>> rose: welcome to our program. we begin this evening with the dramatic pre conference of congressman anthony weiner. >> i have not been honest wh myself, my family, my constituents, my friends and supporters and the media. last friday night i tweeted a photograph of myself that i intended to send as a direct messe as part of a joke to a woman in seattle. once i realized i had posted it to twitter i panicked, i took it down and said that i had been hacked. i then continued with that story, to stick to that story, which was a hugely regrettable mistake. >> i can only imagine what the coverage will be like tomorrow and now there will be a feeding frenzy to look for details and there will be competition between the "post" and t daily news and the local stations and not just the tough local media but this is where the national media is headquartered. it's compounded by the fact that this is not a press-shy member

of congress. anthony wynner is a protege of shuck schumer, someone who developed more power than his seniority would have alled him by being extraordinarily good both in the old media-- going on television and traditional formats-- but also new media. all of that now is called into question for him. can he continue to be an effective member the way he was before? absolutely not. the quesons aren't goingto stop for a whilet least. >> i think it's the very intelligence of these men like spzer, like weiner, how bright they are, how quick they are, how successful they are that gives them a sense of invulnerabily. that nothing bad can really happ to them because nothing bad ever has >> rose: we continue with an update from libyaby the "new york times" ldon bureau chief jo burns. >> i get the impression that this is a government that doesn't have any... many tools left in its locker. they are, of course, facing

rebel advaes in the west, in the western mountains. the rebels are only 130 miles east of here at misurata to the east. they have shortages, increasingly serious shortages, of fuel and so i'm told food. we hear that colonel qaddafi is more or less a fugitive in his own town, no longer staying, understandably, in his command compound here which has been so heavily bombed. moving at night from hospital to hospital. we hear from libyans that it's hospital to hospital to school to school to the homes of friends with a small entourage of bodyguards. >> rose: we conclude this evening with another "new york times" reporter, gretchen her gone zen. her book is called "reckless endangerment: how outsided ambition, greed and corruption lead to economic armageddon." >> four years after the crisis erupted in 2007, we still d't know the half of it.

and so what this book is tryin to do is first of all to assign some accountability. many of the books that we've read up until now have been sort of these ideas about this being force or an act of god. well, this was an act of man or men or men and women. this was not someing that just happened. >> rose: a program note. our conversation with davi mccullough will be seen later this week. tonight, mark halperin, roger simon, john burns and gretchen morgenson when we continue. every story needs a hero we can all root for. who beats the odds and comes out on top. but this isn't just a hollywood storyline. it's happening every day, all across america.

every time a storefront opens. the midnight oil is burned. or when someone chases a dream, not just a dollar. they are small business owners. so if you wanna root for a real hero, support small business. shop small. captioning sponsor by rose comnications from our studios inew york citythis is charlie rose. high political theater. it was interesting psychology, it was as much about motivation as politics but politics was

certainly involved. congressman anthony weiner admitted today that he had lied about sending explicit messages to women online. speaking earlier at a hastily called press conference he explained his behavior. >> in addition, over the past few years i have enged in several inappropriate conversations conducted over twitter, facebook, e-mail and occasionally on the phone with women i had met online. i've exchanged messages and photos of an explicit nature with about six women over the last three years. for the most part, these communications took place before my marriage, though some of v say took place after. to be clear, i have never met any of these women or had physical relationships at any time. >> reporter: should you renine? >> i am deeply regretting what i have done and i am not resigning. i have made it clear that i accept responsibily for this, people who draw conclusions

about me are free to do so. i've worked with the people of my district for 13 years and politics for 20 years and i hope that they see fit to see this in the light that it is, which is a deeply regrettable miste. i had not... you know, i'm going try to handle this and i haven't ruled out, perhaps, seeing someone. but i'm not blaming anyone. this is not something that can be treated away. this is my own personal mistake. this is not something... this is a deep weakness that i have demonstrated and for that i apologize. >> rose: house democratic leader nancy pelosi has called for an ethics investigation. joining me now, mark halperin of "time" magazine and from washington roger simon of politico. i am pleased to have this on this program. this is political theater but mainly it's psychology. to me. >> it is. this is a guy who was very miliar with social media. one the smartest people in politics, obably. you and i both know him well.

and he did something that he said today he knew was wrong and reckless but he did it. >> rose: y know politics and politician, this is not the first time this kind of thing has happened >> it's really the oldest story going, politician and sex and politician lying about sex. anthony weiner is one of the most experienced and greatest practitioners of using social medias a political tool an i think ve things he found attractive about that-- beg able to reac ound touch constituents and supporters around the country and around the world-- led him to use it for a different purpose and a purpose for which he could not account for himself today. >> rose: the interesting thing about that is he continued to use it ev after he was mared is it not? >> even after he was married and then, of course, compounded it by lying. this was a surreal event today. i've covered a lot of political events and press conferences of politicians under siege. this was a strange event? a lot of ways, including the fact that andrew breitbart, the right wing web meister who has played a big part in having this

story come out and having the pictures of congressman weiner publicized came to the press conference and anthony weiner was a little bit late, andrew breitbart took the podium and spoke from the microphone people were waiting for anthony weiner to come to and spoke about his role in the story. itas quite surreal. and the other thing is and, this is, again, part of the new media age in which we live, there was not a lot of congressman weiner's staff there. no one checked names at the door. so the room was filled with local and national reporters b also right win oggers and right wing columnist ins and a lot of the questioning came from people who where there with an ideological agenda and congressman wein was adopting that strategy. he started to get some pretty abusive question bus h had no choice but t engage with people who were not objective journalists but people with an agenda. >> ros but he said he won't resign. >> he says he won't resign. i think u until now no democra has called for him to resn. it will be a lot of presse on

some democrats, nanc pelosi, the hous speaker, has ca for an iestigationnto whether he violated the house rules in any way. i think that the if he told the truth today and if no democrat calls for him to resign he can probablyold on to his seat but those are big ifs. >> rose: roger simon, welcome, it's a pleasure to have you here. >> thank you. >> rose: sow what do you make of this? we're more interested here in the sense of the psychology and theater and than... what do you think? >> i think unfortunately for him that even as rough as this pre conference was his troubles may have just begun and this may not be the last press conference he is forced to have. he has legal problems ahead, political problems ahead, and personal problems ahead. on the legal front he seems to have avoided the big pitfall committing perjury, which is w he would not talkto the capitol

hill police, why he would not talk to the f.b.i. about "being hacked." because he knew if he had talked to those law enforcement agencies and not told the truth it would have been the crime of perjury. okay. so he skated up off of that one. bunow he has the problem of not knowing where these pictures really went. he was asked if he knew whether all the recipients were adults and he says well he thinks so but on social media how do you really know? well, that's why you shouldn't be sending those pictures to strangers on social media. if any of them went... it's not a crime to send lewd pictures to an adult. it is a crime if you send a lewd picture to someo who is underage to a child and it's a serious crime. and i would guess that somebody going to be compelled to investigate to whomever picture went and to determine the age of everne who received such a picture.

then, as i said, he has political problems. he has to face... he wanted to be mayor of new york, it's no secret. i think he's going to have some difficulty with that. then he has to worry about his whole... his own reelection and he... he came close to saying what i think people wanted hear him say but because he was aubliy elected official, he couldn't. and that's to say, look, i have a problem. i have a psychological problem for which i am going to get help. if he was in a normal job he could have said that and the public would have applauded. but how do you run for reelection saying, "by the way, i'm running for reelection but i'm also going through psychoanalysis." it's a you have to row to hoe. also on a political front-- which merges with the personal front-- it has become necessary in these american psychodramas

to have spouse-- which usually is the woman-- stand by her husband's side. we have not seen that yet. it is still early but don't forget maria shriver got her husband electeto the governorship by going on oprah and telling everybody that arnold schwaenegger couldn't poibly have molested all these women in california. hillary stood by bill and even elizabeth edwards kept john edwards secret so he could n for the presidency. we have not yet heard from mrs. weiner and it is necessary, i think, from a political view point forher to stand by her husband. i totally understand if she doesn't want to. but if she doesn't want to i think his career is at an end. >> rose: my impssion is that she said she'd... he said that she would be standing by him. that was my impression from what he said. did i misunderstand... >> it was his explicit

representation, roger is right. we'll have to see whether it's true. i think he's got... roger laid out a lot of his problems. a big problem he has is he has the unfortunate position of being a congressman from this city. new york city media is tougher on this kind of stuff than anybody else. and so... >> rose: front page for a week. >> and you can only imagine what the coverage will be like tomorrow and now there will be a feedinfrenzy to look for details and there will be a compition between the "post" and the daley fuse and it's not just the tough local media but this is where the national media is headquartered and this is not a-- under normal circumstances-- a press shy member of congress. anthony weiner is a protege of his former boss, chuck schumer. someone who developed more power than his seniority would have allowed him by being extraordinarily good both on the old media-- going on television and traditional formats--but also new media. all of that now is called into question for him. can he continue to be an effective member the way he was before? absotely not. the questions aren't going to stop for a while, least. >> rose: what was his

explanation for why he did it and, b, why he lied? >>is explanation for why h lied was simpler and easier to understand. thought if he toldthe truth it would be embarrassing and humiliating and he was hoping he could make it go away by not telling the truth. >> rose: not jushim but his wife and family. >> and career and supporters. he d it, he id. he codn't explain why he did it. he apologized repeatedly and condemned his own actions a said he wasorry to his wife first and foremost but to lots of other people around him. and he didn't really explain it , i think, quantify it in a way that, aga, the press is going to be interested in having it quantified. >> rose: president clinton was accused of certain kinds of things and acknowledged certain kinds of things but at the same time there was an allegation of lying as well. he could be elected any one of a number of political positions today. >> well, anthony weiner's last time in his district-- which is a democratic district but not a

slam dunk democratic district-- the guy running against him last time got 44%. it was a much closer race than he had in the past. so we'll see what happens. again, i think he's in a precarious position if democrats start calling for his resignation. a republican member of the house for new york had to resign for sending one picture to an adult of himself with bare torso these are ls of pictures and the sort of story that i think some docrats will say if congressman lee had to resign congressman weiner needs to resign, too, and that will be hard to withstand. >> rose hard for him to withstand if the creche crescendo of resign resign resign. >> right. what are the two senators from new york going to say? what are the house members are new york going to say? >> rose: what does andw breiart have to doith this, rojer? >> well, he is the one who first broke the story and then weiner made the mistake of saying it was untrue which angered him and

he showe up today in one of the most bizarre episodes i think we've ever seen. and usually either the politician behaves badly or the press behaves badly it's usually not combined so they both behave badly. but as mark indicated, new york is a different kind of city. i really doubt you would have had that press conference in washington had weiner been smart enough to do it in washington. the elbows are a little sharper in new york when it comes to press polician exchanges. i think we saw that. >> rose: now... but andrew breitbart said i think that he had x-rated photos? >> one photo. >> rose: one photo. >> and weiner did not deny it. >> rose: in fact, did he affirm it? >> he basically affirmed it. >> he did say he could not... sorry, he said he could not deny it, you're right mark. he put hit in e negative but it's the same thing. >> rose: and andrew breitbart said he would release fit congressma weiner apologized. to him, i guess?

>> and congressman weiner did. it was a surrealistic thing. even as breitbart yielded the stage to weiner he stayed in the room or came back in the room so at one point the colloquy between weaner and one of the other reporters about bright bart and bright bart said "i'm here. i'right here." he's taking the hh road and wh anew breitbart c take the high road he's delighted to do it d he's able to take the high road and say "i don't want to release this photo." he said he would if weiner continued to deny it. i don't think breitbart will frontly-- if you'll pardon the pun-- release this photo. he might give it to someone else who releases it. someone else might release it. but now under these circumstances he will stand pat with the situation and not put the photo out. >> rose: i have the feeling this photo will get out. it's too delicious-- sorry-- but someone is going to sell it. don't forget, someone received it and if he or she get a high enough price for it, that picture is going to be made

public. i'm surprised it hasn't been made publicalready. we d't know exactly whatt shows. but x-rated gives us a hint and when a congressman has to say, yeah, i sent and x-rated photo over the internet to a stranger, basically, then that's a person who has a problem. he has a problem to tha goes way beyond the political problem it's a psychological problem, i think. and as i said, i think that's difficult for a sitting congressman to admit. >> he's a star in the demratic partand hehas a lot of friends in the democratic party. >> rose: he had a realhot of being lengted mayor. >> i think he had a real shot of being elted mayor. he'd run a mean campan last time and was strategizing about it. his ties to the clintons were clearly... would be a big benefit for him had he run for yor with their support, which i think he would have done. in the end his popularity won't matter much. if democrats think it's politically unsustain to believe stand behind him and beside him

they will call for him to resign. he not give ts job up ligly. but it may be that he has no choice. >> rose: so what's the most interesting question for you? >> i think most interesting question is whether, as always happens when there's a situation like this, is will this chase another... >> rose: well, smart people think they can get away with lying, don't they? >> and politicians lying about sex, again, is the oldest story in the world. >> i think that he was obviously compelled to do this, there was a compulsion involved and he was asked this at the press conference after congressman lee from new york's 26th district, a republican, sent a single photo to a woman andwas forced to resign by the republican leadership? very short order he was asked if that was a caution to you,id that make u tnk twicend he basically said n he didn't really connect the two. >> rose: but he said something inside of him knew he shouldn't. >> all along he said that was the caseut he said he didn't look at what happened with congressman lee. one picture summarily forced to resign. he sai he di't look athat

as anything connecd to what was doing. >> rose: roger, closing thought from you about this sdra drama? >> it was a scrum, it was a mess. it's a human tragedy but i can't say that weiner is a victim. he brought this on himself. if it's a compulsion than his disease is not his problem but his cure is. he needs to get help. if it's something else, he needs to address that. you wonder why powerful people, politicians who wield such ordinary people is vast privilege and power. eliotpitzer goes to hookers, weiner has to send pictures of himself to women. why are they compelled to d this when there are so many other paths they can take. >> rose: that's the question i have, too. >> they've devoted their lis to public service. >> you should have booked joyce brothers if you want the answer to that. >> rose: i've asked eliot spzer and he said "there's something about the ego of being

in politics." et cetera et cetera. >> anthony had risen really fast. he'd been a congressional aide to chuck schumer when chuck had the at anthony has now. part of thetory of what happened to him, i think clearly, is he became a ptty big celebrity within the democratic party by going on cablt.v. >> rose: very vocal about health care. >> i think he did more to champion the cse of single payer and then a public option than anyone else in the party d for a lot of liberals that was great to have tt kind of leadership among somebody in congress articulate and able to use old and new media to get that message out. and i think that my guess is part of this story is the heady experience he was ving at becoming a national democratic figure. >> i think it's the very intelligence of these men like spitzer, like weiner, how bright they are, how quick they are, how successful th are that gives them the sense of invulnerability.

that nothing bad can really happen to them because nothing bad ever has. and sometimes their luck just runs out. >> you won't meet any smarter people in potics than those two guys. you just won't. >> rose: thank you very much, roger. thank you. i know you drove in a long way from bethes all the way to bloomberg. thank you. mark, thank you for coming. it is... i debate about whether we should do this, number one. somebody said to me would youo this story and i said no because i couldn't add anything to it. this story just... after watcng it over the paper for the last week and seeing this dramatic thing, i sat there and said, wow. >> it's a story of the ages because of the new media and because of the very explicit lying when iwas clear he was caught and he continued to lie. >> rose: thank you. thank you, roger. we'll be right back. stay with us. we go back again to the war in libya this evening. on the ground no aircraft--

including attack licoers-- continued to hit targets in tripoli which remains the stronghold of the qaafi gornment. though nato has intensified the efforts, the conflict remains at a stalemate. na announced it will extend its mission for 90 days. joining me now from tripoli is john burns from the london bureau chief of the "new york times." i am pleased to have him back on this program. what's the nato assessment of the circumstances on the ground today? >> i get the impression tt this is a government that doesn't have many tools left in its locker. ey are, of course, facing rebel advances in the western mountains. the rebels are only 130 miles east of here at misurata to the east. they have shortages, increasingly serious shortages of fuel and so i'm told food. weer that colonel qaddafi is more or less a fugitive in his own town. no longer staying,

understandably, in his command compound here which has been so heavily bombed. moving at night from hospital to hospital. we hear from libyans thatt's hospital to hoitalo school schl to the homes of friends with a small entourage of bodyguards. and the principle tool they have to have is propaganda about nato bombing and the killing of civilians. which i have to sa has worn thin and threadbare because as far as we can tell the bombing is pretty well pinpointed and wooils there are undoubtedly are civilian casualty there is seem to have been very few. >> rose: are people still calling this a stalemate or is it becoming something else? >> very hard to say. we had the deputy foreign minister who has emerged as something of a principal spokesman for the government today telling us that life in th qaddafi held areas and particular in tripoli was 50% to

60% normal. well, of course, if you have terminal cancer you might say that apart from that you were 50% to 60% normal. i would say that the mood here is one not yet of desperation but of increasing alarm that they are up against formidable foes, the most important of them being the nato bbing for which they really haveo defenses. that there probably are pple in high places who would like to e a deal done as urged by william gue, the british foreign secretary, yesterday which brought peace between the rebels to the east, many of them by the way, former mistered in the qaddafi government and the present loyalists in the government minus colonel qaddafi. the's your sticking point. nato says heust go, the rebels say he must go, colonel qaddafi says no way. >> rose: so what options does colonel qaddafi have? >> well, he's a wily fellow.

as these people who have gained power and ruled with an iron hand very often are. saddam was as we saw, though he was on the run f what, eight months before they found anymore his spider hole. qaddafi does have his loyalists, no doubt about it. another curious thing, contrasting with baghdad, this is a police state. but it's not a very effective police state. and it afears be becoming less and less efficiently so. so reporters, for example, here move somewhat more freely, not with complete freedom, somewhat more freely than we did in baghdad and as for the populous there seems to be a great deal lessear now at least than there was throughout saddam's time and right until the end. we can go out of this hotel, go into the medina, the old ottom heart of tripoli, to the bombing sites and we get surprising candor from libyans who say--

t all of them, by any means, there are qaddafi loyalists, but a lot of them say they want the bombing, they want qaddafi driven out. and last night at a hospital in the east side of tripoli where there had been a bombing and we were told that there was a child, a seven-month-old baby girl who was the victim of a bombing a member of the medical staff at great risk to herself one would think slipped a note in english to one of the reporters present saying the child was not a victim of the bombing, she was the victim of a road accident that occurred several days ago. that sort of thing was virtually unthinkable in saddam's iraq. >> rose: but what options does qaddafi have? is he... does he have as an option acai flupl south africa? does he have as an option asylum in venezuela? does he have as an option asylum in saudi arabia? >> well, we were told about 36 hours late last week that when the south african president, jacob zuma, came here, he did

raise the question to the extent of suggeing to qaddafi... zuma was here as a representative of the african union which has strongly been supported by qaddafi for decades. he apparently to his own staff, zuma's staff, in south africa did ggest possible asylum in an african state, not south africa which you wouldhink would be the mt appealing one. zuma's staff didn't say where but the answer was a resolute no. colonel qaddafi does apparently believe that he can finesse this situion and if he can withstand the bombing public opinion in the west will run out of patience with this, especially thecan persuade the world that the victim... civilians are the principal victims and eventually the west-- the united stes, britain and france principal among them as the main nations carrying out the bombing-- will be forced to come to the

negotiating table with qaddafi leading the government side. >> rose: but everyy sobody defects from his government somewhere. >> they do. they do. it's an increasingly significant li, as you no. several of the most prominent rebel leaders were, until february, ministers in the qaddafi government. the oil minister has gone most recently. we know the foreign minister who s probably second most important man in the regime. he's gone. we hear increasing numbers of members of the military who have gone, but the government to judge from the attitude of senior officials we speak to seems to be blithely unconcerned abouthis. they say in effect one oil minister more or less, who cares? we can find another one. >> rose: wh will libya look like if qaddafi goes and who will be in charge and what do we know about th? >> well, i think that's a very big question and one that was raised in a very interesting

way. yesterday by william hague, the british foreign secretary who had been to benghazi, the most senior western official who has been to talk to the rebel leaders and taking a reading from what he said when he returned to london we can be sure people in high places in washington, london and paris are seriously concerned about that. they know that the rebels e dely dividedolitically and by personal ambition. we know that there is some al qaeda element there, perhaps not very important. the truth is we don't know a lot about them. william hague said it's time for them and he said this week to come up with a plan for the post-qaddafi governance of libya and specifically to include in that plan members of the present government. that was quite an advance. they're talking about let's sit down with the government, work something else but again minus qaddafi. that appears to be an

unnegotiable standpoint with the rebel leaders and with the west. >> rose: i assume that means qaddafi and his family and his sons. >> i'm sure it does. this has been, to some extent, a family-run business here. one son, we were tol was killed in a nato air strike on the qaddafi command compound here in badad on the 3h of april. some dispute about that, which enrage it is libyans. they say nato doesn't even respect the dead. there are several other sons including two or possibly three who command iortant military brigades which are really the fiber of what remains of a qaddafi fighting force. the most important of the sons, saif islam al qaddafi very intelligent wily character who spent much of the last ten years trying toll mend fences with the west. spent a great deal of tim in

europe with a principal mover in opening up libya's oil mkets again to western companies and building the hotel on his roof i now stand, which is the most comfortable domaini've ever add in a war zone, a real five-star hotel with cappuccino and wicker chairs in the garden every evening. so he's a wily character. but the western leaders are saying all of em have got to go. >> rose: what's the next shoe to drop? >> well, we had robert gates and others saying ty don't know how long it will take. hague said it could be weeks or months, he even mentioned christmas. i think if we were to listen in to what they are saying to each other, they're geing increasily concerned abo how long this is going to take. they're appealing... the appeal to include members of the present government looks to me

like a recognition that their best shotay be literally they have a shot. the one-bullet theory. that is to say a nato air strike that kills qaddafi or something more dramatic in the sense of a coupe with a... a palace coupe or simply the... that the top people turn onqaddafi and say "you've got to go." >> rose: john, thank you. we're losing satellite time, unfortunately. thank you so much. great to see you again and i hope we can do it again very on. >> it's a pleasure, charlie. >> rose: gretchen morgenson is here, she is a business columnist in for the "new york times". she looks at wall street and world financial markets. she's also reported on the 2008 financial crisis. her latest book is called "rkless endangermen:ow outside ambition, greed, and couption led to an economic arm dead don i'm pleased toave heifer back on this program and especially

this table. >> thanks, charlie. >> rose: so you've thought about this. how many booksdo we need? >> right. >> rose: (laughs >> we've already had how many, right? >> rose: and mies, charl ferguson, in fact, "inside job" endorses it. this is what bill moyers says "even before "reckless endanger." gretchen morgenson was more port of the decade. now she shows how american taxpayers were suckered by the shenanigan greed, back scratching and guile of financial and political elites who swarm like vultures around fannie mae picking it clean of oversight and accountability while its executives gourd themselvess on the spil spoils. a lon sentence there but very nice. >> rose: >> charlie of course there have been so many books written about it but four years after the crisis erupted in 2007 we don't know the half ofit so what this book is trying to do is first of

all to assign some countabili. many of e books that we've read up until now have been sort of these ideas about this being a an actof god. well, this was an act o man or men or men and women. this was not somethinghat just happened. so identifying the cast of characters, identifying people who will have sort of slipped from the scene without really having been as participants is useful. i think it's extremely important to be able to say this is what happens. this is why it happened, how it happened, so it doesn't happen again. >> rose: is it fair to say that your particular expertise in part is about the housing market and understanding that financing of housi? >> yes. we all know that housing was what really drove this boom. the mortgage lending, the recklessness in mortgage lending

that really took us to the moon and th, of course, the big, big crash that followed and, of course, we were still seeing the aftermath. many, many foreclosures at very high levels, delinquencies, people being thrown out of hims. and so housing still dominates e headlines, although this was not just a housing crisis because, of course, you know, it morphed into high unemployment and actual recession, the longt recession in a very, very long time. so housing is a huge, central piece of this puzzle and, of course, has many, ny tentacles that spread far and wide. >> rose: joshua rozer in, who is he? >> josh rozer in i think is the most astute housing financialists out there. identified problems at fannie mae and frequent before others did and to identify the changes in housing finance that was going to lead the... >> rose:o he saw it and wrote about it but anybody to paid attention?

>> very few. i spade some attention. >> rose: of course you did. so you focused on fannie mae and fraekt. tell us what they are. >> rose: fannie mae and freddie mac were government sponsored enterprises who... they were set up to try to smooth the housing finance arena, to make it easier for borrowers to get money, to buy a home. they didn'tend there money but what they would do is ey would buy loans after a bank made the loans and that would enable the bank to go back and make another loan. so they grease it had wheels of housing finance. they also guaranteed mortgages and pooled them and sold them to investors. so they were very, very big in the market. and they were set up by the government to allow borrowers to get easy access to credit. >> rose: okay so let's go back to e clinton administration. what happened at the time of the clinton administration? >> in 1994 and '95, clinton decided that even though

homeownership levels were very high in the low 60s, 62%, he wanted to sh them higher. homeownership was a wonderful thing. it was something everyone should experience. it's the american dream of homeownership. it's the idea that you can bld a nest egg. >> rose: a the idea that home prices always gop. >> home price always go up so why not allow everyone to participate in this great... >> rose: so nothing wrong with wanting that to be. >> nothing wrong with it. noble idea. absolutely noble idea. execution, ugly and bad. because what happened was no one was paying attention to the kinds of mortgages that were being paid which were incredibly poisonous, which were, by the way, most paradoxically targeting the people that we were trying to help to become ho owners. i mean, this was all about helping immigrants, helping

minorities, helping first time home buyers become homeowners. >> rose:o did what? >> so we embraced the ivate industry that's involved in home building, home lending it's an enormous business and nothing wrong with that, of course, but the regulators were asleep at the switch so as loans become more cockamamie as these crazy loans, affordability oducts they were called which allowed people who did not have a down payment to actually get a mortgagewhich allowed people to buy more hom than ty really should have it kind of created this mania which then took us way too f and, in fact in ft, over the cliff. >> rose: so there's a character by the name of jim johnson whom i know well sense he worked for vice president mondale. he comes there and then youhave a smart focus on him, yes?

>> yes. >> ros (laughs) what did he do tha was different? >> jim johnson is really a central character in this story because when he arrived at fannie mae in 1991 it was kind of a utility. it was a company that had escaped a near-death experience in the early '80s, got back of its feet financially but when he came along it really became according to people who worked there a totally political animal he understood thathe government relationship, the ties to the government were crucial to the success of the company. >> rose: fannie mae. >> yes. because it meant they could borrow at cheaper rates than otr financial institutions. they also had a billion dollar plus line of credi with the treasury. they hadll of these perk we sits that allowed them special... gave them special treatment. it meant more money for fannie mae. and what he understood what he

had to protect that at all costs. and so it became this ry politically driven machi that was all about protecting the subsidy. protecting the government backing. and then became such a drive that it was no longer really about homeownership. it was about ballooning the balance sheet, expanding into other businesses. gring the earnings so that, in part, he and his executives could take even more money out of the company than they had been previously. under jim johnson, the amount of money that went into the executive coffers rose dramatically. so it's a man who understand that he had a golden goose that was laying golden eggs and he uld wrap it in the flag of homeownership, allow the thing to grow. he was adept-- very adept-- at manipulating congress, making sure that he had friends in congress to protect the

government subsidies, to protect the government relationship. also extremely good... >> rose: but everyone does that. >> everyone does thatow, charlie. i think this was a person who really had created the blueprint for this kind of a model. >> re: but remember who this person was. he was the person who was first asked by... a great friend of john kerry when he ran for prident. was a friend of president obama. president obama wagoing to make him heaof the transition team. >> he was a man who was... who was veing obama's vice presidential potential caidat. >> rose: and then was also chairman of the kennedy center. >> yes. this is a very powerful man. >> rose: mr. establishment in washington. hugely respected by all. >> yes, yes. but it's our belief having done the reporting and having interviewed many, many people that worked there at the time and having andeen the outcome and seen the investigations that arose after he left the scene, he's also... very interesting he's on the board of goldman

sachs. it was... what was very interesting to me when we were doing is work was to see how linked goldman sachs and fannie mae are. there were a lot of interchanging relationship there is which was very fascinating. >> rose: that you thought was improper? >> nothing improper but it's just this revolving door between washington and wall street. or this sort of two-way street between washington and wall street that i had forgotten about the level of detail. >> rose: that's always been a part of the washington/wall street relationship. bert rubin, the secretary of the treasury of the clinton administrati was from goldman sachs. paulson secretary of the treasury was at goldman sachs. yes. >> rose: a whole range of people had come out of these wl street firms >> i think when we went into the bailout mode, however, that was very disturbing to a lot of people. the close relationship bween wa street and washington.

>> and do you think financial reform has taken care of all the issues that cause this? >> absolutely not. as you know, as you know. i mean, dodd frank did not even address fannie mae and freddie mac. >> when you would ask secretary dodd about that he would say "that's what we're going to get to next." >> i understand that's big, huge a polital hot potato like you cannot believe because no one is willing to touch this because it's housing. because it's the american dream but don't you think we should have learned something from this episode that the very people we were ting to help, the very people we were trying to raise homeownership by allowing them the right of... >>ose: suffered the mt. suffered the most. you have foreclosure levs among minorities and like you can't believe. >> rose: tell me what you think having all these interviews and the expertise you do and also josh should have been done

there's too much supply. you couldbulldoze these houses. >> rose: and it would be good for the housing market? >> there's too ch supply out there. >> wt's the smart idea to deal with that? >> the smart idea is you have to take princip down onthes mortgages. you have people underwater on their mortgages because the property value has vastly diminished yet they're still paying on their mortgage, if they're good soldiers. some people aren't and walking away. it's a fiction to believe those properties are worth what the mortgage has outstanding. i think if we had been aggressive early on about principle write-downsnstead of these loan modification programs where you tack on the arrears to the end of the line which is essentially just kicking the can down the road, i think we have not faced the music on the fact thatome of these price levels

are never coming back. >> rose: so the best thing to do would be to lower t principle? >> that's facin reality, i think. >> rose: whas the response of congress to that idea? >> the diffilty is even says moral hazard. you're going to encourage people to default on their mortgage to say i need help so wri down my mortga even though i'm still paying. i agree that is a risk but haven't we just done the biggest moral hazard exercise in the history of man by bailing out a.i.g., citigroup, all the banks every other company except lehman and br stearns that were in trouble? so moral hazard, we've been down that road. >> rose: what is the health of wall street today? >> i think it's ver healthy. >> rose: so it's recovered well? >> yes. some of the big banks which i would call commercial banks, not wall street, are struggling certainly because.

bank of america, for instance. >> rose: is still in trouble? >> it's struggling more than goldman sachs. goldman sachs is doing very we. there are two different tiers. >> rose: and too big to fail? >> alive and well. >> rose: and bank of america, for example, bought merrill lynch and is bigger than ever. >> that's another paradox which is that you have banks too big to fail that were all right big, even bigger now that we are in the midst of this crisis. is. >> rose: what's going to be done about fannie maend freddie mac? >> well, congress is going to wrestle over it. it's going to be a food fight and i caot make a prediction about what's going to happen. >> rose: but what about the battle of what to do aboutt? >> the tax peyser intohem for $154 billion. that's not acceptable. it doesn't look like that's going down any time soon. do we want them to be financing the mortgage market? do we want them to goway?

unfortunately i don't feelike anyone is willing toave anen honest discussion about this. >> rose: and an others have talked about accountability and who should have been accountable and who was not accountable. clearly the rating agencies come under criticism. >> yes. >> rose: clearly the s.e.c. and the regulatory agencies come under a lot of criticism. but have... what should have happened to them other than what has happened to them. >> rose: i think that we have to have a regulatory regime where thinking outside of the box is welcomed, acceptable embraced where you're not captured by the entities that you are regulating p there's a mind-set that creeps into play where because you're dealing with these people all along you take their side in the argument. i don't know how you legislate that. probably can't legislate it.

that's their job. it is their job to say no, not to always say yes. >> rose: if, in fact, you will have criticized eitherrevious administrationith paulson, treasury secretary, tim geithner at new york fed and ben bernanke at the fed or larry summers is inthe wte house, what would be your criticism of what they did to rescue e economy? >> thedid not give enough to the homeowners. they did not care enoh about e homeowners. they threw all of their efforts and money at the bas. i understand that because the banking system is crucial to this... >> rose: financial system. >> and we need to have it working. >> rose: so you're saying they should have turned that but then turned to the housing? >> correct. it was such an afterthought. it was so not important to them. it was so evident to most people th the banks came first and

main street came second and that fed into a dangerous perception that there are two sets of rules. one set for powerful and wealthy institutions and another set for main street and everyday folks. >> rose: what happened to the populous rhetoric, though, making that point that they're bailing out wall street but not main seet? >> i hear in the my e-mail box all the time. >> rose: what do they say? >> they say just that. >> rose: you bailed out wall street but you didn't bail out me? >> you bailed out wall street and i didn't get a nickel or a dime or any help at all, didn't get a handto help me pull myself out of this mess. these are not just freeloaders. >> ros but they're peoplin have your mail address. >> so i ink tt's a bad perception that's been fueled by this. now the previous adminiration, i would say, i think they were completely unprepared, ill uipped, didn'tnderstand what was coming down the track. >> rose: including paulson? >> absolutely. >> rose: didn't understand what was coming? how bad it was, how severe it

was and the consequences of the decisions they made? >> absolutely. even though this was a man who had run goldman sachs. who presumably was very smart. >> rose: but other people... i'm just making this point. other people have praised him. we just saw this too big to fail andrew ralph sorkin's book. he's a central character and gets a huge amount of credit for making sure the system didn't collapse once realize how old vere it was. >> i think his running around with his fair on fire bailing out one, not bailing out another then bailing out one, i mean it was sending so many mixed signals to the market that that was very destructive. i think he would even agree. >> rose: but the market is back. >> yes, the market is back. i'm not saying he completely messed up bauds we're still sitting here talking today, the economy is not in freefall, not a depression. >> rose: in fact, those projections are for economic growth. >> yes >> rose: except unemployment is a big issue. >> unemployment is a problem. >> rose: how much of

unemployme is tied to housing? >> very much, very much and it's feedbackecause if u lose your job you can't pay your mortgage. so it's incredibly intertwined. >> rose: what ought to be the great debate now? what are we going to doabout the housing stock? that ought to be a serious issue for debate. >> yes. >> rose: what else? rose: too big to fail. those e two bigssues. >> rose: tt means certain institutions that have become so big we can't afford to let them fail because they'll take economy down with them. so we could have during the econic reform and financial reform set some kind of limit how swig in. >> yes. >> rose: or broken up those. >> even better. so in the early '90s you had fannie mae and freddie mac. they were the only too big to fail institutions. now we have a whole host of them. everyone understands that j.p. morgan will not be aloud to fail goldman sachs will not be allowed to fail because citibank was not aallowed to fail. everybody understands that these

implied governnt guarantees are explicit. >> rose: and you think that the leadership of goldman sachs and bank of america or citigroup and j.p. morgan, none of them which are necessary in danr and certainly not the latter that they are somehow... think about the fact that we're too big to fail and therefore we'll take risk? that's a stretch for me. they say "we can takehatever risk we want to bause the government will save us." >> i don't thinkhey set about to s that or do that, but i think the markets perceivehat so they gea leg up. they get benefits that small community banks don't get. that that's not fair. small community banks make loans to real people these big banks should not get the perks of knowing that they're not going to be allowed to fail which translates to lower borrowing costs, the perception they're

safer. so i think it's a fairness issue. >> rose: what about executive company station in that's another issue for you. >> it is. >> rose: (laughs) yes it is. >> doesn't seem to ever change. it only goes up. >> rose: has anything changed? >> for a while in the heat of the crisis think there was change afoot but it's gone back to the boards. >> rose: so everybody just basically says we will pay them whatever we need. >> you hear the same arguments, you can't find thealent unless you pay them commensurate with what this guy over here is making. >> rose: but is that untrue? >> i think so many people are professionals and love what they do and they would work for nothing and so i find that hard to believe. i think it's about the power, not the money, charlie. >> rose: they wanthe power rather than the money? >> yes, that argument falls ft with me. i could be wng. >> rose: what other big issues.

>> rose: certainly the debt levels we're working flu this country. >> rose: clearly. that's the necessary debate. but that's taking place. that debate is taking place. >> well, it's takinglace but the debt levels are stillery, very elevated. >> rose: whodo you hear is going to take over the consumer protection agency? >> i don't hear! who do you hear? >> rose: i don't know. you think... who will get it? >> it sounds like en rr'twa ezabeth warren won't get it. >> rose: this book is called "reckless endangerment: how outside ambition and greed and corruption led to economic armageddon." thank you. >> thanks, charlie. >> rose: great to see you. nsy edor

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