night at 8:00 eastern on c- span2. >> later caroline kennedy campaigning for president obama in new hampshire. >> this week, a pulitzer prize- winning author and new york times columnist gretchen morgenson discusses her latest book, titled "reckless endangerment." >> gretchen morgenson, in your book "reckless endangerment," next to the picture of james johnson you write of " a calculated political operative, johnson was the architect of the

public-private home ownership dropped almost destroyed the economy in 2008." why so much on his shoulders? >> we have to go back in time. a crisis this large is not happen overnight. if you really want to understand what happens, to create this mortgage bubble and the ensuing crisis, you have to go back to the early 1990's, when fannie mae and freddie mac were under pressure from congress because of prices. congress was concerned that maybe there were losses sitting in these mortgage premiums that were qualify-public, quasi- private. the government had started them, but they had private shareholders, so they were operating for profit. congress was concerned there may be profit losses in these giant companies. they wanted to make sure that they were overseen, that they

were police, and that they were not going to require a taxpayer bailout. so we go back in time to 1991, when james johnson takes over as the head of fannie mae. he really takes this congressional urge or fear and turns it on its head. instead of having a regulator that is tougher, instead of having higher capital requirements at the companies, instead of having a congress that was more vigilant and watchful for the taxpayer bailout, he turned all that on its head. what was created was a legislation, a piece of legislation called the safety and soundness act that was virtually written by james johnson of a fannie mae. >> who was he? >> james johnson was a

democratic political operator who had run up walter mondale's campaign for president. he was a guy who was in wall street a little bit, and who had worked at lehman brothers in a washington lobbying effort. he had come out of democratic minnesota politics. that is where he was born. that is where he was raised. he went to princeton, and then came to washington. he really understood the game. the key thing he knew he had to do was to protect the government subsidy, to protect the implied government guarantee that stood behind fannie mae. and freddie mac. >> let me read you another line under a picture of fannie mae headquarters. you say, "fannie mae's sumptuous and sprawling headquarters in

washington was designed to resemble the governor's palace in colonial williamsburg." seeing that picture, i start to think, how have we never seen inside this place? have you ever been in it? >> i have never been in it. i have been writing about fannie mae as a political machine since the mid-1990's, but i am not a friend of fannie mae. but i have never been inside. certainly, some reporters have been inside. a "washington post" reporter during mr. johnson's era was allowed to follow him around and did a very in-depth story, but it -- the bailing itself -- building itself sends such a message of power and royalty, almost, and fannie mae really was that up until the taxpayers had to bill it at in 2000 a. >> in the most basic -- had to

bail it out in 2008. >> what is built -- how can we understand what fannie mae does? >> fannie mae is not a mortgage lender, but they buy loans that have been created by banks for other institutions -- or other institutions. they sometimes call them on their own balance sheet. in other cases, it packages those loans and guarantees them and sells them to investors. city enterprise essentially either owns or guarantees home mortgages. it was set up in the aftermath of the great depression to try to keep housing and finance moving. when we get into a banking crisis, as we certainly did in the depression, home lending dries up. nobody is willing to make those loans. fannie mae was created to step in when the private market for mortgages fails. >> one thing you talk about is

how much money people took out of it. and overall question, this is a government service enterprise. how did a government-created enterprise have a sumptuous headquarters and allow people to -- take $90 million out of it over a short period of time. how is that possible? >> it is possible because of the implied taxpayer guaranteed. what i mean by that is that fannie mae, like any financial institution, borrows money from investors in the debt market. they go to investors and say, we want to raise $100 million, $10 million -- what do you want for income that will make you buy that security? if you are fannie mae and you have this government-sponsored aura around you, you can borrow money at a far lower rate than

banks that do not have the implied guarantee of taxpayers. that difference between what you as an enterprise pay from the public -- that is very lucrative. that is the subsidy. that is where the riches came from. >> do we know how many people worked their? >> well, now is probably much smaller. the enterprises are shrinking, they are taxpayer-owned, they're almost in a situation where they are trying to reduce their balance sheet. during the 1990's, when they were ballooning their balance sheet, thousands of people worked there. not just at the sumptuous headquarters. one of the things they were incredibly shrewd about doing, and that mr. johnson devised, were these grass-roots efforts, partnership offices they were called, that were across the

country and were designed to create photo-ops for politicians when they came home to their local constituents to sponsor or participate in the developments that looked good for the participants -- constituents and of good for the congressman. fannie mae was everywhere. it was really ingenious. a brilliant strategic plan to really dominate the industry, to defanged its regulators, to co- op congress, and to protect that lucrative subsidy. >> if you look back -- since this crisis, we have tried to look in the record books and find the presidential-appointed board members. as you know, since they became a government service enterprise, they had five out of 18 the

president could appoint. you cannot find a list. fannie mae says, fine dust -- write a letter. you cannot find them. who are some people over the years to have had presidential appointments to that board and also to the leadership? >> i am thinking, i have to wrap my brains, but i remember that certain members of the boards -- one was on the board or was a vice chair. ron emmanuel was on freddie mac. -- rahm emmanuel was on freddie mac. we are talking about high-level people in washington. >> republicans and democrats. >> both sides of the aisle. >> did they make much money as members? >> yes. you talk about the secrecy. it is fascinating. can you imagine that this government-sponsored enterprise

did not have to reveal what it paid its top executives? as you know, public companies have to disclose their property statements, the amounts that they pay their top five executives. fannie mae and freddie mac did not have to do that. when members of congress had the temerity to ask for this information, they were shut down. >> how? >> it was the power of these companies. they would marshal their friends on the helle and would be back any attempts to identify the riches that the top executives were making. >> i want to show you some video of jim johnson back and -- 1996. in speeches he was making and get your reaction to it. >> demographic changes like increased immigration and aging baby boomers have expanded the number of people who seek to own homes.

as these forces come together, they create tremendous momentum in the housing market. watching the trends develop, we came to understand the urgent need for greater and more innovative financing so that more americans could take advantage of the opportunity. just 2.5 years ago, i announced trillione's $1 commitment to finance 10 million homes by the year 2000. >> what is he saying there? >> he is saying that home ownership is a goal that we should all the pushing towards, and he was crucial to the government's public-private partnership to push home ownership. clinton came out with his partners in home are shipped in 1995. fannie mae was right there. jim johnson was right there at the podium with him. it was a bid to increase the rate of ownership in the united states of america. the idea was, if you could allow

more people to buy a home who had been shut out of the process, immigrants, first-time buyers, minorities, that that would be a greater good for the nation, because home ownership is good, even though there was no proof that home ownership was a boon to everyone. there was this aura around it, wrapping yourself in the american flag, there was something about home ownership that was very noble and uplifting. but there was an awful lot of money to be made in this partnership. you did not hear them talking about the money to be made in this partnership. but that was also a huge motivator. >> some of the names -- mr. dahlin, who is now the special counsel for president obama, was working there. bob's on lack -- bob sali --

zelleck was also there. the former chief of staff of ronald reagan was a member of the board. tim geithner is in your book, who is now our treasury secretary. what is his relationship to all this? >> tim geithner was the president of the new york fed during the years when regulation became extremely lax in this country for financial and institutions, particularly in new york. citibank was the purview of the new york fed. obviously, they were not paying attention, because citibank became one of the biggest nightmares of the bailout brigade. so tim geithner was really at the creation of this kind of belief that banks could set their own capital standards, that derivatives were a wonderful thing that spreads risk, and that financial

innovation was not to be stopped. this mind-set that really came down from greenspan, i think, who said that -- he was anti- regulation, not interested in making sure that financial products sold to people would not pull up on them five minutes later. there was a tone that bankers would never do anything so silly and stupid as to take the risks that would blow themselves up. that was greenspan's notion. he later apologized for saying -- he could not believe that they were taking these risks. geithner was a big part of that mind set and a big part of that regime where bankers were really allowed to kind of set their own roles and capital standards. >> you spend a lot of time talking about people. i will name some of them and did you to tie it all together. sandy weil. >> sandy weil was crucial in

getting the elimination of glass-steagall. glass-steagall was the depression-era law that had separated investment banking from commercial banking, protecting us from bankers pretty well for 70 years. finally, he and his friend robert rubin drove a stake through glass-steagall. it was dead and gone. then he began a massive empire known as travelers group, which the merged with citigroup. he was a beneficiary of the elimination of glass-steagall. >> use it at rob rubin, who was treasury secretary, went back after that. was it a $100 million job? >> $115 million over time, being an eminence grise at the board

who did not have to do much but certainly made a lot of money. >> robert rubin is a democrat. alan greenspan is a republican, or something on the other side, right of center. is this a political matter? >> this is, again, across the aisle. home ownership was push that really involves both democrats and republicans, private-sector and public-sector. it was a push that asked regulators to team up with the regulated entities, which was highly unusual. so it was all-in. to push home -- home ownership to -- clinton wanted it to be 70% in the year 2000. he did not get quite there, they got to 69.7%. >> i remember hearing president bush brag about the 69%.

>> bush also carry the standard. >> if people own their own home, isn't that a role that government should play? >> this is the conversation we need to have in this country that nobody is willing to have. what role should the government play in housing finance? if you want to subsidize housing in this country, and we want to talk about it and the populace agrees it is something we should subsidize, then put it on the balance sheet and make it clear and evidence. make everybody aware of how much it costs. but when you deliver it to these third-party enterprises, fannie mae and freddie mac, when you deliver subsidies through a public company with private shareholders and executives who can extract a lot of that subsidy for themselves, that is not a very good way to subsidize, ownership. i think we see that at the end of that movie in to designate. >> how much money has the

taxpayer had to pay to bail out fannie and freddie? >> at the moment, $151 billion. >> will we ever see that money again? >> is possible that it will decline, that that loss will decline, but we will never break even or make money. it is always going to be some sort of a lost to the taxpayer. >> who else was a loser in this process? did fannie and freddie heavy stock traded? >> yes. shareholders who were caught at the end of the line, when all the troubles were coming forward and losses were accumulating, those shareholders lost a lot. banks to bought the debt issuance of fannie and freddie were losers, because they bought -- they thought the money was good. these debt holders came out fine because the government back stop it.

all these years that jim johnson and his colleagues said that no taxpayer dime would ever have to be expanded for fannie mae, of course, that was proven to be false in september of 2008. >> here is another clip of jim johnson from 1998. >> with all this success, it seems to me that those who would change the system really should take on to themselves the burden of proof that there change will improve on the successes that we have had. will there system lower the cost of mortgages for average families more than the system? will there system guarantee liquidity in the system, which is of course part of what makes this all work, where we essentially now having national mortgage system where you can get the same mortgage rate in virtually any part of the same -- the country at any time? will the new system ashore

liquidity -- a sure liquidity? >> what you think they were thinking at the time? >> when he was then that? >> yes. do you think he had other goals? >> what they were doing is that they had to come up with a masterful and -- a masterful way to extract money for themselves while pretending to be doing something good for the country. homeownership sounds like a good thing. if you can pass on savings to borrowers, that is a good thing. if you can allow people who are not to the clear homebuyers to enjoy home ownership, that is also a good thing. in this way, it was actually corrupt. it was a company that was designed to make a profit for the shareholders and pay its executives immensely well, and use a lot of that subsidy that the taxpayers stood behind.

the reason fannie mae was so wealthy is because it did not have to pay as much to borrow money. that money was used to by members of congress, to put out these partnership offered -- partnership offices to put bp are out there that fannie mae was a do-girder. -- do-gooder. it helped them put the message out with advertising and insert themselves and presidential elections. this was all about protecting the subsidy. they would do whatever they had to do to protect it. >> if you are jim johnson sitting at your desk on wisconsin avenue at fannie mae and looking out at the world, you mentioned the partnership offices. how big were those partnerships? he said there were 55 of them at the time when you wrote the book. how big an office would that have been? >> a couple of people. they would often hire family members of congressional

members, so you would be sure to make sure you were helping our friends back in washington. another ingenious thing that he came up with was to create a foundation or fund the fannie mae foundation with fannie mae stock, which was at that time going to the moon because the company was so profitable. what he would do with the foundation money was he would pay academics to write articles that were very pro-housing, pro-home ownership, pro-fannie mae and freddie mac. he ended up coopting almost the entire academic community as well by paying them well to write favorable research about the benefits of home ownership and how fannie mae was delivering on its goals. >> are you suggesting that just lets, who is in nobel economist -- joe steiglitz, who is a

nobel economist? >> he wrote a piece about the small likelihood of fannie mae ever needing a taxpayer bailout. >> said jim johnson gets the partnerships across the country and the foundation. cooler at the foundation -- was it a political job? >> he would give local politicians on the foundation. then he would put pro-housing advocates on the foundation from across the country. >> and that money to form the foundation came out of the treasury of fannie mae? >> he put in a big chunk of -- himself, something like $350 million. a lot of money in fannie mae stock. as it grew and became more profitable when they were ballooning the balance sheet in the 1990's, that amount group. the foundation was immensely wealthy. you could deploy that money any

way you wanted to get the word about good deed dewars at fannie mae. >> defense team -- the foundation was folded back into fannie mae. is it still active? >> no. it is a shadow of its former self. they stopped when taxpayers took it over. they basically shuttered the foundation. >> a supreme court justice makes a few hundred thousand dollars a year. the president of the united states, 400,000 cars a year. how much does the president of fannie mae today? >> they do not make as much as they did in the heyday. their taxpayer-owned. it would not look good for the ceo of these enterprises to be making tens of millions of dollars like the seal of goldman sacks says. >> why should they make more money of the president of the united states? >> they view it as a very

complex company. they have to understand the ins and outs of the business, hedging the big mortgage portfolio -- they have to oversee it. that is their argument. they probably make $1.5 million to two. -- $2 million. >> what happens to public service in terror you tommy. public service is a thing of the past -- what happened to public service? >> you tell me. public service is a thing of the past. >> here is a gentleman you write a lot about who testified on capitol hill and -- former congressman tangor ski --ken jorski from pennsylvania. >> why did our treasury see the same statistics that i got on a

18% failures of mortgages in securitized pools? why did they not see this? you have an answer? you ran the company with the largest number of these. did you participate in putting this together? >> as mr. prince pointed out, these things happen over time. you are not finding out instantaneously. >> this was for the year 2006. >> we investigated each of these loans and what the cause of it was. it was a variety of causes. >> people did not have the income, they did not have the net worth, and they should never have been in those loans. >> that is not generally because. people were sincere and wanted to preserve the house will make the pavement or contact us to see if we can help them work it out. >> what do you think? >> i think that a lot has happened since those words were uttered to make them seem very dubious.

>> that was 2008 when that testimony happened. marchant 2008. >> that was before the crisis. september was the crisis, than two dozen 90 stock market hit the low. -- then in 2009 at the stock market hit the low. i think he was not as truthful as he could have been about the state of his company. the sec treat him -- sued him for insider trading. they turned up e-mail's or correspondence with other executives at countrywide, where he called the loans the company was making toxic and poisoned. public -- publicly, he was raving about the company's financial decision. there was definitely a dichotomy between the private musings of him and the public declarations that he made. >> in your book, "but he recognized that lobbying might

not be an off and began inviting people with deep political connections to join his company's board." you mention the former head of hud and the mayor of san antonio. cisneros was also one the board ofkb-home. -- the ofkb-home. jim johnson is still on the board of goldman sacks. >> and still on the board of target. >> is this -- is there evidence he did anything illegal? >> the only thing that was alluded to in his ear at fannie mae that was questionable came out in the oversight regulator report that conducted an enormous investigation into the accounting scandal that erupted at the company in 2005.

" they found was that -- what they found was that executives at fannie mae would do anything they had to do, move mountains, to make sure they made the earnings number that wall street was looking for and which would generate their sumptuous bonuses. that practice began, according to the report, under jim johnson. >> so what did they check that out and do anything? >> by the time the investigation came out, he was long gone. >> is there any clawback provision to get some of this money back? these people involved in all of have benefited, but the taxpayer loses the whole thing. >> that is right. there are lost that regulators can use to claw back compensation. they have not been used very

extensively. the main thing is the securities and exchange commission, under the sun as oxley law --sarbanes- oxley law, is allowed to clawback compensation when executives have cooked their books. he was one of the biggest book- cooking cases of all time, fannie mae. they got some money back, but not very much. he was the ceo at the time of the accounting scandal. the united states taxpayers continue to pay the legal bills of franklin and two of his cohorts in their defense against shareholder litigation in the accounting scandal. >> have any of these faults that ran fannie mae ever, public -- ever come public? i cannot see jim johnson

anywhere. he is certainly still involved in businesses, is part of the perseus corporation. >> a private equity business. >> as he or anybody else gone public with this? >> franklin has started to come out and talk about how he was -- he was on a panel if he months ago here in washington. jim johnson is keeping a low profile, but he is on the boards of goldman sacks and target. he is the committee chair of compensation for both companies. he is a very prominent -- a very common and prestigious shareholder of goldman sachs came out with a public letter urging shareholders to vote against jim johnson's reelection of the boards on those companies. they said he had been involved

in quite a few questionable scandals, or had been near two -- recited his years and fannie mae. >> here is another clip. where is he today? he took $400 million out? >> he took $400 million out in the last few years from the company before it was sold and a fire sale to bank of america. this was when the boom was ending. he was selling stock hand over fist. $500 million was the amount that he pulled just in that period. he was the founder of the company, he took a lot of money out of it. had he salaries. that is only a portion of what he took out of the country. >> what he do that was wrong? >> the sec contended that because he was making private statements that were different from his public statements, that was insider trading. he had non-public information.

he had increased the amount of shares he was selling because he knew that the end was near. >> had he been charged by any entity of doing anything illegal? >> no. the sec settled with him for $22.5 million. >> here is him again from that same hearing. >> these are speculators. values went down. they abandoned it. a lot of it was fraud. >> how long did it take for you to come up with this understanding? and 18% failure rate, before you send this down the line to check all these loans and future loans for these characteristics so that we do not have this horrendous failure? >> if we do not get a payment in the first month, we contact the borrower. that is part of what we do. >> i.n.d. stand you do that. but don't you put all the statistics to gather and say that, these packages are failing

at a horrific great -- they will never last and there will be a total decimation of our business and these mortgages? >> the gentleman's time has expired, but please answer. >> these mortgages were put in very complicated securities. it is very different -- are they in that particular security or another security? the only person who would know that is the security holder. >> the language feeble use, -- people use, tranches, what does that mean? >> that means dividing up higher quality loans. it is fascinating to watch mr. mozilo now knowing the foreclosure crisis, and what happened to some people who were lured into these loans. losing their homes, losing their credit score. it has been a brutal couple of years. countrywide was, as you remember, the largest single

supplier to fannie mae of loans. so mr. mozilo did not need to remember every -- worry about every loan he made. a lot of them went to fannie mae and were at the taxpayer's bottom line. >> later on in your book, you say that jim johnson was an early and a shift to the vip program. starting in 1998, he received six cut-rate loans from countrywide worth more than $10 million. you go on to this a bunch of others, including chris dodd, barbara boxer, richard holbrooke -- these are particularly all democrats. were there any republicans? >> their there were some republicans. i know that bob brett that -- bob bennett, his son ran one of the partnerships. there was across the aisle

perches a patient. >> this vip program -- >> it is hard to know. you did not understand, but you could be sure they got special treatment about the process, with a lower interest rate, those types of things. the lower interest rate has the real benefit over time in a mortgage. >> you say, at the beginning of your book, josh and i -- >> joshes my fabulous co-author, who is a genius in the analysis of financial institutions and housing finance in particular. he is an analyst at gramm fisher in new york. he and i were -- we had never collaborated before on a book. he had been a source of mine for many years. he was one of the first to call out the home ownership goals as potentially faulty, and among the first to really point out that the kinds of mortgages that

they were making were really going to lure people in and create problems. he was very perspicacious and on the forefront of question against a lot of conventional wisdom. >> we felt to compelled to write this book because we were angry that the american economy was almost wrecked by self- interested and arrogant people who had not been held accountable for their actions. isn't there another way of looking at this, the people figured out how to use the system? most of the time, it was fair and honest and -- i am not trying to put words in your mouth, but people would say that you have a grudge? >> i have a grudge if that means weighing the taxpayer down with a hundred $50 billion in losses. i have a problem with that. i have a problem with allowing

companies to take reckless risks, pay themselves immensely as they are doing it, and when the bill comes, when the risk show up to be problematic and the loans that they may go bad, they do not have to pay. the taxpayer pays. that i have a problem with. i think a lot of people in this country have a problem with that. i do not have a problem if people are operating within the confines of prudent business practices, and if they are being id very well to manage, i do not have a problem with that. i have a problem with taking reckless gamble, reaping enormous profits doing it, and then walking away with your money and leaving the taxpayers holding the bag. that is what i have a problem with. >> why have they all been able to get away with this and take some much of this taxpayer money without -- what is the answer? >> the answer was that they were able to wrap themselves in the american flag of home ownership.

jim johnson was able to argue that, if you touch the system, if you fill with the system and change it, like he said in the clip, are you going to be able to deliver a home loan at the cheaper rates that we will? that was always the threat that was held over people who criticized the business model of fannie mae. it was, you are anti-home ownership. your anti-the american way. what he is not saying is that, of that subsidy, he is only passing on to the bar were 2/3 of it. he is keeping 1/3 of it to himself. that is an inefficient way to subsidize housing. >> i want to show you a clip of a recent speech to be made and i want to ask you a lot of questions about it. >> i am a tough reporter. i like being a tough reporter, but it is hard. you have to have the backbone, you have to have been added to or who is willing to stand up

against the pressures, which are immense. you have to have a different mindset. you do not want to be a part of the party. you do not want to be invited to people's houses who you cover. you do not want to feel like you are part of that scene. there are a lot of journalists who, unfortunately, get sucked into the idea that they can be friends with the people they are covering. i do not do that kind of journalism, but i think that it is unfortunate that there are quite a few who do. >> explain more of what it is like to be a tough reporter. >> for me, it is fun. it allows me to get to the truth, which is really what i am after. >> how you doing? >> business reporting is a lot cleaner and a lot easier than political reporting, i will tell you that. there's a lot of public information, a lot of government documents companies have to file. that can reveal amends amounts of information.

-- immense amounts of information. i get people calling me to where whistleblowers, who are upset about what they see happening in an organization or some practice or other. i have people i have known on wall street. i was a broker myself on wall street long ago. i have a lot of contacts from my years on the street. believe it or not, there are a lot of people who really wants to -- they know wall street can be honest, and it is an honest place for many people, and they do not want the bad apples anymore than you or i do. they will call me and tell me about practices that they find disturbing. >> how do you avoid being friends with the people that you cover? why did you say that so many journalists are friends with them? >> look at it this way. i call it access to oralism. in many types of reporting, you are -- access journalism. in many types of reporting,

york relying on people to get you something they could not get any other way. particularly in political reporting. you are relying on sunday dropping a classified document in your lap. you are thrilled to have it, but you have to explain to the reader how you brought -- got it. you know that whoever dropped it in your lap had an ax to grind. business reporting, you do not need to do that. you can do your work. you can do what we call right- around, were you right around the person. they do not have to participate. it is much harder than in paillette -- much harder in political reporting. what i do in political -- business reporting, is that i do not get invited to dinner at the people's homes. i am the skunk at the garden party. i like it that way. i say to myself, i go home every night my husband and son. that is the way i like it. i do not believe in socializing

with the people you are covering. it is that simple. >> what is the downside for you for that? what do you miss? >> the downside is that i one of -- is that i will not get the piece of information somebody wants me to have that makes them look good. >> why do you want to do this? >> you went to school in minnesota, and jim johnson is from minnesota. do you know him? >> he would not talk to me. i got the silent treatment. i asked him perpetually over the time we were writing the book. i never received even the courtesy of, i am not going to return your call. >> what about mr. mozilo? >> he has never spoken to me. >> what about barney frank? >> barney frank has spoken to me. there are two kinds of people in this story, prime. what are the house and zealots,

the people who believe that home ownership is a worthy goal and that we should push for it no matter what. i would put barney in that category. it is not that he personally benefited. then there were people who want the personal enrichment from the public-private partnership, people like jim johnson. there are two kinds of people in the story, zealots and the personal enrichment people. >> you do say under barney frank's picture that the congressman is a staunch protector of fannie mae. he requested that fannie hire his partner in 1991. did they hire him? >> fitted. >> what is his name? >> i forget. >> i think it is herbert moses. . >> yes. >> so they did hire him. >> they did.

>> how often was that done? >> it was done constantly. can you imagine saying no to such a thing? you won as many chips out to people as you can possibly have. if it means hiring somebody, particularly, mr. moses was an able canada for the job. i was told by people at the time that he was interviewed extensively. they were looking for just the right spot for him. you would have to be insane not to do barney frank a favor, because he is on the financial services committee, which of course is the entity that oversees your regulator and cause you to testify. that was pretty common practice. >> where did you grow up? >> i was born in pennsylvania, in state college. i spent some time in a small town outside of toronto. my father was an academic who

kept getting additional degrees. we spent a year in london when he got his ph.d.. we went to southwestern ohio for my high school and college in minnesota. akin to new york immediately, and i have been there ever since. most of the midwestern. i have a lot of minnesota jeans. my father was born there. my sister was born there. my mother's father was born there. a lot of dna from minnesota. >> mo isrgenson -- mo iis morgenson your maiden name >? ? \ >> yes. i am norwegian and danish. >> jim johnson -- what is his background? >> i really wanted to reflect his point of view. josh and i were eager to hear him out.

i cannot tell you. i never even got a chance. >> you keep reading about all these connections in this town. these folks were making millions of dollars. why didn't anybody stop them? >> people did try to stop them. there is a wonderful episode in the book where the congressional budget office in the mid-1990s decides to do the unthinkable, decides to try to calculate the amount of the subsidy, to calculate what fannie mae and freddie mac got in terms of a government subsidy. lower cost of capital, lower- cost debt. it had never been done. the company did not want it to be done. they did not want anybody to have an inkling of the billions of dollars of sudsy they were reaping. -- subsidy that they were reaping. they also said they were passing

every nickel of that to the taxpayer. they wanted to test that. so a research analyst at the congressional budget office took this on. they studied and came up with a figure, a calculation of how much the subsidy was. it was $6 billion in one year, fannie and freddie. this was in the 1990's, when that was real money. so he is going to deliver this they'rejune o'neill -- going to deliver this research to congress. there is a wonderful moment where, after they have done all the work and all the analysis, fannie mae asked for a meeting. so she invites them in. >> head of the congressional budget office. >> they have been meeting with three henchman from fannie mae. they tried to persuade june o'neill not to publish this research.

it was a big threat to them, because nobody knew that $6 billion was the amount of the subsidy. they had determined that 2/3 of the subsidy was all that they passed on to borrowers. achab 1/3 of that to themselves. so this is a threat to them. -- they cap 1/3 of that to themselves. so this was a threat to them. june o'neill told me she felt she had been visited by the mafia. it was all these bromides about home ownership, you'll make it harder for people to own a home if you print this research. their typical the fall position. so she got up and said, gentlemen, i will publish this. we are proud of it, we know we did a good job. she went to deliver this to congress and was savaged by all of the fannie mae and freddie mac protectors who were members of congress at the time. >> by the way, do you happen to

know whether or not the board members appointed by the president had to be approved by the senate? >> i do not know the answer to that. >> we are still trying to find out. >> you have piqued my curiosity. i will have to find out. >> one thing about this town is trying to get information. how hard was it to get information? how long did it take you? >> josh had a lot of information in his notebook because he had been following the company's four years and years. i had some in mind because i had been following the company and writing about them since 1995 or 1996, where i was at "forbes." we both had a lot of experience with the area, down when the crisis occurred. we look through that. it took nine months to write it. >> is your information that you would like to have -- there is

all kinds of information, but is there information you cannot get to in washington dc or in the government because there is an excuse for holding it up? you mentioned something about how hud could hold information back on mortgages. on a day-to-day basis, how much information is being withheld? >> it is hard to say right now. early on, there was quite a bit of control of the information. interestingly, covering the financial crisis was easier than when it moved to washington. washington became a much more confined and in a closed shop and harder to get information for. when the treasury restarted a program for the modifications, we were trying over and over to get information on how many borrowers had been able to be

helped by the program. it was like pulling teeth. you may have been asking for the formula for coca-cola. they would not tell us. it was ultimately because the -- there was certainly what i would like to know. i would like to know who was meeting with him. who was meeting with higher- level regulators, with members of congress. that interaction would be fascinating to know. it is very difficult to know. >> how much money can fannie mae used to lobby? >> they are not allowed to lobby any more. >> how much money can be used to contribute to political campaigns? >> i do not think they are allowed to do that anymore. when taxpayers took them over, they had to give up the foundation, the partnership offices. they give up the lobbying. they are not supposed to lobby. it is a changed world after day

-- after labor day 2008. >> what the chances the american people will be able to see inside the sumptuous headquarters of fannie mae or freddie mac, which we have not talked all about? >> i do not think that is very likely. the companies are now hunkered down. they are wards of the state. there are certainly not the aggressive, swaggering about town entities that they once were. >> what percentage of the mortgages in this country are still owned by freddie mac and fannie mae? >> they are dominant. i would say 80% of mortgages are either back by or owned by -- there is no really good mortgage market at the moment. fannie mae and freddie mac are pretty much eight. >> in the middle of your career, you worked on wall street for a while, but you

also served as press secretary to steve forbes. why? >> i thought it would be interesting. this was in 1995. i had a newborn child, which was really crazy that i would do that, so i did not travel as extensively as most press secretaries do. i was at its magazine at the time, working on the editorial side as a reporter and editor. when steve, who was on the publishing side, asked me, i thought, that would be kind of interesting. i had wanted to be a political reporter krone. i thought, this would be cool. well, six months of hell. he pulled it after six months. it was very interesting, because i got to see the other side of the notebook. i was working with journalists. it really helped me to become a better journalist. >> what did you arn? >> journalists travel in a pack. they do not care to understand some of the ideas that the

candidate had. it was very -- the perception was that he wanted a flat tax so he could enrich himself. that was in-depth is the analysis got. i like to dig and delta and get to the bottom of things, so the superficial approach of the campaign, which i understand, because you are under the gun day in and day out, that really kind of -- >> you can read your work every sunday on the business section. your recently on the front page of this story about merrill lynch and bank of america. what are the rules for you at "the new york times? " >> my columns, which appear on the sunday business section, are reported columns. that means that they are backed by facts. i am not just gazing at my navel and thinking about what i

see. it is more reported columns. it is not overwhelmingly opinion. i really love to report, so what i do is kind of on the more reporting side than on the opining side. i also do news stories. that is a little bit of a different -- a lot of columnists do not two news stories. i like to keep it in the mix and keep in what is going on. i report to the sunday business editor and the business editor of the paper, who is -- >> we only have about 90 seconds. as we look ahead, this whole thing you have been writing about, do you have any hope that this will never happen again? >> i do not, unfortunately,

because we have not solved the crucial problems. we have nofixed the too big to fail institutions. we have not resolved fatty -- fannie mae and freddie mac. we have not had the conversation about housing. we need to have a conversation. josh and i would hope this book would create a conversation so that people can have a discussion and decide, but we have not done that, we have not gotten near that. i think the chances of another crisis are pretty great. >> are you planning another book? >> i am not. >> why not? have a day job, and the day job is demanding. i did not have leave to write this book. unless it is something in super- compelling, it would have to be very compelling for me to take on another project. >> by the way, who named it " reckless endangerment?"

>> we tried a lot of things, but that stuck with us. the publisher was fine with that. >> gretchen morgenson, author of "aggression -- ""reckless endangerment: how outsized ambition, greed, and corruption created the worst financial crisis of our time." thank you very much. >> you are welcome. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> for a dvd copy of this program, a call1-877-662-7726. for free transcripts, visit us at q-and-a.org.

>> next, british prime minister david cameron takes questions at the house of commons. after that, caroline kennedy campaigning for president obama in new hampshire. at 11:00 p.m., another chance to see "q&a." tomorrow on "washington journal," melanie mason looks at the implications of the recent decision striking down a ban on corporate money in montana elections. the discussion of the recent presidential election in mexico. al-jazeera english correspondent alan fisher talks about how they cover english-language news around the world. "washington journal, " live at 7:00 a.m. eastern. on c-span.