is getting scant at this point? >> nobody should have been. in theory, it could have worked. the problem was, the consumers

were poorly protected. the minute that the wall street firms were in the business of harvesting middle class and lower middle-class american for home equity values, there wasn't natural risk of abuse. generally, people are bewildered. the minute in gets a little complicated, it becomes a lot complicated. >> conservatives point their finger bill clinton and the liberals point their finger at george bush and some point their finger at fannie and freddie. did you point your finger at anybody? >> this is really the story that i have told. in this particular case, these

loans were not being made because the government said that you had to make loans to poor people. they were being made because the lender was lending money and packaging them. it was a volume business. they got paid fees for doing the business. the trick was to persuade people to take out loans. some people would take a lot of persuading, but there were a lot of cases where the nature of alone was disguised from the person who was borrowing the money. >> you talked about teaser rates. >> teaser rates should be criminal. basically, you talk to someone into taking alone at how that has an artificially low rate for the first couple of years so that it is tempting and then it skyrockets after two years. >> here is a rate of 7% for the first three years, but the

impression is that you can flip this house did >> if they make you that long, they have turned to into a property speculator. your completed depended on the price of the property going up to refinance alone. if the value of your house goes down, you are stuck with this loan that will eat you alive. this pernicious relationship between high finance and the american bar oorrower, has this character being very pessimistic. there were something like 1.6 trillion dollars in subprime loans in another 1.2 trillion

dollars of alt-a loans. in most cases, those were subprime, too. you're talking about three trillion dollars in loans. >> so, eisman is sitting there and doing what? >> he is investing in the stock market with his head funds and then seize this explosion of lending back in the 1990's. he says that this is all want to blow again. it is a sinister business. he starts to try to learn about the bond market. he and his colleagues start from almost scratched.

but do not know what a credit defaults what his. he thinks that the loans are going to be bad, so he makes a bet against loans. he buys credit default swaps. >> he knew that some giant corporate entity with a aaa rating was out there selling credit defaults swaps on subprime mortgage bonds. i think that one of my biggest shocks was when i woke up and saw that moody's did not mean anything. how could they get away with that? who are they? warren buffett owns part of moody's. >> i think that movies various -- moody's biggest shareholder

is warren buffett. they will tell you now that they are just like "on the tren -- "auto tred " magazine -- "auto trend" magazine. you should order these in your mind from the riskiest to the less risky. it is much more serious than that. they are a federalese sanctioned enterprise. -- a federally unsanctioned enterprise. how much they have to reserve against each asset is based on the rating. the rating is bestowed on that

asset by moody's and standard and poor. it has a huge affect on the ability of institutions to hold the securities. a triple a rating is what the federal government has. it is what the u.s. treasury has. there were triple a ratings on piles of mortgage bonds. there were aaa ratings placed on hundreds of billions of dollars of bonds. they did not just decline in value, then went to zero. the ratings ended up meaning nothing. >> if i had a mortgage -- the likes goldman sachs sales it to ikb. they think they are being really smart. >> all along, i am starting to not be able to pay at some point. three years into it, i go from

2% to 12%. >> i cannot refinance and all of a sudden i default. >> we are sitting there watching this and betting that it will all collapsed. let me finish this paragraph. the paragraph -- >> don't say it is all too complicated, because it isn't. >> it is not because it is complicated, but i will read the rest of it and try to figure all this out.

here is what i am getting at. the party against -it was at thi saw that, i said there was $180 billion from aig that subsequently went to bail out goldman sachs. >> yes, for vets. there were bets. what's in repulsive and been bernanke, why did the two of them -- milan >>

>> because all of the wall street firms were on the other side of those bets. if aig did not pay off the debts, the firms would have seen the law spirit goldman sachs had lost on its debt -- the firms would have seen the loss. goldman sachs had lost its debt. they had 13 -- they had a $13 billion loss. i do not understand this. tim buttngeithner did not beliet would collapse. >> who got hurt? >> who got her from the collapse? >> knott wall street. the rest of the people in the

country. they were generating this frenzy of finance were finance should not have happened. >> take lehman brothers. who got hurt? can you give me an example? >> if you were a lehman brothers bond holder, you got hurt. if you were a lehman brothers employee, you got hurt. that is about it. >> do say that everybody at the table walked away with millions and even named a couple of them. >> everybody but the people at lehman brothers walked away with tens of millions of dollars. >> who is howard? >> kthis is my revelation.

the financial situation was that no matter which side of the bet you were on, you still got rich. howard hubard is a trader at morgan stanley. he is regarded as the hub of a small group of traders. they were not satisfied making millions of dollars, they wanted to make tens of millions of dollars. they started to agitate for a bigger piece of the action. they wanted to be their own little hedge fund. very soon, months after they're set up, they make an enormous debt. it is a complicated bet, but the gist of it is that they end up

owing about $15 billion of triple-a-rated cdos backed by subprime mortgage loans. that is collateralized debt organizations. the loans go into a trust and the trust is sliced. there are junior and senior claims on this trust. if you are entitled to get the first dollar to get repaid, you have less risk than the person who gets the last dollar to get repaid. the person who gets the first loss gets a triple b-rated bonds and a much higher rate of interest. what wall street did was that it

took the triple b-rated bonds, sliced it up, and 80 percent sign of that is triple-a-rated. how hubler buys is essentially a pile of triple b-rated bonds. he does this very quickly with deutsche bank and merrill lynch and goldman sachs. these bonds -- he has bet against it so that he does not leave all $13 million. this is, by far, the single largest bat in the history of wall street. he blocks away and is allowed to resign. -- he walked away and is allowed

to resign. he is rich. the amazing thing to me is that that had become -- nobody knows who he is. his name is not mentioned. he is allowed to move on. 20 years ago, when a trader lost a lot of money, he was ashamed. everybody knew his name. a public corporation was an incredible thing to me. i talked to all the people involved. >> digit dr. howard hubler? but i am not allowed to say -- did you talk to howard hubler? >> i am not allowed to say.

>> they never paid a price for all of this stuff and people all across the united states are suffering. they lost their house, and the last statistic i heard was that one-quarter of all of these outstanding mortgages in this country are under water. will that pop up here in the next -- >> we are living in a dramatic period. there are real structural problems. i am not an economic forecaster, but everything says that we will have high unemployment and over indebtedness. it is not a great depression. we are not reprise in what happened in the 1930's, but it is a version of that.

>> you have not talked about greg lippman. >> he was involved very early on >>. he was betting against the subprime mortgages. here is a trader who is a senior trader inside a big wall street firm at a german bank. his firm is creating the subprime mortgage bonds and creating the cdos and he spent 18 months at war with his own firm. he is trying to talk people out of buying the stuff that his firm is selling. he becomes an annoying character

to a lot of people at his own firm. he is the other principal short seller. >> how much of all of this is made up just so that these people can take the money whether it is credit default swaps and all of this language that the average person cannot figure out? >> the jargon is probably not self consciously invented to hide what is going on, but that is the affect. people are happy to have that effect on wall street. the complexity is a form of obscurity. if you make it complicated enough, no matter how transparent it is, and a lot of this is not even transparent. you just this way the public from taking too much of an interest. -- you just dissuade the public from taking too much of an

interest. i thought that if i explained this to people, they would be outraged. they really need to know. you need to know. >> let me ask you. you may or may not know about this. are you aware of the negative reviews that you have gotten? >> yes, the people that are upset. >> the negatives outweigh everybody else's. did you know this was one to happen? >> with the kindle? >> yes. >> i did not even think about it because i did not know that there was that big of a market. it is amazons e-book that allows

you to download and books -- double books. -- download books. the publishers have been delaying of the e-book version because they would rather sell the hardback. this is curious, because i have not figured out what is going on. all i make as much money and they make as much money. i think they are worried about the amazon's market power. amazon tin price it wherever they want. but they could take a loss on the book if they wanted to. that is what is troubling to the publisher. >> prices have gone up, but at $9.99, and if you can get $15 at the store, the publisher gets

more. >> the people that own kindles are furious that they cannot download it. i am having a hard time understanding were god gave them the right to have e-book at whatever price they want. >> let me read what they are saying.

>> they are upset because of the kindle. this is what i did. i write a column for bloomberg ms. pera i wrote a column making fun of people with davos. every year, these people go to davos, and every year, they say that the sky is falling. i poked fun at the self important people together to explain how awful things work want to be -- how awful things were going to be.

they were all saying that derivatives were the big scary thing. no one was saying why. i just said that in theory, derivatives -- no one explained to me why that was being done. it was true that the naysayers were right. they did not know why they were right. the book i have written, i am sort of agnostic. i do not plan that i saw anything coming. it was just the opposite. but the people who are persuasive to me as the diagnosticians' of this event were the people who actually put their money where their mouth was. people go on tv to get attention

and then move on. none of those people in davos made a lot of money betting against the subprime mortgage market. if they really understood it, that is what it would have done. >> do you know jenna? -- do you know janet? >> gunnoe. >> let me read what she said. >> i have gotten a little too much attention for my good. this is the backlash from people who did not get enough attention

and they got upset. people, when they interviewed me about what i did on wall street, i cannot control how they describe me. in the public's mind, i am just every other died on the trade 4. i have not made much effort to puff myself up. that particular person was indeed in my training class. i think she was upset because i did not write about her because i think she saw the crisis coming. people got really upset that they were not a character in my book. that is a little weird to me. >> we are about out of time. do you remember the moment that you decided to call "the big short?" what does it mean? >> iraq a little magazine article -- i wrote a little magazine article been i met

steve. -- when i met steve. it popped into my head it would be much more than a magazine article. that is when the title popped into my head. >> what does it mean? >> it is a bet against something that the prices falling. -- the price is falling. >> you guys are betting that the whole thing will collapse. >> there were very mixed feelings about it. one of them goes to the fcc and tries to get them to take action. they are torn up about it.

when it all works out and they are making money -- and i >> how much did he have? >> how much did he make? >> yes. >> about the same. >> it did anyone else make anything? >> he made a bonus of $50 million. so, they got rich. i think that he was sincere. at that moment, when it happens -- with the flood happens and you were on the ark, it is kind of a torn up moment. >> we are out of time. why do you do this by the way? your number one on the list, what are you running around the country? >> because they tell me to.

i sign something that says i will do it. >> thank-you. >> thank you. ♪ >> for a dvd copy of this program, call 1-877-662-7726. for free transcripts or to give us your comments about this program, visit us at q&a.org. q&a is also available as a c- span podcast. ",">> next, former british prie

minister tony blair speaks to labor party members. then, a look at senate history but the senate historian richard baker. after that, another chance to see "q&a" with all the michael lewis. >> tomorrow, on "washington journal," clark kent ervin talks about the no-fly list. representative don edwards talks about democratic efforts to target open house seats in 2010. william minnix looks at the correct need for long-term care.