going up. i can't refinance and all of a sudden i'm defaulting. >> and steve eisman and others mike burry and others are sitting there watching this -- betting that it will all collapse. >> right. betting that it will all collapse. >> are they risking very much? i mean you go into the billions of dollars that they have invested in these bonds and then they -- let me finish this paragraph -- >> all right. you kind of hung up on this. >> well, i did because the paragraph here -- >> don't give your view as the impression that it's all so complicated because it isn't. i think it's pretty -- >> well-- >> my mother understood it. >> well here's -- it's not that it's so complicated is i had an ah-ha moment here and i'm going to read the rest of it trying to figure out all of this out. >> right. >> only a triple a rated corporation could assume such risk. no money down and no questions asked. burry, mike burry-- >> the investor, the protagonist of the story. >> was right about this too but he -- it would be three years before he knew it. all right here's what i'm getting at. "the party on the other side of

his bet against sub prime mortgage bonds was the triple a rated insurance company aig, american international group incorporated or rather a unit of aig called aig fp" it's financial products. >> products. >> "but it was at this moment that i said" i mean i don't invest in this stuff but as i saw that i thought so the $180 billion to aig from the federal taxpayer -- >> yes, yes, yes. >> subsequently then went to bail out goldman sachs and all of the rest of them. >> yes. for bets. they were bets. they were bets that aig made this bet. >> why did ken -- not ken but henry paulson. >> henry paulson. >> and ben bernanke why did the two of them want to -- i mean -- >> why did they want to pay the gambling debts of aig? >> yes, exactly. what was it about it? i mean they said that the whole country would collapse.

>> because all of the wall street firms were on the other side of those bets. and if aig didn't pay off the bets the firms would have experienced the loss. think of it this way. goldman sachs had lost on its bet to michael burry but they really -- they weren't -- it wasn't that they thought they were just brokering the debt between michael burry and aig. so they paid off michael burry in their out of pocket. they want to get paid off by aig and if they aren't paid off they've got a $13 billion loss. this was -- i don't defend this. i'm just saying what they're thinking. paulson and bernanke and tim geithner are thinking if we don't make the wall street firms whole the wall street firms are going to be believed -- are going to collapse. the market's not going to believe they're going to survive. >> a couple of them did. >> yes. and they would have all collapsed if that-- >> who did that hurt? >> who did that hurt from the collapse? >> yes. >> not wall street people. people -- the rest of the country got hurt. the rest of the country got hurt by what the wall street firms had been doing the previous five years generating

this frenzy of finance where finance shouldn't have happened. >> take lehman brothers, who got hurt? can you give me an example if i'm out here just an ordinary citizen if i had stock in lehman brothers? >> yes. if you were a lehman brothers' bondholder you got hurt. if you were a lehman brothers' employee you got hurt. and that's about it. >> but you say here that everybody at the table the big players all of them walked away with millions and you even cite a couple of them. >> yes, everybody but the people at lehman brothers. but the lehman brothers people i mean they still walked away dick fuld, the ceo of lehman brothers they made many, many, many tens of millions of dollars that he got to keep after his firm collapsed. >> who was howie hubler? >> yes, howie hubler is sort of the reductio ad absurdum of this because this is -- this was to me my revelation that first -- that the financial system had organized itself around this bet.

and second was that no matter which side of the bet you were on you still got rich personally. your institution might have lost huge sums of money but you, yourself, got rich. howie hubler the trader at morgan stanley. morgan stanley the wall street investment bank. he's regarded as the hub of a little -- of the smartest group of traders and they trade sub prime backed mortgage bonds. they agitate. they're not satisfied making just millions of dollars a year. they want to make tens of millions of dollars a year so they start to agitate within the firm for a piece of the action, for a bigger piece of the action. they want to be given sort of like their own little hedge fund within morgan stanley owned by morgan stanley. so they're given it. and it becomes the morgan stanley proprietary trading group. and they very soon months after they're set up they make an enormous bet and it's a complicated bet but the gist of it is they end up owning about $15 billion -- they buy in a matter of a couple of months $15 billion of punitive -- of triple a rated cdos backed by

sub prime mortgage. >> wait, wait. >> all right, sorry. >> cdo. >> collateralized debt obligation. now, what is that? all right, so the loans create the bonds. the bonds -- the loans go into a trust. the trust as i said is traunched up. it's sliced in that there are -- there are junior and senior claims on this trust. if you get them -- if you're entitled to get the first dollars that get repaid you have less risk than the first person who gets the last dollars that get repaid. so you get a lower rate of interest and you have a higher rated bond, a triple a rated bond. the person who gets the -- who experiences the first losses to come from the trust gets a triple b minus rated bond and a much higher rate of interest. what wall street is it took the triple b minus rated bonds and piled them all into another trust.

slice that up and 80 percent of that is triple a rated. so what howie hubler buys is essentially a pile of triple b rated sub prime mortgage bonds $15 billion of them. and he does this very quickly with goldman sachs, deutsche bank, merrill lynch, i think, but deutsche bank and goldman sachs are the two big counterpoint parties. these bonds go zero. now, you've got some bets against it so he doesn't lose all $15 billion but he loses $9-and-a-half billion. and it's, i think, by far the single largest trading loss from a single bet in the history of wall street. and he walks away -- he's allowed to resign. he's allowed to keep all of his deferred compensation that has not been paid millions of dollars and he's rich.

he goes away [inaudible]. and the amazing thing to me, this is another reason i got reengaged with the subject is that that had become -- nobody knows who he is. his name is not mentioned. he's just allowed to move on. and you know 20 years ago when a trader lost a lot of money he was shamed. he was -- that everybody knew his name. that this had happened and had been kind of regarded as a private matter in a public corporation was an incredible thing to me. and so i recreated -- i went and talked to all of the people involved and wrote the story. >> you talked to howie hubler. >> not allowed to say. >> but you know one of the things we haven't -- i mean you got to some of these guys and other books have gotten to them but you never see them on television. you envision that they're all at a country club up in connecticut somewhere. and still have vast millions of dollars, never paid a price for

any of this stuff and it's people all across the united states who are suffering because they lost. >> you put your finger on it. >> they lost everything. they lost their house, they're in debt. the last statistic i heard is that one-fourth of all of the outstanding mortgages in this country are under water. >> yes. >> and so is that going to pop up here in the next -- >> we are living through a really traumatic period and it is not over. we're sort of at the beginning rather than the end. and there are real structural problems. i mean yes, that we're going to be living -- i mean i'm not an economic forecaster but everything i read suggests we're going to be living with unusually high levels of unemployment, a lot of pain from over indebtedness. i mean a quarter of the country is on food stamps i saw it on tv. i mean it's not a great depression. we're not reprising exactly what happened in the '30s but it's a version of that. >> and your characters in this book i shouldn't probably use -- i'm sure they are characters. >> they are characters. >> steve eisman and mike burry and charlie ludley and greg

lippman who haven't talked about yet. >> yes. well, he is the one wall street trader who was actually on the right side of the bet very early on. he's the sub prime bond trader at deutsche bank right. >> selling? >> selling -- well he's betting against sub prime -- this is where it gets very strange. here is this trader who's the senior trader inside a big wall street firm. it's a german bank but it's still a big wall street firm. and his firm is creating these sub prime mortgage bonds and creating the cdos and he's saying it's all going bad. i'm going to make a big bet. and he spends 18 months at war with his own firm because people are telling him he's crazy and he's stupid and he's wasting him. and he's telling them you're crazy and you're stupid and you're wasting money. he's running around trying to talk people out of buying the stuff his firm is selling. and so he becomes a -- he's an annoying character to a lot of

people in his own firm but he's the other principal short seller in this. >> how much of all of this is made up just so that these people that worked at these firms could take the money whether it's credit default swaps, cdos, traunches, all of this language that the average person hasn't you know we can't figure all of this out. >> the jargon just generally the complexity is probably not self-consciously invented to hide what's going on but that's the effect. and people are happy to have that effect on that wall street. the -- it's a very interesting thing. the complexity is a form of obscurity. that if you make it complicated enough no matter how punitively transparent it is. and a lot of this stuff isn't even transparent. it's a lot of hidden deals. but you just dissuade the public from taking too much of an interest. and i think that what the -- the only social purpose i had in writing the book i was mainly just interested in what a great story it was was i thought if i could explain this to

people they're going to be outraged because they -- and they really need to know. you need to know. that there's a financial reform bill coming out and people need to know. >> let me ask you, you've gotten whacked some that you may or may not know about. are you aware of al of the negative reviews you've gotten in the amazon.com group? >> yes, the people who are upset it's not on kindle. >> yes. i just -- i got some of them out just because i thought it was interesting. as a matter of fact, the negatives in your -- outweigh everybody else's and it's-- >> yes, but it's all people because they can't buy it. they're upset they can't buy it. >> but let me ask you did youlá? >> with the kindle? >> yes. >> i didn't -- it didn't even cross my -- i didn't even think about it because i didn't realize there was that big of a market for the things. i didn't -- i don't have -- it's my publisher who makes those decisions. i'm not in control over it. >> explain what we're talking about. >> all right. the kindle is amazon's e-book. it's a device that allows you -- enables you to download electronically books. you can buy them cheaper as a

result. >> for 9.99. >> yes, for 9.99 instead of paying 15 bucks foró% hardback. so the publisher decides when to release the e-book version. and the publishers just generally have been often delaying the e-book version because they'd rather sell the hardback. and it's curious why they make this decision. i haven't figured out exactly what's going on in my publishing house. but i make as much money when they sell a kindle book. it doesn't matter to me. they make as much money. i think they're worried about amazon's market power. i think they're worried about giving amazon the right because amazon keeps the right to put the price. they can price it wherever they want. so they can take losses on the book if they want to do it. and, i think, that's what's troubling the publishers because amazon has been known to abuse its marketplace-- >> well, and the new deal is that prices have gone up but at 9.99 and if you get $15 in a store more than the 9.99 goes back to the publisher. they do better under the circumstances. >> is that -- >> yes. i mean the -- >> so people who own kindles

are furious they can't download it but it's a you know i guess i'll get involved at some point. i'm having a hard time understanding where god gave them the right to have an e-book at whatever price they want when they want. >> on the day we're talking there are 101 reviews of your book and 56 of them gave you one star. >> because of the kindle. >> but let me read though what they're saying just so you can get a chance to kick back on this. "unbelievable, in 2007 michael lewis is writing articles praising the world of derivatives in banking. in fact, he dismissed skeptics as being ignorant of the importance of derivatives and redistributing risk and supplementing" -- just let me finish this. "in an article criticizing those who showed concern over the stability of the derivatives michael lewis referred to the derivatives naysayers as wimps and ninnies and then went on to dismiss their concerns. fast forward 36 months and lewis writes a book completely reversing his position. in 2010 he can boldly knowingly assert that derivatives caused

the current american freefall. give me a bloody break, michael." >> they're upset because of the kindle version. >> no, no, but this guy is starfox 2020 whoever that is. >> yes, well, this is what i did do. this is what i did do. that i wrote -- every now and then i write a column for -- a little column for bloomberg news. and i wrote a column making fund of the people at davos three years ago. every year these self-important people go to davos for the economic summit and every year they say the sky is falling. and i just went back and i looked at the -- they say the same thing every year. so i made fun -- i poked fun at the self important people at davos every year coming together to explain how awful things were going to be and then going back to their roles as central bank governors or whatever they're doing and not do anything. so -- and there was a line in there that did say you know because they were all saying derivatives are the big scary thing but nobody was explaining why.

nobody was talking about sub prime mortgages. there was this -- they were derivatives. and so i just said, now, in theory derivatives are meant to redistribute the risk in an intelligent way and i've never -- nobody's explained to me why that isn't being done. now, it is true that the naysayers were right. but they didn't know why they were right. and the book i've written i mean i'm sort of agnostic i mean myself. i don't make any claims that i saw anything coming, just the opposite. i wasn't paying attention. i was writing books about baseball and football. but the people who are persuasive to me as the guy -- the diagnosticians of this event were the people who actually put their money where their mouth was. the people kind of bloviate a lot of the time mean a lot less to me because they go on tv and they say whatever they say to get attention and then they move on and you never know what they really think or what they're telling the next interviewer.

so they were very -- none of those people in davos made a lot of money betting against the sub prime mortgage market. and if they really understood it what's what they would have done. >> just another quickie, do you know janet tavakoli? >> she was in -- kind of -- i don't know her but-- >> i was wondering what you did to her to make her mad. >> i can explain it. >> let me read what she says. she says, "i was in the salomon brothers 1985 training class that michael lewis lampooned in this amusing book, "liars poker." imagine my surprise to see him billed as a trader on "60 minutes" since he was actually he was actually a junior salesman. well-heeled male peacocks strutted the training floor and junior salesman were girlie-men mere eunuchs serving their pashes." >> i've gotten a little too much attention for my own good. and it -- this is the backlash is people who feel like they've not gotten enough attention get upset. but you know people when they

interview me about what i did on wall street i can't control how they describe me. and generally, in the public's mind a trader is just a guy who -- anybody who works on the trading floor. i wrote a whole book about how insignificant i was at salomon brothers. i had not made much effort to puff myself up as a bond trader. she -- that particular person was indeed in my training class and i think was upset that i didn't write about her because she thinks she saw the crisis coming. and i've had some of that people getting really upset that they weren't the characters in my book. and that's a little weird to me. i mean i'm sorry. >> we're about out of time. when did you -- do you remember the moment that you decided to call it "the big short" and what does it mean? >> yes. it was a little bit of a devious moment because i wrote a little magazine article for "portfolio" magazine now deceased "portfolio" magazine a year- and-a-half ago when i met steve eisman. steve eisman was the center of that article. and the phrase popped into my

head. i thought great title for the piece. and i said this isn't actually a piece it's going to be a big book. it's an interesting story. there's much more than a magazine article here. so i ripped it off the top of the magazine piece and i kept it in my back pocket. and they called the piece "the end" or something like that. but it -- so that's when the title popped into my head when i was working on the magazine piece. and what was the other question? >> what does it mean? >> well, short is to bet against something -- to bet the price is falling. and this was the single greatest opportunity to bet on prices falling in the history of mankind. >> so steve eisman or michael burry all of these guys all of these guys are sitting there hoping or wishing or betting that the whole thing is going to collapse and they won big. >> well, there are very mixed feelings about it though. i mean one of them goes to the sec and tries to get them to take action. all of them are screaming to high heaven this is insane. they are torn up about it. eisman, himself, says, he says, "when it all works and they're making their money" he says "you feel like noah."

>> how much does he have, do you know? >> how much did he make? >> yes. >> for himself, i don't know. fifty million, 100 million -- they made for their investors 700 or $800 million. >> what about burry, how much did he make. >> about the same. about the same. >> anybody else in that group that you wrote about, greg lippman, do you have any idea how much he made? >> you know i was told by someone in his firm that he was paid a bonus of about $50 million at the end of '07. so the got rich. but eisman, it was interesting and i think he was sincere. he says, "you feel like noah, yes, yes, you built the arc and yes you're going to survive but at that moment when the flood happens and you're on the arc you're not -- it's not a happy moment for noah. it's a kind of a- it's a torn up moment. >> we're out of time. michael lewis, as you go to your six weeks of -- why do you this by the way? why are you going to all of the -- you got "60 minutes" you're number one on the list. why are you running all over the country? >> because they tell me to. you know it's -- i think it's even in my publishing that i've got to them a few weeks to go -- to publicize the book. i think i've signed something

that says i do it. >> thank you for joining us. >> thank you. >> for a ddt copy of this program called this number. for free transcripts or to give us your comments, visit us at duende.oiq &a.org. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> next week we will feature the gregory brothers. the musical group uses computer technology, setting political speech to music. that is next week at 8:00 p.m.

eastern on c-span. >> this year's cspan studentcam contest was a challenge to create a video. here is one of the third-place winners. >> just from this time the stimulus was planned, two people have already died from hunger. of the old world under is a very important issue, i will focus on a country where 49 million people are struggling with under. only 26.5 million get paid for it. a country where the number of people struggle with under has increased by 13 million people over the past year. the country were one of every

eight people are struggling with under. this is the country we live in. >> there is no excuse for the staggering number of hungry americans. lester, 49 million people were in danger of going hungry, more than 4 million people did not get enough food. >> the people seeking emergency assistance in new york city is up 29%. >> there is a growing number of people who do not have enough to eat. >> the beneficiaries increased by 17%. >> the number is so i is armor to believe. there are 36 million americans on food stamps. >> every month is more and more people. last month was a record and had 05 moderate families who needed help. because of this is the economy. from 2007, unemployment rates

have nearly doubled and although the amount of people receiving food stamps is not as drastic, it's still increase by 33%. in fact, unemployment rates and the percentage of people receiving food stamps are nearly identical. >> the economy suffers when people are unemployed, when they are finding it difficult to make ends meet because they do not have enough resources. there are working several part- time jobs and cannot get a full- time job and are spending money on health care which they would otherwise be spending on food. all things combined make it difficult for american families. >> common misconception is that the federal program is food stamps for the singapore and its of that program, the u.s. department of agriculture coordinate's many other programs. probably the most prominent programs is the school lunch

programs, school breakfast program, and the feeding program which focus on providing free or discounted lunches for schoolchildren during the school year and the summer. however, other programs provide services such as providing new mothers or expectant mothers with meals, making sure that seniors get the meals they need and make sure kids can eat healthy. the focus on eating and eating right. other people have disagreements with these federal programs and think they should be abolished. one disagreement they have is the use of taxpayer money for something most people do not use. they should choose to delay to a charity organization cannot be forced to do it. another complaint by the think- tank cato institute is that the government lost contradict each other. one lot makes sure food prices stay high to insure farmers can

make a profit. then we need another program so poor people can afford the high- priced food, the solution would be to end both programs and the lower prices would make farmers more competitive and help make food more affordable. another complained about these programs is that it is too easy to commit fraud. 4.5% of food stamps were acquired fraudulently. ñ>> the hardest part for many individuals is comprehending and understand the application process which is why we needed to have the qualified person in that access site to be able to help each individual and family applying for those services. you'd be amazed how many people applied for services and got

rejected. >> they are living large of the government subsidies. she may get something like $30 per month in food stamps. can you survive on $30 over 1 months time? >> it would be great if we had something available for kids and if they didn't have to fill out the forms and be embarrassed and i could get something for lunch. >> the government programs should have decent funding. private cherries are struggling. recent study shows that 80% of charities are feeling financial stress. smaller charities are being hurt the most part of 70% of charities received less than $1 million per year and they say

their financial situation has worsened since march of 2009. that is supposed to less than half of large organizations. that is not saying that larger charities are not being heard. even the largest domestic hunger relief charity is experiencing a lot of stress 99% of the food banks have reported a surge in demand of their services. the increase of uses 30% but some food banks have increased increases of over 100%. the feeding america's ceo says people are traveling farther and waiting longer to receive their services. unfortunately, more than half their food banks have had to turn people away since they were low on supplies. [unintelligible] there are many ways to address

this problem. the budget for the federal food stamp program was $37.7 billion in 2008, up by 13%. billions of dollars were at it from the 2009 economic stimulus package but even this is not enough. it will take more money and new ideas to really take a bite out of hunger in america. we must reach more people in this movement. however, common solutions are not the only ones. a great way to get lots of food for cheap prices is to join a community garden which is where a community of people growing crops like lettuce on common land. the crops are given to the members every week. if states were to give grants for gardens, a cheap produce would be easily acceptable. food network's or co-ops or groups that buy food in bulk and

sell it for low prices. if state governments were to encourage such groups and possibly give money to them, many people could save money on their groceries. >> no child should have so little to eat in a nation that has so much. ,76>> it is said that in ameria that anybody would feel they need to go hungry. >> everybody should eat in a wealthy society like ours. >> we have a responsibility to help others. >> to see all the winning entries in this year's contest, visit studentcam.org. >> we will talk with the former homeland security department inspector general about airline security and the don't fly list. donna edwards t