>> rose: welcome to the program. tonight, a look at american foreign policy through the eyes of former national security adviser to president obama, tom donilon. >> it's about their continued economic and social development. those are the top priorities of the chinese leadership right now, and they have really immense challenges ahead of them. they're trying to pursue a very aggressive and important reform agenda right now. and the cop flict with the united states is the thing that would take that most off course for them. yes, there are tensions with japan over the islands issues, and historical issues generally. yes, there are tensions with the philippines over territorial disputes in the south china sea. what's important is the united states be present there because that's the conflicts that china knows it needs to avoid. >> rose: and massachusetts senator elizabeth warren on

money in politics. >> we invested in medical research and scientific research and engineering research because we believed out of those innovations, there would be opportunities for kids like me and other kinds of kids. and that's what happened for 50 years in america. as our country got richer, our families got richer, as our families got richer, our country got richer. i had a fighting chance. i ran for the united states senate. i wrote this book because that's not where we are now. >> rose: donilon and warren next. >> there's a saying around here: you stand behind what you say. around here, we don't make excuses, we make commitments.

and when you can't live up to them, you own up and make it right. some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where it's needed most. but i know you'll still find it, when you know where to look. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: tom donilon is here. he served as president obama's national security adviser from 2010 to 2013. in office, he was a champion of the so-called pivot to asia.

the president is in asia this week on a four-country swing throughs japan, south korea, malaysia, and the philippines. vice president joe biden was in ukraine earlier this week. today, the situation there appeared to worseep. russian foreign minister sergey lavrov warned a military response in east ukraine remains on the table. i am pleased to have tom donilon back at this table. we'll talk about both asia as well as ukraine in this conversation. welcome back. >> thank you, charlie. it's good to be here. >> rose: tell us what the president expects to accomplish in asia on this trip. >> it's an important trip. you'll recall his last trip to asia was canceled last fall in the wake of the government shutdown, and that was costly, frankly -- >> because he was back dealing with the budget. >> he was back here dealing with the budget, and he had planned on that trip to go to malaysia and the philippines and two summits as well and that had to be canceled. >> rose: and the chinese had a real opportunity to make their case while he was gone. >> i think that's right. but the more important point is

he didn't have the opportunity to work some of these issues and have a regular presence, which he's had in asia, since the outset of his administration. so this trip allows him to step out there, to be very present, to go to northeast and southeast asia. in northeast asia, of course, the theme will be allies. he will be with our two fundamental core allies, and those alliances are in quite good shape. the relationship between them is tense, and the president made some progress on moving them closer teplitzk at the haig las. we have an important trade negotiation going on, the most important trade negotiation going on in the world. the key is between the united states and japan. >> you believe this will govern global trade in the 21st century. >> i believe this-- i believe this is the opportunity for united states to obviously get

economic benefits from it-- which i think arguments are compelling-- but more importantly is a strategic initiative. it's the u.s. leadership in the region, most economically dynamic place in the world, putting together the rules of the road. putting together the rules going forward in the 21st century for almost half of world gdp. now, if you combine that with the work we're doing with europe on negotiating a free trade and investment treat weeurope, and if we can get both those done, the picture there, charlie, is the united states strategically in the middle of the two biggest trade negotiations in the world, setting the stage, setting the rules for the economy in the 21st century, and if we don't do it somebody else will. >> rose: with respect to japan and the islands and the conflict there. whose side are we on? >> japan is our a, number one. the islands the subject of the dispute are the subject of the treaty and alliance obligation we have requestw japan. and what the united states wants there, obviously, is to have

reduced tensions between china and japan over these. the united states rejects intimidation and coercion upon. it rejects a unilateral attempts to change the facts on ground, and that's really the role we play. we don't have a claim here. but we do have obligations to our ally, japan. >> rose: which means if in fact they are attacked in any way that we will come to their defense? >> well, they would be subject to the treaty, and we hope, obviously -- >> that's what the treaty says. >> we would meet our obligations charlie, to the japanese. what has to happen hoar is that-- is that that needs to be avoided, obviously. and it's neither in the interest of china, nor japan, to have a conflict over this. i don't think either side wants a conflict, but both sides have strong national sentiments around these issues, and the danger is a mistake or miscalculation or accident which can spin out of control. >> rose: here's what the

chinese defense minister said. china will make no compromise, no concession, no treat net conflict with japan. that's tough language. >> it is tough language, and it's a-- it's not a good situation, when the number two and the number three economies in the world report talking together, talking to each other teplitzky political level, and we should do what we can to move that forward. there needs to be a way to break the ice here between japan and china. what can happen here, of course, if you do have an accident, if you do have some incident, and you don't have a conversation under way, if there are no counter vailing forces it's difficult to climb down. that's the real danger here. the theme on this trip, to go back to the trip, is allies in northeast asia. >> rose: okay, but that brings me to this question. china is somewhat-- someone in5v china said we don't want the united states coming over here and qepg developing a kind of nato agreement with asian countries that somehow is-- has the mission containing us.

and they fear that. >> yeah. and i -- >> you know more than anybody because you spent a lot of time talking to them. >> i think i've discussed this issue with the chinese as much as as anybody in the united states government and i say two or three things about that. number one, the u.s. presence in the asia for last 60, 70 years has actually been the platform on which asian social and economic development have taken place and the chinese have been big beneficiaries of that, maybe the bifght beneficiary. our presence there has caused the situation to move in the direction of prosperity and not rivalry. and that's obviously an important thing. number two, we do have obligations toaur of our allies, and we intend to meet those obligations, but another part of our asian strategy is intensive interaction. our allies and partners in the region certainly expect to us meet our obligations. they expect to us have help balance. they expect us to be there when they need us. but they also expect us to run a

constructive and productive relationship with china at the same time. >> rose: are they fearful of china? >> well, yes, i think they are. >> rose: they feel china is aggressive? >> they are concerned which is why there's a huge demand for u.s. leadership in the region because we have a history of 60 or 70 years. and today, given this mix of china's rise, of history, of nationalism, territorial disputes that are unresolveed, is all the more reason for the united states to be there. we really are the key force. on the containment thing-- let me go back to that for one more important. in terms of containment, we know what containment looks like. we ran a successful containment policy with respect to the soviet union for half a century. it doesn't look like a $500 billion a year relationship with china. that's ths a much more complicated relationship with that. and, by the way, this is a ps, by the way, of integrating china into the world economy, into the world police plil system, that

has been the aim of every president since richard nixon. >> rose: what do you think they want? >> i think mainly what they want is to continue their social and economic development. i think the chinese leadership knows that that's-- that has to be their first, second, and third priority, reet, to continue their economic and social development. >> rose: beyond, that for example, i talked recently to a friend of mine who saw the president and he told him three things-- our economic prosperity, our dealing with corruption, and doing something about the awful pollution problem we have. those are the three priorities. >> yes and those are all about the survival of that regime, and it's about their continued economic and social development. those are the top priorities of the chinese leadership right now. and they have really immense challenges ahead of them. they're trying to pursue a very aggressive and important reform agenda right now. and the conflict with the united states is the thing that would take that most off course for them. so, yes, there are tensions with

japan over the islands issues, and historical issues, generally. yes, there are tensions with the philippines over territorial disputes in the south china sea. what's important is the united states be present there because that's the conflict china knows it needs to avoid. >> rose: i want to come to japan in a moment but staying with china, when you look at how they see themselves playing a role in the world, do they want to-- do they want to be a global player in terms of influence, influence in the middle east, influence with respect to the kinds of conflict we have in ukraine now with russia? or do they want a hands-off, let america be preoccupied with that, and we'll just do with our own mandate here? >> they typically have not been involved in issues that are far away from them. but -- >> unless they were in pursuit of national-- >> as powers rise, they seek more plns. q. right.>> china does have intn

its periphery. there's a lot of history here, and in interest. they do have an armed force that is increasingly well funded and wants to engage in missions, and they do have a real interest, obviously, in providing the resources and getting the resources from around the world. they need to continue their economic development. charlie, it's interesting-- they're a dependent power, you know. to continue their social and economic development, they're dependent on bringing commodities and resources in from around the world. and the point i made to them directly, which is why with respect to the maritime disputes, as they look at their needs of the coming decades, they have a big interest in freedom of navigation and having these rules of the road developed and be-- and be followed. and that's a tension that they're going to have. >> rose: they also are trying to shift their economy from an export economy to a domestic consumption economy. >> yes. >> rose: and that's not something you can do overnight. >> no. and it's a huge set of

challenges. the changes the president has taken on, he laid out the agenda last fall teplitzky party meeting are immense, and he laid out a couple of them in the conversation you allayed. they're trying to shift their economy to a consumer-driven economy, as you said. they have real issues around corruption because they know that will undermine confidence in the regime, and they have issues, obviously, around quality of life issues, a place where you can't drink the water or breathe the air or eat the food safely is a place that's not going to be, over time, stable, and thane that. >> rose: you, obviously, have been part of conversations between the president and chinese officials about cyber espionage from the public and private sector. are we making any progress on that? >> i think a couple of things on that. the president pushed this issue directly with the senior leadership in china, and the key there was this-- it was indicating to the chinese that this was not going to be a free shot. that in fact, that the quality

of the relationship between the united states and china was going to be affected by their conduct in the cyber realm, and in particular, we were-- we were and are quite focused on one particular kind of cyber security threat, and that is the state-sponsored cyber theft of intellectual and other property which is a huge problem between the united states and china and one we need to continue to put teplitzky center of this. the chinese,sh, have pushed back on this, particularly in the wake of the snowe of the snowdes with respect to the n.s.a. programs and it's important for the united states not to accept equivalence here. espionage happens between countries and also oz will. what we're talking about here is something very different. what we're talking about is a big economic relationship we have that is affected by something which we don't do, and which has to be off the table, which is economic stuff. >> rose: define the u.s. relationship with russia today. >> a couple of things, i think.

you know, i saw-- i saw president putin thed from night before he was inaugurated on behalf of the president, and it was clear then that we were stalled with respect to major issues between the united states and russia, like syria, like arms control -- >> like iran. >> iran, no i think-- on iran, they have been a constructive participant in our p5 plus 1 effort, with respect to iran. they have been supportive of the sanctions regime. they have been important players in the negotiations, and to date, i think that still continues. as, by the way, does the activity with respect to the syrian chemical weapons which as of today we have about 90% out of the country. >> rose: but there are new reports of using chemical weapons. >> different kinds, chlorine

gas. but with respect to the weapons identified by the u.n., we're about 90% done with it. that's an important thing to get done. but how to characterize the relationship. it had stalled i think with respect to specific issues. putin moved to a posture-- very different, by the way, from the posture he was in when he had my job as national security adviser for boris yeltsin, and very different where he was under president medvedev, to a much more hostile stance, as seeing foreign policy as something they were going to define as opposition to the west and opposition to the united states, very much zero sum. there are a lot of elements here as to why this has happened. most of it has to do with, i think, president putin's domestic politics. >> rose: his popularity is rising. >> yeah. and i think today, any-- by the way, this is about preserving his regime. and it's an autocratic regime. we've now seen the most repressive russian regime since

the collapse of the soviet empire. expressed in opposition to the media, massive propaganda campaigns being run by the state. so where is it today? i think we're in for a-- this is nothing like a cold war because we're not ideologically standing off against each other, right, but we're in for a cold period here where russia is going to increasingly define itself as in opposition to the united states and the west. we have leverage here -- >> is it leaning towards a different direction in its own identification? >> yes, i think it is leaning back from the west, frankly, and i think, again, trying to carve an independent stants, if you will, basically defined in negative terms of the west. the domestic picture that putin and his ideological propaganda team draws of the west as kind of a decadent place, russia standing tall, asserting itself now after a period of humiliation, after the fall of

the soviet empire and that's the direction i think he's taking it. we are not in a cooperative mode, obviously, and it's going to be i think a bit of a hostile mode for a period to come here. although, we can continue, as i said earlier, to work on issues together where they see it in their interests. >> rose: like iran? >> and the syrian chemical weapons. some of this depends on what putin does. you know, they obviously have troops massed on the russian-ukraine border. they are engaged, charlie, in a debstabilization effort in ukraine right now. basically it's a multidimensional, covert operation -- >> john mccain was here last night strongly attacking the obama administration as he has done in the past saying basically they don't even believe in american exceptionalism, the obama administration, saying the president appears weak to putin and he thinks he can take chances. >> i don't think it's all the

posture of the united states. -- we're support, ukraine politically. vice president pride booiden has been there the last two days. we have organized a support for ukraine economically. we did $it 1 billion. $15 billion from the imf. >> rose: when is it going to be there? >> it needs to be there quickly. >> rose: exactly. >> to support them. and the united states has been behind this. >> rose: that's 16 right there. >> and plus additional money from the european reconstruction -- >> go ahead. >> third is we have been engaged expressly in reassurance of our nato allies -- >> that's a treaty. >> it's a treaty but we need to reassure. by the way, there's a lot of second guessing here about nato expansion and tom freed map other ands is have wondered whether this was the smart thing to do. today, if you sit in the baltics or poland -- >> you're glad you have it. >> you're glad you have this. >> rose: and you may have been

glawd had it if you were in georgia as well. >> yes. >> rose: but it's not going to happen and putin-- >> i think, the president's response here, and the response of the west is a lot more forceful now than it was with respect to-- in comparison with the summer of 2008. >> rose: somebody said to me on this program, the russians went through leningrad. you're not going to break their back on sanctions. >> i think that is a-- that is a -- >> that's a glib way of saying it but not real. >> here's the deal-- russia can stand stride ebtent and defiantly back politically, which is what putin is doing, but in a globalized economic world, he can't stand back from the global economy. he has large companies. they're involved in the commodities trade around the world, and they are vulnerable to sanctions, in my judgment. i led the sanctions effort as you know for four and a half years with respect to iran and can tell you there can be a high cost that can be imposed on

russia with respect to continuing bad conduct and ukraine. >> rose: tell me how in terms of the same kinds of vairchg sas we have against iran? >> i think he will probably continue to try to destabilize ukraine. they have leverage. they have historic -- >> geography. >> geography and economic relationships. so there is leverage that russia has and we need to acknowledge the facts here but i do think there is a price to be paid. for example ucan increase the list of people on the sanctions list and go to whole segments of the economy it's financial and energy sectors -- >> why don't you do that now? >> i think, frankly, my recommendation would be if in fact russia does nothing to comply with the commitments made in geneva last week that lavrov made with secretary kerry, my recommendation would be to go to the next wave of sanctions and to date, i haven't seen anything that the russians have done in order to implement that agreement, and, indeed, i've seen a lot of things --

>> you're saying you should go to the next wave of sanctions. >> i think he will do an assessment with respect to russian conduct and go to the next level. >> rose: but the question is now, if you look at-- if the sanctions are ratcheted up, and you believe it will work, but what if it doesn't work? what if they begin a deeper destabilizing of east ukraine? >> well, i think you increase the cost. you increase -- >> how far are we prepared to go is the question? >> well we're not going to engage in a military operation. >> rose: so again-- ukraine is not worth a military operation by the united states. >> we're not going to engage in a military operation. we can, i think, support shem militarily. i think we continue to support them economically. and you can increase the price here for russia. russia at that point, by the way, a continued effort to destabilize ukraine will result in their continued political isolation and result in a high cost. the russian economy, charlie, is quite vulnerable. >> rose: and energy dependent.

>> yeah, they're energy dependent, but their stock market, their currency, the financing of their various companies-- they are a-- a high cost can be imposed. then the question comes back, well, one-third of russian energy is dependent on-- european energy is dependent on russian exports. well, that's a two-edged srd. if you tonight sell, you tonight get paid. >> rose: if there's no sale, there's no revenue. >> exactly. the last thing i would say in terms of u.s. strategy what, this also has done, i think it really has caused europe and the united states to think hard about steps we can take to increase the diversity of supply to europe of energy and to increase their independence. and we can't let this go. we need to noax on this and get ourselves in an increasingly better position in europe with respect to energy and we can do that. >> rose: are they allies today prepared to be led by the united states and be supportive of the united states?

>> i think so. >> rose: you think so. >> i do. >> rose: is there a question whether you might be too optimistic? >> let's look teplitzky evidence. when we came into office, i think if you had said we were going to be able to put 60 a six- or seven-year effort in afghanistan people would have had doubts about that in 2009. we've been able to do that and able to work with our allies in the libya operation. we're engagemented in an important negotiation on trade. >> rose: interesting historical note. there are some people who say, you know, that putin and his present thinking is influenced by a couple of things. one is kosovo, he is influenced by that. he was opposed to that-- though he's doing the same thing in crimea.

second, that the lib-- >> first of all, i don't think that this-- i think it's a-- it's a bad analysis. >> rose: which one? >> to think this has to do with syria. i think that's wrong. >> rose: he's too savvy to read that into it? >> this is a lot more fundamental. this is about an important aspect of what he regards as the russian sphere of influence. he has tried in mis mind to reconstruct-- or construct, this urasian union. it's a bis bit fanciful, but without ukraine it's impossible. on libya and kosovo, a question you asked earlier -- >> that's a historical note. >> well, i think it's important. i don't think it's historical, actually. i think he's principally driven by this ideological posture and his political need at home. that's first. but on the foreign policy side, i think it's important to

understand, and i have actually sat with him and had this conversation where he will say-- we'll take you in a conversation from kosovo to iraq to afghanistan to lib ra, and you get to syria, and this is where the russian federation was going to stand up and not allow the west to use the international -- >> in other words, when you went through those countries before you got to sirria, ending with sirria, he basically said i don't want that to happen again. and he said with respect to syria i'm going to show you it's not going to happen again. >> and he publicly criticized medvedev on the extension of the u.n. resolution, which is a legal basis on which our operation went forward. so this is, again, part of this whole piece of him standing back and defining russia as separate from the west, not integrating with the west, and rejecting to western conduct. so i think that the point there is-- i think he's wrong about this, obviously. but you identify a strain in his

thinking which is not historical. it's current in its thinking. >> rose: let me make two point. one, when i said historical, i mean that-- i meant these are the things that have happened, and they add to our knowledge of understanding of why people are motivated to do things. that's what i meant by our own history. there are people who wonder if he is so driven by these ideas of restoring russian floar because of his famous quote about the soviet union, you know, that there may be a degree of irrationality and that reason on these issues may not prevail with him as it might otherwise. david brooks in the "new york times" "the tiger of the qawsy religious nationalism which putin has been riding may now take control. that will make it very hard for putin to stopping this conflict where a rational calculus will tell him to stop." >> you can certainly get

yourselves in these kinds of corners -- >> is that a possibility that's his mindset right now? >> he's a rational guy. there were people early on in this conflict, in this crisis, called him delusional. >> rose: people? it was the chancellor of germany. >> he's not delusional. he knows where his interests lie. but having said, that he has built up this ideological, propaganda-driven approach that is nationalist, as david brooks pointed out. there are some quasi-religious aspects to this. it's almost civilizational but it's mainly about preservation of him and his regime. the one thing i want to add to david's point. this is putinism. by the way, it was not ordained. we worked with the russian federation under medvedev constructively, and in their interest, too. it was in their interest to get

into thewt o. it wasn't preordained here but he made a choice here with respect to what he thought he need to do to preserve his leadership. and the reason i say "putinism--" and it goes to david's point-- this is driven by him. you say to yourself, when i analyze china and you analyze a decision there, or a position, you can be pretty sure it's been thoroughly vetted and considered by a lot of stakeholders in china and it had to go to the politburo standing committee. there's a system-- there's no system in russia. >> rose: there's no process or system. there's a constituency of one. >> rose: let me talk quickly about those three things. john kerry has been involved in syria. it doesn't seem to be going anywhere. >> the syrian conflict is obviously a tragedy.

and a solution doesn't appear to be in front of us right now. >> rose: two, israel-palestinian negotiation doesn't seem to be happening. >> we'll see what happens as we get up to the deadline. you know, i don't think that the-- i don't think the announcements that president abbas made in the last couple of days -- >> the fact that there's reconciliation between hamas and fatah. that was one of them? >> that was one of them. the first i was going to mention was the threat to disband the palestinian authority and basically give the keys back to israel. that's not constructive in the last weeks of negotiation. and then the announcement today of reconciliation talks between fatah and hamas. >> rose: i don't understand why that is not good? >> for a number of reasons. we've seen this before -- >> they speak with one voice. you can make a deal with one voice. >> we've seen these announcements before and there are fundamental, ideolog and between fatah -- >> i know--

>> number two, hamas, in order for us to be able to deal with the combined entity, hamas is going to have to come on board with the core principles of recognizing israel and not engaging in violence, and meeting the obligations of the palestinian authorities taken on and to date they have not done that. >> rose: great to have you. tom donilon, former national security adviser and official from a number of democratic administrations. back in a moment. stay with us. elizabeth warren is here. she is the massachusetts senator. she has become a leading populist for the democratic party. less than two years after being elected. she left harvard for washington in 2008 to help oversee the federal bank bailout package. as part of that work she helped create the consumer protection bureau. her new memoir, the "new york times" originally reported that america no longer has the world's richest middle class.

we'll talk about that and much more about the middle dlass and the u.s. economy and about income inequality. i'm pleased to have elizabeth warren back at this table. welcome. >> it's good to be back. >> rose: how do you like this senate thing? >> i like it. i really do. >> rose: even though it's about legislating. >> in part but remember there are a lot of tools in the toolbox when you're in the united states senate. we about legislation, how many laws you can get through. but one of the things i learned early, early on, there are a lot of banking regulators out there and a lot of banking laws. but if the regulators won't pick up the laws and use them, then the banks can just kind of go off and do what they want. if the regulators will actually use those laws, then we actually have a safer system. so the united states senate has oversight responsibilities over those bank regulators through the senate banking committee-- which is where i sit. >> rose: which is where you wanted to sit?

>> that's exactly right. and one of the things i get to do, along with my colleagues, is remind our banking regulators that they don't work for the industry they regulate. they work for the american people. >> rose: you believe they think that? >> you know, i believe they have to be reminded of that. we have to remember that the way it works in washington is that for a long time now, those who have money and those who have power make their voices heard too the highest volume. and everybody else just kind of gets left behind. and that's true whether we're talking about the banks blocking legislation they don't want to see. it's true when we're talking about other big corporations. and it's also true when we're talking about these regulatory agencies. >> rose: but, as you know, money talks in politics. >> boy, no kidding.

loud. loud. >> rose: yet, at the same time, dodd-frank was tougher than the banks wanted it to be so it didn't go as star-- they tried to block portions of it. and so their money didn't achieve all of the objectives they wanted to achieve. >> this is actually -- >> is that true or not true? >> it is. but let's talk about this for a second because this is actually one of the major chapters in the book. you know that in a fighting chance i talk a lot about my own life story early, but i talk about the fights. and one of the fights was the fight to get the consumer financial protection bureau. just a reminder. what had happened by the early 2000s, the biggest financial institutions had figured out that they could build a profit model around tricking people on mortgages, on credit cards. and basically, there was nobody who would call them out. so they kept handing out --

>> who should have called them out. >> their regulators. >> rose: what regulators, the federal reserve. >> the o.c.c., the feds-- office of the controller of the currency, the fed, the f.d.i.c., the regulators should have been out there and qawl called them , but here was the problem -- >> this went from administration to administration to administration >> it did. this did not just happen on one watch. this happened really starting in the 1980s. think of it this way, we come out of the great depression, we put tough new banking regulations in place. it works for about 50 years. we build a strong middle class. starting in the 80s, starting with the reagan administration, deregulations the watch-word of the day, and there's less and less oversight-- glut but it continues through the clt administration. >> it continues through the clinton years. >> rose: bush and then obama.

>> and then what happens is they have now sold enough banks enough toxic mortgages to bring down literally millions of families, and they particularred them and sold them out into the economy and to pension funds and all kinds of other places to bring it all down. >> rose: you make an interesting point because we thought of the crisis as about shaking the financial system to the core. it was shaking lives to its core. >> that's the reminder. you know, all the way through this book, i talk about the big banks. i talk about after the crisis how it was that they fought back against the regulation. do you know at one point they were spending more than $1 million a day in order to lobby against financial regulation. and this was after the american people had already bailed them out. but what was teplitzky core of this, and what i talk about in here, were the families who just got slammed. you know . >> rose: easy credit and then

couldn't afford it. >> it was worse than easy credit. there's a woman here-- remember, i was doing studies all the way through this, serious, empirical studies, had good coauthors at other universities around the country. and there's one person in particular i talk about in this. an older woman who was in one of our studies in 2007. and she had called the office-- she had been in the office and been picked up because she had filed for bankruptcy. and she explained her story about how she and her husband had moved to this little town in the south. he had passed on now burkts she was getting along okay. she could manage on her social security. then the nice man from the bank called and told her he could lower her payments. and at least the way she understood it, she said to him, "but what if the interest rates go up later on?" and he said, "i'm a banker. i will know these things, and we'll put you back in your old

mortgage." and then she said he never called. and so the payments shot up. they were bigger than her social security check. she tried borrowing, holding it together. but he was the part, charlie. she called because everyone who participated in the study who did a long questionnaire, we offered them $50. they would get a check, and the check had to be mailed after it was processed some time down the line. she called us to say she was going to be moved out of her home in a few more days, and she would be living in her car. and she wanted ton how she was going to get her check. that's what the economic crisis of 2008 meant. it was-- it was people like this-- this retired woman who lost hear house and at least for a while ended up in her car because some banker made quota

by calling her and selling her an exploding mortgage. >> rose: i totally agree. and not only that, i know people who ran small businesses-- >> i talk about this in the book, and i talk about small business lending. because you know what really gets me about that story. that was happening when the united states taxpayers were shoveling money into these huge financial institutions to stabilize them and here was the big mistake-- doing it on a no-strings-attached base. so the money came in from the taxpayers, and the big financial institutions, we were told, would turn around and lend it to the small businesses, would turn around and help people like the homeowners who were in trouble. instead, they held on to it. you know what some of them did with the money? they bought other bankses. they expanded their reach rather than using that money to help heal the american economy. today, those big financial institutions that we were told

in 2008 were too big to fail, today, they're 38% bigger than they were back then. >> rose: clearly that's what happened because of all the things that we talked about during those years, and especially in 2008 and what had happened with derivatives and all the other kinds of things happened. but then you had first under the bush administration administration, paulson, bernanke, geithner. then later you had under the obama administration, a different treasury secretary, geithner, same fed chairman, bernanke, and i forgot who was teplitzky new york fed at the time. they get a lot of credit for saving the economic system. do you agree with that? that what they did in the emergency situation, they made hard choices that had to be made. my question, do you agree with that assessment of what those people did in those two mrpgzs?

>> as i make clear, when there was only so much time and so much money to go around, they saved the largest financial institutions. they did not-- they did not focus on american families and small businesses. >> rose: so we're now talking about not the banks who made the loans. we're now talking about what happened when we had a financial disaster that affected everything. >> yup. >> rose: what should they have done? >> they have put that money into the banks with strings, strings attached. let me put it this way-- whenever a big corporation gets into financial trouble, outside this crisis, when a big financial corporation get into trouble and new money comes along to be put in-- whether the couple ends up going through chapter 11 or not-- the new money always says there have to be changes here. what kind of changes? you wipe out the old shareholders. you make the old debt take a

haircut pup change the management. and you make sure they've got a new and different business plan. why? because it disciplines that company to run a different kind of organization, and it's a signal to everybody else. it says, listen, c.e.o.s, if you run your business so you're going to need outside money, then it's going to be your job that's going to be on the chopping block. that didn't happen in the bailout in 2008. basically, henry paulsen, followed by tim geithner said, "take our money, please." >> rose: have you never met a banker you've liked? >> i've met lots of bankers i like. >> rose: do you think everybody on wall street is part of the problem? >> look -- >> because that's one of the things they'll say to me, i hear all this time-- there's a lot of things that we're trying to do. yes, we're trying to make a

profit, but it is not as brutish as elizabeth warren would make us-- >> all i can say is they continue to fight the regulations. they continue to fight to create as many loopholes as they can in everything that gets written -- >> but that happens in everyone industry, doesn't it? >> that doesn't make it better, charlie. >> rose, of course, it doesn't. the money that talks from financial institutions also talks for automobile companies. it talks for a whole range of other companies-- pharmaceuticals. oil. >> absolutely. that goes back to -- >> because it's money talks in politics and in washington. >> that's the heart -- >> to get elected. >> that's the heart of why i wrote "a fighting chance." because we now have in washington concentrated money, concentrated power, making its voice heard day after day after day on issue after issue after issue. and you're exactly right. it's not just in banking. that's where i experienced it up

close and personal and talk about it. but it happens across a range of industries. and ordinary families, regular families, hardworking people across this country are playing on a playing field that is increasingly tilted against them. >> rose: tell me about it because it clearly influenced you. >> it did. i grew up-- i'm the baby. my-- the late-in-life baby. my three brothers by the time i'm 12 are off in the military. by dad was selling carpets. he had a heart attack. and it turned our family upside down financially. a long period of not working, the bills piled up. we lost the family station wagon. we were right on the edge of losing our home. my mom was 50 years old. she's never worked outs the home. and i remember the day going into her bedroom. she had her best dress laid out.

she was crying. she pulled that dress on, pulled that zipper up. it-- the dress was probably about 15 years old. she rubbed her eyes, put on her high heels, and went out the front door to apply for a minimum-wage job at sears. because back then, a minimu minimum-wage job would at least help you make the mortgage payment. she saved our house. she did what needed to be deputy. now, there's no 12-year-old who sees that and it doesn't change your view of life forever. but here's the thing, charlie. there was no money for college in my family. there were no opportunities that were going to come like that. i ended up in the united states senate. and how did that happen? it happened because i could graduate eye got married at 19, dropped out of school. i ended up going to a commuter

college that cost $50 a semester. i ended up going to a public law school. i grew up in an america that was investing in kids like me. we had a whole period in america-- about a half a century-- when the first thing that our politicians in washington worked on and thought about was how it grows the middle class. those investments made in education, in a g.i. bill, in loans and state universities. those investments in infrastructures-- the highway system, the power gridz that we built. so a small business could get started and there was a good infrastructure to back it up. the fact that we believed-- this is what made us special-- to build a big pipeline of ideas. we invested in medical research and scientific research and engineering research. because we believed out of those innovations there would be

opportunities for kids like me and other kind of kids. and that's what happened for 50 years in america. as our country got richer, our families got richer, as our families will got richer, our country got richer. i had a fighting chance. i ran for the united states senate. i wrote this book because that's not where we are now, and that's what we've got to get back to. >> rose: i'm going to talk about that in just a moment. >> okay. >> rose: tell me about-- you very much wanted-- having created-- as part of the financial-- new financial regulatory system, a consumer protection. that was your baby. >> yup. >> rose: you wanted to run it. >> i did. >> rose: the president did not appoint you i assume because he did not think you would be confirmed. >> but you know, charlie, look how it worked out. it turned out pretty good. >> rose: mom would be proud. >> i now have the incredible honor of representing the people of the commonwealth of massachusetts, and i sit on the

banking committee where i have a chance to help protect that agency. it kind of worked out. >> rose: fair is fair. >> uh-huh. >> rose: and the man you defeated is thinking about running for the senate in new hampshire. >> yeah. >> rose: what about that? >> you know, all i can say is he's gog have his hands full with jeanne shaheen. she's good. she's good. >> rose: it is also said you have become the great hero of the left in american politics. is that accurate? >> you know, i think that's-- that's pundit talk. what i do believe is true, though -- >> regardless of where it comes from, is it true? >> what i believe is true is that there are a set of issues we have to stand up and fight now. this goes back to this core notion of the rich and powerful are calling the shots in washington. they've got money. they've got power. all we've got on our side is our voices and our votes. and so it's time to level that playing field. consumer agency. good first start. but there's a whole lot more we

need to do. in fact, let me tell you a key one. colleges. it starts with me. my $50 college. today, most kids who are going off to college do not come from family where's somebody can just write a check and pay for college. so the united states government comes in and says we'll send you the money. i think that's great. i think that's what they should do. here's the deal. they say we want you to pay us back not just the funds of the funds and the administrative costs and the bad debt, we want to double that or in some cases nearly triple the amount of money to produce billions of dollars in extra revenues for the united states government. so in effect, what we've got right now, is a system where the united states government is making billions of dollars in profits off the backs of kids who are trying to go to college. that is obscene. that is wrong. so one of the bills that's going

to come up next month-- we've got this thing scheduled. we're going to be out there talking about is. is we've got to refinance the student loan debt that's outstanding, bring that interest rate down-- look, people refinance their homes when their interest rates are low, their business -- >> what is the supply-demand equation today in terms of housing stock? >> so, we've got a problem. young people-- this is how the pieces are tied together. young people are not buying homes teplitzky rates tha at thd predict. when they hit 30 which is when they start to buy. they're not buying them. the studies show too many of them are weighed down with student loan debt. a lot of kids have to pay an equivalent -- >> i thought a student loan was a good thing. >> not when you charge too much. not when you choke these kids on

students loans. a lot of these kids have to pay off the equivalent of one full mortgage before they are dead-flat broke. >> rose: the income ipequality issue it's pope is talking about it, the president is talking about it. what is it, in its most obnoxious tone for you-- not the language, but the essence of income inequality? the richest 1% have just gotten richer and richer and the other 95 have not kept pace-- 99. >> that's right, that's right. the hardest part of this for me is the people teplitzky top have all the chances in the world to build what they want to build. and nobody else even has a fighting chance. i had opportunities. i was the daughter of a maintenance man and i had opportunities -- >> and you had a brain, too? >> yeah, and i worked hard. but i grew up in an america that

was creating opportunities. it was investing in kids. >> rose: but you think we're not longer creating opportunities? >> no, we are not. >> rose: secondly, when you look at this, do you blame capitalism? is it the american brand of capitalism part of the problem? >> i think -- >> do we need to have more regulation? do we need to have a hard look at what capitalism does and how it works, in your judgment? >> oh, we always need to have a hard look at all of our policies in this country -- >> i'm not talking about washington now. i am talking about the essential economic system that has brought the united states to the place of economic leadership that it is. >> but that in part are the rules in washington that make the difference, charlie. you put a cop on the beat on main street. it means nobody steals your purse. >> rose: right. >> you put a cop on the beat on wall street, it means nobody steals your pension. the decision about whether to have a cop on the beat will

profoundly affect how much stealing goes on. we've got to have fair rules. whether or not we invest in our schools will determine whether or not kids are going to have real opportunities. if we invest in infrastructure, we'll determine whether or not small businesses have a chance to grow. those policies are not divorced. >> rose: most people understand that billion investments-- investments-- in infrastructure, investments in scientific research, investments in human resources are essential to our competitive place in the world. >> yes. so then the question becomes so why are we cutting back on all of those? think about that, charlie. you're exactly right. everybody understands that we need to make those investments. >> rose: you're in the congress. tell me. >> oh, i'll tell you exactly why. because the rich and the powerful are hanging on to their privileges.

if we-- we need the money to be able to make those investments. so we propose closing some of the tax loopholes -- terrible tax loophole use oil industry makes $170 billion in profits last year, the big five, and yet still sucks down billions of dollars in subsidie subsidy subt the same time we can't get refinancing for our college kids. >> rose: do you believe that the principles you believe in-- cha might be called a populist agenda-- is the majority opinion in the american body politic? >> oh, i'm sure of it. >> rose: then why does it look like we may very well elect a republican congress, a house, again-- majority. and may change the power balance in this senate as well? >> because money talks in washington. it talks in elections.

the supreme court has just said it can talk even louder. that's the heart of it, charlie. the game -- >> so money in politics. >> it is. >> rose: the book is calle calledify." elizabeth warren, senator massachusetts. thank you. >> thank you, it's good to see you. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

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