>> rose: welcome to the broadcast. tonight, we take a look at a broad range of economic issues with joseph stiglitz, nobel laureate in economics and the author of a new book called "freefall." >> our financial sector is in some ways more dysfunctional than it was in 2007. and so as i look at where we are unless we make some vig significant reforms in both the structure of the financial sector and the regulation of the financial sector i think there is a significant risk that we will some time-- five years, ten years-- face another crisis of the kind that we've just been through. >> rose: we continue with duff mcdonald who's written a new book, a biography, about jiplmy dimon, the c.e.o. of j.p. morgan it's called the last m

standing. >> jamie's the guy who stayed jamie the entire time. did what he thought was right even damn the consequences. so that's compelling. the other thing is he, unlike a lot of c.e.o.s, particularly wall street c.e.o.s, he's extremely candid. he may not answer a question but he may say it's none of your business or i'm not going to tell you the answer to that but when he does he... it's not canned c.e.o.-speak or p.r. speak. it's actual interesting and thoughtful answers. >> rose: and pra program note. we intended to show you this evening a segment on google and the digitizing of the world's books and an interview with gina biancichi, who is the c.e.o. of ng. tonight we take a look at a new biography about one of the world's leading bankers. that's next. ♪

if you've had a coke in the last 20 years, ( screams ) you've had a hand in giving college scholarships... and support to thousands of our nation's... most promising students. ♪ ( coca-cola 5-note mnemonic ) captioning sponsored by rose communications from our studios in new york city, this is charlie rose.

>> rose: joseph stiglitz is here. he served as one of president clinton's top advisors and as chief economist at the world bank. he he's advising the greek government as it faces a debt crisis that has raled european markets. he won the nobel prize in economics in 2001. his new book is called "freefall: america, free markets and the sinking of the world economy." in this he writes that he fears the country faces a far longer and deeper recession with a financial system that is more vulnerable to another crisis. give me a sense of where you think we are. >> well, we've been brought back from the brink but we're not out of the woods. and let me tell you why i think we are still in a... i might say a precarious position. while growth is starting to resume, it's not likely to be sustained. it's likely to get much weaker. but the core problem are two. first, a very high level of

unemployment. more than one out of six americans would like a full-time job and can't get it. this includes people who are... have jobs but are working part time, can't get a real job. 40%, more than 40% of those who are unemployed today are long-term unemployed, unemployed for more than six months. that's so important because the longer you're unemployed, you drain your cash reserves. and particularly for young people, a period of should be building up skills, those skills their training becomes weakened. and we know from previous downturns in the united states and elsewhere that young people who have experience or other people who've experience prod tracted periods of umployment are much harder to bring back into the labor force. and when they do, their wages are markedly lower.

and then there's the problem with the foreclosure, which is what started the crisis in the first place. fch pace of foreclosures is expected to be higher than n 2010 than in 2008 and 2009. we've done nothing about the... almost nothing about the underwater mortgages where they owe more money than... >> rose: than the house is worth. >> than the house is worth. and more than 25% of those with mortgages are now underwater. now, there's some di asian d.l. problems that we're about to face. commercial real estate, about a half trillion dollars commercial real estat has to be rolled over. >> rose: we have loans that are coming due and they've got to... >> ...be rolled over somehow. many of those are under water. many of those are securitized and those are very difficult to roll over. in the old days where you had

conventional banking, the banks might have rolled them over holding their nose and closing their eyes in the view that... with the view that maybe with luck somewhere down the road things will get better. bank examiners, supervisors, are less willing to engage in what's called forbearance because they've been very criticized for having not done their job in the last five years. and it's almost impossible to roll over these underwater mortgages. the first of these problems came to the fore in a bankruptcy that was a multiple dollar failure. >> rose: by one of the most reputable land development and real estate firms in the city of new york and then when it came time to pay the loan they couldn't do it.

>> and that's systematic of what we're about to see over and over again. two more problems if you're not feeling bad enough. the states have a shortfall of about $200 billion a year in revenues. down from what it would normally be because of the recession. and the states... many of the states depend very heavily on property taxes. the states have balanced budget frameworks. which means that when the revenues go down, they either have to cut expenditures or raise taxes. that's equivalent to a negative stimulus. and so far the federal government's been picking up about a third of that gap. but with the stimulus coming to an end in 2011, the question is what will happen. i just came back from california where you see the future. teachers, university professors on furlough two days a month on

the way to being laid off. and, you know, a whole set of problems in a number of other states. so these are among the sort of clouds hanging on the horizon... >> rose: and so therefore you believe the consequences of all these things are? >> that the economy will not be able to sustain the growth that we've mean? the last two quarters. there will be a marked slowdown possibly into actually a double dip, which is another recession. but the bottom line is for what most people care about-- jobs-- growth will be too slow to provide new jobs for the new entrance into the labor force and certainly too slow reduce the unemployment from the very high level that it is. so it's going to be a lot of stress both in the labor market and the housing market unless we do something more than we've been doing.

>> rose: and what would that be? >> well, that comes to the view, i think we need a second stimulus. we need a large second stimulus. a lot of deficit hawks are around there saying we can't afford it. and i would say we can't afford not to do it. and, you know... >> rose: you have to put people to work first and then you can worry about the deficit. >> moreover, it was the shortsightedness of the banks that got us into this trouble. we ought to be looking not at the deficit but the long-term debt. if we take... if a large fraction of this money goes into investments-- education, technology, infrastructure-- and we underinvest in the all these areas for years, all we need is a return of about 5% or 6% and then we get more tax revenue from the growth in the short run we get more tax revenue from the growth in the long run from these productive investments,

and our long-term national debt will be lower as a result of running a deficit today. and that's what we should be focusing on. >> rose: what size stimulus are you talking about? >> well, the way i like to think about it is the size ought to be appropriate for the depth of the downturn. so, for instance, one of the key pieces of what i've been calling for is making for the shortfall in revenues of the states. so right now that shortfall is about $200 billion. if our economy remains weak, we're going to have to make up far. if the economy recovers, then the amount of money we have to put in would be that much less. and if i were an optimist i would say it's going to recover. but i don't know and i'm a little bit of a pessimist seeing the kinds of problems that we face. >> rose: some argue that we should have had a much larger stimulus-- paul krugman for example. you're in the same camp. >> that's right.

that's one of the points i said in "freefall." and even the president's chairman of the council of economic advisors is said to have.... >> rose: steve roamer. >> he said we need $1.2 trillion. and what we've seen since then has been very clear they were optimistic about where we were going. and it's a really important point here. the stimulus has worked. and a lot of people have looked and saidnemployment has gone up and that proves the stimulus hasn't worked. no, the stimulus worked. if we hadn't had had had the stimulus we would have had 12% unemployment instead of 10%. >> rose: they argue you could have designed a better stimulus. >> that's right. again, something i say in my book we clearly could have done it. the big mistake we made was the tax cut. we knew from the experiment we did in february, 2008, the bush tax cut, with the overhang of debt and with the uncertainty in the job market people would save a large fraction.

makes them feel good, it's important for their sense of well-being, but the nature of a stimulus is it has to stimulate. that means you have to have spending. and so on a very large fraction of americans have saved a significant part of that stimulus. the other part that i think was a mistake was we didn't give enough aid to the states in the way i described. and so you have this picture across the united states while the government... federal government is putting money in, they're contracting. >> rose: here's what i don't understand. larry summers early on-- and i realize you and larry have had... >> discussions. >> rose: discussions, yes. have had intense discussions. said early on timely, temporary, targeted for stimulus. so that idea was out there. were these targeted? >> they were reasonably targeted but not as targeted as they should have been. >> rose: okay. you would have spent more money on jobs that would really train people for the future?

>> exactly. and that's a long-run vision. and a recognition of the problem, the states that i talked about. and that is a way of putting money into the banks of the economy very quickly without creating a new bureaucracy because if you don't put t money there they have to lay off workers. and in a recession is exactly time that there's so me m demands. and people... young people who can't get a job want a place in university. they want to be able to at least build up their skills. >> rose: right. >> and the universities are contracting. it just doesn't make any sense. >> rose: i hear time and time again that the president made a mistake when he said we're going to engage with the stimulus program and in other programs education, climate change and health care. that he should have said "the issue is jobs, jobs, jobs." do you buy that argument. >> not really.

because the problem wasn't lack of focus, the problem was a program that was not as strong as it should have been. >> rose: because of congress? >> one interpretation was a judgment about bit political feasibility. and my view on that was that if you compromise too much early-- and it turns out that you need more money later on-- it would be difficult for you to accomplish what you really wanted. and that's exactly the situation we're now in. because it is now clear that we need a second stimulus and many people are saying the stimulus didn't work. so that was a political judgment that i think may have been flawed. the second argument for why not enough was done in the area of mortgages and the banks, or not the right thing done in the area of mortgages and banks, was the

influence of the financial sector that got us into the trouble in the first place. >> rose: you're talking about the tarp program and the bank bailouts and the bailout of general motors? >> yes. >> rose: and chrysler? >> for instance, one of the... a lot of people said "why don't you give more money to homeowners? so that they can restructure their mortgages. let's have trickle-up economics." >> rose: my imsuppression that banks are mod fig mortgages. am i completely wrong about that? >> very little. >> rose: so it's a good idea... they claim they're doing it but they're not doing it enough? >> and there's one category which is a very important... the most important category where it's almost not happening at all and that's the underwater mortgages. the one in four mortgages where they owe more money... >> rose: than the house is worth. what should be done about that? >> well, what i advocate is what i call a homeowners' chapter 11.

and chapter 11 is a provision of our bankruptcy code that allows a restructuring of debt that says that if you owe more money than the company is worth, you convert bondholders into shareholders and shareholders get wiped out. >> rose: is your voice heard in the white house because of the tension that has existed in your relationship with larry summers? >> i don't think that's the issue at all. i think there was... >> rose: what's the issue? >> the issue is the influence of the financial markets, of the people who at first succeeded in getting deregulation. >> rose: right. >> then succeeded in getting... >> rose: okay, but let's talk about it specifically. the people... are you talking about larry summers now who, because of his influence as... within the treasury with bob rubin were able to get deregulation? were able to get glass-steagall repealed? is that what we're talking

about? >> that's part of what we're talking about. but it's more pervasive than that because it's not only that they succeeded in getting the this deregulation, you know, preventing regulation of the derivative which is the derivatives are what led to the problem at a.i.g. which cost american taxpayers so much money. >> rose: and who was the woman that was surging them and trying to warn them? >> she had said before the long-term capital management debacle... >> rose: this was a number of years earlier. >> that was back in 1998 the failure of one firm began the... >> rose: that was earlier. >> she said how can you doubt that? and yet they succeeded in not only not having the regulation but passing a law saying you could not regulate it. >> rose: you have been much tougher than you are being here.

you have said, for example, that larry summers and the obama team are in the pockets of the banks and they need new faces who have no vested interest in the past. you're basically saying they came with a mind-set to the obama administration that was sort of... we want to make sure we take care of wall street so that when the time came and the crunch came and the emergency came they were not prepared for the kind of solutions that you believed were the right solution for the right moment. >> that's right. it's a mind-set... >> rose: what's the mind seth? >> well, the mind seth that began with saying markets always work. >> rose: right. >> and that adam smith's idea that the invisible hand, the pursuit of individual interests... >> rose: so you're saying there was no different in their heads about market than there was, say alan greenspan? >> that's right. there was a picture on "time" ma that described the three of them as the committee to save the world.

and they approached managing monetary system... >> rose: are we talking about summers, rubin and greenspan rohr we talking about whom? >> well, that group but there were others. one of the things i think is important in that this area is not just to focus on individuals but to focus on ideas and these ideas were very pervasive. one of my concerns has been not only did they bring some n some sense the wrong mind-set but because they were so closely affiliated with the mistakes of the past, it would be very difficult to get confidence. >> rose: with great respect for a nobel laureate, some might argue that joe stiglitz is a little bit outside and he's screaming a bit because those guys were brought inside and he wasn't. and he had a nobel prize, experience at the world bank, and had written a number of

books and was, you know, a distinguished professor. so therefore he had all the credentials to be the inside and he wasn't and they were. so now he's saying those guys had a mind-set that prevented them from fixing the problem. >> well, i really didn't want to go inside. i had been through that experience. it was a very exciting time. >> rose: for clinton. >> under president clinton. it was a very exciting time. >> rose: with bob rubin. >> we often differed. i opposed the repeal of glass-steagall, he supported it. but what has disturbed me is that others like paul volcker have been very... who share many of the same views have been very... their views have been very reluctant to be heard. >> rose: but they are heard now. >> they are being heard and that's what i feel much better about. >> rose: but being heard on one question, the big question of

financial reform and the need for new kinds of regulation. >> that's right. and even that is not as much as i would... i think is necessary. >> rose: okay. >> we're about a third of the way. >> rose: what will be the two-thirds that are missing? >> well, for instance, volcker has focused a great deal on making sure that the depository institutions, commercial banks, do not engage in proprietary trading. that they're not too big to fail. >> rose: that they don't have hedge funds or private equity firms. >> exactly. i've also been concerned that you can have too big to fail institutions that are not deposit-taking institutions. investment banks. that once you separate the two, you can sll... >> rose: but he seems to be arguing to me and others that there's no such thing as too big to fail if, in fact, you're not a depository institution. >> yeah. and that's where, i think, we differ. >> rose: okay, that's one place you differ. >> and so, for instance, we wound up bailing out a.i.g. and

we bailed out... >> rose: should we have bailed out a.i.g. or should we... what was the alternative? >> the alternative the was to say let it go and if... >> rose: what does "let it go" mean? >> >> let it go bankrupt. >> rose: okay. >> and if some parts of our financial institutions have problems, need money like goldman sachs, then give them money. not give them money, lend then mum in a way that will get back... >> rose: in the same way they did with citigroup? you lend them money for a piece of the equity or just lend them money... >> one of my criticisms is that when you give them money, you get back appropriate compensation. so the form would have been such as... something like warr buffett when he gave money to goldman sachs he got back warrants and preferred shares.

>> rose: and a 10% return. >> and a very high return. so we ould have done just as well as warren buffett. why can't we negotiate terms that... that was an arm's length deal, not affected by politics. >> rose: so in other words, the united states government should have been a warren buffett negotiating the deals it made with commercial institutions, with financial institutions that were in trouble. >> that's right. and other counies have done better jobs in providing money to their banks and getting back value than the united states. so that's what we should have done there. another area that we need to do something about is do more in breaking up the two big to fail banks. i think, you know, the notion that these too big to fail banks can be trusted in any way seems to be... you know, the one thing economists agree on is that incentives matter. and if you have an incentive to

engage in excessive risk taking, you will. and the question there is whether the failure of this institution, engaging in financial activities would send significant ripplesly the economy that anybody could say to us if you don't save that institution it will have sufficient consequences through the financial system. you know, there are other set of issues with general motors for jobs... >> rose: and how do you measure that? >> well, that's not an easy question, but there are models that can look at what happens if you pull out one institution out of the financial web. one of the big advances in recent years in research, particularly the bank of england have been to look at these networks of financial interdependence. so my own research is actually focus odd than question. >> rose: i think government of the bank of england, mervin king is that his name? is in favor of breaking up the banks. >> he says and i agree if you're

too big to fail you're too big to be. >> rose: and you buy that. >> i buy that. >> rose: universal banks is not by definition a bad idea, is it? >> i think what you have to look at in the context of the american economy are the costs versus the benefits. >> rose: right. >> there are some benefits but what we've seen are the costs far outweigh those benefits. an important point to remember is the services that they provide won't disappear. they will be provided, but organized differently. >> rose: and more efficiently. >> and i think more efficiently. and the point is right now we can't... the big banks are effectively subsidized and they have a competitive advantage not based on greater efficiency but the fact is that because everybody knows they're too big to fail they can get capital at a lower interest rate and that gives them a big advantage over every smaller institution. >> rose: you believe that the american capitalist system should look much more like the

european scandinavian model which is sometimes called capitalism with a human face. >> that's right. >> rose: what do you mean? >> there are a couple of dimensions of this. one is we have to recognize that we need to get a balance between the market and the government. and the government plays an important role not just in restraining bad behavior but also promoting innovation. the internet, which has transformed our society, was financed by... >> rose: by the government. >> by the government. >> rose: the pentagon, in fact. >> the revolutions in biology that are extending our lives begin with basic research that has s funded by the government. so that... >> rose: and done at the university level and at n.i.h. and wherever. >> so that gives you an important constructive role for government. >> rose: but we already do that, don't we? >> but part of the debate is the extent to which we do it. part of the debate is the extent

to which we... the role of the government in restraining the bad behavior, the regulation that we talked about in the financial sector. so that's part of our debate. and then the other part of the debate is the extent of social protections that you provide. >> rose: the safety net. >> the safety net. and that... >> rose: so therefore has france-- being exhibit one-- been better off in the economic crisis than we have because they had more influence of the state in their economy and had a firmer safety net? >> yeah, both france and germany have... you know, they've been very badly hit, but on the other hand, the amount of suffering of the individuals has not been as bad. i'll give you one example. one of the things that we're now... a number of places are beginning to imitate in the united states is where they put people into part-time work so that they share the work.

they've recognized the system isn't working well and that rather than having as the united states one out of six americans... one out of ten americans who can't get a job, what they're doing is sharing the work more broadly. >> rose: all right, let me just continue down this. you suest that capitalism has some moral failings. >> an example, for instance, was in the financial market the... >> rose: moral depravity of the financial sector, i think, is the term you used. >> yes. and the example i give is the discovery that w made a few years ago that there was money at the bottom of the pyramid and they did everything they could to move that money from the bottom of the pyramid to the top including predatory lending, the credit card abuses. the point i was making here was that, well, one of the criticism-- and i think a justified criticism-- of the

financial sector was that it didn't manage risk-taking well. it didn't allocate capital to where it was... >> rose: but that... >> but it went beyond that. snu but when you get to that point, that's where people in the financial community come back, push back to you and others, and paul volcker as well. they're saying the kind of financial reform you're talking about, too big to fail and all that, was not the problem. the problem was leverage and risk and the capital requirements. if those had been enforced you wouldn't have had the problem. and you're not going to solve the problem, they argue, by some elimination of proprietary trading. >> there's no single thing that is going to solve this kind of problem. >> rose: right. the potential of another crisis. >> of another crisis and i agree absolutely you have to do something about leverage, you have to do something about the hidden leverage which was part of what it was all about. so i agree with them on that. but conflicts of interest are what caused problems. the conflicts of interest were

en route of the enron worldcom scandals. >> rose: but that's just fraud and corruption. >> but that fraud and corruption undermine confidence in the market economy and contribute, contribute, i don't say... contribute to an economic downturn when it exists on the scale that it did in the united states. >> rose: you don't think globalization is such a great idea. >> well, actually what i said is globalization can be a very positive thing if it's managed well. >> rose: and so what is wrong about globalization as it exists today? >> well, let me give you one example. what we did when we talked about globalization is we talked about unfettered capital markets moving across borders. with very little regulation. the result of that is that you can have a country with inadequate... a very small country with inadequate regulation putting in jeopardy

savers, individuals, all over the world. iceland is an example. so that's an example where people in the u.k., people in the netherlands suffered and now coming back, knew people in iceland are suffering from globalization, they were told let our banks... let your banks become global marketplaces, you'll all benefit. what they're seeing is they're being asked to mortgage their future for generations to come. they're probably going to vote against it on saturday, but that's... that is an example of globalization that has not been managed well. >> rose: you think greece will be all right in the end? >> yes. i think that europe is going to come... >> rose: to the rescue. >> to the rescue. and let me make it clear. when you use the word "rescue," the fact is that greek with its bt to income ratio of 120%... >> rose: debt to g.d.p.. >> debt to g.d.p. they're fully capable of

fulfilling its commitments. when you face an attack and interest rates soar, then you have a problem. and i think europe realizes that that's what this is. >> rose: if they don't act it will spread to other places like spain and portugal and maybe even italy. >> exactly. so what is at stake here is the integrity of the euro and european union which is why i felt so confident that they would eventually come to the rescue. >> rose: one of the reasons i like you so much is you have opinions and you have ideas and they are interesting and controversial. you're not thrilled by the world bank or the i.m.f.. >> well, the i.m.f. has changed a little bit. >> rose: oh, so they're more better to your liking >>? >> they've reformed to a considerable degree. >> rose: meaning they're not creating such tough standards to receive their money? >> that's right. or to put it the way i would put it... >> rose: (laughs) which is a better way. >> in the east asia crisis they demand what we call pro-cyclical policies that converted down turns into recessions,

recessions into depressions. if you look at their programs more recently, most of them have been much less than that way, some of them have actually been very, very helpful. so i think that's part of the change of... in the global debate and that's why many people in greece say if europe doesn't come to itself, the i.m.f. is not necessarily that bad of an alternative. >> rose: you're not thrilled by the dollar remaining the reserve currency of the world. >> no. >> rose: that puts you and the president of france in the same boat. >> a dollar-based reserve system is not working. it's fraying. >> rose: and it's been going down to brazil and doing some interesting things to sort of... >> and they're very worried, and you can understand that, that with the buildup of the...

>> rose: go ahead. >> with the buildup of the u.s. debt and the blowing up of the balance sheet of the fed they're worried that the value of their huge holdings of u.s. dollars will be diminished in one way or another. so china, for instance, has $2.3 trillion of reserves. >> rose: $2 billion a day. >> and it is estimated somewhere between around two-thirds of that is probably in dollars and they worry that the current system puts them at great risk. so there's a demand by the countries that hold large amounts of reserves to move to an alternative system. and other countries have expressed a view this way. they say in a 21st century, to have the currency of one country be the basis of a global financial system doesn't make a lot of sense. >> rose: you'd like to see a government bank. >> i point out in the book that

if you had taken that $700 billion that went into tarp and used just a fraction of that to create a new institution to provide money to, say, small or medium-size enterprises, we would have had a flow of new credit that is so essential to getting the american economy going again. instead we focused on the past. we focused on institutions that have proven themselves not having done an adequate job in allocating capital. they're focusing on dealing with past mistakes. and one of the basic lessons in economics is by gones should be by gones and unfortunately it's very hard to get existing institutions to do that. and that was just one... it was a way of thinking about what we might have done that would have... >> rose: so it wasn't so much a prescription for the future, it's looking at the past and figuring out it might have been a better try go at solving the

problem. >> exactly. >> rose: how about nationalization? do you think we should have had more nationalization as your nobel colleague paul krugman suggestd? even if it was temporary? >> that's not the word i would have used. i would have used the word conservatorship. i would have saidplaying by the rules of capitalism. the rules of capitalism say that if somebody owes more money than they can pay, a firm owes more money than it can pay, it goes into bankruptcy which means the shareholders get wiped out, the bondholders become the new shareholders. that's the rules of capitalism. we suspended those rul. now, in the case of banks, there's a couple particular provisions, the first is that you don't wait until the company's absolutely bankrupt before you do something. you want to make sure that you're not left holding the bag. and secondly, the government has a special role because the government ensures the deposits. so if it goes belly up, the

taxpayer, f.d.i.c., winds up filling the hole. and that gives it dhash is the... those are the only difference between that and ordinary bankruptcy. so that's what i wanted them to do. if they had done that, they would not have needed the huge amounts of taxpayer money. >> rose: you think they'll get some of it back? >> oh, they'll get some of the money bank. but the numbers look like very clearly that there will be a significant shortfall, over $100 billion, and most of those calculations do not really provide... talk about appropriate compensation for what we call the time value of money, the risk that we bore. and so when you say we got the moneyback, we should have gotten far more than the moneyback given the risk that we bore. >> rose: you have an international reputation, are known well around the world, and with admiration. you also saw the kinds of factors coming together that

created the crisis that we had to go through. do you believe that if you had had por to go with your observation you would have been able to prevent the crisis? >> i think we could have made sure that it was much less deep than it currently is. we might have been able to prevent it. and why that's so relevant to the current policy debate is that right now our financial sector is in some ways more dysfunctional than it was in 2007. and so as i look at where we are unless we make some very significant reforms in both the structure of the financial sector and the regulation of the financial sector, i think there is a significant risk that we will some time-- five years, ten years-- face another crisis of the kind that we've just been through. >> rose: joseph stiglitz, one of the nobel prize in economics.

"freefall, american free markets and the sinking of the world economy." thank you. pleasure to see you. >> thank you. nice to see you. >> rose: back in a moment. stay with us. >> rose: jamie dimon is one of the most influential figures in modern banking, in nearly 30 years on wall street he has been at the center of several pivotal deals. he helped create the citigroup banking giant before becoming c.e.o. of j.p. morgan chase. in the early months of the economic crisis, he was considered by some the government's bank of last resort. that happened when j.p. morgan acquired investment bank bear stearns. that story and much more is told in duff mcdonald's "last man standing, the ascent of jamie dimon and j.p. morgan chase." i'm pleased to have him at this table for the first time. welcome, great to have you here. >> thanks for having me. >> rose: "last man standing." why choose that title?

>> because... well, it's quite literally true. during the crisis we saw the leaders of almost every single one of j.p. morgan's major competitors either get fired from their job or lose their job because their company actually disappeared. so dimon through the... a combination of preparation and ability was ultimately the last man standing among all his major competitors. >> rose: and the most powerful banker, probably, in finance today? >> absolutely. he's running the second-largest u.s. bank by assets. but by any number of measures is the most influential bankers in the country if not the world. >> rose: where does he stand onable if reform? >> jamie would tell you that he's all for all sorts of types of financial reform: derivatives brought on to exchanges, a systemic regulator. j.p. morgan's been explicit in

their support of these things. on the other hand, there's some things which they say they don't think are necessary, like additional consumer protection agencies which he thinks would just add more red tape. but as far as just sort of broadly speaking, protecting ourselves from what just happened happening again, he's all for it. >> rose: and the... where does he stand on the volcker rules? >> i think it's... i haven't spoken to him about it. but i think it would be pretty safe to say jamie would be against the volcker rule. because it would effectively cleave j.p. morgan chase in half or, you know, into parts. so i think he thinks that with good management a financial services conglomerate like j.p. morgan chase is something that can be both beneficial to shareholders, employees, and even customers in the country. >> rose: what are, in your judgment, having gotten to know him, what are his core skills? what makes him different than

other commercial bankers? >> well, discipline for one. you know, banking it's been said is not a really complicated business. it's actually a pretty easy way to make money, using other people's money. >> right. >> rose: if you stick to your in thing. hard work, attention to detail. one of the things i think he learned from sandy aisle with which came in very handy in this crisis was the old adage "buy straw hats in winter." >> rose: a contrarian almost? >> a contrarian but there's a line in the book where a new employee at citi said "what's the strategy?" and he said "don't screw up, let others screw up and we'll buy them." and that's basically been their... that was their m.o. at citigroup and that was his m.o. at j.p. morgan. they were the only firm a position to actually step in and

buy bear stearns when it happened because everyone else was scrambling for the exits. >> rose: and they were less exposed on the toxic assets. >> which goes back to the discipline of running your business the way it should be done. is a bank supposed to be gambling on crazy synthetic derivatives that basically bet the firm. no, so they have exposure to these things but it was keeping a conservative approach and runing your business with an eye to the numbers which one would think is what everyone else was doing or should have been doing. but warren buffett said "the tide went out and everyone was standing there naked." jamie was the only one wearing a bathing suit. >> rose: when jamie dimon began to be a central figure, what stories that you found the most interesting about how j.p. morgan responded to the crisis. >> well, one of the most

interesting was the sort of connecting the dots thing. when you look at senior management of these giant companies that don't actually have operating responsibilities, like they don't go to work and, you know, look over a particular line of business, they're just supposed to strategize and sort of see the big picture, he actually took a bunch of data points from different parts of their business, their mortgage business was seeing some weakening, their credit card was seeing some weakening, their securitization was seeing some weakening. and if you actually connect all these you had a picture that was like, okay, wait a second, we need to dial this back a little. apparently goldman sachs seemed to have seen some of the same things, but not a lot of the other bankers saw them. so there was that. and there was also, you know, an ability to just walk away from business that was still there for the taking. that other banks and other financial institutions said, you know, it's still here, we'll keep taking it.

and jamie would... you know, told his people "we don't need revee for revenue's sake, we need good revenue." and to be able to walk away from something before the proverbial crap has it this fan shows a definite ability to see... look forward for your institution rather than take easy money. >> rose: how did you get to write this book? >> well, we had... i'm a contributing editor at "new york" magazine and we had a piece on jamie dimon and the bear stearns deal in march of '08 when that happened. and got some interesting... some publishers and i decided not to actually ask jamie right away so i figured he was busy. >> rose: so you went to the publishers first and said "if i can do jamie dimon, would you be interested?"

and >> i said let's do it anyway, let's do it without him. then we went back to jamie six weeks later and said hopefully you can take a breath of air here after the bear stearns deal do you want to cooperate with a book? and, y know, jamie's a man who pays attention to detail and i think that he sometimes is disappointed with coverage by the media that... not because of a point of view, but if they get things wrong, facts wrong. and from what i was told, he saw the "new york magazine" story and while he may not have liked anything about it but i didn't get anything wrong so we agreed to do it. >> rose: so how did he cooperate? >> he gave me an inordinate amount of time. >> rose: for q&a with him? >> for q&a. series of interviews in a number of different venues. >> rose: did you get to hang out with him in terms of meetings and things like that? >> yeah. and i even was at his apartment with he and his wife for cocktails and hors d'oeuvres one night, which was, you know, crossing a threshold i hadn't

really crossed with a lot of people i'd interviewed. >> they were harvard business school classmates. >> they were harvard business school classmates and boyfriend girlfriend in short order. there's a short order. jeff immelt of g.e., who was in their class at harvard, someone asked him, they said "what's the story with jamie and judy?" and jeff said "it's really simple. judy was the smartest and sexiest woman in the class and jamie got to her first." >> rose: (laughs) >> but another thing that jamie di is... a guy in his position, if you make a call to someone outside the firm and say "i'm working on a book about jamie dimon, would you like the chat?" say warren buffett, for example. >> rose: sure. >> the first thing they will do is call jamie and say... >> rose: do you want know talk? >> do you want know talk. and what jamie did is at first i think he was... said "do what you want to do, i don't want to stop you, if you want to talk to him, go ahead." but over time as he warmed to

the project i think he said... >> rose: it's okay with me, i'd encourage you do that. >> yeah, he gave me access to his family which is really unusual. >> rose: his father's an amazing story. >> his father's an amazing story his wife. and just sort of the closeness of that family is remarkable. and, you know, prominent people of any stripe end to try and protect their families from people like me. from media. people like us, i should say. >> rose: (laughs) yes. >> but he made them available. and i think it definitely added some depth and color to the book. >> rose: and what interested... what was it about him that interested you? >> a guy who had the courage of his convictions. you know, one of the interesting things about wall street is it's a bunch of smart people that sublimb mate a lot of what makes them interesting and intelligent to sort of just join into the

machine. goldman sachs, a place that i worked and obviously a reputable firm of great suck success, people become more alike over time when they work there. jamie is the opposite. jamie is the guy who stayed jamie the entire time, did what he thought was right even, you know, damn the consequences. so that's really compelling. the other thing is he... unlike a lot of c.e.o.s, particularly wall street c.e.o.s, he's extremely candid. he may not answer a question, but he may say it's none of your business or i'm not going to tell you the answer to that. but when he does it's not canned c.e.o.-speak or p.r. speak. it's actual interesting and thoughtful answers. so he makes for a great subject. >> rose: what's his relationship today with sandy weil? >> i would say it's... it's practically non-existent.

the... you know, they're cordial and if the two bump into each other they'll say hi, you know, and have some chitchat. but far as jamie's concerned, i think that chapter of his life is over. particularly given the way that his exit from citigroup happened with the firing and what was... i think what he considered a public embarrassment. that's never going to be repaired. the damage was done. but like i said, they're friendly and i gather they speak occasionally but they're not buddies. >> rose: many people have speculated that he might at some point go to washington as treasury secretary would be the logical place. do you think he thinks about that? >> absolutely. i think he's thought about it. he probably thinks about it a little less than he might have

back pre-election when his name was really in the mix of who obama's selection might be. >> rose: why is that? >> i just think that, you know, the tenor in this country and the tone and the attitude towards bankers is such that, a, it might be politically untenable to appoint a wall street c.e.o. as the next treasury secretary or as a treasury secretary down the line. and also, you know, jamie has a deep sense of patriotism and has said he'd like to give back to his country. but if he looked at something and saw it as, you know, just getting down and mired in politics and rhetoric and accusations back and forth, it's probably not as attractive anymore. however, you know, to the very specific question, if he got the call would he take the job?

i would say yes. >> rose: yeah. and he certainly would take the call. >> and he would take the call. >> rose: he's greek american. >> he's greek american. >> rose: second generation? his grandfather came over or his father? >> his grandfather came over. grandfather came over, moved to new york, so he's... jamie's born and bred new yorker. third generation financial services. grandfatheand father were brokers, stockbrokers. he's more of a polymath kind of banker guy. but, yeah. has... his parents are very... >> rose: a polymath kind of banker guy. (laughs) >> yeah. that's the best way to describe him. but, yeah, they're... the family... you know, their favorite restaurant in town is a greek restaurant. so there's some real greek heritage. >> rose: and that's how he ended up with sandy aisle with, through his father. >> through his father who worked under sandy. >> so this is not a perfect story. what are his flaws?

>> impatience. an inability to as as politic as one might say. >> rose: some people would see these as virtues not flaws. >> yeah, that's like the "my worst weaknesses" on a college application. "i'm a perfectionist." >> rose: (laughs) , that's exactly category it is. or "i care too much about helping my friends." >> yeah, exactly. he's... jamie has a brushness and brusqueness about him that a lot of people don't like. it's hard to get too many of them to talk about it on the record. >> rose: scared? >> scared, yeah. you know, looking down the line, who do you want to offend. >> rose: (laughs) yes. >> but certainly he's not warm and cuddley. and, you know, he has... he keeps... he's got a tight circle of... an inner circle at j.p.

morgan and some people might say that there's enough enough turnover in that. on the other hand, you could say that'soyalty and, you know sticking with people who are good at their jobs. but i think he's definitely trying to make up for something. sandy weill could throw people overboard in the blink of an eye in his career and i think jamie's definitely sensitive to not doing the same kind of thing. >> rose: this book is called "last man standing the asset of jamie dimon and j.p. morgan chase" by duff mcdonald. thank you very much for joining us. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org ♪

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