tavis: good evening. from los angeles, i am tavis smiley. when standardanndndooo's dodogrgrededhe u.s., it senen shock wavessururg a fragilele titi f f the u.s. economy, and despite all of the talk of financial reform on wall street, the release of a two-year probe suggests not much has changed since the economic meltdown. so, tonight, why the culture of wall street remains virtually unchanged with author and columnist william cohan.

>> all i know is his name is james, and he needs extra help with his reading. >> i am james. >> yes. >> to everyone making a difference -- >> thank you. >> you help us all live better. >> nationwide insurance supports tavis smiley. with every question and every answer, nationwide insurance is proud to join tavis in working to improve financial literacy and remove obstacles to economic empowerment, one conversation at a time. nationwide is on your side. >> and by contributions to your you. thank you. kcet public television] tavis: a quick programming note. starting one week from tonight, we will be in new york.

boggess next week include michael bloomberg, katie couric, billionaire philanthropist george soros, and the man who will soon be taking the helm at the dance theater. that is all next week from the big apple, but from tonight, we are from l.a. as usual. we are pleased to welcome back to the program william cohan, a contributing editor at "vanity fair." he is also a best-selling author, whose works include "the last tycoons" and "house of cards," and he could not have picked a more auspicious time for his new book, "money and power." glad to have you here. i want to get to the book. there is a lot to get to, but there is a lot of news. first, let me get your take because you are here, and that

we would jump into the book. standard and poor's downgrade today. >> i wonder what took so long. we have had such fiscal problems in this country for so many years, you cannot have two wars that cost trillions of dollars and live beyond our means as we have been living for the last decade without having some fiscal consequences, and when you combine that with what congress did during the reign duck theories last year, -- a lame duck series last year, this is no surprise. best tavis: the flip side is why they held off. why do you think, conversely, they did hold off so long? >> there were such problems all across europe, it was inevitable that the problems would come home to roost for us.

downgrading the u.s. government debt is a big step. even being put on the watch list is a big step, so they obviously do it very carefully without rushing into it, and i think they may have waited too long. le know that it isdowngrade or something they should of already done before. >> when you say to your mind they have done the right thing, how was this the right thing? >> the downgrade? tavis: yes. >> because it reflects the reality. until you face up to your physical problems, you cannot begin to solve them. it is probably no coincidence that in the last week, the topic in washington has turned to fiscal responsibility. to which i say, finally, what took them so long? to which i say to the s and p,

what to do so long? tavis: republicans are everywhere today, beating up on the white house, saying, "we told you. we have got to get a handle on the debt. we have got to get a handle on the deficit." republicans are using this to grind down the white house. the white house is responding in kind. what about going forward? >> i give president obama a lot of credit for facing up to this problem. i mean, think about the hand he was dealt. huge fiscal problems to begin ith, exacerbated by two huge, unpopular, expensive wars, and now he has been given one half of congress that is very intel's a trend and is very inflexible about helping to solve the problems of the country.

there were some interesting recommendations. they are now being treated seriously in washington. does like in 1994 when bill clinton and bob rubin started to look at this, which set us on a responsible fiscal package, which we did for several years, we need to do that again, and it totally got at the end -- out of control at the end of last year, when they were handing out candy. >> how is this going to change in the coming weeks the debate in washington? >> this is going to make u.s. borrowing costs higher. one of the biggest problems that the u.s. faces in the fiscal budget deficit is the amount of money it has to spend it just in interest alone on the national debt. now, the rates are going to go higher. our credit rating will likely

fall. it is going to be a good thing. it will decrease the urgency for them to get fiscal responsibility, something we had sought -- something we should have done years ago. tavis: with tim geithner, as you can imagine, this is something that was in the conversation. the issue of the debt ceiling and whether or not it should be raised. president obama was against it when he was in the senate, and now he is all for it. since we cannot figure this out in the immediate term, whether or not we need to raise the debt ceiling. how will this impact that decision? >> it makes it all the more important that the debt ceiling get raised. and then that we begin to grapple with our fiscal problems, because with interest

costs going up, with borrowing costs going up, who knows if the higher interest rates are even going to appeal to others? what is the chinese and the japanese say, "we are not going to invest any more in the u.s. securities"? we had creditors who were willing to continue to buy our debt. we know the chinese have been shorting the amount of time that they would be willing to do this, and we will run into more and more problems until we fix this. the nice thing is that everything is coming together at the moment. there seems to be political will to deal with an issue that should have been dealt with a while ago. tavis: the s&p decision, she raised china and the other countries, the mighty u.s. of

a., that we would default? really between a rock and a hard place? but we doave options, depend on the kindness of strangers, and how long is that going to go on for? companies that bid downgraded can eventually go into default. there are some people who think the country is bankrupt already. that is strong language, but it happened in ireland and portugal and greece. biggest reasons the government decided to bail out wall street in 2008 was because of how interconnected wall street was to the rest of the world. why do we think we are outside of world events, that we are somehow immune to world events? we are absolutely not. once again, i think we have got to do with the fiscal problems,

and the good news is i think there seems to be the political will in washington to do something about it. we have been wrong before, and we could be wrong again, but let's hope for the best. if we do not face these problems, we're going to have serious consequences down the road. who will bail us out? i do not think there is enough money to bail us out. tavis: china. put his head lineup, jonathan. obviously, for those of us to read "the wall street journal," you could not have missed this.

this just greats at me. i cannot stand it when i see headlines like this. hedge funds are back, bigger than they were before the crash. what do you make of that? >> par for the course, ok? when the government rescue wall street in 2008, it really began with the rescue of bear stearns. whole idea was to reestablish the status quo on wall street as quickly as possible. what does that mean? it meant recapitalizing those banks, getting the big banks to start lending again, which, really, frankly, has not happened, and get them out of the danger zone. that is exactly what the government did come and, by the way, it was bipartisan. it was in the bush administration and continued in the obama administration. last year, $150 billion. hedge funds are back. what about main street? it is incredible. if you go out in the country, as i have in the last couple of weeks, the for sale signs all across the country, still large. there are small businesses all across the country who cannot

get access to loans to grow, to wirework people, to expand their plant or equipment, and chase manhattan bank has no problem getting a bridge loan to at&t said that they can buy t-mobile. how about on a smaller scale? we are not big guys. wall street is doing well. $2 trillion of capital on the balance sheet. trickle-down economics so that mainstream gets to benefit from what has been going on in washington. >> there was a report released, and there was a former treasurer, pointing a serious danger at goldman sachs. summerlike to call a government

sacks. i have to agree with his conclusion. one year ago, a major league hearing in washington, april 27 of last year. as part of that, they released a 900 pages of documents, which i painstakingly went through and put in order, made sure i understood what was going on, interviewed all of the people. this was about what goldman during the financial crisis. how they see it coming, benefit

from it, but at the same time, they packaged the same mortgage securities that they were betting against, and that is what got senator levin so upset. that does not sound right. if you have decided to make a major proprietary bets against the market, not if you made that decision, as goldman did, in the next six months, you continue to sell to investors around the world the very kind of securities that you were a betting we're going to collapse or fail, you can do that, right, maybe that is like having two different thoughts in your mind at the same time, the definition of genius, but is that the right thing to do? i think at goldman sachs, they would disagree with me. in fact, i am sure they would disagree with me, but i think that is something they have to think hard about going forward. that tavis: there are some say that everybody in the industry did what goldman had done, we may be would not have

had a crisis. >> i think that is adversely an astute observation, because do not forget, goldman sachs was the only wall street firm -- do not forget, there were other hedge fund managers and other people who saw this coming and put their money where their mouth is. goldman was the only wall street firm that saw this coming in the beginning of the summer of 2006, as i tell in the book about how they came upon this, and they decided to implement what they called "the big short." of dollars onions that bet, tavis, when the rest of wall street was losing its shirt. >> -- tavis: that is my point. >> they are mad at goldman for two reasons. they continue to sell assets they thought would fail. that bothers me. no. two is that for some reason, the ceo of goldman sachs, lloyd blankfein, to senator levin years ago and even to me, they

do not admit that they made is that, but it is all in their documents. blankfein isd of that they are trying to play naïve korea that it was not some brands, ingenious design, that they looked into it. >> you are absolutely right. one can almost understand because of the political environment that we live in, but they have got the target, the bull's-eye right on their back, they would rather look sheepish and dom and as stupid as everyone else, when, in fact, as i say in the book, they were brilliant. they saw this coming, and they did something about it. they did not expect anyone to do anything about it.

they did not expect senator levin or another to be issuing 900 pages, so for them to hide behind it and say "we are sheepish. we did not know." that does not ring true. it would be better to look dumber than to look brilliant and have everybody hate them even more. his namence you raised several times, lloyd blankfein, rumors circulating, and i do not know eight things fact about this, so i call this rumor, talk about his stepping down. whether the rumors are true or not, he has survived, where other ceo's had to step aside. who is this guy, and why is he still on top? he is surviving. >> because he is a survivor. he is a remarkable guy. he grew up in the bronx and move to brooklyn to get a better life. his father was a postman. he went to harvard, harvard law school, was a lawyer for a while

and worked in l.a., and eventually, he tried to get a job at goldman sachs, was rejected, and went to work for a commodities subsidiary that goldman had recently bought, and that is how he got, you know, to the big house, because he started at the stepchild and then got to goldman sachs, and he is basically a brilliant trader, a salesman, and manager of other traders. he basically ran this huge department that makes goldman a ton of money, and i have to say he became ceo of goldman sachs in june 2006 when hank paulson went to become treasury secretary, and in the last 4.5 years, he has run goldman sachs for the purpose for which it was designed to be run, which is to make profits for shareholders and creditors and to make money

for the people who work there, so he was a very, very good steward of the firm during the financial crisis, which began six months after he took the job. he has navigated the firm well. as we both know, he has said public relations problems, and that has not been successful. i have a sense that may have taken a toll on him a bit, and maybe only way -- oftentimes, people become too much the store themselves, it sort of like cathleen black did in new york. you cannot turn the page until that person needs, and it seems unfair because he has actually done a good job running the firm. tavis: telling bad jokes does not help. >> as i say in the book, that was taken of context. fair game. but they got the last laugh, because it was a u.k. newspaper. he was making it off the cuff a joke. he has a good sense of humor, but it was too good a line for them to pass up, and it blew up into a headline. tavis: you mention a few names. we have heard it so far, hank

paulson. the name robert rubin, those who worked at the top of the food chain at goldman sachs. i said earlier that many of us prefer to read as a government -- many of us prefer to read as government -- refer to it as government sachs. >> tavis, this has been going on for 100 years. it is not unusual with washington and wall street. people have been going back and forth. once you have been a government official, the next thing to do is go and make a lot of money on

wall street. there is synergy there. this goes back to henry baldwin, the son of the farm markets goldman, who had a seat at the table when they set up the federal reserve system and this system of federal reserve banks. in 2008, they became a holding company, from which it benefits today. talking about henry goldman having a seat at the table when they set up the federal reserve system, it is a glimpse of hank paulson employed -- and lloyd blankfein 100 years later. there was what it was an adviser to every president from lyndon to johnson. he took the subway to downtown manhattan. it is hard to imagine a goldman partner taking the subway now, but he was a senior partner, and on the subway, he came up with who should be the treasury secretary during the eisenhower administration, and eisenhower had never heard of him, and he

got the job, and he was a good secretary. paulsonn, corzine, and all went into government service, and part of the reason is they believe in it and they may get a priority, and you have your time at goldman sachs. you have your time making millions of dollars, and then they want you up, and they want you out. most of the guys are sort of forced out after a period of time, which may be one of the reasons lloyd blankfein is talking about leaving, and then they want to give something back, some talking about philanthropy. if you want to be the secretary of treasury, guess what, you do it. it is not something you campaign for, but if you get asked, you do it. tavis: last year at goldman sachs? >> i do not think if we can count that high.

they gave out something like $16 billion dollars just in bonuses. tavis: $16 billion, with a b. >> it is a good place to be. it is good work if you can get it. it is awfully hard to get there. it is awfully hard to get at the top, but they are like the derek jeters. they do get paid like rock stars. i have never understood why they get paid so much. i did understood why we stand -- i did not understand why journalists got paid so and wall street bankers get paid so much. tavis: what is the future of the house of goldman sachs? >> ironically, except for the public relations, they have never been better positioned, because they have fewer competitors. bear stearns is gone. morgan stanley is focusing on their brokerage business by and large. goldman stands. when you combine that with the fact that bell -- now they are a

bank holding company and that they have access to the federal reserve bank, which they had a hand in establishing 100 years earlier, we are subsidizing their business plan, which has not changed that much. tavis: i am curious as to how they address the issues of race and gender. it has been a suspect at times, to say. am i being generous? >> yes. women have been treated horribly up to the present day. there are a number of lawsuits pending against the firm. i tell the incredible story of a stanford business school student in the 1970's there was black and try to get a job at goldman sachs and got very far, thought he was going to get a job, and that he was told that the interview was over and that they did not hire black people and that was it. and then goldman sachs got

banned from recruiting on the stanford cancer -- campus four years. it is a really chilling story that i tell in this book. tavis: the legacy in the future for that matter of this company called goldman sachs. the book is called "money and power," how goldman sachs got to roll the world. that is written by william cohan. >> thank you. tavis: that is our show for this time. until next time, keep the faith. >> for more information on today's show, visit tavis smiley at pbs.org. tavis: hi, i am tavis smiley. join me next time. a conversation with actress ashley judd on her memoir. that is next time. we will see you there. "bittersweet." >> all i know is his name

difference -- >> thank you. >> you help us all live better. >> nationwide insurance supports tavis smiley. with every question and every answer, nationwide insurance is proud to join tavis in working to improve financial literacy and remove obstacles of economic empowerment one conversation at a time. nationwide is on your side. >> and by contributions to your pbs station from viewers like you. thank you. [captioning made possible by kcet public television] captioned by the national captioning institute --www.ncicap.org-