message. >> rose: you can learn from failure? >> absolutely, yes. >> rose: why the title 40 chances? >> well, i was going to something that most of your viewers will not get too excited about it is called planter school and you go in the winter time and go to the john deere dealership and sit down and different speakers will try to tell you how to improve -- how you do on the crop. >> rose: right. >> and, you know, he kind of talked about how you only really have 40 seasons, 40 growing seasons to do the best job you can and i kind of then translated that into thinking about well you really have 40 really prime years, i was joking and say he has 80. (laughter.) >> rose: this time. >> yes, but, you know, a little eveready battery but, you know, the truth is most people have, you know, in their prime they have about 40 years to really change things or achieve their goals or whatever they want to set their sights on. >> rose: you still consider yourself first and foremost a farmer. >> i love it, yes, i would never want to give it up. >> rose: when you were last

here and talked with warren, you said you were in the middle of a transition to an impact decision maker more effectively, is this book the culmination of this? >> this book is a big part of that. yes, i learned a lesson particularly working in conflict areas, and there is, that is where you really need to have government engagement that if you don't impact policy, you know, if you are working -- you can have great people but if you are working under really poor policy they are not going to succeed so we really started to embrace advocacy as part of our tool. >> rose: and you believe that we can do a significantly better job at trying to eliminate poverty? >> absolutely. i think one of the things is we have been living too much in history, and, yo, you know, technology has changed but also i think thinking has to change and thinking is changing, you know, the younger people in philanthropy today think differently today, they are more innovative and more focused and those people that are thinking and driving that way, i think have to help change some of the

bigger organizations. >> rose: i am amused at what warren once said it is better if you give your money away while you can make the decisions before you are 90 and drooling and have a blonde sitting on your lap. (laughter.) >> i think i got the drooling part down, where is the blonde? >> rose: there is also your mom, and as everyone i think knows, we did a wonderful conversation with her before she died, and here is an excerpt of that in which we see her and her impact on the family. here it is. >> i think he hopes that people remember how much he liked to talk about -- he does that, and i believe that so deeply like he does, and if he can make young people realize and take it a

step further and what can i do for people that are not so lucky including people here, i know that means a lot to him. >> rose: so you say this, warren, in the introduction, in this lottery my children received some lucky tickets, many people who experienced such good fortune react bien enjoying their position in life and make sure their children enjoy similar benefits, this approach is understandable but it can be distasteful when accomplished by smug if i can do it why can't everybody else attitude. emphasize or help us understand the significance of the zero varian lottery, because, ovarian lottery because it says something about being lucky to be born in this country. >> i was born in this country and the odds were 30 or 40 against it in the 1930, if i was born some place else my life would have been nothing like it has been here. i would be wandering around in bangladesh and looking for a

job. >> rose: and sign up for -- >> and i was fortunate with my parent, i was fortunate at the time i was born. you know, i happen to be wired in a way that works very well on a big capital-lific system capitalistic system .. i have had all kind of good luck, it could have been dramatically different. >> rose: many people haven't haven't had that haven't had that ovarian lottery. >> he got a certain amount of criticism when he said people have not done it alone. i have not done it alone, there are 10,000 crosses in normandy and they will need to be where i am today. they are people of gettysburg, i mean, none of us do it alone and i have been very, very lucky to be sort of signed for this time and this place, but a lot of people aren't lucky a the and the market system showers things on me and it leaves an awful lot of people behind. >> rose: i should take note of the fact son and grand son are named howard. >> yes. >> rose: your dad a is named

howard as well, your hero in life. >> absolutely. yes. >> rose: the idea is that you can do what? if our goal is to eliminate poverty, to a large extent. what is the step that we ought to take? and i will bring in your son in a moment. >> yes, i think part of what i try to write in the book is use our experiences and talk about some of those answers, i think when fill situate. >> philosophy clashes with reality, which we have seen in congress, living in reality, the people living in reality kind of lose, so we need to have more serious leadership in terms of addressing this issue, so when people talk about cutting the snap program, you know, those people don't suffer the consequences from that action, and they need to understand who does suffer those consequences. so, really, awareness and advocacy are a key thing in terms of the policy and then, you know, another thing we need to do is i always say, you know,

historically, business has been kind of the bad guy, and in philanthropy people have looked at it and say, you know, they are doing this or they are doing some things so i can't really partner with them, the truth is businesses create jobs and jobs are what permanently bring people out of poverty, it is not that simple in a lot of cases but we have to have a different mindset about what some of the solutions are. >> rose: tell me about you and what you have learned and your role in this book. >> well, i am just honored to be involved and over the last 15 years i have been able to travel with my dad around the world and take in so many experiences and that is a part of what we have tried to capture in 40 chances but for me growing up i have had the two most incredible role models anyone could ask for and, you know, we sit around at dairy queen at family brunch and have conversations but they are still unbelievable conversations. my grandfather built one of the greatest fortunes and turned it into one of the world's greatest gifts and empowered my dad to be

able to change the world and that opportunity is what my dad has used to chair with me to try and improve lives everywhere. >> rose: tell me about your visit to prague in 1969. >> yes, that was a big change in my life and one of the best things i ever did and i wouldn't have gotten it done if it weren't for my dad because my mom didn't want me to go and we argued and argued. >> rose: at the time -- >> yes, i had no concept of what was going on in prague, i just know vera who stayed with us as an exchange student said come on over so i said i want to go over and i am flying in, i one of the kids the mood changes quite quickly because i am flying in and i love big machines and you are landing and have all of these tanks and, this is really cool and then when i am standing face to face with the soldiers and looking for id i am going boy this is not so cool, and so, you know, but i learned so much, you know, i didn't get three meals a day, we boiled hot water on sundays to take a bath.

i mean, you know, it was just so different, and you saw people who were subdued, people who were beat up by secret police, i mean, i saw all of this and to see it different is different than reading it in a book so it really changed, you know -- it is the first time i felt helpless and i felt like i really should be doing something but i can't do anything and i think later on in life that really stuck with me. >> rose: what is it that makes you most proud? >> i am proud of all three of my children but they don't have to do what they are doing, i mean, they don't have unbelievable amounts of money but they have enough so they can spend their time in a country club or something of the sort. >> rose: right. >> and i don't know how many countries he has been in, howie, but he is trying to help his fellow human being, unfortunately, i have got somebody, fortunately i have somebody who can help him do that but the energy and the imagination and learning from mistakes and all of that belongs to him. >> rose: one other thing you have other than this sort of instinct for farming and agriculture and experience and

learning is photography, and we will see a couple of things here, several things, tell me, your wife introduced you to kearments, yes? >> yes. >> rose: and what did it do for you? what did it turn you into? >> i think for one thing, the first thing she would tell you it taught me some patience. if you want to get a cheetah on a kill you have to wait. and. >> rose: they are not waiting for you. >> that's right there is no remote control. so it did, it taught me some patience but i just saw -- i started seeing things, you know, on the farm originally that i just wanted to capture and then when i started traveling and originally we did a lot in conservation so it was a lot of fun, you know, elephants and cheetahs and lions and all of those things that kids like to see and we all love, but, you know, then i learned that photography is a really powerful tool to change people's minds, to make them -- you can't -- if you have a strong enough photograph, people can't turn away from it, you can't deny that it is happening and so to

me, i think i write in the book if i remember right it is look a, like a truth gun it really forces people to deal with the reality. >> rose: as somebody said effectively a picture is worth 1,000 words. >> yes, absolutely. >> rose: take a look at some of these. i want you to describe the photograph. this is a emaciated veteran saluting a flag. >> yes this is everett in west virginia. this is one of those circumstances where i had not gone to really photograph everett but we saw him and came out to get his mail and i saw his ribs and knew he was malnourished so we turned around and went back and that picture is really interesting because i was on the other side of a very busy road waiting to cross, my colleague went off and went to the bottom of the stairs there and i yell across the street, ask everett if he is a veteran and immediately what he did is he saluted and then we spent quite a bit of time talking to him but he is an example of somebody who served thi country and hasn't been treated fairly. >> rose: here is a picture of a boy you photographed in

senegal who was -- what is this story. >> there is where my camera almost got me in a lot of trouble. we got in, i was able to take one camera, it was am amazing we got into this area about 40 or 50 young boys in shackles, and chains and they basically are caught in a religious system that their parents give a child to the head of the religion there and basically those children beg for money, if they don't get enough money on the street then they are treated like this. >> rose: the third slide is a picture of a woman in armenia, 82--oyearld anna. >> i think howie should tell you this story. >> we had been driving through the country side in armenia for hours at this point and i think almost by happenstance we stopped at this house and we were invited in by anna and she told her story about her sister who was mentally ill that she had to lock up at night because her sister tried to kill her and what you are seeing is you are seeing her standing in both her kitchen and her bedroom and her porch all in once there and it was one time that i had an

incredible difficulty with it, because whatever it was about the situation it just -- it hit me so hard emotionally and, you know, my dad and i have seen indescribable instances around the world and anna's story just touched me in a way i was not expecting. >> if i could add really quickly, i told howie we are in south -- on the way home we are going to go armenia. >> dad, i don't want to go to armenia and i said i was just there. >> and i said -- >> rose: generation difference there. >> and, you know, i said you are going to see something you have never seen. i have taken him to bangladesh and all around africa and central america and what i wanted him to see is a society that when you talked to people, you know, this is -- this was a situation where people had good jobs, we talked to professors out of work and, you know, they have lost cars and lost houses, they can't send their kids to

school anymore it is a very different environment than what we see in a lot of countries we work and i wanted him to have that experience. >> rose: that is one of the thing bill and melinda gates have done and is travel and firsthand experience with their own eyes and visit. >> yes, you can't sit in a building on park avenue and really understand this. >> rose: yes. you believe, what ought to be the debate about philanthropy now because they are having meetings as part of that in which they try to understand how to give more effectively, but do we need a bigger debate about philanthropy and how it can be applied and why you should be engaged? >> well, philosophy. >> philanthropy does not operate with a market system, when we sell the dilley bars at dairy queen we find out if they want dilley bars, capitalism is wonderful in the eyes of ideas and products and philanthropy if you are handing money to people,

they are going to say keep handing it one way or another and flatter you and do all kinds of things so you do not have a market system test and that makes it much more difficult, and you can do the wrong thing for a long time and nothing will stop it. so it requires, it requires more ability than it does business. >> rose: it requires more ability to give money away than make it? >> oh, absolutely, absolutely. there is no comparison. >> rose: yes. in fact that's why you gave the money to bill and melinda gates. >> and the children. >> rose: because you were admiring of the fact you could be effective -- >> the ability and intelligence and energy, the lifelong commitment, that is important. >> rose: so what is your role that at the bill and melinda gates foundation? >> writing checks. (laughter.) >> actually it is -- i just endorse them. but it is the same role i have with my children. >> rose: but it is more than that. >> no, no. >> rose: you bring a sense of wanting to inspire. >> well, and -- but i wouldn't have joined with them if they

didn't have the same goals there. their philanthropy is grounded around the proposition that every life has equal value and my children believe the same thing, and they are young and they are willing to devote their -- the rest of their lives to it as my children are doing. so i have got these -- the people working for me that are doing it far better than i would do it and i happen to love what i do, and fortunately that tends to increase the amount of resources available for philanthropy. >> rose: still tiptoeing to work, are you? >> tap dancing, tap dancing to work, i am doing hand springs. >> rose: foundation was famous for the green ref loose and support of that. are you, do you think something like that in agriculture? >> i think today where i call it the brown revolution, we have got to start protecting our natural resources, soil is the key, you can't -- you know, it is like if you want to gove to put gasoline in it or diesel fuel, you have to have soil to grow anything and we have not done a good job of recognizing

it is not sexy, soil isn't sexy so people don't think about it but -- >> rose: bill gates thinks it is sexy. >> i gave bill this book called dirt i said rea read this and yu will understand why soil is more important, but, you know -- and, you know, it is a challenge, because it is not what everybody thinks about but we do have to pay more attention to how we are treating our natural resources and we want to be able to farm the way we farm in 100 years and we have got to do it. >> rose: i want, one more time, because she was such a part of the shaping of the three of you, i mean you have said to me about suze, you know, that you once said to me you have got to meet her because i was a mess before i met her. >> that's true, that is true. >> rose: this conversation took place not soon -- not later -- soon after this she passed away but here is her reflecting on the family and the values. >> i think that is what made

warren a democrat i take the credit for that, because both our parents were republicans and we are not, and he would go with me to hear speakers, you know, jesse jackson and the man who wrote black like me, and lewis, and he would go with me, and say -- loved him, loved him, so without knowing it, step-by-step, i was infiltrating and so -- and he is very much -- i find this a profound thing. i was talking to him one day about some racial issue and he looked at me and, this, charlie, would have been 40 years ago, and he said to me, wait until -- discovers we are the slaves of the world. now how many men are cognizant

of that and even women. >> rose: wow. prophetic, huh? >> i watched that interview before i wrote this book. >> rose:. >> it is throughout the book. >> i should point out she is just recovering from throat cancer, and it affected her voice. >> rose: and this was june 2004. let me talk about the world that you see now politically. we just went through a crisis in washington. >> washington created a crisis. >> rose: demanding things before they could support not only a rise in the debt ceiling but also some other budgetary items. >> what is this doing, do you think, to the image around the world and people who either hold treasuries or, b, have looked to america for economic strength? >> well, i told my children that i think it is in the book that, you know, it has been 20 years building a reputation, you destroy it in 20 minutes. well the united states spent 237

years building a reputation and that's why we have become the world's reserve currency, and people trust our full faith and credit, and for a congress to threaten to destroy what took 237 years to build is just -- it is totally irresponsible. the debt ceiling -- it shouldn't exist, i mean, the way to have a ceiling on your debt is not to spend more -- >> rose: my idea of a debt ceiling is negotiating. >> but if you going to have it, it can't be used. i mean, we have nuclear weapons but we are not going to use them, even if we get disappointed but we say because this is happening not the way we want we are going to use a nuclear weapon. the debt ceiling is a political weapon of mass destruction and both parties should say it is off the table, we can argue about abortion and immigration, whatever it may be but we are not going to tie that to a threat to destroy a reputation that the united states has built up over 237 years so i would ask

both political parties to say it is off the table. >> rose: do you think it is more likely they will be listening because of the close call we had here? >> i think maybe. you know, i always have hope in humans, and actually, senator mcconnell, who i don't agree on many things, but he has introduced in the past, i believe, something that at least -- it will reduce the chance that the debt ceiling will be used as a weapon, and it should be eliminated entirely but if that is the best we can do politically more power to him. >> rose: what would -- >> it just would have been plain stupid, you know, it would be -- it would be like using poison gas or something, just because you weren't getting your own way. it is not something to be used as a weapon. >> rose: okay. so now you have democrats and republicans and you have a commission, merry and paul ryan, sort of chairing it. >> yes. >> rose: and they have -- >> they are good people. >> rose: and they are good people and they have -- and they know something about budgeting,

because they are chairman of the respect if the committees. you now have until december 13th, should they use simpson-bowles as a starting point? >> well, i think thick use that or something like it. i mean, their goal ought t to be to get a lot done. >> rose: so what should they try to get done? help me understand what a warren buffett recommendation should be. >> well they can't get everyone on board but do as much as they can raising revenues where it won't hurt the economy and i think looking at certain aspects of entitlement, if they want a means set of social security i am all for it. >> and a certain age too? >> probably. you can't look at with one part of a program without looking at the whole program. >> rose: right. >> but if they come up with a program i am 80 percent in agreement, with i will cheer them on, i mean nobody is going to be 100 percent in agreement. >> rose: and that is their job. i mean, that is their job,

whether it is in this time frame they can get it or maybe that will help what has happened up to now but the job of the congress, you know, is not to be putting up debt ceilings and shutting down governments and doing things like that. the job of the government -- >> rose: they have to find a budget now and they have to do that so they don't have the debt ceiling crisis they had before. >> but the first thing i would do if i were patty murray and brian, paul ryan is, i would say, on behalf of our respect if the parties, you know, we are calling for absolutely taking the debt ceiling out of any future discussions, to tie up with anything else, and i would say, we both have said the past, i won't get into this finger pointing sort of any of this stuff it doesn't matter who used it in the past, it is an inappropriate instrument to use. >> rose: and you would say to democrats we have to reform entitlements. >> sure. >> rose: because there is an article you saw in the wall street journal a day or two ago saying, the liberal party saying

no messing around with entitlements. you are saying, don't cut as the taxes as long as you have those two positions. >> it certainly has worked wonderfully so far. >> rose: to. >> to the extent it can be done if i were murray and ryan, i would try to do in this private and come out with something of a package, because i think if you take it one by one, nobody wants to give on the individual points, so it is an enormous problem to have a debate in public when people are facing primaries and not, in not that many months and that's what they are worried about so i would try to come out with something close to a package that everybody just liked a little bit but overall we felt was good for the country. >> rose: what is it you dislike you would be willing to see in the package? >> oh, i think that we have to make certain judgments about entitlements and i think we have to make certain judgments about taxes but how -- you can't really talk about one part of the package without looking at the whole package, that's why i

would like them to come out with the whole thing. >> rose: when you talk about we need to increase revenue, obviously, we do, you mean more than simply reducing deductions, you mean increasing rates? >> revenue has to go up to 18 and a half percent or so of gdp. >> rose: expenses -- that is a place it ought to be 18 and a half percent. >> expenses should be 20 and a half or 21, we can take two, two and a half percent gap without gdp going up, without the debt going up as a percentage of gdp, there is nothing wrong with that. i have operated in a world like that, you know, since i was -- since world war ii ended, it works. but it is not -- we are richer than we have ever been, you know, $50,000 of gdp per person, i mean, we are way richer than when i was working 30 or 40 or 50 years ago. so the problem isn't that the country has become poor, the problem is that we have over

promised and we are unwilling in some cases to raise the revenues to meet some of the promises we probably should have. >> rose: $50,000 of means when we compare our per individual -- >> it is six times. >> rose: and $50,000 or thereabout and in china seven or 8,000. >> yes. >> rose: maybe four or five. >> we are the richest family on earth, a and imagine when my dad was in the waiting room in 1930 and somebody said your son is going to live -- when the average is six times per capita what it is today my dad would have thought, well it is a utopia, it is unbelievable what we have achieved in terms of learning how to turn out stuff, in terms of how we handle the stuff that we turn out, i mean, we are enlightened a little bit. >> rose: to say your son will have an income and a wealth larger than some -- a number of countries too. >> oh, things will -- this country has a wonderful future, charlie and incidentally, 535 people can't screw it up.

they may try sometimes but they can't, they can't stop 315 milli americans, i mean america works, but it certainly has gotten gummed up in recent months. >> but do the chinese and people who own treasury have somewhere else to go? >> no, no. and america will pay its bills, i mean, the full faith and credit of -- is still intact in the united states, i mean, i think -- i think enough people have learned something from going up to the brink that we are going to -- it should be just ruled out entirely, why worry about something that isn't going to happen, why cause millions of people to worry about something that 535 know would be crazy and it won't happen. that doesn't make any sense. if i would say something on this show that i know isn't going to happen, and then cause worry for tens of millions of people that is irresponsible. >> rose: and the idea was they would be able to defund medicare, for example in the budget -- obamacare. >> they can say they want a new post office and i won't vote for this thing it is just crazy.

>> rose: but there is also this argument and tell me where you see it we have deficit hawks who tell us about long-term debt that this country faces, and you have larry summers and others who are arguing that, you know, what we need to do is focus on growth and the growth we will have will enable us to pay off the debt because that is not an immediate need and the immediate need is growth. do you agree with larry summers on that? >> we are having growth and we are going to continue to have growth. >> rose: we need growth to meet the challenge -- >> but not increase, but not increase our debt faster than we have growth, we can handle the debt we have, relative to our current output. but we can't keep getting debt growing at a rate that is faster than output, eventually that catches up with you. >> what is an appropriate rate of debt to gdp? >> nobody knows exactly. >> but our net debt, people talk about close to 17 trillion but our net debt is not 4 trillion, our net debt is 70 odd percent of gdp, we came out of world war

ii with i think close to 120 percent i may be off a little bit on that, so nobody knows the magic level but you don't press them to the ultimate, and if we stay at 72 percent or whatever it may be, of net debt to gdp that is perfectly okay, you know, it got down into the thirties not that many years ago starting from that 12 120 but we are fine, but is a trend that should not continue. >> rose: how do you feel about sequestration in. >> well, again, that gets into the, you know, sort of gets into the names that people play. i would just like them to focus on what this country needs, what they can do for the 315 million people. >> they are not all going to agree if they get a budget and you like 80 percent and you like 80 percent, it is not going to be the same but we will feel zero okay and a lot better than playing the games they have been playing the last few months. >> but do you have a sense and i

think you said yes that may very well because of what mitch mcconnell has said and other have stepped forward to say we can't let this happen again. we just can't kick the can down the road. >> it should be taken off dar we used the atomic bomb twice in 1945. we faced all kinds of things since then, the soviets have faced all kinds of things, but really irritated them and they wanted to change in a big way they did not drop nuclear bombs and this is a nuclear weapon of a financial sort. and it just does not belong in the repertoire of either party. >> rose: do you believe we learned a lesson that caused the crash in 2008? >> well, we learned that bubbles will happen and when you get one in housing can be a very big bubble. we -- people may get smarter in some respects, when it comes to fear and greed, i don't think they will change in the next few centuries, anyway, i will let you carry it out beyond that. >> rose: but interesting we

just had a nobel prize in economic awards and one man believes that the markets can be ordered and that they are -- >> they are efficient. >> rose: they are efficient and the other, shiller says, no, they are irrational and we will have more bubbles. >> yes. >> rose: where do you come down? >> the markets are generally quite efficient but they are not efficient and i think probably professor palmer would say that. >> rose: yes. >> shill search right we will have more bubbles. >> rose: yes. >> this was a particularly extreme one because it involved the biggest asset class in the country that almost everybody had, us housing and it also is leveraged to the little in many cases, people have refinanced their houses and everything so you had a huge asset class, mar y ramirez engined to the little and, little little and hilt .. and when that asset price fell it hits financial institutions all over the world, i mean it was designed to be a huge, huge crash and we got it. >> rose: and do you think we have learned a lesson?

>> we have learned a lesson about that kind of bubble, you know. >> rose: and will dodd frank help us next time? >> i am not sure. >> rose: you don't think they have done the job that was necessary to create a regulatory structure that may be both a warning and preventing people from doing the kind of behavior that got them in trouble in the first place? >> fear and greed are pretty hard to control. you know. >> rose: fear and greed trumps over regulation. >> after 1929 we had the fcc and deposit insurance and did all of these things, looking at 1929, and, you know, we got 2008. i don't think humans will ever behave in a way where you don't get mass fear from time to time. >> rose: one interesting thing is that tim geithner is now having some speeches and private conversations who said we could not have done what we did, bernanke, paulson, and me without the emergency powers that were given to use by the

congress. and then some people in the present debate want to stop that kind of power. >> if you look at dodd frank, i have read all 20 -- however many pages there are, but bernanke used something called section 133, i had a federal reserve chairman i won't tell you which one who told me once he said under 13-3 we can do anything. and the truth is, we had to do almost anything. and hank paulson had something what was called the emergency stabilization fund, it was set up when they changed the price of gold. that is what he used to guarantee money market fund, nobody thought it was designed for that but they did it, you know, and who was going to stop them? i don't know whether the emergency stabilization fund allows that, but you had men there who would act and who had these authorities and to some extent, i believe, i may be wrong on this, that dodd frank circumscribed some of those abilities, the fed and the treasury had and believe me they

were important last time. >> rose: and they have the say so -- there is also this, j.p. morgan, a $13 billion settlement. what do you think of that? was that appropriate? was it the right amount? will it serve to send a signal? >> i don't know what the right amount is but i know this. when a prosecutor tells you that a financial institution -- it was i think we got fined 290 million when i was at solomon, i had -- if they brought a criminal action against us we were out of business the next day and that would have had a lot of quest so you have, consequences, so you are like a wolf at your throat, basically, if you are dealing in that kind of a situation, and i don't know where the numbers come from. i do know that in my own view, punishing j.p. morgan for anything that happened with bear stearns is a terrible mistake, i think maybe jamie didn't get an indemnification agreement on bear stearns, but he was

stepping forward at a time when the government wanted him to step forward and saying -- >> rose: you think it is unfair? >> yes. i think if it relates to any of that it is unfair. yeah, i really do. >> rose: i think they will argue there was more than that. >> well there was more than that probably but they have referenced, i think they have referenced the sins of bear stearns and -- in coming up with the number and, you know, i don't think anybody in government was hoping that j.p. morgan was going to wake away from bear stearns or wombel, they probably could have gotten an indemnification agreement if they wanted to take risks with the whole economy in terms of keeping the negotiations going. but, you know, they were asked to act in a very quick manner and they did and maybe they are getting punish patric punished t now. i think, i will put it this way i think the system is better off because jamie diamond has been running j.p. morgan straight through from. >> rose: you say that because? >> i think the guy has been a leader. >> rose: because of the

decisions h he has made? >> yes. >> rose: in building the biggest bank in me america? >> yes when bear stearns was going down and when -- was going down he was there and those were important decisionnesses not just in terms of those institutions but what they said to the rest of the world that somebody is stepping up. >> rose: who pays for this? $13 billion? >> well, the shareholders will pay for it. >> that's the nature of it. i am not sure if the same shareholders are around. >> rose: 02 other banks, bank of america and wells fargo, you have an investment they also are at risk. >> they have written big checks already. if a regulator comes around you and you hold licenses in all of these states and -- you do what they say. you know, you do what they say. >> rose: well, according to to what we have read, jamie very much wanted them to forego in criminal prosecution and they

refused to to do that so the criminal possibility is still out there. >> i don't think it will happen but -- >> rose: but -- >> i would not like running a financial institution with a threat of a criminal action against it but i did at one time. >> rose: the solomon brothers. >> i did it. and every day you wake up wondering whether the plug will be pulled. >> rose: when you look at what they did and in terms of the future, j.p. morgan can absorb this. >> they can absorb 13 billion. that's why they got asked for it. it is the exact same actions that happened in a place that couldn't have afforded 13 billion, even -- >> rose: they wouldn't do that. >> no, no. >> rose: do you think too big to fail is still with us? and should be with us? >> i think -- yeah, i think -- but too big to be punished -- the people that were active participants and have walked around rich, you know, it is the shareholders of those institutions that pay, i mean,

shareholders of aig paid, they didn't have anything to do with the actions of aig financial products, but the loss was a significant percentage of their network that owned the stock. i think that if you run a major financial institution and you need the help of the government you and your spouse should go away broke. i mean, a all kinds of other people end up getting broke. >> rose: that is not what happened. >> that is not what happened. >> rose: how would you correct that? >> well, maybe -- >> rose: let me -- >> i can write a statute if you gave may little time. >> rose: what would it say? >> it would say that, it would have to be more drafted by somebody who knows more than i do but essentially i would not let any huge financial institution who is so important to the functioning of the united states that they had to go to the government and get saved. i would make sure that the ceo that led to that and their spouse walked away broke and say

the directors should at least have to refund everything they have earned in the previous five years or so, if that were there i think you would have more attention going into -- you know, you can say the down side some guy has 500 million and 100 million of the stock but, you know, that is not real, it is the shareholders that pay for it and society that pays for it so, if you want to change human behavior, i think you change the penalty that happens to the humans whose behavior counts in that situation. >> rose: yes but you are talking about financial losses to these people and they should go broke and not profit from the decisions they made that ruined the lives and fortunes of a lot of other people is what you are saying? >> yes. >> rose: should they go to prison? >> that depends on what they did. >> rose: if they did things that justified going to prison? you know more about this than most people? did they? >> that is hard to say, charlie, i don't know the answer to that, but it is ott not inconceivable to me but i don't know the answer to that. >> rose: the buffett rule is there. >> well, my assistant is called

debbie -- rule around the office. >> rose: and i know and love her. >> as you should. >> rose: an and there is also this, though and this is interesting and it has come up in this conversation and it is about a life or a financial doings. you don't want to go right where the line is, you want to play in the middle of the field. >> sure. >> rose: and you don't want to do things if they end up on the front pages of new york times your life would be ruined. >> absolutely. >> rose: as you say you can build a reputation for 20 years and you can destroy it in one moment. >> yes. and the united states almost did that here recently. >> rose: but you are optimistic about the country because of the innovation, because of the resources, mainly because of the human capital. >> just look at the last 237 years, i mean what does it pay to b against america over any time? 237 years, you know, people say well you are betting on america. well, who wants to bet against it? i mean look at the record and we haven't come close to tapping our human potential, now

this country, best days lie ahead of us. >> rose: because science is moving forward so fast and every other kind of -- >> everything, everything. >> rose: now, here is the other interesting thing about your dad, as you know i have had many, many conversations with, ibm, you made an investment in ibm, not withstanding the fact you always said i don't want to invest in things that ha to do with technology that i might not understand. they have seemed to have run into a rough patch too. >> well, i am sure the ceo is disappointed with some aspects but they are going to earn more money this year than they ever will. >> rose: and china -- >> but they will have a record per share earnings this year, you know, i mean, that can be disappointing if you expected more, but it is not a bad record, believe me. >> rose: and this is a good place to talk in this conversation about that which is, you know, you didn't invest in ibm because what you thought they might do in the stock price, and the stock price might

do in the next quarter or the next quarter or the next quarter you had to look at the fundamentals of the business and say they are on the right track? >> i don't know what m in, earned in the third quarter of 1927 or 1962 or, i mean, in the end, every company, including berkshire, you know, we have had a fair number of blips overtime but if we go the right things we will get the right results overtime and we are fortunate to be operating in the best country in the world, we have a tailwind. >> rose: and so does your son, 40 chances, and your grandson, with forwards with references to your wife and your mother and your grandmother, finding hope in a hungry world. great to meet you. >> thank you. >> rose: great to have you back. >> nice to be back. >> rose: thank you, warren. >> thank you, charlie. >> rose: back in a moment, stay with us. >> let me start off by just saying we have a terrible problem forecasting because when

we look out into the future it is incredibly foggy and i want to try to indicate what it is and why that is the problem. >> rose: alan greenspan span is here, he was chairman of the federal reserve from 1987 to 2006. he has spent a lifetime studying the complexity of the u.s. and global economy. the financial crisis of 2008 took nearly everyone by surprise, leading economists and the brightest minds on wall street were forced to rethink fundamental assumptions, the map and the territory, risk, human nature and the future of forecasting, it is a guide to measuring economic variables once thought to be immeasurable, i am pleased to have alan greenspan back on this table, welcome. >> thank you very much. >> rose: let's talk a about where we are today. when you talk about the most recent crisis we had, give me your assessment of what happened in terms of the debt ceiling in and in terms of using that as a

weapon, which warren buffett, warren buffett calls a weapons of mass destruction. >> i think some thing very fundamental has happened in recent years. going back to fundamentals, and i discussed this in the book as well. >> rose: right. >> a society, especially a, especially of 300 million people like we have in the united states has to agree on certain fundamental principles, and that is the bill of rights. that is basically freedom of the press, freedom of speech, freedom of assembly, freedom of religion. everyone agrees with that. and if you go much beyond that, you have to be willing to compromise on all other positions, because you cannot have a functioning society unless people recognize they have differences, recognize that they do wish to live together,

because of the fundamental things in which they believe, and as a consequences of, as a consequence of that as we did for a very long period of time, a degree of comity in the political system which we have lost. >> rose: who is missing the point here? the tea party? >> a lot of people are missing it. they are missing it. and a goodly part of the democrats are missing it too -- >> rose: but are you prepared, because of your own political bias, are you prepared to believe that they are equally responsible? >> currently? >> rose: yes. >> no, of course not. >> so what do you think. >> i think basically that just look at the statistics, in the house vote was very extraordinarily, tea party vote,

and it caused the problem to occur, which incidentally parenthetically the debt limit shouldn't exist in the first place. >> rose: so there is also the question of regulation, and dodd frank. >> yes. >> rose: does it act, it is not a perfect bill as tim geithner would tell you, but as a creation of rules and regulations that would be a kind of monitor so that circumstances that lead to bubbles wouldn't happen? or in a sense removing or restoring some of the kinds of oversight that both was a warning, you know, and a prevention? >> >> as dodd frank is written now. >> rose: yes. >> -- the answer regrettably is no. there are parts of dodd frank, for example, the capital requirements is very important. in fact i will even go further

than that. i will say what we are trying to avoid is the corrosive collapse and bubbles which have high leverage. for example, the dot-com boom collapsed, there were huge losses but the economy barely budged, and the reason is that all of the toxic assets of the stocks were held in 401-ks, mutual funds, households, no debt to speak of. if there is no debt, you cannot have failure and you cannot have connotation. >> rose: right. >> >> contagion. >> and there are numerous examples in the past where we actually went through the big bubble, a burst and big loss and no economic impact. >> rose: and a lot of those companies had core values and core strengths.

>> yes. >> rose: it is just they had a stock price that was inflated. >> yes. thawas certainly the case, and indeed i will have to give you stories about that it is so crazy. but the whole point here is this. that what you are trying to do is to put in regulations which will effectively solve the problem. big, big increase in capital, in and of itself will cause -- will prevent -- will prevent contagion from occurring. >> rose: what do you think of the j.p. morgan deal? >> with the justice department? to pay as we understand it, $13 billion? >> yes. i am really saddened by that. >> rose: because? >> i was on the j.p. morgan board for ten years before i went into federal service. and the crucial issue with the board in those years was how do

we maintain our triple a rating and they were very scrupulous in what they did and i have no way of knowing obviously what the -- you know, what specific charges are and that is beyond my -- it is not beyond my interest, it is beyond my knowledge. >> rose: right. >> but i am saddened we have gotten to in point because remember j.p. morgan was actually a very instrumental player in helping the government -- >> rose: but are you also saddened by the fact so many people found themselves with mortgages they couldn't pay for and lost everything? >> you know what i think about that? >> rose: and so many people who were investors, go ahead. >> no, no, absolutely, i agree with that. i think what is wrong with dodd frank, in a way, is i don't think that the particular regulations they are setting up will work and i think the necessary condition when you are having a regulation is to explain what it is and what it

is supposed to do and if it doesn't, forget it. >> rose: i don't want to cite warren buffett here too much in one program. >> that's okay. he is a good friend. >> rose: maybe the both of you would suggest their wisdom, it comes with age. there is this. he suggests strongly that people who were in executive positions at the time of the circumstances building up to the crisis in 2008, you know, should be broke, should pay a huge financial price in their personal wealth. and you seem to agree with that based on what i have read. >> yes, well that is for a different reason. i shouldn't say a different reason. coming at it a different way n 1970, the new york stock exchange decided that all of its broker dealers which were required up to that point to be partnerships could incorporate. i think that was a crucial point because i recall though

investment banking houses wouldn't lend you a nick kel overnight, and the .. thought of actually -- >> rose: because the partner's money was at stake? a. precisely.i mean, each indivs fully responsible for the losses of everybody else. >> rose: right, right. >> and you would never have gotten even remotely close to -- >> rose: but the principal is, principle is the same if people had fear they would suffer consequences if they made egregious mistakes with other people's money, and caused egregious loss, then they should not be able to have these, you know, comfortable compensation packages that would make them immune from any -- >> that wouldn't have happened before the 1970's regulation. >> rose: thank you for coming. >> my pleasure. >> the book is called the map and the territory, risk, human nature, and the future o of forecasting. thank you for joining us.

>> captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org >> rose: funding for charlie rose has been provided by the coca-cola company, supporting this program since 2002. >> and american express. >> additional funding provided by these funders. >> and by bloomberg. a provider of multimedia news and information services worldwide. >> you are watching

welcome back to "this old house," where we're here on the jersey shore. norm: today's the big day -- you're going to lift this 1890 house up 4 feet. man: yes, we are. lots of activity. you excited for today's lift? i was a little more excited this morning. it doesn't look like it's going up today. kevin: so yet one more setback for you and your family. richard: here in manasquan, we have to start by taking this house down. uggh! norm: look at this! it's overwhelming. richard: the power of the water is just amazing. kevin: what is this community's future? it will be our house, just 10 feet off the ground. norm: look at that. we don't want to go through this ever again. i'm going to rebuild my entire house. kevin: you sound optimistic, but this is not going to be easy. any color. no, really.

any color. and then... let's make it happen. the home depot is proud to support "this old house" and doers everywhere. [ wind howling, bird squawks ] [ thunder crashes, car alarm blares ] when the unexpected happens, state farm is there to help you get your old house to a better state. proud sponsor of "this old house." man! what we need is some elbow grease. [ laughs ] yeah, you can -- are you kidding me? gmc -- lending "this old house" a helping hand since 2002. retailer of hardwood flooring. their wide selection includes bellawood prefinished, bamboo, laminate, and vinyl plank flooring. lumber liquidators is proud to sponsor "this old house."

welcome back to "this old house" on the jersey shore. when superstorm sandy hit, the biggest enemy was right there -- the atlantic ocean. 30-foot waves and a high tide caused extensive flooding and damage to homes all around this area. now, the homeowners on the beach front here in bay head think they did a little bit better because of these stones or boulders called a revetment. many of them didn't even know it was here because it was covered with sand. but the storm eroded that away. the wall ends right about here, so today, a group of homeowners, all on their own, decided to continue this project down the line. well, thacher, you have quite a project going on here. we sure do, norm. this is a rock revetment which we built to build or rebuild our dunes,

basically building the dunes back to what they were prior to sandy. so you and your neighbors are privately funding this whole project. well, we're all paying for the wall in front of our own homes. we need to get this done quickly. it's been now six months since the hurricane. the project will take about two and a half months. so it looks like the first thing you did is dig a big trench in the beach. they do, they dig a very deep trench about ten feet down, from beach level all the way down to sea level. they then put a layer of fabric and put the rock on top of that up to about ten feet high, and then you're at beach level. then they build the revetment over that. wow, so this thing's going to go up quite a distance. well, it'll go up 18 feet from the very bottom to the top, an then there's two feet of sand all the way around it. so where do you get all these rocks? they come from a quarry near princeton, new jersey, middle of new jersey. they're trucked in on very large flatbed trucks, maybe five rocks to a truck. some of them are as big as volkswagens.

they're very large rocks. a lot of transportation costs there with the rocks, but you don't have to worry about getting sand. [ laughs ] no, there's plenty of sand right offshore. well, this is no easy task. i mean, the machine operators have to be very careful. it seems like they're placing the rocks very specifically. this is like building a refined stone wall. well, you're right. it's a highly engineered... revetment. as you can see, they place the pieces together like a puzzle. they have to make sure the slope going back is right, they want to get the height right. it's a difficult job. so the slope is very shallow, so how does that work? how does that help you? well, in theory, as the waves come in during a storm event, they'll roll up this dune, and the dune will dissipate the energy, the wave will roll back down. unlike a sea wall, which would just try to stop it and eventually the wall would fail. well, the wall would fail or the sand would be scoured out from underneath it, yes. well, once these bulldozer tracks go away, you'll have a nice, new beach. we'll have a nice dune.