>> rose: welcome to our program, tonight, a conversation with michl lewis, the author of "lirs poker, money ball" "the big short" and "boomerang." >> we still have this strange financial system where institutions are basically too big to fail, where they're taking risks that will benefi them on the upside, if they go wrong are going to be taxpayer bailouts again. that... and they're allowed to speculate with essential lay government guarantee. it's crazy. like a hedge fund with a government guarant. now i realize at some point that if this global financial crisis wasn't a global financi crisi that was series of local financial cris and each one wadifferent from the other and this wasn't about money, it was

about lture. and the money was a window into the culture. it was a way to get into these places. >> rose: michael lewis for the hour. next. cu

captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: michael lewis is here, he is a best-sell august thor and journalist. his best-known books include "liars poker" "the big short" and "blind t blind side." he's also the author of "money ball" which came out in 2003 with brad pit, jonah hill and philip seymour hoffman. here's an excerpt from the movie. >> hi, mr. shot, it's peter brent. i apologize to putting you on hold earlier. billy asked me to call you back. he's on another line.

>> tell him we want $225,000 for ring cone. >> billy he wants $225, forricardo rincon. please, yes, i added thelease at the end. okay, hold on one second. >> tell him i'll pay for one when i sell him back for twice, i keep the money. >> okay, so billy says he'll pay for rincon himself, but when he sells him for more money next year, he's keeping the profit. okay, thank you very much. wel call you back. thank u. >> come on! come on! >> rose: (laughs) in his latest book he examine it is roots of the financial crisis in several european countries. it's called "boomerang: travels in the new third word." i'm pleased to have chael

lewis backto the table. welcome. you like in movie, d't you? >> it's great. it's great. it's very funny. hard to say why but it really works. >> rose: and maybe oscar stuff, oscar contention. why not? >> rose: why did it take so long? this is a classic story written in 2003 and is appearing eight years later in 2011. >> it was not an obvious movie. i thought when they bought... when columbia pictures bought it i thought they were nuts. i was glad they bought it but i thought they were nuts and i think they'll never make it. and then it waslear they were going to make it i thought, oh, no, it's going to be terrible. and the problem with it is that the book is really the story of an idea. it's a sry of this idea of how people get valued and how rkets can misperceive the valu of people, even professional baseball players and if they can... if you can misperceive baseball players, who can't it misperceive.

but the biogphy of billy bean is in the service of that idea and it's woven into t book. but it isn't the biography of billy bean. and the vie people took the story and turned it into the story of a man and they managed to get across the ideas pretty well at the same time. it surprised me how good it was. >> rose: it had the added benefit that brad pitt loved the story, even obsessed by the ory. >> i thin it's fair to say that that's why i got made. he said "i'm going to make it and let's figure out how we're going to make it." >> because he loved the story of... >> this is a great kwai, why he was so interested in the story and i have not talked about the why of it. can i guess on air? i'm just guessing here. here's an actor who his whole life has been seen as a pretty face and just a pretty face when he was starting out, probably. and he has... he's got real

acting ability. yowatch this movie, you're watching somebody who knows what he's doing. he's bn misinterpreted as someone who's just pretty. so i have a feeling of being on the receiving end of human beings so often he's aware of how distorted it can be and he identifiedith both the theme of theook and the main character. >> rose: it's in his own life so he appreciates the idea more and it's a story he wants to tell. >> right. >> rose: but you had a couple great screen writers, two of the best. >> that's right. >> rose: it didn't get any better. >> no, it's... the... that's absolutely right. so the question is with all the talent thrown at i.. bennett miller directed it. >> rose: well, there's this back story that somehow steven soderbergh was attached to it. he was directing? he srted... >> he spent $10 million building sets... >> rose: that's more than

attached. >> steven soderbergh was two days away from starting to film. he had all the actors and all these real people, actual human beings who were going to play themselves assembled in los angeles and the studio pulled the plug on it. >> rose: because they thought it was too much of a documentary, it h been said. >> it seemed to me that what happened was some people in the studio hadn't seen the direction he was taking it and when they saw it at the las minute ty panicked because it was less... it was more experimental. >> rose: they were worried about throwing good money after bad. >> i guess so. but i think... in truth, the... even the studio, the head of columbia pictures is amy pascal. it took incredible nerve to do this. when i saw scandal involved in pulling the plug two days before it went down and spending all this money i thought "they're going to walk away from it. it's so tainted nobody will want to be seen associate with this thing and if they make it and it's bad, they're done for and instead they stuck with it.

it was kind of great because it was the opposite of the typical hollywood... >> rose: but they haven't made a movie since 2005, capote, and that was reall good, philip seymour hoffman. >> when you sit and talk to someone you can't tell whether they're good or not, but he had a sensitivity about him that was interestinto me when i talked to him and an awareness of... an ability to hold multiple ideas in his head at the same time. he wasn't fixated on one. it was a really difficulted thing he did. it was very, very hard to do what he did. >> rose: so what was your involvement after having sold them the rights to this book? >> busily trying to claim credit for something i didn't have anything to do with. that's my involvement. >> rose: did watching the movie get made appeal to you? >> my kids liked visiting the movie set. so we visited the set twice. it was aunny thing. i took my then eight-year-old daughter dixie to the coliseum to see them film and it was a night... they were filming at night. we got there at 9:00 at night and brad pitt was coming off the field and he came over to say hi

to us and he knelt down and spent, i don't know, ten minutes talking to dixie, i left the two of them to themselves. and after a while dixie kind of nicked, comesunning over and grabs my l and says "who was that man? who's that guy?" >> rose: (laughs) then brad pitt's wife showed up and she recognized the voice from "kung fu panda" she was very excited. >> rose: (laughs) that's great. what is it about sports that you seem to like a lot? >> it'.. >> rose: "blind side." this. you're supposeedly going to write another bo about softball or something. >> (laughs) >> rose: what is it? >> there's that "money" that was sold as two books. there's a companion book that... >> rose: it won't be written? >> it will be written. >> rose: what is it about sports? >> you can tell so many different kinds of stories through sports a sport prose

sides are you with the action that's going on behind the story. i mean, it's not sports exactly it's what sports enables you to get to. i really like the fact that you never know how it's going to turn out. the unscripted quality of the sports. it that has capacity to surprise you constantly. and there's not much in our culture that that's that way. and it's people's passions that are just really involved in sports. so... >> rose: winners and losers. >> people that care about it a lot. so it's easy attract an audience to a book about an idea when they think the book is actually about baball. it's a way o tricking people into reading stories i want to write. >> rose: and it's also about boyhood and girlhood aspirations and dreams. i mean, it's not just... it could be figure skating. it could... now it could almost anything. it could be soccer for a woman. >> loo i wrote a little book about my high school baseball

coach. >> rose: that's righ >> and i wrote it because at some point i realized in my life the voice i hear in my head when i'm in trouble, in a pinch, undepressure feeling like maybe i can't handle something was his voice. >> rose: what is his voice saying at these times? >> usually screaming at me. >> rose: he's coming at you don't you dare give up? be smart, be wise? >> he's there. he's there. he's say there saying you don't know what you have inside you. find it kind of thing. and that... it's a voice that you let into your life when you're a kid a probably never again. but once you let it in, it's with you forever. and this happens to a lot of people with sports and kids, i think. not everybody has as gift add coach as i had but it's a role in a kids' li that can be very powerful. so it was a way of getting how... getting at the whole idea

of h human beings get shaped. >> rose: do yo think if you'd stayed at soloman brothers you'd be some big rich hedge fund guy today? >> so i think i kind of know what my alternative life was if i hadn't wanted to be a writer. if d actually really enjoyed being at soloman brothers. i worked for johneriwether group. >> rose: oh, yeah, long-term capital. >> that was my chain of command and i ally liked them. they were very smart. very interesting. and when they left to go create long term capital, i'm almost certain i would have ingratiated myself and that i would have lost all my money. so i would have been rich briefly and then poor again. >> rose: and there was a moment in which everybody thought these were the geniuses of the world. if there was masters of the universe it was the people at long term capital. >> absolutely. >> rose: that was the feeling. >> well they actually did have a secret for a while and then everybody caught on. and it wasn't a secret ymore. >> rose: what was the secret? >> well, they had... >> rose: data?

>> and betr ways of valuing complicated securities. and an ability to find interesting, arcane bets to make. >> rose: did you never want to tell that story? >> i told in the a magazine article. >> rose: oh, you did? >> i did. but i didn't ever see the book in it. >> rose: that bringme to this question which i aays wanted to you ask you. what is yr core competence. treat it without the fact that it sounds like you're bragging. >> there's an assumption there. >> rose: this was an article from new york magazine. "it's one of the most remarkable long form journalism careers" says gerald maserati, his fmer editor of the "new yortimes" magazine. he's had at least asbig a career as tom wolfe if not bigger. but other journalists can claim to have changed the way e game of baseball has played influence resolutions like the dodd-frank act and possibly inspired someone to opt a black baby. then again not everybody is so impressed. everybody think he's this icon, like he's just the most

brilliant intelligent person ever created. we don't see it. we don't see it. we just think he's goofy and odd. >> (laughs) >> i'd say she's close to the truth. >> rose: but what is it you know? you know how to do what? >> i know how to taken a interest in something. actually be deeply interested in something and expressed that interest in words. so i know how to find things that interest me. it'ss simple as that. you're going to think this is facetious, i think this is absolutely true. i have a real wide lazy streak that i... my natural state is at rest. and i'm... it takes a lot to get me working and get interested. but once i get interested and get passionate about something i do get very, very xr sized about it. and i think fact that i'm hard to get interested means that i... that there are high

standards for the subjects that i take on because i really don't want to do the work and the subjects really... i really is to care about it. and when i care about them, there's a ki of. thers a magical process that goes on of the. that idon't completely understand if i'm really interested, the readersend up being interested. >> rose: is it the fact that you ve an instinct for finding characters who are just remarkably interesting and good or is it that you have such journalistic and literary skills that you can take anyone and find out what makes them interesting? >> well,... >> rose: is it you find interesting characters that everybody else could see if it were directed to them or you know how t do and find and observe things that most normal human beings wouldn't? >> well, i think if that's my choice i think "a." >> rose: anything else you'd like to add to that? >> i think some combination to th two probably. >> rose: but character is in everything you've ever written! >> this is absolutely true.

this is absolutely true. i do, am really... ideas are very important, too. but it's true i take real interest in the people i'm writing about and i've had great fortune stumbling upon really interesting people. but often that means... >> rose: stumbling into them or you have aadar for finding them? >> well, i was thinking about the most curious example of this. i had covered the '96 presidential campaign for "the new republic" and i had a book call "losers" about it. that was a campaign people remember as bill clinton versus bob dole. in my telling it was a story of a cdidate named maury taylor who spent $7 million getting $7 votes in new hampshire and iowa. no one in his right mind would have put maury taylor at the center of that book but i thought i could say things about the american political process through him that i couldn't say through that conventional candidate. and he was wonderful to be with. but it required both the literary freedom-- which a

magazine gave me, "the new republic" gave me-- and the indifference to the opinion of my peers to put him front and center. so it is a kind of insistence that the reader be interested in what i'm interested in. that it probably i an advantage even though it's not obvious that... obviously the they can one should be interested in. the billy beane story is that way, too. nobody was interested in what the oakland as. >> rose: how did you find billy sfwhooen >> he'sn my backyard. i live in berkeley. but it started with the queion how could they be winning these games if this market makes sense? a team who no money should not be able to succeed. >> rose: and the stories about the guys from the big shore. these were not obvious pictures... these weot obvious... >> yeah, they were... >> john paulson would have been... >> rose: well, that's a big story. >> that's right. but fact that there were so if people w made the big bet and it didn't matter to me whether

they made $20 billion or $3 million, the fact that they had everything on the line is what matters and what was it about them... >> rose: they see it and the rest of the world didn't. >> and the fact that they'd made their fortune from the collapse of civilization, that that was... that the heroes had achieved their heroism that way, made them even more interesting. made them very complicated heroes so i thought it was an interesting way tell the story. >> rose: which brings me to this. how did you get to this? >> same way, actually. when i was working on "the big short" and talking to people who had been so prescient, i came to kyle bass, a hedge fun manager in dallas. >> rose: right. this is a great story. oh, man. >> i was in a casting search >> rose: ah! in your opinioa casting search in looking for the character? >> i was looking for the character. i knew they came from this pool of characters, i just didn't know which ones. i was looking for the withins i thought could best teach the reader what had happened. >> rose: or what's happening in

europe. >> well, this this case,urop, but in that ce it was the u.s. subprime story. and... well, not st europe in this case. but kylebass had been one of these pele who made the big bet with the subprime mortgage market was a sham and bonds wer going to go bad. but he had already moved on by the time i got to him. he was.. he had made the observation-- that turns out to be very prescient-- at the western world's response to the crisis, thathere are all these d debts that were incurred privately by private banks and the banks have got all this rotten stuff in them. that the government stepping in to essentially guarantee the banks meant this this liability was now sovereign liability, it was now a government debt. and government's already had a lot of debt going into this. his observation is that this de... that sovereign debt is likely to fail was totally original at the time. and i thought it was out there. i thought he was crazy. >> rose: you thought he was crazy but you believed him or

you didn't know whether he was right or wrong? >> i didn't know with whether he was write or i don't think but i thought what some of his investors thought which was, yeah, you were really right about this really improbable thing having happened, this subprime mortgage crisis. so you've gotten wedded to the idea thayou can predict very unlikely things that are essentially unpredictable. so i thought he was looking for the next big thing and this was the obvious one. i thought... i didn't think... this seemed improbable to me that a guy sitting in dallas mo who spoke no foreign languages and knew no foreign people and had... his interactions were europe were just analyzing the data that was coming out of their financial system could have thisort of global sweeping view that was right. and what the view implied was so scary bause t financial crisis of 2008... we're still living with it, i think. but the reason it was p on hold is people believed it when the u.s. government says basically the banks aren't going to fail.

or when the italian government or the spanish government or the french government could say that about their banks. and it was the credibility of the sovereign state that arrested the panic. wh he was sang is that the credibility of the sovereign state is going to be called into question. what then arrests the panic? at which point iasked him. i said, well, you're talking about... >> rose: who's going to bail out the countries? >> yes, this is chaos. what do you tell your mother to put her money? and he said guns and gold. (laughter) >> rose: at that point i said "i'm out of here. you're the only one in the world that thinks this and i'm out of here." but then iceland fai and tn greece fails and then ireland fails and he had made these bets that these four things were going to happen when body else made them so i circled back and i started to go to the countries and i thought... he's the one who launched me into this story.

>> rose: and how did you find him? >> well, the way i found the characters i "the big short." i just... >> rose: you asked questions? who is? who is? who is? >> meredith whitney. >> rose: oh, yeah. i know about her. >> i don't knowf she knew about kyle bass but she put me on to steve eisman who in "the big short" and the idea that there were these people out there who made this bet and i started doing things like seeing who had done extremely well in, say, 2007 as a hedge fund manager, that's when the market and the subprime mortgage bond market fell apart and the people who kind of doubled their money that year there was only one try do it and it was people... >> rose: the short? >> in the community selling short subprime mortgage bonds. and in the comnity o investors when someone has that kind of score people talk about it. so i talked to all kinds of people. they're people whose job it is is to do nothing but invest in hedge funds, they call fund-to-fund managers and i talked to a bunch of these people, they gave me lists of people i should talk to.

so i camepon kyle bass tt way. >> rose: tell me where the collapse of 2008 is not over. where do you think it is and where do you think it's going before we move back to europe? >> right. well the... it's expressing itself diffently indifferent places. but theassive misallocation of capital that led to this crisis, to banks making lot of b loans, basically, one way or another, our dumb bets, this got resolved by countries taking on the bad loans and the bad debts and and so i think it's happening now. the countries are being called into queion and e way it's expressing itself is standard & poor's lowering of the u.s. treasuries credit rating. >> rose: but not because of economics, their judgment was based on the inability of the

political system to do anything about it. >> about the problem. so your point is well taken. this is no longer purely a financial issue, it's a political issue. we're now in political territory. >> same things in europe. >> to answer the question where are things going you have t answer the question... questions like what is german puic opiniogoing to be a year from now? and what is riting to me is people like kyle bass employ llsters now to run arod germany and figure out what the german people are going to do. and this is in the annals of insting a very strange moment i think. who would have thought hedge fund managers would be employing pollsters to figure out the politics because it's now... because th sovereign states are involved it's now... these are now political. >> rose: so do you think we could very well slide into a recession? if we're not there are we headg there? >> so i'm not tan economist, right? >> rose: but you talk to people.

>> and i'm phobic about the whole idea of forasting because i do think that most of ll street is premised on the false... a false belief in the predictability of unpredictable things. so i think that there are too many moving parts to predict accurately what will be happening to the economy. what i find strange is such a fetish is made of the word "recession." we are clearly... whatever we call it, we're going to be in a very slow growth mode for a long time with high unemployment, with the political problems that come with high unemployment and social problems that come with high unemployment and not just us. so that's the air we're going to be breathing. >> rose: it happened at the very time we need to be competitive and thinking about ways to invest in the future. that's the great issue. >> yes, yes, yes. and it's happening also at a moment where there is inten ange- global, but in this country especially-- about the unfairness with which financial

people were treated. that they have aspecial deal. >> rose: as we speak there are people down close to wall street demonstratingnd in a sense maybe eling some kinship with what happened in cairo and other place. this sense of building from the ground an idea that there was injustice. >> yes. the problem is that people in cairo knew what they wanted. they wanted the government... >> rose: overthrown, that's right. >> the people down in southern manhattan aren't asking for lloyd blankfein to resign from goldman sachs. that's not what they want. they don't know what they want. and what they want is complicated, probably. it's probably what they want is an intensely regulated financial sector but the regulations are very complicated and hard to understand. >> rose: so do you think at first glance it has legs? >> well, the tea party is part of this, too, i think. the tea party was born out of tarp and about... the rescue of wall street and nobody else.

>> rose: and then general motors. >> or a few other people but not much. the idea that... i mean, this idea is still outrageous and it's still alive that we have socialism for capitalists and capitalism for everybody else. >> rose: and the irony of this is that remember barack obama, the president of the united states, said to a group of bankers "the only thing that that stands between yo and a pitchfork is me." >> (laughs) and he was right! he was probably right. and they still hate him. >> rose: he's demonized them, too. >> but what he could have done... i mean, the story of obama, to me... the story of the obama presidency,t least in part-- and it's so unfashionable to defend him now but i'm going do it-- it's story ofhat government leaders in europe are facing. is that decisions that where the choices not between a good option and a bad option but two bad options sand when a political leader has that decision to make you don't win.

because nobody gives you credit for choosinghe least bad option. >> rose: it's hard to say "you should elect me because the other thing is worse." >> yes! and it's hard to say you should praise me for this bad situation we're in because where you could have been would be so much worse. because nobody imagines that other thing. >> rose: henry paulsonsed to say that when he was treasury of secretary. it's a hard argument to make. >> you can make it... >> rose: i don't like to do this but we have to do this befor the economy collapses. i'm not in favor of the government taking over banks but if we don't do this... right, right. >> rose: not that i like doing it. >> right. so to get back to this anger, the wall street protests, i think it has potential. i think it needs to be focused. >> rose: and they need leadership. what was interesting about the arab spring in tunisia's case it was set off by a man who set himself on fire and then because of social media and video went

instantly to egypt and the rest of the arab world. but it doest have a leader. that's a reason there's nothing there now in terms of sort of an easy conflict between the army and those people who were in the square. there's no one leader. and that was what part of made it the way it was. >> right. >> rose: there's no one enemy, either. >> right. and there's no one simple goal. >> rose: but you think it has legs possibly because there is more anger about this than we know? that there is a sense of unfairness about people who caused a problem continue to get very rich? >> yes. and the problem not being totally resolved. we do still have this ver strange financial system where institutions are basically too big to fail. where they're taking risks that will benefit them on the upside and if they go wrong are going to be taxpayer bailouts again and they're allowed to speculate with essentially a government guarantee. it's crazy.

like a hedge fund with a governmentuarantee. >> rose: too big to fail is a bad idea? >> oh, my god! i mean, it's horrible idea! it's so antithetical tothe whole notion of free markets but in addition... >> rose: but nobody that i know standing-- maybe you are one person and maybe many that i dot know-- would have argued that witthe benefit of 20/20 hindsight th therehouldn't have been some kind of bailout of lman brothers because of what lehman brothers collapse did and was followed by a.i.g. and others, clearly. but it really was the match to the kindling. >> i ought thauls the problem wasn't the lehman brothers failed it was th lehman brothers was allowed to succeed. that the business was not more heavily regulated up front. >> rose: well, that's years before. >> but now lehman brothers failed and what do you do? in retrospect the big mistake

was thinking that... think of the policy options, three big ones, you let nature take its course the way capitalists claim they want theworld to be a let these places fail. total social economic chaos. can't do that. second is nationalize them. wipe out the shareholders. >> rose: i bet we'll find out that that was a serious consideration in the white house and other places simply bause they want to say l the options are on the table and if you look at all the options, one is nationalization. paul krugman argued for this in his column! >> i think he's right. in retrospect that would have been a better option because you could have restructured the industry and the industry needed restructuring. what they did-- which seemedo be the soft... and i can see why they did it. but was we're going to basically subsidize this industry back to health. we're going to gift money to these people until the institutions are healthy again. what dihey didn't count on was that when they restored them to strength the industry would rise up and deat any attempt to reform it and that's what

happened. that's the shocking thing. the industry mettled in the legislation. >> rose: this hasso many interestg aspects of it. at the same time, business now sitting on a lot of cash because they say we don't know what the regulatory structure is going to be like. meaning business feels like there are more regulations out there and you just said that wall street rose up to defeat the regulations. to make them hollow. >> rose: that's what's going on right now. because they're writing the regulations as we speak. >> to gut the meaningful reforms of the indtry. >> rose: there's also this point. most of the fincial institutions have paid back most of the tarp money. i think there's probably 25% or less that remains to be paid. >> right. >> rose: they paid most of that back. >> yes. >> rose: and so therefore the taxpayer made money, in fact. >> that's true. that's true. and that's nice. that's nice. but i want that deal. i want the government behind me. >> rose: (laughs) >> so i can take risks and when it works out i get to keep it.

can i have that deal? >> rose: iother words, they'll guaranteyour book will be a best set seller and if it's not you'll still get the same amount of money >> so you ask me where we are. i think we sort of... there's a kind of... there's an attempt by the governments to... there's been an attempt by governments to muddle through this problem and it's better than depression and chaos and 25% unemployment but the costs are that they're still reckoning with the problem. the problem is still there. there are going to be losses to be realized in the system, they're going to cause uncertainty and panic in so on and so forth. so the story for me moved once i... once i saw that it wasn't just an american story-- though it was an american inspired story everywhere-- investment bankers had their fingers all over this. >> rose: let's start with

iceland. >> well, iceland, as the i.m.f.... the head of the delegation went in to try to fix the place when it fell apart. >> rose: what happened to iceland? >> icelan turd itself into... as you said, into a hedge fund. it's a nation of 300,000 people. always remember that. you're dealing with peoria, illinois. and they had three banks that had assets of a few billion dollars that in a period of four or five years accumulated $140 billion in assets. and became global bank. >> rose: and those assets sfwhr >> everythin from indian power plants to danish newspapers to british soccer tea. they went and conquered the world. they borrowed money from outside and went outside. there were bubbles inside iceland but there wasn't enough to do inn iceland this was a country that had gotten rich by fishing-- intelligently. it was afishing-based economy. they have very rich fishing

grounds and they have big fishing grounds and literally professional fishermen were walking off of boats to become currency traders. and i spent time with one who was... a guy who's regarded as sort of a gifted codfisherman. and you could tell when he talked about it he was good at it and he was 30 years old, hd en training since he was 16, that's all he ever wanted to do. then suddenly someone says "you can make money in trading currencies in this bank." and he leftthe boat and went into the bank and three days later they were letting him trade, a portfolio. take risks for the bank. so they were intoxicated by this idea that they were financial wizards. and they actually... this is what a lot of people did in the boom. they created a narrative to justify the circumstance. they told themselves thatur already aly well suited to

financial risk taking. the world had not discovered this until now. as thousand years of poverty followed by successful fishing, something ha prepared them for this. >> rose: they bought the story. >> they bought the story. and th funny thing about it is there was no questioning of it. in such a small community you would thin that... everybody knows each other. they know that... you know, they would know stefan, i've known you since you were a boy, you're not a currency trader kind of thing. >> rose: (laughs) >> they sort of believed... >> rose: what are you doing? you don't know anythingbout currency! >> it got so absurd that these icelandic tycoons, they bought a big chunk of american airlines and star write memos, press releases about how american airlines needed to change to be a successful business. >> rose: (laughs) >> now, where do they get this idea thateople who basically know nothing can go and buy businesses and run them better than the people who have been doing that business forever? well, all these icelandic people have been educateed in the

american system. they come for post-graduate degrees and clege. they get it from us! they basically... it was a parody of american finance. the kind of... the parody of the private equity toon kind of thing. and they were reflecting a distorted image of ourselves back at us. and the otr thing about it that was so striking was how male it was. >> rose: indeed. yes. >> it was men. it was men. the men... it was a male and all the banks were run and controlled by men. and you're thinking what are their wives doing letting this happen. the women clearly just went along cause, well, i guess for eons icelandic men have known what they were doing when they went to work. they went to fish and they were the best in the world world. and th they tell their wives that we know this other thing and the women kind of went along. and it was riveting... >> rose: and they bought things, too. >> it was riveting when it all fell apart. >> rose: why did it fall apart? >> well, they didn't know what

they were doing. >> rose: they had massive losses and the minute there was a... the minute that there was any question of whether there was a sound enterprise and they lost the presumption of innocence the whole thing unraveled and everybody wanted their money back. they made massive losses in the investments that they made. and it was a run... there was a run on the country. everybody who hadiven them money before wanted it back. but what happens then between the genders is so interesting. it is the most where you're driving with your wife and you said you know where you're going and she says "stop and ask directions" and you say "i know where i'm going" and then you're lost and she gets furious. they threw allhe men out of the tops of the banks and women have come to be senior peopl in the banks. they threw the government out of power and they've elected the firslesbian head of state. women have clearly sort of... and i think a funny way that's a model for what should happen in american finance. part of the problem with american finance is male

overconfidence and there have been studies that have shown that men left to the ownwae. they think there can be experts. >> rose: you would think in the hedge fund business where the rewards are so groundful-- if, in fact, you do it well-- that more women would be doing it if it's just a matter of what you just said. >> well... >> rose: are you suggesting there's no point of entry for women? because it's my understanding if you can make money and you can get some and make more then nobody looks at gender. >> not true. >> rose: okay. even in that business? >> even in that business. >> rose: because it's not institutional as much as it is... >> it's... the decision who have to give money to is still very male dominated. and the... it helps when you're selling yourself as a money manager even if you actually

can't make money out of money, even if you don't haven edge, even if you believe you do if you believe your own b.s., you have an advantage of raising money and i think menre better believing their own s. than women. thiss the male overconfidence. >> rose: meaning women are more realistic? >> yeah. >> rose: but also in an up market when everybody's making money it doesn't take skill to make money, just... it takes just the ability to raise the capital because if everybody's making it, they make it. right. >> rose: until somebody says game's over. >> right. >> rose: so take me to ireland because it was a very different situation. >> this is the thing that kept me going with this story. i realized at some point the global financial crisis wasn't a global financial crisis, it was a series of local financial crisis and each one was different from the other and this wasn't about money, it was about culture. and the money was a window into the culture. it was a way to get into these places and ask... and reveal... >> rose: how were the irish different than the icelandics? >> similar on the surface.

their banks went from bng small to enormous and the world's worst bank was an irish bank, probably, anglo irish. anglo irish made losses in a nation of, what, seven million people of 34 billion euro. so if you scale... you translate that into dollars, scale it for size of the population, imagine a single u.s. bank that comes to the treasury and says "i lost $3.4 trillion." that's basically what happened. and that was one of three banks. the other two banks were just right behind them. and the icelanders had carly this... the male icelander had this conquering impulse. secretly had to go out and conquer the world. the irish didn't do that. the irish bought ireland. they wanted it turned inward. they createdhis fantasy that ireland was going to be something completely different than irela had ever been. a global financial center and a place where people would move to. voluntarily. >> rose: before all this happened there was a belief in the irish miracle. you know, they had low interest

rates, low taxation, everything was like... this was a place where they had set a system up that they believe was the wave of the future. and that they understood capitalism better than anybody. >> they were very vulnerable because after centuries of povr, centuries of economic failure, breathtaking economic failure, millions of people immigrating or dying of starvation, in the early '80s they experienced this incredible turnaround and people have been trying to explain this. it's not ever been fully explained. a pair of sociologists at harvard argued it had to do with the catholic church declining, birth control becomin available and of... a lucky period where there was a disproportionate number of workinage people. productive people. and it's an an intriguing explanation but the fact is nobody's explained this.

so you have this totally... this ultimately insex plicable economic miracle that's real. it's based on people becoming more productive and cpetitive. and it goes on for the better part of a generation, right? early '80s to the early 2000s, then along comes a truck of free money. unlimited sums o money you can borrow to indulge any fantasy about the economy you want to indulge. well, they're already predisposed to believe in miracles, they're lived one. let's have another. and they turned inwards and they bit up irish land prices to the point where... i mean, the thing i saw, that was house which was not that different from a big house where i grew up in new orleans. it was like a big new orleans house. it was somewhere short of a mansion but bigger than a ddle-class house. it had changed hands before the bubble burst for $80 million. $80 million. and... in ireland.

the... what leads to that is incredible. it's an assumption that everybody's going to want to buy stuff in ireland and it's going to get more desirable. it's out of control and the banks were lending against ever-higher real este values where they got absurd and not just houses but office buildings that were never going to be occupied and villages called ghost estates that were built where no one lived. they have these villages that are just empty. >> rose: like ghost towns. >> ghost towns. instant ghost town bus brand new and it all comes crumbling down and the bank are left with b debt. and this is where the irish story gets very curious because it's a world historic kind of real estate bubble but there have been real estate bubbles. we've had some on our own. it's what they do then. these banks are all operating in the private sector. they're private banks. they've borrowed the money they have lent from lots of foreigners. german banks lent to irish

banks. they have all this outstanding debt that is private debt. these banks fail. you would think that... and they're massively too big for the irish tax payer to take on their debts. you would think that the irish government might say, you know, all's fair in love and war, you invested in these banks, you accept your losses, you, the bond holders. maybe not you the depositors but you the bond holders. instead, the irish government said "we're going to nationalize these debts. we're going to sink our country to pay you back money that you should never be repaid." >> rose: right, right. >> and the irish people then go along with it. there's been almost no protest. >> rose: out of national pride or what? >> well, this is where i theorize because it's important. someone's got to explain it because it's the opposite of the greeks who borwed the money at the level of the state and don't want to pay it back. >> rose: we're going there next. >> but the irish seem to have...

they do have a taste for suffering and there is a certain status to suffering in ireland. and there is this thing that happens when a bunch of irish people get together that whoever had the worst thing happen to him they're the ones who get to talk. >> rose: i know somebody who's skilled who will write about it. >> and there's a kind of shame, too, there. a long shame. and they... it was... it's deeply... it's a cultural event. this is not an economic event, this is a cultural event. their willingness to just suffer and put themselves through all misery to pay off these people who probably should have never been paid off. that's what they're doing. their respond to crisis is sui generis. and as i say, what interested me was money is a window into the place. >> rose: what the culture. and tonderstand the uniqueness of the culture and its behavior. >> right. and so the crisis...

presented someone like me with this wonderful literary opportunity. >> rose: sow so how a the greeks different in how they handle their situation from icelandnd... ireland. >> it's funny that all the chatter, allhe media chatter is will greece default? >> ros exactly. >> greece has defaulted. they're already defaulted. the question is how badly. >> rose: why do you say theve already defaultd? >> they've already negotiated terms where they'reepaying creditors back less than 100% on the dollar. we've already had an acknowledgment they're not going to pay back what they owe. the question is how big a cut will the lenders take? is it going to be total collapse and chaos and they'll get pennys on the dollar or is it going to be 80 cents on the dollar? >> rose: also the issue, too, getting 80% of the dollar is that there is some sense that because those banks are not all greek banks, they are banks in europe and some in the united

states it has a contagion impact >> oh, it does. no question. so what happened in greece-- like everybody else-- the greeks are left alone in a dark room with a big pile of money and left to to cope with their temptation. the... they succumb to their temptation and the what they're tempted to do is nothing to do with the private sector. they have a dysfunctional and bloated state. >> rose: this is unbelievable. had no idea. >> rose: >> they had a dysfunctional and bloated state alread it was essentially a instrument of patronage for the political parties. they come in and hands out goodies to the government. >> rose: the point is if you went to work for the government and on the public payroll you made more than if you were on the private payroll. >> one story that completely captures t tone o the place, there is a public national railroad in greece, it generates 100 million euros a year. it pays $400 million euros in

salaries. four times what it takes in. the average salary of a greek railroad worker is 65,000 euro a year, which is more than in any prate company in greece. that's just one example. >> rose: and he or she can retire at waunl what age? 50? >> it depends on whether the work is classified as hazardous enough. hair dresser is classified as hardous. >> rose: you were classified as being in a hazardous occupation in greece you can re... if you work for the government or for anybody you can retire at 50 and get some kind of significant pension benefits? >> yes. i think that's right. but that's just... that's just a tiny piece of this big puzzle. the big puzzle is the state is an instrument of graft and corruption and it's... and totally dysfunctional. the problem i greece, the financial problem in greece, the greek banks are about to all go belly up probably because... not because they did anything bad, they own greek government bonds. so it's this very weird

situation where the coury sank thbanks. most of these other stories are varis versions of the bank sunk the countries. including us. but the countries sunk the banks in greece. the greek banks were have been sleepily the whole private sector is very sleepily. at least the official private sector. so you've got this state that is using the free money to bloat itself to even more grotesque proportions. and the trouble is that that is the culture. the culture is i go to the government to basically steal things from it and i don't pay my taxes to it because i don't trust it. >> rose: so they had rampant non-payment of taxes. >> i sat down with two different tax collectors in greece both of whom told me you were goodat collecting taxes in greece you got fired. the point is not to collect the taxes. it's okay to take bryk bribes,

not collect the taxes. >> rose: do all those people feel any get about having germans who have been stoic and existed in a saving society a society that engaged in significant savings rather than consumption is going to have to rescue them or else there will be i a bad place? >> i didn't detect much guilt. >> rose: (laughs) >> i detected a lot ofnger. >> rose: anger at... at the germans! and everybody else. >> rose: why anger at the germans? >> this is a question worth asking because they're being made to change their way of fe to aommodate the germans. >>ose: because the germans are demanding us a austerity in order... >> their money back. and no individual greek sees why he's personal responsible for althis debt and they don't see why they individually have to suffer in order to pay the germans back. and they... in addition they have historical grievances with the germans that are still very much on the surface of life there so that the germans especially are annoying to them

and their idea that the german tax collectors are in greece as they are teaching the greek tax collectors how to collect taxes is really outrageous. so it's a... they're talking like this oop-to-each other. the greek people don't feel like they have an obligation. they have a government that feels like to hold the society together they have to honor the obgation and it's notlear that that's accurate or true. it's not clear that it's going to be good for greece to pay all this back. >> rose: so what? it should simply declare bankruptcy and... >> i think the debts need to be wiped ou the only thing that works is wiping these debts. >> rose: and what happens if you wi out the debt? >> >> this is the question. >> rose: banks go under. >> maybe. the greek banks go under. but... >> rose: and what about the french banks? >> there are lots of examples in history of countri going from unsustainable indebtedness to

defaulting to... >> rose: prosperity. >> prosperity. because once you've wiped out the debt you're a good risk ain. so the problem actually isn't greece, i don't think. the problem is the people who aren't going to get their money back. >> rose: that's why they have brups so you can find room to recover. >> the idea of social reinvention or national reinvention is not alive and well in europe. that's our idea. the europeans don't go for that. they think failure is permanent failure and it's built in their laws. being bankrupt in ireland is miserable. it's much better to be bankrupt here. but the... the real problem is not greece. the problem is if greece does not repay these loans then which french banks go down? and if the french bank goes down what has to happen? well, the french government has to step in and nationalize the banks. the french government has pretty nasty looking balance sheets and who's going to want to lend money to the french government then? so the question is do the

dominos start to fall? and i don't have the answer to that. i don't know. i don't know. i mean, there's no good answer... this is one of these situations where there's not... if there was an easy answer... >> rose: we've done this on different programs. what would be intriguing is... so the china babies in went over to europe and there were there for a conference of some kind and everybody says "you have lots of money, you can take care of this." >> no, we've learned our lesson with the united states is what they said. we ted this once before and it didn't work. we found what everybody finds is thatf you lend somebody a thousand bucks, you own them but if you lend them a billion they own you. >> rose: you ear their partner. >> so i think chinese have figured out the better something to buy it in bonds. >> rose: like natural resources in aftersglachlt hard things. >> rose: you're a damn good travel writer so you take us... travel write jooers v to understand culture, what's interesting and compelling about the aspects of a place. whether the place is wall street

or whether it's a country. >> travel writers need to create movement on the page. >> rose: oh, that's what they meant. >> and make the things... you have to create the feeling of movement on the page and i have always... it's funny that that critic said that because i have always thought of myself kind of as a travel write yir. when i'm in a pinch as a writer that's where i go to. so"liar's poker" was a trave log ofme wandering through wall street. so that's not an alien mode for me to be in. >> rose: this books called "book rang: thavls in the new third world." michael lewis, thank you. >> thank you.

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