that was the fundamental flaw that alan greenspan has admitted to. there was the discussion to do away with the glass-steagall act. there was the law that deregulated -- that was the deregulation decision. if we look at the really key factors that led to this particular economic crisis, and look at a sector that was outside the reach of regulators, that was not the case of rules being on the books and not being enforced. that was the case of a vision of deregulation that was enforced. >> in your new introduction to "no logo" you say -- you were talking about president obama, slamming the greed of executives, even as he hands the reins of the economy to consummate wall street insiders. >> what i am describing here is the key pieces of deregulation that created the context for this crisis. they were all clinton era decisions. they were all when larry summers or bob dornan was in charge of the u.s. treasury. -- or bob rubin. the fact that larry summers is the most powerful economist in washington is troubling. barack obama did that. i always remember th

i think it says about our political system the president who originally appointed alan greenspan was the first president bush. it was reappointed after bush was considered to be a politician vitti was reappointed and greenspan is extreme right-wing. then you have years later mr. bernanke is appointed by the right wing republican george w. bush. and a liberal democrat wants to reappoint him. what is going on? people believe there is a difference between a first bush clinton and a second bush and obama? >> guest: first of all, there has not been a change in the new regulations that come on to the financial world between any of the to administration changes. >> host: i will back up. raising an interesting point*, not a democratic republic in body essentially would you are saying the differences everyday, the key financial issues how we do with wall street and who is head of the fed. >> it seems like one of the least partisan things in washington because if you look at the sheer regulations that are passed the continuation of the fed chairman under the changes from republican to democrat

but i think sort of the confident pronouncements that alan greenspan in particular used to make over the past decade about how much they allowed us to decrease the riskiness of the world. those haven't really panned out. >> on a related note, there's been a lot in the press recently about the growth in the use of exchange traded funds, and then thing that is are called inverse exchange rated funds that take positions on those markets. you also have -- so you have a lot of new product innovation in the space which you eluded to, for example, with the onion market. and then you also have a lot of technology, flash trading and very quick trading by large institutional firms. can you talk about how the roll of product innovation and technology innovation are driving the markets, and whether theory can keep pace with both. >> first of all, i should point out that future trading in onions is still banned. so don't try it, anybody. the thing about all of these innovation in financial market is clearly it's a good thing over the long run. the issue seems to be that a new financial product ne

the same point but the response from most of the economics profession and finance academic send alan greenspan was that markets know what they are doing. yes there is some new stuff happening in the housing market that we have all of these great new derivative instruments that are going to spread the risk and take care of everything. and then it all fell apart and greenspan made his famous admission last fall. he has backtracked a little since then now that the world is less scary than it was november, where he said my world view did not work anymore and intellectual edifice and he was specifically referring to derivatives has collapsed he said. so, and i'm going to go to questions in a minute here but i wrote this but. is not a polemic, it is not an argument. it is the story of the rise and fall of this idea but obviously i sort of feel compelled to say so what do we do now? i don't have particularly good answers but financial markets are not perfectly rational. we should allow them to determine everything that our society does. the problem as governments are made up of people too in people w

the president who originally appointed alan greenspan was the first president bush. he was reappointed. he was reappointed, greenspan is an extreme right-wing guy, by a liberal democrat named bill clinton. then you have years later mr. bernanke is appointed by a right-wing republican george w. bush. a liberal democrat wants to appoint him. people generally believe that there is a difference of opinion between a first bush and the clinton and a second bush and ann obama. how does this happen? >> guest: first of all there has not been a change in any of the regulations that come on to the financial world between any of those to administration changes. we hope there will be. >> host: let me back that up. this raises a very interesting point. not a democrat or republican. what you are essentially saying, are these kind of key financial issues of how we do with wall street into is head of the fed? >> guest: it seems like one of the least partisan things in washington because if you look at just the two regulations that were passed, the continuation of fed chairman under th

the president who appointed alan greenspan was the first president bush. he was reappointed. the first president was the right type of politician. reappointed. a liberal democrat named bill clinton. then you have some years later an appointment by a white wing of republican. a liberal democrat wants to reappoint him. what is going on? i generally believe there is a difference. how does this happen? >> there has not been a change in any of the regulations that come on to the financial world. unfortunately. >> love me back that up. a he has speak as an independent. would you are essentially saying, are you kind of key financial is used and how we're dealing with all streak into is head of the fed. >> it seems like one of the least partisan things in washington. if you look at just the sheer regulation that were passed and the continuation there is not a tremendous amount of difference. there is more financial deregulation done under clinton. >> and the secretary of the treasury. >> the secretary of the treasury who happens to have also been echoes ceo of goldman sachs. that is

. >> which economist, you know, in the paul volcker, alan greenspan group do you respect the most? >> the greatest economist, the one for whom i have the most respect, is robert mundell. >> where is he? is he alive? is he -- >> he is a professor at columbia. he won the nobel prize in 1999. he is the father of supply-side economics. he also has a magnificent castle in siena, italy, with his wife, valerie, and their young son. and every year -- and i believe he's done this since 1971, since the dollar went off of gold -- he has a fantastic gathering of economists from all over the world, talking about how can we ever get back to a stable, international monetary system. and he has people like paul volcker in attendance. i've met many central bankers and leaders of government there. and so, he's very much involved still in the future of the international monetary system. he's been consistent intellectually. and he's very interested in china these days. he sees china as coming on board, just as he supplied the intellectual groundwork for the creation of the euro, the european money. and

>> guest: ever people within the fed alan greenspan -- was very concerned about some of the problems taking place in london but most of the people of the federal reserve were tasked with regulating the that cra said they had a vested interest part of their power and their influence so they had a vested interest in seeing the speed to be vigorous and strong because it gave them leverage. the federal reserve to achieve it mightily to the problem because they had a loose money policy and that made money cheap. >> host: which means the interest rates stayed too low for too long, that the money supply and all that did not warrant keeping the interest rates that low? >> guest: they were printing money -- you had an effective interest rates of 81 percent in some instances so it led to the point where if you were in individual who doesn't have any money who has on steady in, and you want to go out and get a mortgage on alone you've got a bank encouraging you to do it because they've got a quoted to me to, federal regulators advancing the agenda saying this is a good thing in a money supply o

so under alan greenspan i thought it would only happen once keeping interest rates as i point out in america for sale i give you the charts 1% in 2003 and in 2004. that led to the real-estate bubble. people felt their houses had doubled in value in 2006 and began using their houses as atm machines. okay, it was all a bubble. those values collapsed, and similarly when interest rates now by helicopter bin bernanke or at 0i never thought the fed could top 1%. in other words i think it has to be challenged the could be negative interest rates. maybe to get people to take their money. with one -- with zero interest rates which is where we are now the fed has converted the dollar into the carrying trade. in other words the yen used to be the trade where we can borrow the currency at such a low rate and zero unless they're going to pay you to borrow that is the lowest the the federal reserve facility that is open to a whole variety of investment banks or banks that run investment units the money is borrowed from the fed and invested in the stock market. so it is pure speculation on your mon

>> guest: there are people within the federal reserve alan greenspan -- was very concerned about some of the problems taking place in lending by most of the people in the federal reserve were tasked by helping to regulate to the cia so they have a vested interest part of their power and influence so they had a vested interest in seeing the community reinvestment act been vigorous and strong because it gave them leverage. the federal reserve to ship in mightily to the problem because they had loose money policy and that made money cheap. >> host: by loose money policy you mean the interest rates stayed too low for too long. with the money supply and all that did not warrant keeping the interest rates that low? >> guest: they were printing money. >> host: to take more risks. >> guest: you have an active interest rates that may be 1 percent in some instances so it led to the point where if you bring an individual who doesn't have any money who has gone steady income and you want to go out and get a mortgage on a loan if you got a bank that's encouraging you to do it because the having qu

alan greenspan, who, you read his autobiography and is one great acclamation for ann rand and he has come out and said that too big to fail is dangerous. the governor of the bank of england has said that around the world everyone has forged this consensus that too big to fail is the single biggest great -- the single biggest threat to our banking system. we have socialized risk and privatized gain. you cannot do that. if you do that, you'll get distorted investment patterns and this willingness to tolerate the risk that we got and that enhances the destruction that we got. all of this is deeply problematic. we have also participated in what i call the regulatory sure raid. what is this? it is fun, a game lecture rates, where everyone in washington says, well, the ceos say, it is not our fault, we did not get it right. the regulators say they did not get it right because they did not have power and everybody runs to capitol hill and they write a new law. we did not need a lot -- new laws. we just needed regulators to use the power they already had. they did not want to until this cris

is it alan greenspan? i wish he were here to defend himself. the changes will also concentrate even more power in the head and the fed chair and lead to more unsound and easy money. it is critical that there is a healthy debate at the fed. and the regional fed presidents who are the only voices at the fed representing everyone who lives and works outside of new york and washington have been the voices of restraint and monetary policy. while these are legitimate concerns that bankers should not choose their own regulators, that concern is addressed by removing oversight from the fed. now more than ever, we need federal -- regional feds that will stand up to the chairman, not be a bunch of bernanke lackkys. all the fed easy money has to end up somewhere and for a variety of reason, it is the greater effect -- it has the greatest effect on housing. eventually the housing bubble had to end. and when it did, consequences were always going to be severe. but they were made much worse by the bad decisions in policies that must be addressed. first among