>> rose: welcome to our program. tonight from boston, the president of harvard, drew faust and the president of m.i.t., susan hockfield. >> i think an important part of how we think about competition in higher education is that it is always so tied up with collaboration and sharing it's a race that in a sense everyone loses, not one group or another. because if we discover things more fully, more rapidly, if we discover more things, if we are able to move research that will save lives or improve lives forward at a more rapid pace, that's good for everyone. >> we will be judged badly if america does not invent the next chapter in democratic capitalism. and it's democratic capitalism that's better for all. a democratic capitalism that

welcomes all comers into our midst. america has so many fabulous models of opportunity for many that are to the world's benefit. >> rose: and from new york, a conversation recorded last week with felix rohatyn. >> caretaker share holding, which is a very good concept that people have. that the responsibility of directors, for instance, and shareholders, is not just to the stockholders but also to the stakeholders, as they call it, and the people who drive the trucks and do the work. and yet it's very hard to put that concept into being because the law says all you're entitled to take into account is the price of the stock. but stay home with these concept of stakeholder capitalism.

>> rose: drew faust, susan hockfield and felix rohatyn, next. exposure to the arts. maybe you want to provide meals for the needy. or maybe you want to help when the unexpected happens. whatever you want to do, members project from american express can help you take the first step. vote, volunteer, or donate for the causes you believe in at membersproject.com. take charge of making a difference. additional funding provided by these funders: captioning sponsored by rose communications from our studios in new york city, this is charlie rose.

>> rose: innovation and education are vital in the global struggle for economic prosperity. until recently, the united states has led in those fields, attracting the brightest minds to its universities and industries. today many worry about whether the country can retain its competitive edge. the u.s. now ranks number 11 out of 100 best countries in the world according to "newsweek" magazine. joining me here in boston, two extraordinary women, drew faust is the president of harvard university and historian of the civil war. susan hockfield is the president of m.i.t. she's a neuroscientist and formerly provost at yale. both f them back on this program and to have them zitding here at wgbh in boston. so the state of american education today. >> drew and i really have extraordinary... the extraordinary privilege of sitting in the midst of these

cauldrons of collaborations that are universities and that, frankly, have been founts of innovation in ways that i think most americans underappreciate. have been the source of if fuel for the innovation economy that has built this nation's great economic strength. you and i have talked about this before but bob solo, one of our nobel prize winning economists, demonstrated that over half of the economic growth in america post-world war ii can be attributed to innovation. and the heart of what we do on our campuses is to turn great ideas into innovations and they're not just about new technologies and new businesses, they're about new ideas, new ways of billing communities, new ways of relating to one another, new ways of interacting around the world. so what happens in our campuses, we bring people together, they have great ideas that then take form and lead the campuses and i

think that american higher education remains the gold standard for the world for the moment. i, of course, have some fear about the position of the united states relative to the rest of the world. but i think that the work that grows on in our campuses is absolutely critical in terms of powering up the next cycle of america's innovation economy. >> rose: it's a big idea which i as you know, care about. it is that universities don't just teach, they do research, they are the place that we look to examen the old and find the new. >> rose: i think that susan and i have the privilege to serve in these positions at a really critical time because all of what she says is absolutely true. but i think it's taking place in a changing environment and in an environment that's increasingly global, in an environment in which technology is changing and science is changing in a way that is perhaps unsurpassed

since the scientific revolution. if we think about the discoveries related to the human genome, if we think about computational capacity we can make advances more quickly and more dramatically than has been possible in the generations that have preceded us. and so how do we unleash that research capacity? how do we attract the talent that can best take advantage of it and move it forward? and also how do we do that in a world in which challenges to values that are at the same time a part of all of this change? and so how do we ask the big questions that go along with these kinds of discoveries. so i think those are the issues that we face. and they are opportunities. but they are also ways in which we find ourselves having to ask how we structure what we do. >> let me just add, what is implicit in what drew has said is one of the fascinating and exciting challenges of the moment is that the united states

is not in this game by ourselves anymore. there is fantastic competition to play the american game, as it were, coming from an enormous array of places around the world and i love competition. >> rose: wouldn't you wrather have an informed and wiser sense of self-than an insecure and paranoid sents of self? >> >> oh, of course. wisdom ought to give you a kind of freedom to collaborate. one of my favorite topics. >> rose: right. right. >> and one of... you know, the marvelous products of the second half of the 20th century america is that this model has worked and it's spreading all over the world. and we brought, as a world, hundreds of millions of people out of poverty and this is a good thing. so we want this approach of these technologies to spread around the world. >> rose: china's growth has enabled it to bring more than 300 million people out of poverty, which is the largest amount ever in the history of civilization. >> and that's been accompanied by an enormous increase in the

number of people pursuing both primary and higher education. so those go hand in hand. i think an important part of how we think about competition and higher education is that it is always so tied up with collaboration and sharing and it's a race that in a sense everybody wins. it's not one group or another. because if we discover things more fully, more rapidly, if we discover more things, if we are able to move research that will save lives or improve lives forward at a more rapid pace, that's good for everyone. so i think that having a proliferation of centers of higher education beyond traditional locations reaching out to people who wouldn't have had that opportunity befor that's all good. and so as we reach out across the world-- and susan and i both spent a lot of time traveling, interacting internationally, that's a big part of our jobs and i think more than our predecessors would have seen. that means that we're learning and our universities are learning and growing.

>> i find it to be exciting and promising and the question for us is what is america's unique advantage? what do we do particularly well? and it's not that we want to keep hit in the united states, but we want to amplify our advantages because we need to call that out and a part of what we do very well is higher education. part of what we do extraordinarily swell marrying research and education at the research universities in america. part of what we do very well is have an open society that brings people from all over the world to be part of this american experience. is part of what we do very well is, frankly, work on something that's always a work in process, which is a meritocracy, social mobility. there's things we do extraordinarily well here in the united states and these are things that i hope will spread and will continue to spread. but, you know, i think calling out our unique advantages that will allow us to continue to be a leader in the world in terms

of advancing to the next state of our civilization that makes it possible for more people to come out of poverty and more people to be educate and more people to have fulfilled lives. you know, the great universities in america have been elevators of opportunity for a long, long time. and i think people often forget about it. the caricature is that these university are privileges of the elite. >> rose: right. >> and, frankly, nothing could be further from the truth. something on the order of between 15% and 20% of every class of m.i.t. freshman are the first in their families to go to college. it's just one measure of where these people are coming from. our graduate schools are full of people from all around the world who want to be in the place where new ideas are being generated. >> rose: but what percentage of your graduate students are from outside the united states? >> well, across all of our

graduate programs, which are heavily science and engineering, it's 40%. >> rose: 40? >> 40% are international. >> rose: i thought it was more than 50. >> many schools it is and there may be individual departments at m.i.t. where it is. but because so much of what we do is science and engineering i think 40% is a good number. my concern, charlie, is that in the past if you go back even ten or 15 years most of the people who graduate from m.i.t., their first choice from where they would want to work would be in the united states. and ten or 15 years ago, the second choice was kind of a distant second and our immigration policies make it very difficult for those people to stay in the united states and contribute to inventing the new. >> rose: and there's more opportunity now as well. >> now there's more opportunity and the immigration policy is just as humiliating as it was ten or 15 years ago. so i fear that we are sqaund erring one of the great resource this is country has known, which is bringing people from all over the world into these centers of

collaboration and then, you know keeping them here to help generate the next cycle. >> but looking at the world that you see, give me your agenda for change. >> my agenda for change is to building on some of what susan has said. we have to bring the people into our educational sphere. we have to support them. we have to give them the environment that enables them to pursue the kind of creativity that yield it is discoveries, the claim on the future that i think is what higher education is most about. so what are the combination of factors that can do that? one is supporting students and reaching out to students from a wide range of backgrounds. making sure they understand that higher education is for them and that we want them. it's also giving them the kind of intellectual environment that can enable them to make discoveries and to think as broadly and ambitiously as possible. if one of the dimensions of this is the way in which traditional

fields are breaking down and we see much more integration between the physical and the life sciences, for example, we see social sciences and natural sciences. >> rose: physics and biology? >> something like bioengineering which we do at both our institutions. that would have seemed like an oxymoron several generations ago. bio and engineering? how does that go together? that is one of the most vibrant areas in student interest and intellectual and science discovery. >> rose: because in some ways technology is powering biology. >> yes. yes. so those kinds of questions and i would just want to add that i think an important part of what education in the united states has been and what higher education institutions of our kind represent is also embeding this kind of questioning in a broader context of humanistic as well as scientific inquiry. i was in china last spring and had a lunch with chinese academic leaders. i had invited a number of them to come to lunch with me.

and what they wanted to talk about was the humanities. and they said many of them came from science-oriented institutions. and they said "what we haven't done in china is nurture the humanities. and we feel there's a spark of creativity and insight and critical thinking that comes out of this that will make us better in everything we do." and i thought how curious it is that at a time when support for the humanities has been weaken in the united states we see china wanting to strengthen it. so how doe do we create an intellectual atmosphere that enables people to think about how to make things different. how to innovate, how the change. i think part of it is understanding a world that has been different as well as the components of the world as it is. >> i think people always say well, china can't do x or china can't do y, why are you worrying about it? i said remember what the honda civic looked like in 1969. >> rose: (laughs) yes. >> and where that company is today. and you know, the determination to be part of the modern world is so exciting when you visit china and i think america wasn't

the fount of innovation that we are today in our early history. but what's marvelous about what america has done is invented a new way to pursue an innovation-based economy. it's not new to america. it happened in england in the 19th century. the united states was struggling to catch up. but we are open access as a nation. people often focus more on competition than collaboration and open access. the fact is that most of the work that goes on in our campus we distribute to the world through publication. through publications. >> rose: and now that the internet is here... >> it >> it's even easier. and you know about open course where we leave all the material for our courses available to everyone. we do research and teaching in the some place. we don't have separate... well, we have some. but the great preponder rance of our inquiry takes place in university settings where

everybody is learning the discoverers at the very forefront of their fields are doing research. but the young people are discovering how to discover. and they often insert so much into the perceptions of the more experienced scientist. and that model has been a remarkably rich one. and the kind of communities that grow up around different generations of experience and inquiry have been a critical factor for us. and so i think that's something to emphasize about the particular way we do our research. >> absolutely. so i had another bit of evidence around this. you know, two different stories, one was peter diamond, we had a little press conference when he won the nobel prize and he did this thing that i've heard before at m.i.t. which is first he thanked his family, then he thanks his chregts, then he thanked the m.i.t. students for helping him sharpen his ideas. ma what's important in a research career is what you take on and teaching the m.i.t. students helped him figure out the most important problems to the great... you know, i was talking to a young person who

would like to come to m.i.t. today and describing the premise of our institutions that our faculty on r the frontiers of knowledge and it's knowledge they're sharing through education and the challenge to our student is we want you to come with us. run very fast but a it is this... the idea that you have said so beautifully that everyone on the campus is at the same time a teacher and a student and is really great sharing of roles. i think it has been to discoveries that have happened thanks to the... following world war ii the idea we're going to not fall into an economic recession or depression. we're going to turn to purpose in terms of purpose of the increasing economic growth for the nation and the civil domain rather than just the military domain.

>> rose: when a young 18-year-old comes to harvard or m.i.t. and four years later gets a degree, what do you hope has happened to them? (laughter) >> i always say to the gathering of parents we want to give you back a different child. >> rose: exactly. >> we guarantee a different child. (laughter) >> rose: and they say "that's what i fear." >> but i had to give a talk to the freshman class, parents at freshman class weekend and i said what i hope most for your children is the that while they're here they find a passion. >> that's right. >> rose: something that they care terribly about. that they want so much to be engaged in. something that fascinates them. and i urged the students explore before you settle on this because your passion may be just around the corner, you may not have encountered it yet and there's so many more things you can learn here than wherever you learned in school so search widely and please i hope you fall in love with something that will last you your whole life as

something to be engaged in and something to fuel your brain and capture your engagement. and she is a parent. she has a freshman at harvard. >> rose: hello? hello? >> and she is having the experience that, you know, we really want all of our freshmen to have. all the members of our community have. we had our parents weekend and the parents came... m.i.t. doesn't have the reputation of the parents saying you know, my daughter or son is so happy. they're loving it. they're loving it and the parents are loving it because what the parents love seeing is these extraordinary able and brilliant young people having their minds grow and being in an environment that encourages intellectual exploration and encourages them to reach into new disciplines and they have friends to take learning seriously. i mean, this is such a joy for the young people and their parents who come to our campus and so what i often say when i

talk to entry freshmen i say "what do you think you might want to study?" but i say it's not a promise because if you don't change your mind we probably aren't doing a good job. and there's a sense of discovery and, you know, we want them to leave as people who are not just in love with something, we really do hope they find something to be passionate about for their lives. but also who are still just intoxicated by the joy of learning. >> i had a second part to what i said. the first thing i said was passion and the second thing i want is compassion. i want them to think about how what they learn and what they do here can have an effect on making a better world. because that is a part of the responsibility that goes with the privilege of being an educated person. and so i would add that, too. >> and we see so many of our students going into activities engaging in public service while they're at harvard and a variety of other ways that they can have an impact on the world in

whatever field, whether it's business or government or medicine or science. how does what you learn kind of help you make a difference. >> rose: and let's bring it back to the moment because we have a generation of students on our campus, i call them the 17 to 30-year-olds, some are 15, some are 35. but it is a different generation from anything i've seen before. this is a generation that has a will to citizenship, passion for solving problems. when they discover a problem, no sooner have they understood it's a problem, they roll up their sleeves to get to work on it. and i come to call this generation "generation why not?" they are undaunted by the kinds of challenges that we can list. why the world is such a tough place now. they're just out there to make the world a better place and i love this idea that they emerge as someone who has a passion but also compassion. it is an extraordinary generation. and this new generation will not

find the kind of receptor sites, the kind of enthusiasm, the kind of pathways through which they can do the good that they want to do because as a nation we've kind of gone flat on our ambition. that we've lost our optimism about engaging with the problems of the world in a productive way. and so i think as a nation this kind of pervasive pessimism that we heard so loudly during the election is just a bad state for the nation. >> rose: where do we lose it? because if we don't know where we lose it we won't know how to find it. >> it's a deficit of inspiration, in my mind. we have a mono mania around who our heroes are. and somehow the sense of america's continuing evolution as other countries are catching up, i think other countries catching up is a great thing, a great thing, and feeling kind of daunted because there's competition. crazy. we should be accelerating because there's competition. and we were the first in

education so in the 1960s we were actually top of the world in college and high school completion rate and now we're... >> rose: okay, but you've got to... i still don't know why. >> i've got another part to this which is i think we need to work hard together on defining problems that we think we can solve in common and pathways that we can take in common to solve this problem. as i look at our students they're so aware of challenges that the world faces. and i think that's another privilege of being a president of the university right now is that this generation you call why not is faced with such difficult issues that they are so passionate in their approach to them. and that makes our jobs very fulfilling as we watch them move forward. if you see these young people and you see what they are able to do together and you think if we just let them and people of their age group and people with their commitment move us through some of these issues, isn't that

going to be the foundation on which we can build some forward movement? and their willingness and eagerness to be involved with every kind of issue and social service problem and... from running summer camps to joining teach for america to making scientific discoveries to joining the military. they say "my life matters in the world." and we've just got to figure out a way to build on that. >> rose: and i get psychic income from being able to participate that way. >> absolutely. >> yes. >> absolutely. >> yes. >> there's a since of pessimism that's overdone and i don't know where it comes from. let me give you one example which i find absolutely confounding. we're beginning a new study on manufacturing in america called manufacturing in america 2.0. and as i talk to people about this, not on campus but you have a campus, there's a bimodal response. half the people say-- and these are intelligent people--

"america doesn't do manufacturing anymore." and the other people "this is the most important thing for the nation." and i'm in that latter category. i mean, we are the largest manufacturing nation on earth to this day and many people have somehow gotten the idea that we don't do manufacturing. >> rose: all the jobs have gone overseas. that's the theory. >> and it represents a smaller fraction of g.d.p. than it used to. but the fact is we make 20% of manufactured goods in the world. we are a great manufacturing nation. we need to be a better manufacturing nation. >> rose: there's this question that if, in fact, you want to have a future you have to invest in the future. you know? and that's one idea. are we getting that or is that slipping away, the investment on the part not just from just your endowments but in terms of where the federal government ought to be. >> charlie this is something that worries me perhaps more than anything else. the nation's economy has to grow

and we have to reduce our deficit. these things have to happen together. so if we go splashing our deficit in a way that robs the foundation of the future, we will just set ourselves back another decade. of course i focus on budgets for research and development, it's one of the things we do at m.i.t., all these great research universitys do. and my fear is we're going to go into another cycle where in the enthusiasm for cutting the deficit we're going to cut the source of economic growth for the next several decades by cutting research budgets. >> i think it's very important that we as institutions of higher education make this case to the new congress for investment in the future and investment in research and investment in this magical relationship between teaching and research that i was talking about. and a lot of these congress people are new, as we all know, and some of them haven't been involved in these areas before so i think we have a big communications challenge. >> there is also the notion of the collaboration between the private and the public which is part of the solution that david

cameron is suggesting. kind of a new way. is that... does that have merit? is that possible? do you see it happening in your own realm today? >> both of our institutions do a great deal of this. we're working hard on trying to explore how to do more of it because we see marvelous ways that we can intersect. we were just talking about something that we have... our institutions have been joined together which is a high-performance computing facility that we have partnered to help establish in holyoke, massachusetts, because it can provide very low-cost energy for us. >> green energy. >> hydropowered energy. and that involves not just m.i.t. and harvard but it's also state, i involves umass and it involves private industries, cisco and e.m.c.. so those kinds of partnerships are good for all of us and they involve private, public, institutional, business, state. i mean, it's a marvelous example i think, of how we all have to work together. >> and many people think of our

institutions as largely in competition but we are largely in collaboration of the health science and technology program that we started in the '60s. you know, the high performance computing centers, the reagan institute. you can go down the list. and if you talk to our fact cullity, there's a huge amount of clan ration. there's open registration at each university. >> our students take classes at the other university. >> it's something we've done a lot of, but you know ambien understanding is that somehow something we don't do but i think we need do more. and as a nation we talk about public... i have to say i'm very concerned about public universities in the united states. we look at our campuses while we have a lot of students who come through, it's nothing compared to the educational power of the public universities. >> rose: and the strength of american higher education has been in its diversity, having different sorts of institutions and so for the whole sector,

it's enormously important that these different kinds of opportunities be available. >> if we don't do what, history will judge us badly? >> i think if we don't take the demands for change that are implicit in what we've just been through and turn those into new ways of bringing people into higher education, of advancing knowledge and research, of making this a core part of how we both address the issues that america faces but fundamentally the economy, the knowledge economy that has to be its future, i think we will be judged. and i think the key relationship between universities, the knowledge economy, and the nation's future and the world's future has to be linked in a way that is effective and that changes the future and makes the future. >> rose: so this is actually something i have been thinking quite a bit about.

i was at a meeting with business leaders not so long ago and... the american business leaders, we were doing... kind of self-criticism over the failures of the american finance system. and a business leader from india stood up and said "would you please get over it? our country, based on this marvelous western model of democracy and capitalism, our country has just managed to move into that realm. and now, because of the economic crisis, people are saying no, no we need to go back to socialism and communism and the western models seem to have been tarnished." speaking with some business leaders from taiwan who were on campus a couple weeks ago and one of them said to me "well, democracy certainly doesn't work so well, does it?" we will be judged badly if america does not invent the next chapter in democratic capitalism

and it's a democratic capitalism that's better for all. a democratic capitalism that welcomes all comers into our midst. america has so many fabulous models of opportunity for many that are are to the world's benefit. and if we do not move into that next chapter, we will be judged badly for having squandered the advantages that we have. >> rose: thank you very much for coming. great to see you. >> great to see you, charlie. >> thank you. >> rose: back in a moment, stay with us. we're in boston at wgbh, the public television station here, talking with the president of m.i.t. and the president of harvard. >> rose: felix rohatyn is here, he's known as the man who saved new york city when it almost went bankrupt in 1975. for years he was an investment banker. he became the consummate deal maker. he was on the front lines of a

new culture that saw the biggest leveraged buyouts of the '80s and '90s. in 1997, he left the world of finance to become the united states ambassador to france. he writes about all of this in a new memoir. it is called "dealings: a political and financial life." i am very pleased to have him back at this table. in full disclosure, he is a great friend of mine and one of the great things we have done in the history of this program is that we went to france when they was ambassador and did a one-hour profile of him there and, in fact, the way he starts his book is a story he told me on film, which you can see on our web site. and secondly, i hop he will remember that this is a book that i said "you have to write" and now he has written it. welcome. >> thank you. thank you. always a pleasure. >> rose: you open this this book with the scene of you leaving france. >> well, we left france... we were lucky to leave france because if we hasn't have left france we wouldn't have gone any place. >> rose: yes. >> and how to leave france is...

>> rose: what was, 19... >> this is 1938, 1939. and for jewish, polish refugees watching the german troops coming towards paris didn't give you a feeling of great comfort. and we were able to get out because my mother was driving a car that had things on the roof. my stepfather was in a camp so we couldn't find out where he was. we tried to drive into spain to go to a place that was possibly more safe and my mother was at the wheel all the time. and ultimately we were able to save ourselves because a german soldier stopped us to look at our papers and we had no papers. but the soldier decided he was

going to light a cigarette. and while he was lighting a cigarette he waved us through the checkpoint and as i looked back, i'll never forget, looking at this soldier lighting his cigarette while the road ahead of us was becoming clear. >> rose: and you made your way to the united states through marseilles? >> through casablanca and marseilles and lisbon and rio. >> rose: and came here and went to middlebury college. >> that's right. >> rose: and then there was andre meyer. >> yes. >> rose: a pivotal man in your life. >> absolutely. absolutely. >> rose: who was he? >> a towering man. he was the senior partner of an investment bank. i never knew what investment banks were until i got here. and he was an emperor. >> rose: and what influence did he have on you? because he gave you a job? >> he gave me a job which i was very grateful to have gotten. and he let me sort of work my way up in the firm.

he sent me abroad to i don't know what for but he did. and he was my teacher. he was the philosophy of finance is not that simple. and andre had a very, very strong philosophy about how you dealt with the people who you were lending money to. and whether it was a good thing to do and what... whether you could use these as purposes that were valid by creating growth, by creating a good education for children. by... and by having a defense also that would protect you from people who wished you harm. he was an extraordinary man. >> and he said to you once "you never thanked me." >> that's right. >> rose: why did he want to tell

you that? what was he saying? >> he was setting the rules of the game. that i had gotten to the company and we had settled on a $50 a week salary and i thought whatever. yes, i think it was $50. and he had... the firm had increased that payment to, i think, about $60 or $70 a week and andre had been in europe and he came back from europe and he clearly was upset and i thought "my god, what have i done?" and he sat down at the table and he looked at me and said "you could have said thank you." and i said "well, of course, of course, i'm very grateful to you." he said "never let that happen again." and i still didn't know that i'd been raised from $50 or $60 a week to $70 or $75.

>> rose: but he's right. say thank you. >> he's absolutely right. but he was terrifying. until i said... i never called him by his first name, obviously. >> rose: mr. meyer? >> yes. but up to the day that i went to his funeral i never said anything other than mr. meyer. >> rose: has the values of that time changed? >> yes, i think so. i think the values changed because the property changed. i mean the money that was changing hands was so large and so different that it was a whole set of different rules. and we lived by this. we had very stringent rules with respect to insider trading, to providing clients with the best possible deal that you could provide for them.

and at the same time run a business that was profitable and that was respected. and that wasn't... it doesn't mean that the firm or we never made any mistakes because obviously that's... that was 30 years in this, 40 years. >> rose: greed is what you have said got out of hand? >> yes. yes. well the numbers, you know, got so crazy that if you looked at... i remember looking at the tables of compensation for... not even for just top executives but just in general... >> rose: traders. >> it was... >> rose: >> and the money had no more meaning at that point. leverage was something that people talked about vaguely. >> rose: it wasn't 401, was it? >> it wasn't 40-1. and people thought you were... you know, what is this pipsqueak doing giving us lectures about care? >> rose: and there was always,

you said, a consciousness or at least this was your point of view, there was a consciousness of what the deal means for the employees. it wasn't just financial engineering. >> that's right. >> rose: it had consequences. >> yes. and you know the interesting thing about this-- and i know you're referring to the notion of caretaker share holding which is a very good concept that people have... that the responsibility of directors, for instance, and shareholders is not just to the stockholders but also to the stakeholders, as they call it, and the people who drive the trucks and do the work. and yet it's very hard to put the concept into being because the law says all you're entitled to take into account is the

price of the stock. but stay home with these concepts of stakeholder capitalism. >> rose: and you were saying this... a number of years ago. >> yes. with very little... >> rose: little resonance. >> little resonance. that's right. >> rose: everybody identifies you with saving new york city. you have said to me at every turn and you've said it publicly that every turn "the man who saved new york city was hugh kerr rery." >> absolutely. >> rose: what was it that was done under hugh kerry that enabled new york to be saved? >> well, first of all we had to have people around us and around the governor that could deal with the situation where you were about to go bankrupt. and hugh carey who was was a liberal democratic congressman

from brooklyn... >> rose: and an establishment politician. >> absolutely. and we had to do things that were complicated. we had to do things that were somewhat risky in terms of committing the company, committing the state. and then ultimately daring the president of the united states to either sink us or let us be. and i don't know of anybody who could have done that other han hugh carey. >> rose: but what was critical was that labor and business public and private worked together. >> absolutely. well, not only that, but we first of all we created the the mack... >> rose: municipal assistance corporation. >> and we financed it partly with bank money and partly with the union pension funds. it was something for it for the unions to commit their pension funds to a chorus that was not

at all certain of succeeding. and they came with us and ultimately the banks which had even... it was just as much opposed to this finally came along because at every step of the way we could say to them "isn't this better than the alternative? the alternative is going bankrupt. is having all these people that are trying to get out of town, trying to get things that are no longer possible. that's what i will always remember of that period is that it was a period where bankers and union leaders essentially got together and restructured this bank, this asset. >> rose: and it worked. >> it worked, yes. it was very close. >> rose: talk about ambition. here you are a very, very, very successful investment banker.

you had ambition for public life what did you want to be and why didn't that become? >> well, i was always interested in public affairs and i saw really no basic reason why i couldn't do that at the same time as i was doing business. but honestly i never really thought it through very carefully. i got involved in a lot of deals and things because harold jeannine was a c.e.o. who who bought 50 companies. >> rose: it was his business. >> that's right. but... and i think another thing is i'm jewish and i'm a refugee. which is not inconsequential if you're trying to chart a course in a difficult world. >> rose: but explain why. >> well, i'll give you an

example. i went to middlebury college after i got out of the army and i was in a fraternity and that fraternity did not allow jews or blacks to be members. and one day we were in the fraternity house drinking beer or whatever with one of my... one of the other members of this group. >> rose: one of your frat brothers. >> who was black. that's right. when we got the visit of a gentleman who worked for one of the railroads or something. and he came down to tell us that people of our background were not welcome in this fraternity house. and we should leave but that he was very considerate and had a case of beer that he was going to give us. so that i was sitting with two of my fraternity brothers who were both veterans and i started

to get up and they said "no, this is our problem." and they got both of them on either side of me. they lifted this gentleman. they said "we're taking you to the railroad station." (laughs) >> rose: (laughs) this is great. >> and we got bounced out of the t fraternity. but we made our point. we also bought the house. but you know to me it was just... i was a couple of years out of occupied france and after the war, to have these two guys stand up and say "look, this is our problem" you know? that was something. >> rose: you became under president clinton the ambassador to france. you were a great friend of francois mitterrand. >> yes. >> rose: what was the most important thing you accomplished there? >> when i was ambassador of france? >> rose: yes. >> well, things were not going

that well between the french and ourselves in that period, especially the beginning of the iraq war and everything else. but... so there was a certain amount of tension. i think the... i think that i was able to fulfill the logic of being an ambassador who are is... who does things and who helps relationings between... >> rose: and you were an ambassador who who spoke french. >> which is helpful. >> rose: and your wife learned to speak french while you were there and i heard her at the embassy one night and she gave an award. >> yes. but it's hard to imagine when one comes from abroad what it can do to your psyche to look in the mirror and say "i'm an american." "i'm not only the ambassador but i'm the american ambassador." i remember going down to speak in marseilles when we were giving a medal to the memory of

a young man nameder haveian frye. >> rose: what a great... yes, they made a movie about him. >> that's right. and when i was speaking i start it started coming back to me what this young guy had done. what the world was like at that time and what it meant not necessarily to be ambassador but to have the standing that goes with it. actually that was very, very much the same thing that i felt when i first became involved with a municipal assistance corporation schfs now i'm an american. >> rose: you have been in the new york review of books for as... for a while, not just yesterday but for a while arguing of the nd for significant public... >> infrastructure, yes. >> rose: and especially infrastructure. >> yes. >> rose: it hasn't happened. >> have been constantly rebuffed. >> rose: exactly. so... >> so i think they missed the boat. i think one should have... one

should have created an agency, whether it was the same as the r.f.c. or something else. >> rose: and what would it have done? >> it would have invested a trillion dollars over the next 12 years in building public infrastructure and that public infrastructure would have had a huge investment which would have probably created another million people over the next ten years. >> rose: a million jobs. >> a million jobs with people. (laughs) >> rose: (laughs) right. but here's the argument. the argument... >> and it was a a layup. >> rose: well, the argument that... was this argument made clear to the president of the united states, to the secretary of the treasury, to christine romer? >> larry summers knew perfectly well about this. >> why did they reject it? >> they rejected it because they thought, i think, that they couldn't do everything and that this didn't have their priorities... >> rose: well they tried to do everything. >> well, they started on this

business of stimulus. >> rose: and what was wrong with the stimulus? >> i don't know what was wrong with the stimulus. but after that everything stood behind those priorities. >> rose: okay. basically the president would say to you and to anyone else and his advisors was look, what we tried to do with the stimulus was stimulate the economy, that's what it was about, economic recovery act was what it was called and we wanted to make investment that would have a real benefit over the long term so therefore it was energy, education and health care. those were three things we thought were important. now, they didn't say a whole lot about building infrastructure at that time. >> that's right. >> rose: the argument against it voiced by some was this, it does not create jobs quickly. >> well, that's absurd. >> rose: (laughs) well, tell me why it's absurd. >> if you're building infrastructure... >> rose: how long does it take you to build? you don't build infrastructure in a day >> you don't do in the ten

minutes. >> rose: i know but... >> so if you want to spend a trillion dollars or $500 billion whatever on infrastructure you get the engineers and you get your plans and you say this is what we're going to do. it's going to take us eight years, it's going to take us seven years and it's going to cost us $750 billion and joe schmoe is going to be responsible for it. >> rose: and somebody is going to come along and say mr. rohatyn, i respect but you we're spending too much money in this country already. do you know what kind of deficits we're facing? do you know what the debt that this country faces when you look at our entitlement commitment and you look at our commitments for social security? i mean... and you look at our interest payments, for god's sake. >> but not doing infrastructure didn't relieve them of... there were other things that were done probably for the same amount of money. >> rose: so you're saying the things they chose to invest in were not the smartest things to choose? >> not only that, but infrastructure is a long term

permanent... not permanent but it is long term... >> rose: it pays dividends across the board. >> you have different ways of financing it. you have different ways of using debt to do this. >> rose: so why didn't they do it? you know people. >> i never met the president and so, you know, i couldn't sort of wander in and say, by the way, mr. president... but i know that he knew about this. >> you could have sent a word. >> i don't hide behind that. i just think it seemed to me if larry summers, if meissner, they were big boys. >> rose: yeah, they are. >> i can't explain to them the difference between... the one financing and another financing. >> rose: (laughs) >> but i regret it. >> rose: you regret they didn't do it? and you think it had consequences? >> absolutely. absolutely. >> rose: we were worse off because we didn't do that? >> no question. >> rose: do we need another stimulus now?

>> well, i don't think... >> rose: the political environment is gone? >> yeah, totally. >> rose: so what's going to happen to the growth of the economy? >> on the other hand, i do think that the arguments for infrastructure and for the way to infrastructure should be possible of explanation to the republicans. >> rose: and this president is capable of making that argument convincingly? >> i think so or he... look, the republicans aren't all hopeless people also. look at if world. go to de gaulle airport in paris and look at the rapid trains and see how they build these things. >> rose: go to china and look at the commitment they have to the fastest, biggest, best rapid train you've ever seen. >> absolutely. we have to move to one of these plays. >> rose: (laughs) we do like them, though. so there is also this. the president himself said in an article by peter baker that he

found out that there were no shovel-ready projects. >> yes, which absolutely stunned me. absolutely stunned me. because the arguments that were being made before that was well, it takes so long to do this thing and a we don't have the money, b, it takes too long. and now today we have the governor of new jersey who who can't build this tunnel because he's short $6 or $7 billion and if we have an investment bank for infrastructure we could use that as a way to help the governor of new jersey finance this tunnel. we are facing bankruptcy on the part of practically every state and local government while, you know, people are dancing in... how are we going... you repay debt out of income and you can't

have income unless you have things that produce income. >> rose: there is also this. you don't think kindly of your former... and present profession. >> rose: no, i don't think kindly of them. no. >> rose: so what's your indictment? >> well, first of all, my first indictment is that the financing that the profession was pushing during the last ten, 15 years was just monte carlo. that was casino. and the rules of the game were just thrown away. the business... you had no controls. you had no limits. you had no ability to backtrack in case you see that you're overbilled. it's not a complicated business but we don't to have 30 to 1, 40 to 1 leverage ratios.

>> rose: well, there are new capital requirements. >> there are new capital requirements. we'll take a look. >> rose: and take a look is what you should do at this book called "dealings: a political and financial life." felix rohatyn has been at the center of some of the most interesting times and he writes about his own story here. it's great to see you. >> rose: >> thank you, charlie, thank you. >> rose: i remind people, go to our web site and look up felix rohatyn, a piece that we did. it's an hour and it's about him and also about his remarkable wife who's also very public spirited and this book is dedicated to... in the following way: "to my wife, our children and grandchildren with love and admiration." thank you. >> thank you, charlie.