>> ros welcome to the oadcast. tonight te peterson, the thor of "the education of an american drear. >> we've never had anything approaching these kin of defici. we have never en this dependent on foreign capital. you've gothe housing situation, god forbid that housing prices fl gnificantly because they can. ll y would houng pces fall because interest rates might well go up. why? because foreign lenders demand higher intert rates. soe have a whole new set of viables. >> rose: pete peterson f the hour next. >> funding for charlie re has been provided by the followin

captioning sponsored b rose communitions from our studios in new rk city, thiss charlie rose. >> rose: pete peteon is here. during a remarkable caer in business an politics,he has served as commerce secretary. chairman & ceo of lehman brothersand chairman of the new york deral reserv he also co-found the ackstone group one of wall stet mostuccessful ivate equity -- equity farms -- firms. last year he retired from the firm a senior chairman. today hilife is focused on what heays is the threat

of national insolvency, he committed 1 bilon of his for tune into his undation to raise awareness about the country'fiscalhallenges. he just published his tobiography, it is called" the education of an american drear "how aon of greek immigrants leaed his way from a nebska diner to washinon, wall street and bend. i'm pleased to have him here athis table. welce. >> thank you, arlie. >> ros back, i should say. now i want toalk about many things. ani want to come back to the book. t was writing the book cathartic, was it dficult? how did you approach it? >> you ha only covered half of it. it w exhausting. was like tt dk cloud, younow, of who was it, not pollas in the cartoons hanging over youhead. u wake up every day say what am going toe done with this da thing but you can't not do it, you know. >> rose: yes. >> so one of the happy days

of my life is when i turned in the manusipt. >> ros how did you go abouwriting it? >> wl, i did it a nights. and i did it on ekends because i wasworking at blackstone at thtime. >> rose: but, d what was your -- you read lot of moirs. and many of tm as you have said suffer fro heavy doses of bored d an inability to find any weaknesses and flaws their life. >> i would say sective recalls -- and so i tried to think ofome things that uld embarrass me if they were known. and they -- i said to myself at a 82 what can anybody do to me anyway. so whyon't i jt let it hang out. >> rose: just t it go. i an the things that's here that ny people are struck by cluding reviewers and you got a ry good review in "the wall street journal," it isthat you talk about personal failings. >> precise. >> rose: in buness. you talk about failed marrges. you talk abo being a

workahol. speak to that. >> it has the virtue of being true. >> rose: to coin a phrase from henry kissinr. >> right, rig. >> rose: but when u look back thereas one thing that bothered u. whatever the responsibilit are to familyand children and marriage. >>eah. well i -- admitted something else that i wa told i shouldn't admit and at i had a very intensive psychoerapy. >>ose: right. >> bause i began to realize that i waseurotic and i was obsessed with achievement and work. and i ied too back and understand whe did this come about. and we finally concluded the followg situation. my father was a greek immigrant, comes over at e 17. has a few pennys inis pocket. doesn't know a word of english, third grade edation. goes to nebraska and tak a job nody wants. namely, washing dishes in e caboose of a railroad.

hetakes that job in that steaming kitchen. he sleeps there. he eats ther and saved alst everything that he ha and then he open up the inevitable gek restauran, 24 hou a day, days a week 365 days a year for 25 ars. and when he nally shortened the hours, head noey to the front door because it had never closed. and heas kind of mymodel of the work-oholic. and kind o the greek husband, you know, in which he's the paternal figure. and he's the number one figure. and he the one tha ovides. >> rose: so the psycho therapy was that you we nstantly trying to measure up to your father's stanrds? >> well, that was part -- that was par one. part two was t folwing: my mher was again, a wondful greek wife. and she had a daughter. and through r daughter she was rebn. and tragically, my sister

died a age o. and my mother went into dee melancholia. and as a child you think are you the center o theolar syem an youe responble for everything. and i must have done something that causeher abandome. which of course is ridiculous. it's irrational. i hado come up with a strate, charlie of how do i t her attention. so i dided i would get her attention by gettingore gold stars, better grades and achieving andchieving and achieving. and that doctor ceaid to me is a knew row sis an endlessepetition of an obsolete feeling or exrience. and i watrying to get her attention. and who would my re model be. well, i gss it would be my fath. so they kind combined in a quiet conspacy to create this hum being, if thas at i was, tt always had to be a supachiever

regardless of the pernal cost. >> rose: in terms of the cost to family. >> ct to family, and a marriage, ye >>ose: why does it take l of us so long to realize those things? >>ell, do you want to have a discussi of psychotherapy. >> rose: i do, yes. >> we hide thesthings from ourselves, charlie, because they're painful. no one lik to admit, do they, that theye neutic. no o les to ait that they arebsessed with something they shouldn be obsess with. because it revea a certai weakness, a certain lnerability and so forth. and i used to, finally i decided to have double sessns because when you are as verbose as im, you know - >> rose: you need a lot of time. >> the first 50 minutes can kind of talk myself and talk him avoid t ier hard realities. >> re: how often would you do thi >> o, twice a week for two hours. >> rose: is that rig, and it really -- >> it ally made diffence, made a huge difference. >> rose: made u a --

>> i deced in this book i was going to let it all ha out. and'm perfectly are of the fact that wall street titens -- titans or whatever the hell mi shouldn'go around admitting that they are that vulnerable or --. >> ros why do you think that true? >> we, because we presen this ima of bei strong d decisive and self-sufcient and all that kind of thg. and i just decided i wld let it hang out. >> rose:ll right. i'm going to come back actual of that t a fascinating story. but let me go to today, the global economy and tell how you think it is, and what you think -- how you think we're doing. because for a whilhere people were sayi well maybe the recovery maybe we bottomed out. now when you look what the world bank is saying and you look awhat waen buffett isaying and others, not soast. it may not besuch. what does pete peterson say. >> i tl you what pete peterson is principally concerned with i guess you ha had somebody on the show from the ill-named peterso

institute. >> rose: yes, we have. >> and the foundatio asked et peterson institute if theyould put their brigest guys on the question of wher amera's foreign bt is going. and charli, was enoug to really, soberly wake one up. thnumbers were totally unsuainable as to t foreign debt. and we've develop this dangous, and i think dysfunctiol dependence on foreign capital. and what ccerns me as much as athing, if we don't start getting our act together, is the foreign lenders lo at oururrent deficits which i tnk are going to be at least $2 trillion. anthen they look at the long-term entitlemen oblems and so forth, and see us doing nothing. and ju say, you know, i don'have much confidence in what thes people are doing. w why don't i just n just withdrawll my current money but just be muchless willinto lend or --. >> rose: stop taki any more american de. >> yeah or have higher

interest rat. onceou have higher interest rates, you' got inflation, you havthe housing isis being re-energized. and that is the one to me big vulnerable. yo have had paul volker ny times for whom i have enormous respect. he thinks the chanceare 75% --. >> rose: that in fact th will stop lendinmoney. >>hat there will be a doar crisis in five years. 75% chan. and wh does that mean? rose: the dollar falls suddenly, terest rates go way up, inflation recession, housing oblems all over again and so forth and that's the vulnerability. and this country has just goto learn toave more. which means the government not dissaving, and more peonal savings. we just can't continue. >> ros but in the mean tim we need a stimulus to get the economy moving. >> that's right. t i think weeed to send a signal to the foreign lends that we also are aware we ha aonger-term problem that 've got to move on. >> rose: okay, l me just talk about thafor a moment. because of your own experience for a number of ars you

were on the board the sony corporation, the japanese. china has t most amecan debt. japan, ihink, is second. >> sond. >> rose: whado they tell you,ecause there was a time, the lastmonth in which one of the inese officials said we hasome concer about america's future becau of the economic crisis. >> precisely. so what are they saying you now, what sign would say to them we he to pull back. >> i had a senior cnese ofcial that i have known for 30 years. ca me the other day and say he wanted to come in for a strictly ofthe record meeting. and he said peter, you've been concerned about the debts and deficits for me time. but the numbers we're talking about now are in totally different category you know, it's on thing to talkbout $200 billion, $300 billion. are you talking about $el -- $2 trillion a year. now let me ask you a question. have you people aed yourself where's thimoney going toome from? and what pri do you think

people are going to charge for lending you this money? well, i id tell me about your point of view. he said well, i remind you first of all, pete, that our stimulus program is a much bigger stimulus program as a percent of gdp than yrs. secondly, i remindou that our expt revenues are dn 25%. and i then remind you that we've got a trilln 400 billion or something, whic an awful lot. and we're having to seriously conser what we'regoing to do. and i don't blam them a damn bit for feeling tha way. that's the vulnerability that i am most worried about. >> rose: oy, but -- what might trigger their decision? -- topending moneyo th united states, to stop ying american securities. >> tre could beconomic reasons. andeo political reasons, les take them one at a time. the economic reasonsould be, and u knowhen their dollar crashes they're often

cretary of treasurymakes a stupid comment or something happens that nites a loss of confidenc. we're not speing enough time, charlie, lookingt the geo political aspects. d i'm sure you've done that on this sw. do you recall in the '50s th-- well, you're not quitthat old. >> re: yes, i am. >> where the french and the british se troops in to egypt. >> rose: yes. >> take over the suez c all and at happens, of course s that weere then a huge creditor nation. we had hug amounts of french secities and british securities. and it was very much against our pocy to have a mitary intervention on th cana rose: right. >>o one of our top officialcalls the senior officials in great britain and france and says this is very mh against american policy. and i will tell you what's going to have to happen. unle you change your policy, we're goi to have to seriously consider

dumping a lot of your secuties. well, those economies were so vulnable they couldt tolerate it. ten days later ey pulled their troops outof the suez cal. >>ose: so economic policy trumped potical policy. >> precisely. and why couldn'the chinese do t samthing, why couldn't the mideast do the same thing. that's what i meawhen i sawe are dangerousl dependent foreignapital d we've got toave more. >> re: there is also this argument, it's always made, thehinese lend oney because we're a csumption society d they can sell theiproducts to us. anthey need our markets and it's a very nice, cy little relationshi >> wel let me tell you how thchinese are looking at it, if i'm hring them correctly. they n understandhe long-term unsuainability selling this much to us d our borrowing ts much. becausthere are unsustainable levels incidentallyunsustainable, i was in a white house that had an nixon humouro that

is a rather oxy moronic concept named herb stein. >> re: yesindeed, the chairman othe council of economic advisors. >> remember, if something is sustainable it tends to stop. but he also said to mene day if yr horse di, suggest you dismount. and we'reriding this rse as though we can keep borrowing and borrowing and borrowing. the chinese kw that. so what arehey doing? they're putting tremendou resources and stimulatg domesticemand. and that's exaly what they ght to be doing. they're very, very smart. >> ros what's interesting to me is even the bigr picture than this. there was recently a meeting in russiin which youad china india, prime ministers of both. prident of one, prime minister, u had brazil a russiaeeting, you know, to whether, wre are we in term of ameca's role in e global economy. d in ter of t trends for future growth in the developing world.

>> well, i w talking to fareed zakaria t other day about the nkage of economics an foren policy and the dline of nationsmt and he took me rough each of the declines that havtaken place in the world. >>ose: in the history of civilization. >> rome and ain and great itain and so forth. and he sd in every single case, e triggering event was debt that just got to be excessive. and that's the position 're moving in. >> rose: so the deficiwe are havingoth in terms of the current accot -- >> theoreign debt, the foreign debt. and incidentally -- >> thefiscal bts also reaching htoric oportions. >> it ntributes mightily to that. and then this peterson institute study they d, their conusion was very melancholy. the numbs were so bad in five or n years where we start loing like a developing country that they in turn said that long before it hits these numbers there will be crisis. >> rose: okay, but you are saying to the question at often is said, the chinese

need our markets. the chinese don't need our markets d don't believe overhe long run it's a good idea for them toe dependenon american maets. >> they're now putting much more emphasis on destic demand which theynow will take time. th're not putting a -- and they are n putting a lo emphasis on encraging trade in the -- with the other asianmerging market countries. >> rose: wn will china have the lgest economy in the world? >> oh, how do know? it dependsn whether we get our act togeth, frankly. >> rose: speakg of getting r act together, what is your assessmenof the obama economic poli so far. an especially in e context of what we a talkinabout? >> wl, they willno alternative buto have a stimulus proam. anwe can spend the rest of the day arguing whether it's precisely the rit mix. but they were deing with some political realities. and i'm suref they had been ablto tailor the program, they woulhave done it differentl what concern me --.

>> rose: politic realities being the congress. >> wt bothers me more charlie s that we're taking on the health-care pblem. and that is clely the biggest problem i the world. the medicare unnded prises are a stunning $35 trillion, five times as much as sial security. so he's right to say health-care cos. the question is, what are th doing to reduce the cos long-term? >> ros well, they say that they are building in preventi as one thing. >> buildg in prevention. but whdon't we talk about some other problems. angiven my senior age, i brought little card to make sure. let's go tough them quickly. >>reporter: all rit. >> there are se long-term struural problems with our health-care system. it is going to take us a lot of time and paito fix. rose: like? >> we're the oy country in the world th haso health careudget. it's totally on-ended. and let her r. secondly there are variations that ta place

between regions in this country that no company in the world woul permit. ere we have six times the back orations and six times theprostate removals. whdo we have that? cause we have the most perverse incentive syst. u and i couldn't have defined ones at's more perverse. on the onehand, the consumer of the product pays nothin it's free. on t other hand, it's loaded with produres, visits, tts, all kindsf things. and th providers have found out somethinquite obvis, the more ty do, the more they prescribe, whether it's over, themore money they make. so they're doing, somebody s got to do something about that idea. we've gothese tax subsidies wre fat cats like chlie -- rose, i belie your name is. >> rose: i think so. i just rember i had a stock offeng in which i brought in 1 billion dollars. >> well, hypocrisy ot

something i ha totall lost. then you have a -- there's a ghly encouraging thi taking place, ich is what they call integrated healthcare. d they've discovered that places lik mayo and others can achievwhat we ought to be afteretter health outcomes and --. rose: but how do they do that at ma, for example. >> how do they do that? >> rose: yeah. >> because they thinof the patient in anintegrated way. i just had one of mylosest friends whis having major surgery tell me, a kind of a bizarre case in neyork. he's goi to haveajor surgery on hiseart valves. he's a pern that has had some health-care probls. and he discovers thathe heart surgeon has ner talk to his cardiologist. >> rose: i jt find that rd to believe. i know -- >> but it happens,harlie. >> rose: i know e person are you talkinto. and i' early -- he speaks the truth. budoesn't that -- confound you that a cardiologis and surgeon woul not have a coersation. >> it se does. >> rose: and that's your

point. >> but you see, in an tegrated healthcare clinic system t data are all there. they're organized aund the patient. someing else. we spend 25% to 33% of the medicare budget in the last months or year of le. nobody wan to talkbout th because it raises some very central issues. but other countries have lookedt that problem. litigation. >> rose: all right, but so i ar you. and i hear you whe the weaknesses are. what would be the peteon recommention for a health-care rerm and when? >> okay. given thate already hav $2 trillion deficit, i would have either said we're going to demonsate up front that 've got the alth-care cost problem on it way. anhere's how we' going to reform the sysm. and nk it to a new system instead of sayin we're going to have universal health ce and in some rather mysterious way, health-care sts are going to be reduced.

chare, there are a lot of health-carcost chaes we can make without hing universahealth care. and why is thathe case? because politicall, we beco a country, haven't we, where sacrifice is politicall terminal. where asking people to give up something. and we with an't going to solve the health-care cost problem if we're overprescribing and overoperating without us giving up me -- se treaents that may have some benefit. but what does that arise? the questi is rationg. well, what on earth isnot rationed? thisorld? >> so howouldougoabout rationing health care? >>ell, for example, we ought to have a health care budget. if y have a budget what does that result in anyou're not going to spend more tha this, is the people running the program have to cide where they're going to put the money. you remember what happened with oregon in the early bushne administration? th were going broke beuse medicaid, you kn,

consumes a lge part of e of t budget and the states have half it. thos fine people list 715 diagnostic relat groups which is theeason you go to hospitals and ey listed them. d they said we're only ing to spend so muc money. and we're not going to spend money for these purposes if weun out of money. so if u want a second liver transplan because you'ren alcoholic or whatever it,we're not going to do it. we're not goi to spe money in t last months of life for her oic intervention if i doesn't improve the quality of life. so a good place to start is why don't we have a buet for health ce. >> it is inevible though thathe government -- that we wilneed to have vernment healt care comping with private health care. >> whether it ishis community progm that senator conr is talking about or some -- and i uldn't -- i wouldn't mind trying out two or ree ways

and finding out which is the best way to do it. >> b should it be deferred because of t cost of health ce today and because wee got all the economic issues th you talked aut? and not be part ofs the president says, we need to fix these thingnow. so he points to health car and educationnd climate change as things that need immediate attention. >> well, i'm t sure why they need immediate attention. indentally, i'm for universal health care, perhaps phased in. if youant to ask where i thinkwe're going to end up her we're goingo end upith the cost concerns e so deep now given the normal bget deficit, we're going to probablyave a smalr program. we may have to phase in some stuff over two, three years. t if i read congress, they've been frigened by t statistic, a you know aa deficit, not for some time --. >> rose: you are wh they call a deficit haw >> wel, i think- closer

to the reality. but you saw the studthe other day, and iever thought i would see this, where e american people said their concern over the budgeteficit jusdue to the sheer magnitude is me important than smulating the onomy. i never ought i would hear such a thing. d don't think that congress-. >> rose: but do you think they are rig in that judgement. >> it doesn't matter whher they are right. that is the polical reity that congress is dealing with. >> rose: so congress now reizes it has to deal with thdeficit. >> with the cost and charlie, e of the odd things i let'sssume we achieve a macle for the moment. and have a deficit neutral objective here, that the heal-care costs savings are at least a much as the added costs. >> rose:o it is as the president says deficit neutral. >> let's assum we do th. we still have 56rillion dolls of public debt and regular social security and medicare deficits. what aree going too

about those? and it is that realization of what e future holds --. >> rose: but here's what is intereing about, i mean you have been speaking about that for a long me. >> much o long. >> rose: no, you haven't. and people gave you credit for it and you've written books abt it,hey're not as interesting aut this on but you have. >> y remember the great line, don't you. once you put it do, you won't be able toick it up. >> rose: ed soreensonaid th. bu you've beennthis case of theuture danger peril of our entitlements. >> that's right. >> rose: cllenge. thisresident for the first ti is talking about -- >> he's talking about it. >> now the question what action ought he take? what should be e action that backs up the recognition of thessue? >> i would do twohings if were inharge. first of all, we need a process here that is politically more likely to be scessful. you know how welose military bas.

>> you appoi a commission. >> and sufr down vote. i would personally and my foundati or ouroundation has pposed just such a mmission that includes entitlements and tax reform and budget processes. we need the following three things. budget process we have to do what they didn the '90 that w very succeful. we had snding caps. which we remember we got rid ofin '02. secondly, we have toet u aoncept here or somhing, of puttingeverything on the table. because you know, i'm a rockefelr republican. the are two of us left. >> rose: not many of you around. >> maybe davidnd myself are the only two. i'm not sure aboutavid at the moment. but what happened ther is we tied spending caps pay as go rules. and a resul we couldn't increasepending unless we figured out how pay for

. so you needudget processes. >> ros the president supportive of that idea,s he not? >> wl, heays he is. t's see it. i have grea admiration for this man but i want to see him start taking some tou actionwhere we ask americs to give up something. and youan --. >> rose: but let make sure understand what you mn by that. what should hesk the cotry to give up? i mean clearly you' said they havto phase in healt care. that'sne thing. >> allight f you put the spending cs and the pay as you go rules it's going to force us to give up so stuff. >> rose: social spending >>n spending generally. >> rose: defense. >> across-the-bod. nuer two, tied with pay. numberwo, i would seup this commission anput everythi on the table. becauswe now have a triangle that justoesn't coute. my repubcan friends have never t a t cut they didn't like. and the democrats have had trouble seein an entitlement program they didn't want to spe. >> rose: well, this president campaigned on a middle class tax cut b the people who made more than

$150,000 -- what was the number. >> ical 250,000. >> ros is that a wise tax policyn your judgementor no >> well, we need to look at our whole x policy. and i, for example, among others wouldike toee me tax refo in whi gets at the basicroblem of this country's saving mor, which is a very important part of this country problem. and that suggests to m some nd of progressive consption tax. so i would like to have this commison --. >> rose: aales tax. >> a sales tax but progressive so that th poor didn get hurt. i would like this commission not just to look at the spending. becausthe democrats wl en say oh, all you guys wa to do is spending cuts. and chlie, we ha to face it. we need more revues. and fat cats like u and i e going to have to pay more as indeed are others. >> rose: oy. we need re renues from rich people. >> well, we need more revees from a lot of ople. inuding the middle and upper-classs. because the -- >> rose: so don' in other words,ou would not have

continued the tax cuts that the bush administrati had in. >> that's right. i was against the tax cuts to begin with. >> ros are you against the tax cuts forheiddle cls that preside oba -- >> yeah, but let me tell yo y tax increases aren't going to solve it. charlie, if you got rid of all the burke x cuts and body is proposing that, at i have seen, it's 1 percent of the gross national product. do younow how much t spending increases are for entitlements? >> rose: i d't. t i know you do. >> 9% of the gdp. if we tried - >> rose: so if we took away all the tax cuts we would only gain 1% and the entitlement oigation is 9%. >> so it time we tell the amican people the truth. of course we'rgoing to need someevenue increases >> rose: do the americ people have and do politicians have the politicawill to tellhem the uth. and should they be sced of the americ -- of the public's response because they don't have confiden in the government.

>>hat's one of the reass we need a bipartisan oup. you ow, i wasrought up in nebraska. wesed to somhing cald the fee sta shoot, orhe turk shoot. and the or turkey that stuck his head up, bang, got his head shot off. you can't make this partisan. itequires presidential leadership and bipartisanship. >> rose: so you're recommending this eving that the predent appoint a commission. >> right. >> re: to deal with all these broad range of issues and make recommeations on cutting -- on th cuttin spending and raising tes. >> on budget processe, on taxes, and on the benefits themselves. >>ose: who are we going to put this commission? would u chair this commission? >> well, there would be far better choic than i. rose: who do you want on the commsion. >> i am great respecter of paul volker. anhe would be a great guy, i think, to . rose: buffett, people like that? >> well, perhaps. i dot know how warren would feel aut it. but there e quite a few people i cld think of. sam nunn would be the kind of person who transcend politics. >> rose: let me tell you for

minute about what you are doing. you did ha as i referred to earlier, youe got a checone day for $1.56 billn. >> pretax. >> rose: pretax. >> i want you to feel sorr for me, charlie. >> rose: and so therefore, which was, yr timing was eck questionsi, a public offering of blackstone and you said i will sell a lot of my stock and you did. >> and said i'm going to put a billion dollar into a foundation. >>ose: that is what i am comingo. you said i wil do this foundation bause i think we need toave f the survival and -- the country as we know it, you ow, a hard look at our economic policy. so i am ing to fund fountion that will ma aware the political and onomic realities that we face. >> i'm saying there are several challenges tha are undeniable at are unsustainab. and thatre politically untouchable. and we not only have to educate the amerin public, charlie, we ve to motate them and act to express themselves politically. because at the presentime if are you polician, and you are conceed about the

next election, which you are ncerned with. rose: right. >> you've got to confront the fact thaif you ask people to give up something, it cts them when they get elected. soe've got to make it painful for tm n todo something. and wee going to spend a lot of money on advertising and mtv and we're trying to get young people involved. we've got video games. we got all kinds of things. we're trying to motivate the people, not jt ecate. >> rose: so you arready to goith that, thatrogram. >> we're very close to gettin and i would persolly like to see something a we're exploring this, 's kind of like the arican asciation of young people you ow. >> rose: sure. >> and say to them, hey, kids, it's your future. >> rose: well, ty showed a certain intere in politics in the 200 election. >> they d. now we got to translate that so ty understand that it's their futu that's beg threatened. >> rose: let me just dole back to two things w tk about. one su personally. but first, the economic picture today, i mean, blkstone where you -founded is a major private eqty firm.

its stock went --anked would be fair to say after it, the public offering. how do you see the economy today? today? in ter of, from the perspective of private eqty firms and your business as ll as other aspects of our econo? >> charlie, sie i'm not encumbered by being an economist it ey for me to sit here and pontifate. >> rose: the point is at you see threality of the economy beuse you're making hard investments. >> no longer. i'm retired. >> rose: i know, but you are awe. i know a you not there u got t and retired so you would have timto write the book. >>odesty is my middle name you know. >> rose: are you the onl person i know who said that reasonall right. >> rose: howo you saying it, for a while we talked about grn sprouts and maybe it's bottling o, bottoming out. and you know, larry summers said that it like something roing off a tablthat he thought it uld stop.

>> kmarmee, a lot ofthese economic foulas like a lot of projections arebased on the past being like e futu. the ture rather being like the past. >> rose: right. >> right and that assuming that -- assumes that in the past u had recessions and there's a sharp v-shaped rovery. and so that aumes that this situation is like t other one weave never had anything approaching these kinds of deficits. we havnever been this dependent foreign capital. you have got the housing tuation. god forbid tt houng prices fl signifintly because theyould. well y would housing prices fall? because interest rat might ll go up. why? because foreign nders dema higher interest rate so we have a whole new set of variables that make the future muc harder to predict. >> rose: okay, we've see from thised a mrtion, i wa to talk about the economy and all the problems that are confronted. but we hav seen this admistration try to do a

number of things. ona stimulus program. are you hay with tt? do you think that it is about right in terms of what it did oth than trying to do too much? >> well, iould have been much happier but it wouldn't have passed. sohis is aheoretical objection. if ty put more money in infrastructu which was goodor the future our onomy because an investment --. >>ose: that exactly what they say about education and healthare and climate change. >> well, i think thas far less lely to create jobs. rose: and also they say about infrastructur t takes time for ito kick in. >> except there ara lot of projects therehey could is have lined up. but it see to me that would have preferredo have more of it in at form. >> let's go to the fincial sector and what the have done in ter of the tarp ogram and in terms of what has happened there are they on the ght track there? >> well, i a prejiced observer. because i chaired the new york fed when we picked tim quitener. and i think tim quitener is one hellf a guyyself. >> and his choices have been

in terms of policy, implementations, treasury, have been aut right as far as are you concerned >> as far as i'm concerned, th had to do what they talked abo. th regard to stimulus ograms. what you and i d't know unless ween politics is what does it do to get the ogram passed. not what does the professor or president of e new york fed bank think has got to be done sitting in this nonpitical environment. >> but what would yo recommend ey do about all these toxic assets tha are ill being held by the banks. >> well, you know, you've t this whole concept of the gd bank,ad bank which runs you, are you gointo nationalize the bankor not. i'not an expert. >> but these are basic fundamental onomic things. yocame out of chicago. i mean you -- did you not to the univeity of chicago. >> i was presumedly educated there. >> rose: that's ght. >> and milton freedman was my hero, right. >> rose: buto you worry about toomuch government involvement in the private

sector today? or do you s i don'tike it but 's necessary. >> it's necessary for the mont. but what i want see is how we ex --exit from . >> rose: do you see an exit rategy. >> i sean exit strategy i we start rebuildinthe economy andaking some moves so interest rat don't go up and have another housing crisis whi worries . >> rose: ithis private public relationshi going to work tbuy these toxic assets of the people co in and take them off th balance sheets of the banks? ll the banks sel tm if? >> again, i'm prejudiced about tim quiten, if you re sitting where he was siing and he's got x 100 llion dollars worth of toxicecurities, dealing with the real world i ead of y and i sitting here talking, politilly, was he going to gto the congress and sahey, fks, i've discover another problem. wir is the toxic asset inventy isarger than i thought it was. and i'going to need $500

biion. >> rose: you're saying politically copt do that. >> there i't anyway in the world theyre going to gi him another500 billion. so what did he ? he had to leveragehe amnt by saying the public puts up something ande p some stuff onhe balance sheet. and it's not a direct yment. so i don't think he had many alternatives. >> rose: will that work though s my questi? >> well, we're about to find out, aren't we. rose: soon. >> soon, they're about to --. >> re: will blackstone be buyi them, probably. >> would youe buying them and i be buying them because they are trying tget all of us involvedif buying these securies. >> re: but people like blactone, a private equity firm, i'm asking a questn. prave at equy firms are looking these assets thinkinghey will make a lot of meyful lking at distressed debt saying is theranother fortune to be ma buying these things. that's precisely rightment and they're doing it out of necessity. because the credit financi is not there to fund g privatequity projects. >> ros so sovereign wealth fundand all that are not there any mo for you to go

in and g a lot of money from. >> that's right. >> ros what damage, or what dference, what's gointo be thempact of the economic climate on dge funds and private equity fds. >> it depends howuickly e credit crunch -- i'm in the at all cse but they te me it is still very hard to get lots of mon for finaing. and one of the reasons they're attracteto buying the securities is they thinthe upside is sufficient. th're not going to need emendous amounts of financg. >> rose: do yobelieve this is back to anoth question, that, you kn, if china is a savin country and wee a consumption country tt we can change our -- >>e have to change t charlie. we have to se more. there ju is -- whenou look at theseumbers and some day you ought to have somebody from the person institute to scarehe hell out of you. the des get tobe so big that youan't possiy get there, the foreign debt. so we have to csume less. we have to conme -- spend more. they'rgoing to have to builnor domesticemand.

it's just th simple. and it's very hard to do because their ctures have been built around . and has ours. >> re: let me move back to thisook. the education of an amecan dreamer, you nsider yourself a dreamer? >> is there such word. created this word in america. it's someone who has enjoyed the american dream. and lord knows i have. in my early days used to lk about david -- john d rockefeller, and thehad $1 million or million. if you think i had anydea, not only tha i wouldn't be a millionair but the thought having a tusand times that much. so i got myselfn a frame of mind what do i do with all this money, charlie. anthe first thing i looked at is maybe i could take did with me. i haven't been ableo figure out how t do that. second thing y don't spend the rest of my life, i'm after all, 8 years old, counting the money and trying to make a little more. whwould i want to do that? so looked arounat the people i reay spected.

david rockefeller, grge sorewes, bill gates, rren buffett, ted turn ter. and i disvered something. rose: they all created undations. >> theall created and put a lot of money in them. anguess what, everybody says it's me lessed t give and receive. well, iadn't realized until i taed with these people, it's fun giving money away particularly if it's about something you care about. so i have neverad a better time in my life. >> rose: butill gates ose, you know, global health. >> he chose global hlth. >> i chose these unstainable long-term challenges that we're not addressing. i've deded that's where my mission is and got a great guy running the undation t davealker. >>ose: your life, it is said that you deeply regret even are ang still about your lehman brothers experience. >> that n't really true because that turned outo be the bestbreak i ever had. >> rose: because it madeou

go out and start over. >> and srt blacktone. and -- blackstone and there's no way in the wod i could ha made a billi dollars at lehn broers, given what's happened. >> rose: i wl come to that. in fact, iant to come to that. but -- but will man brothers was -- at the time, i mn this a great sty. here's guy who h been secretarof the commerce. who comes to wall stet and he becomes ceo of lehman brothers. and then there is a co-ceo. and then all of a sudden s mont later, peterson is out. >> right. and imane how i fel because en i got there there were stories in the "business week," lehma back from the brink o bankruptcy. and i neve worked so hard in my life tsave an institution. ani was there f ten long, hardears. i cided it to share the wer and the glor with somee. and low and behold b five week after we setp this ing, this person says ie

got to besoley in charge i d a decision to make. was i going start all over again you know, in which rtain people i wa't in the trading busiss, would leave and go shall did -- i said to hell about it. i did that t years ago. and ey would call on me d say we want you to come back. and i saido, i d't ally want to go throu this again. and i was -- i believe in mb luck, charlie, tha luckiest thing thaever happen to me was sting uplackstone becauset would have neverappened hawe not had the coupt lehman. n't think i planned it. i didn't. >> rose: butere you scared at the time? were you worried. you had enough money, clearly you had llions of dolls at that time. >> had remarkably few million, if you wa to kno the trut i had aew million colors but that's all i had a the time anhow would i -- how could i have imagined tha little blackstone with four people could have developed into what it di i had two or three of the roughestears in life all over again. >> rose: you also talk here

about ing kicked out ofive. nt m.i.t.. >> yeah, i did. >>ose: what happened? >> well, i had nev been to new york. and one my close flends was jebroso pope, a powerful italian. and i hadn'tnown this guy had any money. he was so mest. and gi to newyork. and all of sudden this hick, country hick from nebraska is eosed to a great apartment at 10 45th avenue and going to th operas and broadway, you know, and l this stuff. d here is th country boy. and i got all excited aut thiswonderful life. and onof his friends was roy cohen, theinfamous r cohen. and m.i.t.idn't give a damn at the time abt undergradues. they were dog radar and clear bombs. d there was very --ery litt attention to the undergradues. d everybody in ou frernity was turning in term papers they'd neve written. and one day gene pope sai

my friend roy has a rm pape an you ani got to submit it. whdon't we use his. and i was abou 50% integryous as i frid on called it. and i said i'm going to take this paper andpend a lot ofime improving . he turned it in just as it was to another class. and i got caht. >> rose: how did y get caught? >> well, they oked at that time and they sd this isn't plausiblthat you did this paper yourse becaus roy cohen was this bright lawyer. and we honcepts in the like -- all thisindf tough. by questioning me they discovered i didn't know enough. >>ose: so you confessed. >> and again that is a piece of dumb lk. i wod have been the world's louseiest engineer. and inead i go to northwtern and go into busiss. and it was a fabulous break. rose: by age 32 you become the ceof bell and howell. >>he youngest ceo and so forth. so i think lif, who is this

guy, pluck et, wasn't itor pink -- somethg like tt, who said i see portunities as i took them. myife is a sers of dumb luck situatio. at somehow i took advantage of and ey turn out be the gatest thing the world. for example, why did i have a career in government that's changed my life? one sime reason, i worked at 39 south lasalle street and i wa walking home one day. >> re: in chi i can for thosof you that don't know lasalle street. >> 19 south lasalle street and there was e university of chicago. i hadn'tlanned on going there. and i said well wh don't i go he for night school. 100 feet from my office. so i went there d it anged my life. i met all these great professo. taught part-time there. and one of mycloseriends wa george schultz. and george schultz calls e day andays the predent wants to see you and the xt thing you know my whole lif changed. >> rose: was he then director of office and manageme. >>irector of office and

management. >> re: so you went to work r richard nixon. >> ahisssistant for international economsment and my who life cnged. now i had not worked at 39 south salle, had i not walked by 1 south lasalle, my caree would have been to e totally different. rose: what is the moral, make sure you getaught planerizing so you get kicked out of the colle. make sure you work in a certain ple so you will meet a certain perso, is this the mal of this sry >> if you ha duming luck and lord kns i've had lot of it, take advantage of it, and turn it into an portunity. >> ros okay. but be cand with me too out -- about thisdea of hard work and the sacrices u have made. mean would you have been able to the things you have done if you had not been a workaholic, if you had not had focused. >> two tngs hadn't happened. if i had noteen a workaholic, buyou can learn things too well, if you get my meaning. and if i didn'have the

parents i did. beuse what i learned from them is te responsibility for the future. save, and my father used to sa god blessim, because he loved erica, and tear was roll down his cheek when sangod bless america. he put in me the notion that i had a responsibili for the next generatio as well. and i had to, and he saved the moneand he used to say me, my son, i saving money so i can buy youhe best education money can buy. d i learnedhat less on so i'm a luc guy to have been born in this country and to have these parents. >> rose: well, first ofall, nixon, what diyou think of nixon? >> hwas the most complicated character iver met. >> re: because? >> he was in the first place u're going to have trouble believing is. how can a pitician be a mi an throp. but fundamentally he didn't like people very much. he pretended he didut he really didn't. he had remarkably few friends.

bebe rubosand apple nelp. one or two, one or two. secondly, howan a politician not have a sense of self-esteem. he didn't have a very develod sense of selfsteem. i've give you the example. john bodeen cway fm texa i used to watch john walk to the cinet room and nixon's eyes would lig up, tall, gregaous, good loing, booming voice all this kind of, you kno and nixon w, i don't mean it in a per j difficu sense,kind in love with him becauseeep represented what non --. >> rose: he want to make him vice preside. >> and then president. andjohn connelly could tk him into virtually anything. wage and pri controls, i will ner forget ou meeting atamp david where we wer-- we closed th

gold window, you remember that i was very ch involved in. but the wage and price controls. and herbtein and and other so-cled fiscal conservaves say a nixon, a republican adminisation is going to put in wagend price controls john connelly single-handedly convced richard nixon. so you hadthis -- and then u had this --. rose: but what is interesting about nin, st some stuffas out this week as they began to publish more and more of the tapeand everything else, anthe papers. he had thisthinghere he was a, there were ntradictions, very strong. >> when say complicated that's an understatent. but he also had a touch of paranoia. ani am often asked who is least favorite charact thatalace guard and that's a hard choice because there were two ree of hem. andolson was the one that i think in some ways had t most damagg effect.

and this was a very gss taphor. but he was what would cal a scab puller. and used to walinto t president's office and the presidt had a touch of paranoia. and would say you know, is son of a pit so-and-s let me tellou, mr. president, what they're dointo you. an shall tyou and the blood would start owing. and then out of that would come let's break into psychiatsts office and blow up the brookings, you know, all these hoible --. >> rose: did you hear any of the anti-sellityism that sometimes isuggested. >> no, but henry kissinger was jewish and sometes you ought have henry in here and tell you some of his stys that he hrd about anti-semitism. t they were there. >> rose:et me take the remaing couple minutes and asthis one question. you are at 82, 83, it is a great erican ory. you have done many thing beyo your businessuccess the council on foreign relations and lots of her places.

u created t person foundation. but young ople aduating from college today looking ahea at life, give me an essence of what yourdvice is to them. >> wre going to spend an awful lot of money and i ho a lot of imagination focusing on young people. becauscharlie, you remeer the o philosophy jo which the professor says to the class which is worse, ignorance or apathy. and someleepy kidrom the back ss i don't know and i don't care. the youn people do not know what confron them. they've got be educated about itnd we're gng to use the new media. i don't even do e-mail. and we got all these --. >> ros but i hear you on th i'm talking about somethg else. what kind of life dow nt to lead. whatre the principless ey need to carry forward. what are the things at peop like david rockefeller and othersave that you admire, take the men and won that you admire iluding your wife, what quality they have thatas enable them to ma a real contbution and

live a life that isoth admired and successl. >> well, my ceer advice costs you nothing. maybe that's all it's worth. but ere are several things i've learnedrom painful mistakes i've de. focus aadam smith said on your comparative advantage, focus on the things you do best. secondly as josh camel id, follow your bliss. your "passions". and whenever i have been involved in somethi i loved, that played to my strengths, that's when iid partularly well. then ask yrself how ch dow t from this country and how much haveouiven ba. and one of the reans i was ppy to pledge a llion dollars is iave taken a lot more out of this country than i have put back. focus on the future. we are great denyersf the future, arlie. we've becomeo short-term oriented. so instant atification oriented. that we don't think about the future any more. and ou politicians think only not about the next

generation, but t next eltion. so focus on the future. take responsibility for it, get invoed in public policy >> rose: the bk is called the education of an american dreamer, h the son o a greek immigntearned his way om aebraska dinerto shington to wall street and beyond pete peterson, thk you. >> tnk you, charlie. >> rose: thank you for joining us. see you next time. captioning sponsored b rose communitions captioned by media access gro at wgbh acce.wgbh.org