he cautioned investors during the japanese bubble, the dotcom fringe and the subprime crisised today his urgent warning focus on population growth and threats to the world's natural resources. i'm pleased o to have him here at this table for the first time, although we spoke by phone in an earlier interview for business week. welcome. >> thank you. nice to be here. >> rose: great to see you. so how do you see the global economy? >> in a long-term slowdown. >> rose: yeah. >> i think unappreciated by most economists, mainly because they're not interested in the long-term. in the short term i have no strong view, no conviction. we seem to be muddling through quite reasonably given all the obvious problems rdz you worry about a number of things including the united states will never, ever, or you don't expect it to ever go back to the level of economic growth and gdp annually that it did in previous years. >> right. and i worry that the powers believe that it will. so clearly bernanke seems to believe it will go back to 3%, the good old days. >> rose: you don't think that's possible. >> w

david: that brings us back to the subprime mess which we were told the same thing, there is no risk inhings because the government will back it up. it almost brought down the entire financial system. >> should a situation continue like this were student loan performance continues to fall behind, the government will have to find out a solution. david: why should i want these? if i am in fixed income, doing my hot trading the stock market, why do i want these bonds? >> the federal backed bonds don't really have that worry. the sallie mae credit underwriting loans don't have the government guarantee, but they're only give into good borrowers the loss of credit and lost principal on the bonds i would say is not as great. david: which would you prefer? pay the government bonds worth risk because they don't do critics search they can be backed up by government guarantees for sallie mae which could be better credit risk because they only lend money to people who are good credit risk, which would you rather have? >> it all depends on your risk appetite. the sallie mae bonds offer a larger yiel

we are suchering from the subprime housing crisis. we learned that nonchecked loans are dangero and now we have a trillion worth of these loans from students? >> no income, no job, no problem. we'll give you the loan. no income, and no job is what students are faced with. this is the problem. it is the universities and colleges that are gouging the middle class. they are charging a lot much money for degrees . that is the issue. the business model for universities and collegings - colleges are nonprofit and live off the taxpayer nickel. universities, stop gouging middle class and get the degrees that are useful . in you do that and degrees that people can get jobs with, get rid of the 83 overlapping federal training work training and do it right in the beginninwith the college doing right. >> we are see heavily weighted with the government loans. federal reserve bank cited 93 percent of the student loans are made by the government and again they are not credit tested. i can't emphasize it enough. anyone who fogs a mirror can get a stud

mortgage debt was about 10 trillion, if i remember, of which about 1 trillion was in the subprime andall day. they were not destroyed by war. they are all still staying. so if you mark them down to 50 cents on the dollar, people holding those bonds lost about 500 billion. on half of which were held by banks. the banks were taking losses, not a huge amount of money. the reason why the crisis happened was because banks didn't know which of their colleagues was holding this stuff. so they stop lending to each other which dried up the inter- banking market, dried up liquidity and so no trading was in these things. the price fell below the value of the underlying houses were worth. the regular then insisted the financial institutions mark-to-market, which is sort of began to threaten their liquidity. so this thing mushroomed completely out of control as a result of lack of transparency between the banks and the regulators on insisting on mark-to-market. back to the real, debt to real household was only slightly worried again. everybody looked at the debt to income ratio. that's not the rea

and i was really interested in the housing cry is us, the subprime. turns out the main victims of subprime or were actually prime borrowers. but when i got boo that, i began to see the same kind of patterns that i'd seen in job offshoring, that i'd seen in the burden shift on retirement. and i said wait a minute, there's a story here about the american middle class, what's happened to them. actually, i didn't start with the title, who stole the american dream. i started with the title "the dream at risk." i knew there was a problem. everybody knew there was a problem for the middle class. it was only as i got into it i kept discovering more and more things, i realized this was not impersonal market forces, this was not technology, this was not globalization. what was happening was american politics and american economics were working against the middle class. people did this. we decided this. if you look at other countries like germany, their middle class is in better shape, they've done better trading against the world, their companies are making mone

. >> in 2007, foster sent a team to the boston area to search several branch offices of countrywide's subprimeivision, the division that lent to borrowers with poor credit. the investigators rummaged through the office's recycling bins and found evidence that countrywide loan officers were forging and manipulating borrowers' income and asset statements to help them get loans they weren't qualified for and couldn't afford. >> all of the--the recycle bins, whenever we looked through those, they were full of, you know, signatures that had been cut off of one document and put onto another and then photocopied, you know, or faxed and then the-- you know, the creation thrown-- thrown in the recycle bin. >> and the incentive for the people at countrywide to do that was what? >> the loan officers received bonuses, commissions. they were compensated regardless of the quality of the loan. there's no incentive for quality. the incentive was to fund the loan. and that's--that's gonna drive that type of behavior. >> they were committing a crime? >> yes. >> after foster's investigation, countrywide closed s

americans didn't know where greece was either and you know it sounds a lot like what we've said about the subprimeortgages you know it's a tiny little problem why should we care you know the problem is huge just because it's happening first you know cyprus is the tip of a very big iceberg when it comes to banks because you know we have the posit insurance in america just like cyprus and one thing we have in common is if our major banks failed if the two largest banks in america were to fail bank of america and citigroup there's over two trillion dollars in deposits there and the federal debt the i see has about twenty five billion dollars that's it and of course it's all in u.s. treasuries so if large banks were to fail in america you know depositors are going to take losses too and of course what everybody forgets is american depositors already suffering in the positive x. is called quantitative easing zero percent interest rates is a way the government confiscates the interest that you would ordinarily earn on your bank account and because quantitative easing means that there's inflation it mean

was there any thinking in china that, given the subprime crisis in the united states, that china would> some people will try to put it that way. but, you know, at least-- it's not my thinking. >> now, some people consider what you're doing a huge threat. your real intention is to gobble us up, you know? they see you as vultures, really. i mean, i've seen that word. >> or some people say locust. >> locusts? >> the europeans call it locusts. the americans call it vultures. >> "vultures we are not," he says. "we're like a typical investor. our only aim: to make money." mr. gao bridles at the mistrust. >> immediately after we announced our existence, then the u.s. government, some european governments, all came out and said, "okay, we think of this as-- this is a dangerous, and we think we should do something about it. they probably want to control us. they probably want to do something bad about us." >> the reason mr. gao agreed to this interview, his first as fund president, is because he wants to dispel any fears that china intends to gobble up u.s. companies. >> it's our policy not to

the documentary shows us the human consequences of budget cuts, the subprime mortgage crisis and hollowinge class. >> we need help. >> we just got an eviction notice. >> are you sleeping in your car? >> under a bridge, actually. >> i hear them sometimes saying we skipped dinner because we need to feed or kids. sometimes when i hear that, i cry. sometimes. >> for the middle class in this country, we have a one strike and you're out economy. the system that once was in place to cushion those crises has been frayed. the most endangered species in america is the middle-class family. i think we have to be alarmed by that and ask whether that is good policy. >> joining us now are emmy award-winning film makers joe and harry gants. thank you for coming on and making this. we talk a lot about positive and disparity in this country, but broadly hugely underdiscussed as a subject of national concern. what brought you to this project? >> we were seeing a few years ago, more family struggling, more people out of work than in the last 80 years, yet all the discussion was on cutting budgets and cutting

these bonds that the bankers sold, these bonds that these goofy bankers sold, the subprime version of not? i give you the last word quickly? >> of course it is. and how about the goofy investors who bought it? they relied on some goofy rating agency. this is a ship of fools, larry. >> i hope so. >> blaming the workers and taking away their pension, what they worked their whole lives for is absolutely unfair. >> we won't get anywhere with tax subsidies that work -- >> i got to get out of here. i got to get out. >> not the workers, just the unions. but the two are synonymous in detroit. >>> two of the biggest wall street names get flagged in the stress test. kayla joins us with the full story. ♪ [ laughter ] ♪ [ female announcer ] each one of us is our own boss. ♪ and no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. ♪ zap technology. arrival. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way

because it reminds me of the word "contained" which is what behr b ben bernanke described the subprimecontained, before everything exploded. when these guys start talking about a situation that's manageable i get scared. >> jeff, i think what you're saying is interesting. i just don't know what the particular comment is. >> i think it's a high quality tried. i think investors should be staying high quality here. >> had you been banking on collapse or the fed being wrong on this thing, you really would be a poorer person today. >> 130% poorer. >> the apock liptic attitude has not been the one that is the enriching position here. >> there was a point that this was productive, constructive for the market. we're past that point now. >> thank you, guys. we'll have a matador moment as we celebrate cal state northridge. the three of us went to school together. >> say hi to harry dent. >> you're missing that one, too. >>> let's send it over to josh lipton for a market flash. >> i want you to check out quickly shares of tesla which are enjoying a nice pop here. a pop that coincides with a tweet

policy changes to address derivative trading abuses which had something to do with the crisis of the subprime crisis. you said requiring major banks to disclose to regulars trading portfolios such as the ones in the-- prove claims that that derivative reduce risks rather than increase them. stop using derivative pricing practices to hide loss, enforce risk limit breaches by ending risky trade rather than silence the alarm, insist troughe trougher-- taxpayers won't be on the hook for a bank bailout. do you not believe the capitol requirements as they are now are sufficient? >> well, i don't think they're sufficient. but the world community, the gulars around the wod don't either. that's why they have come up with this thing called basal 3. it would increase the amount of-- . >> rose: i'm including what is proposed bypassal 3 and also what is proposed by dodd frank. >> is that sufficient to you. >> no, then i think-- it is, providing we implement dodd frank. right now some of the big banks are opposing the implementation of dodd frank. they're fighting the regulations which would implement what

they are going into the subprime student loan.l we have another, will this be another subprime price with student loans instead of houses? >> the reason of this is because of the government getting overinvolved. they insist in providing all of the loans and letting everyone go to college. it inadvertently ran up the price of college. no one can get a job after they graduate from college because of the unfriendly business environment in this country. charles: ultimately, taxpayers will pay for it. nothing is free. the it -- the administrator in california. later this hour, we will have details. an eye-opening interview that this lawmaker actually gave. wait until you here which he had to say. it is at 10:35 a.m. we are also amidst a narcissism epidemic. it rose just as much as obesity. our next guest says it is all about facebook. we will blame them. >> everyone has problems on facebook. it is a recipe for people to feel bad and for people to be tremendously narcissistic. they are pretending that they have hundreds of "friends." ch

the fact that 28 million subprime mortgages were in the financial system in 2008 -- again, almost half of all mortgages -- was undoubtedly news. i might have been wrong, but it was news that i said it. it had never been reported before, and it is a shocking number. yet i have never found a single reference to it in any major media report on the fcic hearings where i made the statement. and i never recall receiving from a reporter, receiving a call from a reporter asking me where i'd come up with that number. publication of the 25 million number would have led immediately to questions about how so many of these weak more gamings got into the financial -- mortgages got into the financial system in the first place and where they were located. i would have been able to show that only a minority of these nonprime mortgages were on the books of banks or other private financial institutions and that most of them were on the books of government agencies. yet my statement never evoked the slightest media interest, and, of course, was never covered in the fcic report. in addition, at the time th

national political scene for the first time and of course when the economic collapse begins with the subprimely to be related, very closely to that, those two factors and it's not only the person of the president, our first black president but the demographic change he represents, in other words the idea that whites are predicted to lose their majority, fall under 50% of the population by 2043 so there are big changes happening in our society, and some people are reacting in negative ways and joining the groups. >> what you're saying is there are a lot of knuckleheads or racists who are threaten ed by change in demographics t brings out the racists. >> let me be clear that we're talking about two different types of groups here, hate groups which have risen to over 1,000, and so-called patriot groups, the groups we used to call militias back in the 1990s. it's with the patriot groups that we've seen the just spectacular expansion of the movement and those groups aren't explicitly racist but the demographics caused many to feel this is somehow not the country they grew up in, that other people

property, but 20 years ago did the government stop redlining whole neighborhoods for mortgage insurance and did private lenders stop targeting communities of colors with subprime> yes. >> and i think that the study raises provocative things for us to think about, but basically it suggests that over the last several decades there has been a stable model for wealth accumulation, and economic process for the white middle-class and upper middle-class. >> and homeownership. >> yes, a formula to go the college, and get married and buy a home and save for retirement, and what the study suggests is that all of those things combined have worked well to promote affluence among the white working class, but each one of those have been less effective for black americans, and going to college has produced lower returns and marriage returns lesser income, and so on and on and that model that we have established for the white pros pperity that has word well for america over the last several decades, the question is how to extend it to the broader way. >> i don't want people to miss the way you are saying that, because it is important that part of what happens when we talk abo

the crisis. these confessions came because although they had no idea that they had securitized subprime mortgages, the government had done the same thing with three times as many. that was not reported in the media. without this information, it was possible the private actions could have been responsible for the financial crisis that they saw all around him. a good example of this phenomenon is the chief investment officer at jpmorgan chase. he circulates a newsletter to friends and clients, and in 2009, he used it to plain banks like his own for making irresponsible and risky mortgage underwriting decisions of ron the financial crisis. this was to be expected. the only information he had was what he has read in the newspapers or saw on television. he did not know what the government rule have been. one day he ran across the majority report of the financial crisis commission, to which i argued that it it was the government's housing policy, and the affordable housing requirements that were imposed on fannie mae and freddie mac that drove down standards and built an enormous bubble and caused the

here are the basics and you must stop me if this doesn't make sense to you. here's what they did. you know what a subprimemortgages? is garbage mortgages? are not qualified, but they give you the mortgage anyway and the interest rate jumps up and they say, don't worry, you can sell your house in a couple of years. but they basically -- they look at the people who don't really qualify for a conventional mortgage and they do these subprime mortgages. so here is their big trick. you gather up a thousand subprime mortgages. they are supposed to pay interest and principal every month. we take the interest. he poured into a bottle. that bottle is all the interest. all of these mortgages are not going to fail at the same time. historically, 90% of people in it with default. so you put all the interest rates together. all of that income. and these wine glasses -- those are security is like bonds. instead of a system where you pour out the wine, the top row, than the middle row, then the bottom row. so no matter what happens, if you have 20% foreclosure, 30% even, you will pay the taxes first. so if you buy the ph

the allocation of capital. and if you don't get blamed when things blow up come exactly what happened with subprime lending so theycan dictate the banks allocate cap gold and in the banks when it doesn't work is far more powerful. it's a much more serious solution and the reason the left jumps on the issue is justification to never get justified in the reason they have so much intent is they are really scared about any attack. they really depend on the smiths. i did interviews with numerous reporters, some of which claim to be economists. anytime you bring up the solution is not they argue with you. they get emotional intensity because if you undermined the myth of everything that's happened since the crisis started doesn't make any sense. it's a real threat and they want to make sense. so peter is right. this is a big important issue about the future of our country because controlling capital can grow some economy. [applause] >> mr. >> thanks for the chance to be here today to discuss peter's boat, which was excellent. it differs from dodd-frank in several ways. one, it is well-written and is an attempt to do wit

it's also true that we wouldn't have had half the subprime mortgages written, people thrown out of their a little less prosperity in the near-term, or even, god forbid, a minor recession as opposed to just keeping the party going, because when the party ends, we all know about drinking. the hangover is a lot worse if you drink a lot more. >> how much would simpson-bowles have solved the looming crisis, at all? >> i think it would have helped. >> we need even more than that. and we're nowhere -- we're not even close to doing that. >> all this discussion goes back to the kids. who's really going to be hurt by this happening? >> what can we really expect to do? >> hold it. we've got to figure a way out to energize these kids to understand, they're at the greatest risk of all. look. there isn't a hell of a lot that's going to change in my life or my wife's life until we go. thank god we've done very well. and we live comfortably and we live sensibly. but these poor kids haven't even started yet, and when you think about the implications of frustration of not being able to get a job these kid

program is a program that go into communities that have been devastated by foreclosures based on the subprime meltdown we had in this country where so many people were tricked into signing onto loans and mortgages they could not afford. thus they went into foreclosure. these communities have been devastated, with boarded up homes, stray animals on the property, with police and fire having to spend more money in these cities to try to upkeep them. the ryan budget would do away with the neighborhood stabilization program. the home values must be maintained in these communities. some people are trying to keep up their home bus with these boarded up property the value of the homes go down. the neighborhood stabilization project is a project that would revitalize the properties, put them back on the markets as affordable homes, and instead of doing away with this program, that helps to keep the value of our american citizens' homes, we protect it. we protect it. the ryan budget would do away with it. thank the c.b.c. for understanding how to protect our neighborhood, how to protect our consumers,

what exact metrics are going into that one specific ratio, and of course, residential capital the subprimeurt its capital levels. >> it can't help your cause to criticize your regulators, right? >> right. >> that seems like a slightly crazy thing to be going if your goal is to somehow pass the test the next time. >> right. and i think that it's especially poignant, considering that ally is basically the only legacy asset that's still in t.a.r.p. the government still owns 74% of ally, it faded a little bit unclear whether it will be able to go public, whether it will end up getting sold. this is the one where it really matters. so it's obvious if they weren't going to pass this, there were going to be some bones that got thrown. >> kayla thank you for giving us that update. we'll see what happens. >> still ahead. 8:19 now. and that means 11 minutes till the february employment report up next we're going to get some final predictions from our panel of experts before the number comes out. and then they're going to stick around for some instant reaction at 8:30. >>> can't catch "squawk box" on

and what the fed is basically saying is that this is a subprime lender that needs to address their mortgageties. that's what went into the results of the stress test. we issued a report in january saying the exact same thing. what we need to see from ally is a real plan to resolve their subprime mortgage liabilities, even in the face of their subdivision res cap filing bankruptcy. we need to know how they're going to rebuild their capital and re-pay taxpayers, who own 74% of the company. and the problem that has to be always remembered with ally is, we bailed out ally, because we were told if it went down, that gm would go down. and gm is still in the t.a.r.p. bailout as well as allay. so this company needs a plan to be and stay strong p. >> shelia, what's your take. and give me your take on this conditional approval for jpmorgan and goldman sachs. >> we knew there could be some adjustments there, because actually, the big difference between goldman and jpmorgan chase and the fed was in their assumptions for the pre-provision net revenues. they were closer on what they thought the losses wo

. >>> after the break, one hedge fund giant raked in big bucks, shorting subprime. new highs. where's he putting his money to work. >>> two words, fish mcbites. mcdonald's same-store sales coming in lower than expected, after bringing in some new customers. acceler-rental. at a hertz expressrent kiosk, you can rent a car without a reservation... and without a line. now that's a fast car. it's just another way you'll be traveling at the speed of hertz. (announcer) at scottrade, our clto make their money do more.re (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade... ranked "highest in customer loyalty for brokerage and investment companies." >>> our next guest, one of those that made a lot of money shorting subprime debt. is there a dark horse trade out there? and what about credi

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>> complicated story with regard to the enterprise, participation in subprime lending, but clearly drivenby what was going on more broadly in the marketplace. there is a sense of fannie mae and freddie mac losing market share to private participants. there was a sense of serving more borrowers that the margin or mortgage market and the sense the strength of the u.s. housing was such that home prices are going to continue to rise. there were a thought of things going into participation in the marketplace. with regard to where we are today, was undertaken a couple pretty important steps. one is that the pricing of doing tvs this marvelous piece today and it was. they are clearly underpricing risk in the marketplace and the second is underwriting standards have been in root in the 30s through the discipline are things like better discipline in the origination process and being produced today comply with the standards fannie and ready. >> i'm concerned about the multifamily housing. i want to quote from your remarks he gave at the national press club on march 7th. and i quote, we are setting

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the way he played it is through mining equities that hurt. subprime trade absolutely a great one. pretty much has called it. appe they are pretty happy. >> i like to talk to insider buying, one of the best, george muzia. he says when he looks at the data insiders are telling him risk is on the negative side of neutral. what they are buying, number one on their list, energy. among those energy or natural resources companies with the top patterns include murphy oil, pbr partners, synergy resources and weatherford international, bottom of the list, consumer staples and telecom least favorable. highly selective, one thing they are pointing out these people are selective in what they are purchasing. again, what we keep hearing, this theme, stock pickers. >> i'm hearing the same thing. energy is a particularly complex phase. there's something i'm hearing a lot about, commodity fatigue. you see pension funds after two years of laggard returns, big turndowns in oil among other things. but that doesn't mean people aren't going to take advantage of the drilling in u.s. >> we are arguing late

now most of the excitement has been in the equity market which i understand but cyprus is a small problem today but so was subprimen 2007. so you can't just eliminate it and you can't tell what the effect of greece and spain and italy if this thing blows up or this gets worse. so it is something that the market --. david: we'll find out tomorrow when they try to open those banks. tyler, bring it home for a second. you point out over 100 companies have been lowering their coming earnings forecasts. only five raised it. does that make you a little more defensive? >> i think we're not sellers at this point. i think going into earnings season here in a couple weeks i think investors want to get a little bit more defensive. david: how do you do that? >> i think you move into sectors like you saw leading today's market. you enter into health care. you enter into staples. you go into utilities. again, this market reaching new highs today, was driven by defensive areas. so i don't think you want to be a seller but i think you want to pare back on risk. i think you want to be in bigger dividend players. i think getting ear

the issue. our female guest said something rather relevant. and that is, inflations contain now. in '07, well, subprime was contained, until it wasn't. and i think that what bothers me is, at the point when things start to heal two, three years down the road globally, inflation probably won't be contained. velocity will pick up, and that's when the fed's going to have to decide and exit. it's going to be messy by the very nature of when the white flag goes up the poll, a lot of forces are going to awaken that we haven't had to deal with since before '08. >> rick is absolutely right about that. once the fed is not a buyer, and god forbid, if they're a seller into the market, you're going to see something that we've never really seen in our lifetime. i think rick's absolutely correct. you can't be complacent about this interest rate situation. >> let me turn to our female guest. margie, what's your version of how you think the fed will start to rein it in? there's a belief that maybe they'll just hang on to those bonds and let them mature. is that how it should go, or what do you think they should do? >>

subprime loan, anyone? he will tell you why this is the real problem behind student debt that nobody else is talking about. and google airports to delays. top airport officials say the worst is already happening from sequester. really? will break out the "money" truth meter and check out the claims. even when i say it is not, it is always about "money." melissa: first, today's market moment. even as those dreaded cuts move, stocks are unafraid taking another step toward the all-time high. shrugging off economic data from china reversing early losses. the major indices closing with modest gains. but the question on many investors minds, will tomorrow be the big day? e dow 38 points away from hitting its all-time high. let's talk taxes. how much do you think is enough for anyone? rich or poor? after hearing the president hammer home the rich paying their fair share, income families are paying more taxes than they have in 30 years. we aren't here to just repo on that, our mission on "money" is to challenge the story you are hearing everywhere else. so what is your impact is even more this year, will it help o

the dow but it didn't get bailed out. >> didn't get bailed out. nothing as a subprime amex. >> that's exactly right. ve got a platinum card you're doing all right. >> you are. >> down to you, sue. >> thanks, guys. bob nardelli back with us with the dow sitting at an all-time high. what does that tell us about the outlook for housing and private equities? great to have you back with us, bob. >> thank you, sue. >> you mentioned housing before. you used to run home depot. >> yes. >> what does your gut tell you about this housing recovery right now? >> i'm encouraged when lou at all the builders. their prospects have been very positive. i think the pent up demand for housing is there. i think valuation has gone up, which is another good sign. we're starting to see occupancy going the right direction. so i'm really encouraged by what's happening in housing. it's such a strong indicator for the overall economy and job creation. >> there are some people who are using the word housing bubble again, primarily because we've had that pent up demand. we've also had a lot of foreclosures out there. what do you ma

i believe that the first profit warning in 2007 came from the united states and they distinguished themselves as not being subprime lenders, although they premuch coined that phrase. >> they've identified some portfolios that he would like to sell when conditions improve the accelerate that runoff. >> they're really sort of refocusing. they point out that over half of the revenue drivers in these results come from the growing emerging markets or the growing markets on record. >> and tell us about what happens with the legacy stuff at home. will they ever be able to achieve its double digit return on capital here? >> well, a lot of people are stuck on this mind-set that after this crisis is over, how many we're going to return to the old levels of profitabilities that we saw on banks. by the fact that regulations demand so much more equity, not capital, but equity capital, that unless you dramatically krez your returns, obviously your roi will be completely diminished and in a completely new range. >> what you think is the most they can achieve at this point? >> hsbc is doing fairly well. the revenues are up in all

the recent economic crisis. his and not because once they ran out of mortgages to securitize, and subprime mortgages, they started doing bets on the bets. and they gave those triple-a ratings. is that correct? >> i am not an expert, but when you start talking about the deaths on debts, that is in fact correct. but i am not an economist or a financial guide. >> yes, i understand that. >> if they hadn't given triple-a derivatives, derivatives on derivatives. >> get away from the s&p case, i think the assertions that you are making are in fact correct that the financial system made bets on that. i'm not talking about s&p now. >> i'm not asking you to testify as an expert on finance. liz engine was part why our economy labs and the credit agencies. they knew if they gave a triple-a rating, they would get more business. that is essentially what the case is about. >> we basically said in the dodd-frank, that we give the fcc the ability to address that it passed in a bipartisan way, 64 votes. it got to the conference and became a study that said that if the sec fined for this conflict of interest still exists, that they

subprime with commercial and residential. big banks want out of that business. investment banks want out of the business. they pick up the business and collect mortgage servicing fees. they collect late fees if there are late payments they get paid. if they refinance the mortgage in any way, shape or form. there is good top line story there. there is big bulk business acquired by this company. it is only selling eight times forward earnings, david. that's one of the reasons we really like it. senior management has been around for years. this is business maybe 1 to $2 trillion of servicing stuff they could still continue to acquire. there is good persistent story. although the stock has done well we still like it here. sandra: john, dare i say, apple may be looking attractive right now? it actually went up 2 1/2% in today's trading up 11 bucks. this is a stock that has not participated in the rally this year. it is down 17%. are you starting to think it looks attractive at these levels? forward pe is about ten right now. >> right, absolutely. i think apple's attractive. we just rerecommended the stock in

the recent economic crisis. isn't that because once they ran out of mortgages to securityize and subprime mortgages, and they gave a.a.a. ratings, right? >> i'm not an expert but when you start talking about the bets on bets, that is correct. but i'm not an economist or man and financial guy. >> i understand that. when you say it goes to the heart of the recent economic crisis, what i'm saying is is that this house of cards that card high if they hadn't given a.a.a. derivatives and derivatives on derivatives. >> getting away from the s&p case, because that is a pending case, at the assertions you are making are correct. correct that the financial system made bets on bets giving ratings to derivatives that were not necessarily deserved. i'm not talking s.a. -- s. and p now. >> i am not asking you to testify as an expert on finance, but the prosecution goes to the heart of why our economy collapsed, and what it was was that the credit agencies, there was a conflict of interest there, because they knew if they gave a aaa waiting -- rating, they would get more business. that is essentially what the case is about. gov

a lot of that was subprime and sec lending. you can see the greenberg? >> i think that's too simple to describe it. when you attack somebody for what he did and look at people doing things in accounting and other activities that one does in a company, you have to look at the size relative to what's going on. but as maria would say and very aggressively and eloquently, he's never been brought to trial of anything's done wrong. and so i feel as bad for that young guy that was rested by rudy on the floor of the new york stock exchange, taken out in handcuffs and two years later, he's innocent. >> it brings up the larger problem, how safe should we feel with our regulations and regulators if we're only a bad ceo away from this happening again. if it's all in the power of one person and whether or not that man or woman can do the job. >> it's why i believe that it's in aig's best interests to be regulated by the federal reserve. we have an outstanding team from the federal reserve now at aig. they're digging through everything we have, checking our

the recent economic crisis. isn't that because once they ran out of mortgages to securityize and subprime mortgages, and they gave a.a.a. ratings, right? >> i'm not an expert but when you start talking about the bets on bets, that is correct. but i'm not an economist or financial guy. >> i understand that. when you say it goes to the heart of the recent economic crisis, what i'm saying is is that this house of cards that collapsed would have been one card high if they hadn't given a.a.a. derivatives and derivatives on derivatives. >> the asergs you are making are correct that the financial system made bets on bets giving ratings to derivatives that were not necessarily deserved. i'm not talking s.a. -- s. and p now. >> this prosecution, it goes to the heart of why our economy collapsed and what it was was that the credit rating agencies had -- there was a conflict of interest they had because they knew if they gave a a.a.a. rating they would get more business. that's essentially what the case is about. >> that's the essence of the government's theory. >> senator wicker and i wrote an amendment to dodd-frank which

the world. as if an academic argument is going to in some form. two said in 2007 there wasn't a subprimen't going to dip into a recession and said that fannie and freddie were fine and in 2009 said they weren't going to monetize the debt. and in 2012 said that we're in the process of learning by doing, these same people were going and giving trillions of dollars to make a bet. and our hope is that and the world's hope is that this bet will turn it into reality. we find that suspect. we've never seen a point in time in history with so many people trying to do so much to manage an economy. so i think we've moved. we've morphed to this government-managed capitalism. it's become a faith-based economy. and at some point we're confident that volatility is going to increase again. >> we have a great economy and the government can do a lot to it and i think we've seen evidence it's still going to do okay. aren't we kind of -- isn't that the flip side of what you're saying? >> sure. we're not going to manufacture 13 million cars forever. we're not going to only have 2,000 home starts. >> did he j