>> rose: welcome to the program, tonighght a look at the u.s. economy with jeffrey lacker, president of the federal reserve bank of richmond. >> i think we made great progress. i think it's been stunning. he look at the 70s where inflation fluctuated from 3 to 13%, average 6, 7% over that decade. it was a mess. and it was caused by us going off the gold standard and losing that anchor. industrial banks around the world had to engage in really a voyage of discovery to figure out how to manage monetary policy to keep inflation low and stable. >> we continue with catei, with a new memoir called parist: a love story.

>> these are honest accounts of myself is, and of these these public men, this is not a tell-all book but i did my damnedest to make it an honest account of myself and not to make things pretty when they aren't. >> rose: jeffrey lacker and catei marton when we continue. funding for charlie rose was .rovided by the following:

>> from our studios in new york city, this is charlie captioning sponsored by rose communications >> rose: jeffrey lacker is here, president of the federal reserve bank of richmond and a voting member of the federal open market committee. the committee makes decisions about interest rates and the u.s. money supply. there is much anticipation ahead of an annual

conference in jackson hole wyoming next week. on august 31st chairman personage will deliver remarks where he makes fresh changes ahead for monetary policy. financial markets, economists and politicians will be listening carefully. i'm pleased to have jeffrey lacker at this table for the first time. so i say welcome to you. >> my pleasure. >> pleasure to have you here. >> thanks for having me. >> rose: what do you make of the the minutes of the last open market committee, basically saying that they may, may take action if they do not believe the economic recovery is sustained, significant and sustainable if i'm remembering the right words. >> right, it was substantial and sustainable. >> and the economic trajectory. this economy has been disappointing. it's really trying our patience. the economy is growing slowly. the growth rate has been fluctuating. sometimes it's more rapid. earlier this year second quarter it slowed down pretty substantially. there's some sentiment around that table for doing more.

personally, my sense is that monetary policy isn't capable of having a material effect on growth or employment or unemployment at this point. if it did have much of an effect it's likely it would increase inflation as well. so i'm in the camp of being a bit of a skeptic about more monetary stimulus at this time. >> rose: just as a primer and i know because of your so central to some of the arguments because of positions you hold, when we talk about monetary policy we're talking about what. >> so the fed has a billion sheet. on the liability side of our balance sheet, is the paper currency but also the circulates probably some in your pocket. in addition to that, reserve accounts that bank holds, so this is high-powered money. this is the bank's bank, this is the money banks use. >> the bank of the united states. >> right, so the money banks use to pay each other so this is the ultimate money in the economy. we've lowered interest rates to virtually zero. and the way we lower interest rates is to add more money so that the

supply and demand mean interest. once we get down to 0 the only way to add stimulus is to increase the size of our balance sheet by buying some securities in the open market. that eads reserves, increases the supply of money and that has a stimulative effect to some degree or another. getting a gauge on that is really difficult. and i think you need to be humble about the extent to which you know, given increase in supply of-- . >> rose: so when you buy these assets what do they call that? >> well, we've called them our large scale asset purchase program, the people call it quantitative easing, that is the lingo in the market. >> rose: we've had certainly of those quantitative easing. do they work as far as you are concerned. >> i think the jury is out. i think will take a while to find out. arguably the one in 2010 may have increased inflation a bitment inflation is in a good place right now. running around 2%. i don't think we want to push it up any higher from

where it is right now. >> rose: you have the same fear of inflation that alan greenspan had. >> i think we made great progress. i think it's been stunning. you look at the 70s where inflation fluctuated from 3 to 13%, average 6, 7% over that decade, it was a mess. and it was, you know, caused by us going off the gold standard and losing that anchor. central banks around the world had to engage in really avoidage of discovery to figure out how to manage plon tear policy in a way to keep inflation lower and stable. volker figured that out in the early 80s, brought inflation down to 4 or 5%. alan greenspan completed the job in the 1990s, tightening the money supply. and the key episode is instructive for now. in 1994 we were coming out of a recession, early 1990s. people talked about jobless recovery. the recession was relatively shallow but it was a jobless recovery and people were worried about choking off growth. he raised interest rates starting in 1994, even though inflation wasn't rising. and he did that because

inflation was at 1 or 2%. the fed wanted to keep it there. that cemented our credibility, cemented the commitment the head it made to keeping inflation low and stable. since then there had been a couple scares where people thought inflation, we were going to let inflation rise. we will to sort of raise rates to nip that expectation in the bud. that credibility is paying off for us now. >> rose: while we are doing this economic primer let's ask this, what is fiscal policy. >> fiscal policy is what is taxing and spending and the like. >> rose: the budgetary process. >> exactly. what congress and the administration do. now there is a subtlety here because classically traditionally before this crisis, when we did monetary policy the way we would expand our balance sheet or shrink it would be to buy or sell u.s. treasury securities. >> rose: right. >> just now in the crisis what we started doing was other things. we would lend money to bear stearns. we would lend money to buy mortgagebacked securities. when we do that, we're essentially selling some

treasury securities to the private market. so it is as if we were issuing government debt and using the proceeds for mortgage baiked securities. so when we alter the asset composition, the composition of our assets, that's fisca fiscal-- fiscal policy, that is making a fiscal decision. when we laend money to somebody other than the u.s. government, that is fiscal policy that has traditionally been a that would for central banks. and that's a good reason to draw a nice clean line between fiscal policy and monetary policy. >> are you a lone dissenter or dow have other things to talk about. >> so among the voting members now, as you know, all seven members of the board of governors vote. the rest of the f-- consist of the 12 presidents of the reserve banks. only vive of them vote at any one time but there are others and you can see this in the minutes. there are others who sort of, for example, share skepticism. my skept stism about the advise ability of further

asset purchases. you can see a record of that in the machines. >> rose: we also had almost concurrent with this release of the minutes and a conversation about the minutes the congressional budget office had some interesting things to say in testimony too. >> they did. so we have this fiscal cliff coming that everyone is talking about, i think what they are talking about a large number of changes in taxes and spending programs will kick in if nothing is done. i think everyone anticipates. >> this is the last time they raised the debt ceiling. >> exactly. so i think all around the economy, i get out in my district which goes from maryland down to your old hometown of north carolina. >> right. >> down to south carolina, out to west virginiaia. i get out and talk to businessmen, bankers, consumers all the time. and we have been hearing from them, they just don't know how to make economic decisions. they are good ideas out there but they don't know how to cost out a new plan. they don't know what the tax rate is going to be. they don't know what the health-care benefit costs are going be for any workers

they hire. regulatory policy is hanging over them. there have been changes at the epa and other agencies but a lot of that is in litigation. >> is your fear of inflation real? >> so we're in a good place on inflation. i think our credibility is high. we have seen a lot of fluctiations on inflation, oil prices go up, that passes through to headline inflation. but you see inflation trail back off and come back to just gravitate back to 2%. i think that speaks to our credibility. but the important thing is you don't want to lose it. you don't want that to drift away. you don't want to drift up to three and have it be in question because it will be costly to get it back down again. we would have to hammer the economy. >> do you worry about the consequences of europe? >> so yes and no. europe has a long struggle ahead of them. they've gotten a lot of the way through it. they're embarked on a process of constructing a new regime. the problem they're dealing with is the ambiguity of the commitment to a fiscal

union. they form this monetary union 20 years ago, began that pass. they sent a lot of centrals, made a lot of communication that acted as if they had a monetary union but they didn't have any teeth in it, as we saw about 10 years ago. and they didn't have any support mechanism for actually carrying out that mutual support. they're building that now. they're living up to the implicit commitment they made. at the same time they're building the constraints on each other, the surrender of sovereignty they would need to make it a sustainable and workable arrangement. and naturally the germans are reluctant to provide money for the funding the implicit guarantee until they see, you know, some surrender of sovereignty that gets them to a sustainable arrangement. >> when you look at the ecb do you approve of the actions they've taken. >> i think central banks around the world have been asked to do too much. and i think expectations

are -- >> i think expectations about central banks have gotten a little bit ahead of reality. >> that-- you got to look at the dynamic here. our independence, you know, is important for the conduct of monetary policy. this is something that countries around the world learned during that process i described to you where after volker where we learned to keep inflation under control. country after country in the 80s and the 0s redid the charter of their central bank in order to provide some measure of insulation from electoral politics. but part of that, part of a byproduct of that is you've got this entity of a balance sheet that's off budget. and if some firm gets in trouble, if some sector gets in trouble it will always be tempting for a minister of finance or collective of ministers of finance or say well i don't want to go to congress for this money, can you just lend the money to

make this happen. and i think that's lead over the last couple of decades to an expansion of what people think we can do, and what we think they, what they think we ought to be able to do. i think that's been a problem. >> what is your assessment of a chairman bernanke during the 2008 crisis when the fed played a principal role along with the treasury secretary and the then president of the new york fed and secretary of the treasury. >> i think they all were doing what they thought was best for the economy. it is important to understand -- >> did you think what they were doing was best for the u.s. economy. >> let me explain, give you a little background and i will come back to that, i promise you, okay is so beginning in the 70s there were a series of interventions where the fed lent to prevent the failure of an institution, essentially to rescue short-term creditors of the financial institution we had. franklin national we had continental illinois in 1984.

and then others. that lead to the expectation that the fed would step in again to rescue short-term creditors. the large financial institutions therefore didn't have the discipline, it encouraged them to borrow short and lend long. it encouraged them to live dangerously. and we, that came to fruition, that came home to roost in 19-- in 2007. august we see counterparties, financial institutions pulling away from each other. the diagnosis then among some was that this was a liquidity problem, that more central bank lending was the answer. and i don't think that's true. large financial institutions were borrowing from the home loan bank, tens of billions of dollars. over a hundred billion dollars. they didn't have a lack of excess to liquidity. they just didn't trust each other. that missed diagnosis lead us to take actions that were designed to encourage

institutions from borrowing from the federal reserve. that encouraged people to believe that we would continue to rescue short-term creditors which we did in the case of bear stearns and some other institutions. i think we lost the opportunity that we would have had between august of '07 and september of '08 to encourage financial institutions to take steps to insurance late them from the types of problems they had in 2008. >> rose: they could have insulated themselves by -- >> they could have rolled off short-term borrowing. they could have built up liquidity buffers, liquid assets. they could have raised capital. and there was that window to do it. some institutions did, some didn't. >> rose: before we go further. take that, what they did and what you saw, what might have been and didn't happen, if you look at 2012, and you look at what we have with sdod frank, are we in a better place so that financial institutions can look at some impending

crisis and believe that they're in a better position to deal with it than they were in 2008? >> we've taken some good steps but there's a lot of work to to do. dodd frank did a couple of good things it strengthene strengthened-- tougher capital requirements, tougher liquidity requirements. they can't borrow all that short-term money. >> rose: an you're in favor of both of those things. >> yes, they are good things. living wills, doesn't get a lot of attention but this provision that all these financial institutions have to device a plan for their failure and it has to be a plan that does not involve government assistance. they have to have a plan for failing themselves, for filing for bankruptcy and not requiring government assistance. they have to file these with us. we have to approve them. we have to say if they are credible or not. this going to be a lot of work. these are big complex companies with sub s si-- subsidiaries all over the globe. this is forcing them to look at their structures, clean them up, make themselves

less complex and make themselves essentially resolvable. and the goal here is that for any one of these firms, if they get into trouble, a policymaker is willing to say yes, unassisted bankruptcy is the path. we don't need to bail them out. when we get to that point then perhaps we can make it credible that we're not -- >> we're not saying too big a failed rules. >> it's still around with us. there is still that expectation out there. you can see it in financial market prices and the risk some of these guys pay. so we've got a lot of work to do. >> can you say that wall street is, or not, wall street banks, big banks in new york, which are global, jpmorgan, citi, wells fargo, and others. >> b of a. >> bank of america. >> they're in our district. >> that, they're okay. they have recovered. but small banks around the country are they okay as well? >> the large banks their

conditions improved substantially. >> rose: right. >> community banks it's mixed. we've had a lot of problems with community banks. and our district, for example, i mean the problems in georgia, florida, nevada, california are well-known. a little bit later, a little bit different time scale, the same troubles hit carolinas, and virginia, we're working away through that. we seem to be over the hump. there's some consolidation that needs to happen. some capital raising that needs to happen, some cleaning out of loan books. a lot of them were involved tangentially in the housing market by lend stock land developers who were buying lands, putting in streets and the like. >> rose: back to my original question, do you believe that bernanke and paulson and geithner made the quite call in 2008? >> i wasn't party to the discussions about bear stearns. i, my hunch is-- . >> rose: what they did in

bear stearns is they backed up and guaranteed a purchase by jpmorgan so whatever the decision was in the short run had it long rubin sen difficult effects that we're still dealing with, and i think are going to be problematic. >> rose: meaning the next time there is a crisis people will expect the fed to bail out the banks. >> people will expect to us intervene. >> rose: but it didn't in lehman brothers. >> so that was an interesting case. after leeman brothers everything is different. i mean at that point, it is a watershed, right. >> rose: a marker. >> at that point five different financial institutions had failed in 2008. and the government had handled them four dferent ways. you had bear, you had endie mack, fannie and freddie and lehman and aig, you had six five difern different ways, different parts got support, different parts didn't. it was varies across institutions so there was-- the key was ambiguity. just a lack of clarity. financial markets had no

idea when with would bail out, when we wouldn't, whether, where in the capital structure we would intervene. we would support preferred shares, would we support subordinated debt or not it was entirely unclear. and i don't think we could have said something that made it clear. i don't think it would have been credible to say here is the new regime without essentially what they did was throw in the towel, go to congress, get a huge checkbook and offer to clean up everything. so after lehman everything is different. because we had veered and zigzagged so many times at that point. there was no hope of achieving some clarity of expectations about our policy. >> rose: okay, but i'm still not, did fallson make the right call? >> i disagree with the diagnosis of liquidity problems. i think everything stemmed from that. i wasn't close to the

decision about lehman. or the decision about bear. >> there is also this, sandy weill stepped forward to say you should break up, you should break up the banks even though i spearheaded the drive to create these superbanks, i now think its with a bad idea. >> that sounds good but how far do you break them up. in 1948 when we had too big to fail was sort av nounced as a doctrine, those institutions if you just drew them-- grew them with inflation they would be $200 billion. so is $200 billion small enough. they were too big to fail in 1984 according to the comptroller of the currency. i think the only way to do it in a sensible way is to look at a failure, could you take them through bankruptcy and would it work? and that process of doing that analysis is what's going to show you are they too complex. should you separate these. i think that's the way to figure out how to break, whether to break them up or not. >> you can help us on this very important issue. jackson hole is coming up, okay. >> uh-huh.

>> rose: what will be the focus of the discussion out there? >> that's a good question. i'll be out hike on the trails in the afternoons, but i assume you are talking about the coffee breaks. >> rose: yes, yes, i am. >> well, i think people will be talking about what is going on in europe. i think people will be talking about whether the fed going to ease or not. >> rose: that's it. >> whether they should. this is a big one. there's a lot going on, superadvisory policy, a lot of international coordination that needs discussion as well. >> rose: some of the banks will say well, if the capital requirement is too high t affects our growth. do you buy that? >> so there is always a trade-off with capital requirements. capital is expensive. the capital makes you save. you know, yes, we're requiring more capital than we did before. would it mean more growth for us to have less capital, yes, but it would be a more risky situation and you have to weigh the cost and benefits. >> when you just look at the american economy, are you

optimistic that somehow we will make the country, will make the right decisions and you know, looking at the precipice of disaster, will focus the mind as they say 9 hangman'ses into does. >> i'm hopeful. i hope that's a more appropriate gauge for me than optimistic. i think we have to be patient right now. i think the fundamental forces of innovation and entrepreneurship that create new ideas and implement them are still there. but i think they're being held back. i think they're being impeded. >> by. >> well, i will mention three things. three classes of things. one is just the general aftermath of what we when through. i think we had some policies on in housing that encouraged people to borrow too much and build too many houses. and people found out after housing prices fell they had more debt that they wanted. and we own more houses than we wanted. households are adjusting.

and they're doing that by paying off their debt and being very cautious about spending so i think the cautiousness of american households is holding back growth. and i think that is a legitimate concern. and i think they're right to be cautious. if you look at the data, you know, they're very apprehensive. they're worried about the risk to their own household income, that is one set of things impeding the recovery. related to that of course, is the overhang of housing. we built more houses. we're going to have to grow. >> supply and demand is out of kilter. >> there is an argument that that made pie people, one of the accusations made recently and inn some of these new announcer pieces that ot bama administration had missed opportunities to do something it was not their highest priority to deal to the housing crisis. >> yeah. >> and that the housing leads into the most influential, warren buffett and others, one of the most influential factors in the economy because housing not only affects construction t affects so many other

industries that are derivative to housing. >> so housing is important to the economy to some extent but it's very small now. so little swings in how it grows aren't having much of an effect. the broader picture with housing is that you look back at the data and housing always went down and it always went up in the recovery, pretty sharply. went down sharply because interest rates rose, went up sharply in the recovery. the thing that is different now is that this recession was essentially caused by overbuilding of housing so we shouldn't expect. >> too much credit. >> we shouldn't try and force too much, exactly. >> so the secretary set of things is this uncertainty that i talked about. we get out and talk as i said to a lot of businessmen in our district. one of them very vivid case, he's a manufacturer. has a bunch of manufacturing operations here and abroad. and he is into high density polymers and that sounds sort of obscure but it's like swimming pool noodles and artificial wine corks, you know those ones that are kind of plastic so he makes

those. and he's got a lot of other products related to high density polymers, he say he has new ideas for new things involved building a factory, new product, new market. but he said i looked at them. i just can't do them. >> rose: but i talked about this a lot. and here's what i don't understand. how much of that has to do, if there is an equation here, how much of that he can't build the plant is because he doesn't know the demand is there, and how much of it is that he is worried or has uncertainty about the nature of things because of regulations or because of the cost of health care or because he doesn't know where the economy is going? you know t if the demand was there. >> i've talked to a lot of people about this. >> rose: hear me out. if the demand, i don't have a position here. >> he's pretty confident. >> if the demand was there, and he's confident the demand is there. >> why doesn't he build the plant and serve that demand. >> well, he doesn't know if he gets the rate of return will want. he didn't know if it will break even or not. that's it. >> because of not the buying and selling of the product,

the man would serve done -- >> labor korx doesn't know what health care going to cost him. you have to add on something for health care and you don't know, he doesn't know what the magnitude of that is going to be. those kind of things. it's plausible. this is air hard thing to get a handle on but it's plausible. >> but he's there. >> so there is a collection of things like that. and hard, you know, hard to size quantitatively. but i have become a convert, the more and more i hear from people around our district. >> rose: convert to the idea that the problem with the american economy is uncertainty on the part of people who create jobs. >> that one class of problems is just the overhang. i mean look at it this way. think of all the economic activity that is effected by the federal government. so you look at defense contractors, right. they don't knows what's coming. there could be this sequester. they're getting no guidance about where it's going to fall. is it going to effect appropriated funds, past year funds. nobody is telling them.

they're having to prepare for a lot of different eventualities an they're pulling back now just to be heav. programs entitlement programs, there's a lot, every thing that could be a part of the solution that is a part of the uncertainty facing people in the american. >> as i close this here is what i hear you saying, one, that you worry that dodd frank is too much regulation. >> uh-huh. >> two, on the other hand you believe that too business fa fail say concept they should work to eliminate. number three, you believe that there is little that monetary policy will do to stimulate the economy at this stage. >> i think we need to be patient. i think we need our leaders in washington to make choice, to clean up the unsofernt. i think when we get a clarity around policy in the past forward for the federal as ifical-- fiscal environment, i think we'll do better. and i think we should be

humble about our ability to stimulate growth right now. with monetary policy. >> rose: but you also seem to say you believe that there is, within the american economy, a potential. >> i do. long run. >> rose: all of it is done, the dynamism of the american economy is still possible and we're not looking at a new norm in terms of growth rates. >> uh-huh. we're going to get there. >> rose: and unemployment. >> we're going to get there. innovation is there. the entrepreneurial spirit is there, the willingness is there, the flexibility of our markets is there. we have problems with worker training that we need to overcome but we're working on there. there are a lot of people. >> rose: and we can restore our manufacturing base. >> yeah, it's there, it's coming back. we have mid skilled, higher skilled manufacturing operations in north carolina. >> rose: on that note, a good note, thank you for coming,. >> my pleasure. >> rose: back in a moment, stay with us, kati marton is here, a journalist and author, herself enbooks

include enemies of the people and hidden power. her late cess a memoir t is called paris a love story. i am pleased to have her back at this table. welcome. >> thank you, charlie. it's wonderful to be back. >> rose: you've got me when you say paris and a love story, why did you write it? >> well, i fled new york to paris after richard holbrooke, your friend and my husband, sudden death. and because i couldn't pick up the thread of my life. there were too many ghosts in new york, particularly in our apartment. and paris was a place where so many good things have happened to me, at every stage in my life. so i wrote it because first of all, when richard died i started keeping a journal. and this is partly based on that journal. i con sleep. and so at night i would write.

so i wanted this to capture what richard and i had. but also to make some kind of sense out of seemingly random events which-- which have made up my life. and somehow by writing it i see now trends and patterns. and i think i have made richard permanent and i think i have made peter jennings, who was also a huge figure in my life, solid, by writing about him. and these are-- these are honest accounts of myself, and of these public men, richard holbrooke and peter jennings. this is not a tell-all book. but i did my damnest to make it an honest account of myself and not to make things pretty when they aren't. >> rose: but notwithstanding that, and did you include things that people thought you might not have included whether it's an affair and haig your husband learn

about an affair and that kind of thing. >> yes. >> rose: it is also, one might ask, were the things that you felt like you could not include. >> well, of course. >> rose: because they were too deep and too personal and too -- >> yes. this is a memoir of love and loss and how to get beyond loss. because loss is something that eventually finds all of us. but this not a book about grief. because shortly after richard's death and i was shattered, joan did ondropped off a note at my apartment. and it was written in the tinniest handwriting i've ever seen, deer catei, i woke up this morning and i thought of you. and i thought of all the mornings that you will wake up and think about richard. i was very touched by that, by charlie, i decided then and there that i did not want to wake up every morning for the rest of my life and be sad. and what i needed to do w to, was to bring richard

along with me but to start rebuilding my life as he foresure would want me to. but without pretending that i wasn't completely struck by grief. and so how do you do that? paris was the bridge for me. par business all its beauty and all its memories of great times that hi with richard, with peter, and as a girl. and now again. the thing about loss is that it opens up the possibility of i different life. for example i have drawn extremely close to my children. peter was their father it is not that i wasn't close to them before, i was. but richard and i, we made up our own universal. and so my family has kind of reconstituted itself.

i am much closer to my siblings. friends have become much more important, and paris has become much more important. it's a different life than the incredibly dynamic, exciting, historic life that i lived for 17 years with richard holbrooke, with whom i had a ringside seat to history, from-- i am so happy i was with him during the balkan wars when he was negotiating an end to bosnia, i was with him, and with him in dayton, and saw him work his miracles. and then later at the united nations where we had this extraordinary journey together. and i write in the book about our 12-- our whirlwind trip to africa covering 12 countries which resulted in richard forcing the security council to put a health issue, aids, on its agenda for the first time so all of

this i write about and as a result, of having written this, it is now permanent. you know, it's not "gone with the wind". it's, i have it and you have it. >> rose: this is you quoting brodsky f there is any substitute for love t is memory. to mem orize, then s to recover intimacy. >> yes. >> rose: and that's what it is about. and you say this too, he disappeared that is how it seems to me. i assumed death would be a gradual transiltion, a passage after a long illness and sad, unhurried goode bye, not a midlife thunder clap. >> that's what it was. it was one hour before he collapsed, never to regain consciousness, ripped and ri were on the phone laughing and making our christmas plans. and i guess partly what i want people to take from this book is that this is a cliche but i'm here to till it's real. this is it. this is life.

right here what we're living is life. there is very little beyond that that you can count on. which should not put a giant cloud over the present. on the contrary, it should, it should make us really focus on what we're living now. as richard did, until the very end. >> rose: if he did knock he lived life to the fullest. >> it was an os tonishing love story. and i had such joy in writing it. because it turned out that this was in 1993, and i had escaped to paris where i always seem to go when i'm in trouble, with my two small children, and fleeing an unraveling marriage to peter 15 years of struggle, finally i got up the courage to leave. and richard was an ambassador to germany. and he had had some kind of a gps on me for some time. >> rose: that's what told

you. >> he told me when he came, drove his enormous armoured ambassadorial car from bonn to paris, he told me that he could remember every time he had seen me in a decade that was before i knew he had a photographic memory so i was completely-- i was completely blown away. but you know, you know what i am trying to do here is to show the romantic and sentimental side of richard. which is not as well-known as his brilliance. >> rose: how was it expressed. >> it was expressed, i think i say in the book, that richard was a complicated man who loved simply. and i am sorry to say that i tested that. his love and his devotion. because like most couples, long-standing couples, we were married for 15 years, we hit a bump in the road. and i write about that.

i provoked it. i write about that for the simple reason that i think people should know that just because richard holbrok was a public man or peter jennings was a public man, that these are not men who face exactly the same problems that we all face. the problems of daily life and the problems of relationships that go south. >> rose: they do. >> they absolutely do. we're all made of the same human stuff is what i am trying to say. and richard was determined that our marriage should survive my own-- my misstep. >> rose: we're talking around this. let's talk in it. so why did you have an affair. >> this was-- this is hard. this was 2004. and richard had thrown himself body and soul into

the campaign to elect a democrat, john query. he was traveling all the time, campaigning for other democrats, writing position papers. and at the same time i ghon back to my hometown of budapest and was digging deep into my own history which had been withheld from me by my parents. and speaking in hungarian, making new friends, including with an extremely attractive, smart, funny hungarian who the door was ajar. richard and pri on automatic pilot. we were more like best friends than lovers at that point. and i led this man get much too close. but richard was my best friend, so of course i couldn't keep it from him. and-- . >> rose: was that an emotional commitment to that man or was it simply. >> well, it was-- we spoke my mother tongue. there was an emotional connection but i'll say this, that i contemplated, richard

and i contemplated life without each other. and it was very scary. and so we stepped back from the brink and he said, look, you're it for me. >> rose: i'm willing to forgive. >> but you have to clean this up. you got us into this. those were his words. you got us into this. now you get us out of it. >> rose: when you're in the midst of this, did you think what did you think was happening to your marriage, did you think your marriage was over. >> charlie, when are you in the middle of something like this t like a fever. you aren't really thinking rationally. you're just living in the moment. and i-- you know t isn't just men who have a monopoly on bad behavior. >> rose: exactly right. >> but i think this reflects so well on richard, the way he behaved. it was extraordinary. and. >> rose: what did you tell him when you came back. >> well, he-- you know, he knew me so well, i don't think anyone's ever read me as well as richard did. he knew it was over. and we both wanted to get on

with it. and you know, richard used to say to me, we're stronger than dirt which i didn't think was a very romantic thing to say. but a year after this incident when he said we're still stronger than dirt, it was just a huge relief. and for the next, and for the next decade we were much closer than-- we weren't as you know, full of gauzey vision of romance. but we had forged a much closer bond and that's why it was terrible to lose him. >> rose: richard's life, his ambition, his you know, help us understand where he was in that life. because when he died, as always happens, people appreciate a life as they did with him, as they did at this table with his best friends. >> yes, yes. and you know what, it's one of the reasons i wrote this

book is to, is to say to my friends, starting with you, but and my readers, that life, don't put it off and don't appreciate other people only when they're gone. >> exactly. >> because of course i now wish that i would have told him, you know, february times a day that i thought he was extraordinary. and he was. >> rose: yeah. you feel the same way about your parents and people, you can never tell somebody, you can never tell somebody you love you love them too much. >> yes. >> rose: and that you need them. >> yes. >> rose: and that they need you. >> yes. but you know, i mentioned that this is not a book about grief. it's really a book about the quality of life. >> rose: about life. >> and how we have to tell each other while we have a chance what we mean to each other. so i consider this an extremely life affirming

account of my life so far, even though i have had a lot of bumps in the road as you know i had a very dramatic childhood where i didn't see my parns for a couple of years. and so i kind of thought that i paid my dues early. and that as a result, i was going to get off easy for the rest of my days. and i say early in the book that, that the last year of richard's life i had this, when things really were going well, oh, i know he had the toughest job of his career, afghanistan, pakistan, but it was work that he loved. i had had the best reviews i ever had. our kids were doing really well. and i just remember because i have this superstitious hungarian side thinking please, god, don't punish us for being happy. and, and when those late night fears circled, my first thought was to my kids. because richard holbrook was

inductable. richard would always be there to pick up the pieces. so the very last thing that occurred to me was that i would lose richard. who, and i think that's why-- . >> rose: even though, even though people had said to him constantly, slow down. >> slow down. >> rose: you've been on too many planes, too many countries, too often. you're not taking care of yourself. you're eating lousy. >> but that's who he was. you know, one of the most touching calls after richard's death was from the president of pakistan, zardari who called almost simultaneously with the president of afghanistan, karzai. and the contrast between those two calls. because karzai was,, you know all business and i could just about picture him reading a script, mrs. holbrooke, we need, we wish your husband speedy recovery, et cetera, et cetera. but because i had by then

lived with richard for 17 years i knew not to waste a moment of time with a man that he was trying to negotiate with. so i said you know mr. president, for richard afghanistan is more than his latest post. he loves your country. he loves your people. and he's absolutely determined to find some kind of reconciliation. >> rose: and he thought he had found a way. >> he had. and at that point karzai, you know, maybe i just wanted to hear some thing different in his voice. i thought he went off script there and that there was genuine emotion and he said yes, we really need him back here. and then came the next call. >> rose: so there had been lots of tension between the two of them. >> of course who doesn't have tension with president karzai. but that's another conversation. but then came the call from the pakistani president who

zardari who was a human being. he said kati, i told him he was overdoing it i said richard i marks friend, you have to stop flying to all of these terrible places and crawling in your body inside these tents in the refugee coverall of whom richard who was no young stef was doing. and he said, then he came over for the memorial service. and he came to see me in my motel room. and he said you know kati, you have to let the grief, you have to feel the grief. and after benazir, his wife benazir bhutto who was assassinated, after her death, i have not moved anything of hers. everything is as she left it you know what, charlie that is not how i want to live. lz you cleaned out the apartment and everything. >> i have moved from the apartment after 25 years. and i am trying to live a new life. but at the same time,

bringing richard along with me. >> rose: paris became your love when? >> as a student, age 18, plunged in the middle of the latin quarter, the stu pen pent-- stud ent revolt of 1968 which at first was exhilarating but then it turned very scary for me because it reminded me of the first real revolution that i been part of when i was a little kid in buddha pest which ended in bloodshed. and so i fled paris then. but vowed that i would come back. and i did, ten years later as foreign correspondent for abc news. and that's when hi this head-on collision with peter jennings. >> rose: what is the head on on collision. >> well, the bolt of lightning. we fell madly in love on our second evening together, he said i think we would have beautiful and smart children. and we both knew that he wasn't kidding. well, those children are now

beautiful and smart and much wiser than peter and i. >> rose: peter was married at the time. >> he was separated. he was separated, but of course everybody had warned me about peter. but of course, i thought that this was going to be different. and it was. we were together for 15 years. but he was, it was a difficult union. >> rose: why? >> peter for all his obvious gifts, his brains, his good looks, his fame, best in his field, was a deeply insecure man. he, as you know, never finished high school. and as a result, he kind of thought he was pulling off something on the world. that he was a fraud. >> rose: even though he read everything and -- >> but he overprepared for everything, as a result of that insecurity. and that insecurity, once we moved back to new york and he became the anchorman and we were living from ratings to ratings, and they were

always coming, every week, it made ind massey very difficult. our-- intimacy very difficult. our private life was over the minute we left our pardon me because he was so recognizable. i described the heartbreaking scene where he called me and asked me to meet him in central park to tell me that he had been diagnosed with lung cancer. and by then i was with richard and we had divorced. but of course he was the father of my children. and my first and most passionate and most explosive love. and as-- i call him my lover and my torementer. for the rest of my loochlt and he said to me, i have lung cancer and i burst out in tears in central park. and yet all these people kept coming up to us, and saying hey, petser, how are you doing. and i said wow, at the don't leave you alone even for this. and he just slugged, that was his life. but it was a difficult life for a couple.

>> rose: tell you some things you wrote. i was torn between my passion for peter, my drive become a great foreign correspondent that stuck peter as unseemly, unfem minute. he usd the word ambition tas applied to me gave it a biting sound like av ris. >> he didn't think that his wife should be that ambitious. and as a result i left my chosen field, broadcaster journalism and tried my hand at writing. and that was, this is my 8th book since those days. but even that didn't calm his, even the fact that he i was now working from home and no longer traveling the globe with largely male crews which was one of our a source of -- >> a source of. >> a source of jealousee, he was, you know, this is not the peter jennings that his adoring fans know.

but it's important to see all of us unfold. and not to have this notion that these-- these iconic figures are made of marble. because they're not. i mean peter was an entirely remarkable man as was richard. but they're made of the same material that the rest of us are made of. and i try in this book to inject reality to the kind of plastic image that so often nowadays is how our public people and celebrities are portrayed. i don't think it takes anything away from either richard or peter to see them painted in human colors, do you? >> no, of course not. i mean it.

>> i understand. >> you understand what i am trying to say. i wanted this to be a true account, not a harsh one. not a gloves off kind of thing. because i hope you agree that this done with great affection and respect. but at the same time these were human, human beings for all and all. and which makes their achievements, particularly richard who was an historic figure, all the more admirable. he was in addition to being a hard charging diplomat, he was a very loving man. >> you say about peter, i began to think that peter loved the idea of me, in reality he was searching for a wife who would fill the role his mother had had. >> had not. >> a full-time supporter of all his efforts and needs only minute mallly distracted by her own.

>> and i thought coy do that because i was head other heels in love with this improbably handsome, dashing fellow. i was ready to throw it all up. but in the end, you know, we are who we are. and i couldn't bend myself into a pretzel to become his ideal woman. i-- so i do think that he liked the idea of me multilingual, he often kid me about how he actually married me for my graduate degrees. because he didn't have any. >> rose: and leaving him took place because you finally said -- >> it just got too rough. hi made a pledge to myself that i would hang until the kids left for college. but obviously i didn't make that. kids were 11 and 13 when i left. but i didn't leave peter for anybody else. >> rose: you left for yourself. >> i did. >> rose: you want us to understand that a, with

richard, life can end in a moment so enjoy every moment. >> yes, yes. >> rose: live every moment. >> and that when loss finds you as it will, all of us, it should not paralyze you. it should propel you to come out on the other side as i am trying to. i don't think-- . >> rose: it's a work in progress. >> well, yes, of course, of course, paris has been tremendously helpful because to be in a place of such beauty and you know that resonates with history and with death too, it's part of, you know, every parisian bloc tells a story of some violent chapter in the past. so it's much more integrated into daily life there. than it is here. in new york we sometimes consider death in midlife as

some kind of a human failing. there in europe it's still more accepted. as well, it's just something that we all have to live with. and i'm pushing through that. but i am not saying that mi doing that without tremendous feeling for richard with whom i spent the last 17 years. >> rose: thank you. >> thanks, charlie for having me. >> rose: paris a love story by kati marton, a love story, thank you for joining us. we'll see you next time. ol captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org