the last milepost on the way to 2007 and 2008 was enron. enron was a very neat distillation of the entire financial industry in that its business model was barrault tremendous amounts of money, use that money to purchase its own assets from itself at ever higher prices. this allowed it to book tremendous profits which allowed it to borrow more money. why could borrow more money? because it said it had insured its own debt and made it risk free. now this was a strange and fascinating business model. but by definition enron was saying if we go bankrupt don't worry, we will pay for it. but the strangest -- [laughter] -- the strangest and most fascinating thing about enron was the banks and wrong did business with compaq bear stearns, lehman brothers, citigroup, did not think that this business model was very strange at all. and when people say when could we have averted this crisis by doing something different with bear stearns in 2007 by bailing out lehman kaput the last time to do anything about this was enron. after that, these regulations

last milepost on the way was enron. it was a very neat distillation and in that the business model was borrowed tremendous amounts of money, use that money to purchase its own assets from itself at higher prices that allowed it to make tremendous progress that allowed it to borrow more money because it said it had insured it sonat -- its own debts and native risk-free. it is strange but by definition it said if we go bankrupt, i don't worry, we will pay for it too. [laughter] but the strangest and most fascinating thing is the banks that and ron did business with, bear stearns garcetti group did not think of business model was strange at all. could we have averted the crisis by doing something different with bear stearns by bailing l. lehman brothers the last time to do anything was enron but after that the regulations had eroded and they were not subject too any reasonable discipline because they knew the market to supplement economic catastrophe and that is how we get 22008 when the markets finally did correct their e

now, enron, but before i get into enron, two examples of how these reasonable prudent regulations that eroded so thoroughly that the financial system just was left without any market discipline to governate by the time we got into the 2000's. 1990, -- went bankrupt in greenspan was called under congress to testify about this. he said that it would be inconceivable that we would ever apply too big to fail to an investment bank. five years later, bearings investment bank in britain went bankrupt through a bad derivatives that. it could go bankrupt some of the normal bankruptcy process with its lenders taking his losses because it had made these bets on a regulated markets where it had put cache down in the markets understood where the risk lied. just three years later a hedge fund, long-term capital management, could not go bankrupt to the normal bankruptcy process because it did made the same derivatives bets on on making the need markets without putting any cash down so as bankruptcy could have blown up the economy. that is what regulators worry about that the engineered a bank bailout

. >>> former enron ceo plans to challenge the law used to convict him. the u.s. supreme court will hear arguments on his appeal. his attorney says that the law is unconstitutionally vague. prosecutors argue the law was appropriate at the time. >>> still ahead, is more wintry weather headed our way? steeg is tracking the very latest conditions. -- steve is tracking the latest. latest conditions. -- steve is tracking the latest. and in hard times, sometimes, a belief in a dream, a belief in what is possible - can transform everything. at at&t, we've never forgotten that our company began in a small laboratory, with a dream and a belief, in the future. today, our wired and wireless high speed internet networks are connecting small businesses across america - in cities and small towns - to markets around the world. we know that investment in broadband high speed internet can create hundreds of thousands of new american jobs. small businesses are being formed - dreams are being launched - and real jobs are being created. at at&t, we're investing billions to upgrade an

the last milepost on the way to 2007 and 2008 was enron.enron was a very neat distillation of the entire financial industry in that its business model was barrault tremendous amounts of money, use that money to purchase its own assets from itself at ever higher prices. this allowed it to book tremendous profits which allowed it to borrow more money. why could borrow more money? because it said it had insured its own debt and made it risk free. now this was a strange and fascinating business model. but by definition enron was saying if we go bankrupt don't worry, we will pay for it. but the strangest -- [laughter] -- the strangest and most fascinating thing about enron was the banks and wrong did business with compaq bear stearns, lehman brothers, citigroup, did not think that this business model was very strange at all. and when people say when could we have averted this crisis by doing something different with bear stearns in 2007 by bailing out lehman kaput the last time to do anything about this was enron. after that, these regulations h

attorneys for former enron ceo jeff skilling take their case to the supreme court monday challenging the conviction of the man convicted of helping pull off one of the biggest frauds in history. at issue skilling's attorney says it was unfair to hold the trial in houston because houston itself was involved in the case, a victim in some ways. we spoke with the attorney daniel petrocelli earlier this morning. here's what he had to say. >> this case is very much like the oklahoma city bombing case that was transferred from oklahoma city to denver. the community blamed jeff skilling. they blamed ken lay. and they sought vindication through the trial. >> skilling case goes to the supreme court on monday and we will be following it all the way, mark. >> all right. luxury home builder toll brothers trading higher in premarket after reporting a narrower first quarter loss than expected. shares of toll brothers pretty flat this year in comparison to the ishares dj u.s. home etf which is up 7%. here to go inside toll's numbers, buck horn, home builder and real estate analyst of raymond james.

you have greece in a kind of enron-type accounting fraud that has been discovered. germans seem to have to bail them out, are hating the prospect of doing that. if they do that, does that produce a follow-on effect for the other countries that have bad economies, spain, portugal -- >> i'll spare you the analogy with greek tragedies and all that. i would say this is the first test of european monetary union. told his fellow leaders at the brussels summit late last year, the government has been corrupt to the bone, not just in recent years but for decades. of course, now they've got a huge deficit, more than 12% of gdp and a massive amount of debt. and the germans are looking at this and saying we told you so. they were very nervous about having a monetary rate to extend to the so-called club med countries, spain, portugal and greece. highly indebted, physically irresponsible -- and italy, and italy. it's sort of "i told you so." in the end the germans will have to bail them out, lead a bailout. they're very reluctant. mrs. merkel apparently said are you saying the ge

if this sounds familiar to a lot of people out there, enron was a great strong company that pursued this type of alchemy through off balance sheet accounting. we saw a lot of this very recently with subprime in the housing bubble, make certain homeowners and barroers look a lot more credit worthy than they were with the securitization process and the great fear here is that it was done with a lot of countries and with governments who were complicit as well. >> brown: to bring this up to date to even recent times, now the discussion is to what degree financial institutions, including goldman sachs, would have contributed to greece's problems or at least to make it harder for them to get out of it, right? through the use of credit default swaps and derivatives, those things we heard about a lot over the last couple of years >> yes. an investment bank like goldman sachs which often bets on its house account enjoys both sides of the trade, both selling the securities and the vehicles to the investor or the government or the company on the front end and being able to bet on the down end. you

the solicitoref wion into enron corporation -- we remember enron -- enron corporation's management ofworkers' pensions that resulted in the recovery of more than $220.8 million for workers' pension plans. $220.8 million that would not have gone to these workers' pensions had it not been for the solicitor of labor. now, because -- i say because workers cannot bring private lawsuits under many of these larks the solicitor is the only official who can defend their rights. the solicitor is also a vital member of the senate -- of the secretary's management and leadership team. the solicitor provides legal advice and guidance on virtually every policy, legislative, regulatory and enforcement initiative at department of labor. the department simply cannot perform its mission effectively without a strong solicitor in place. now, the president has nominated patricia smith of new york to perform these critical responsibilities, and there is no question she is superbly qualified for this job. patricia smith, commissioner smith, i should say, is an accomplished attorney with a detailed knowledge

now what's interesting is, as many of you know, in 2002 after enron, we had sarbanes-oxley, we had requirements that most of their erectors be independent and that they followed the latter procedures. the interesting thing is that if you look at a board like citigroup, they did all that. they remain independent directors. they followed all the sarbanes-oxley procedures, and they don't seem to have had very good sense of how risky that institution was bored what was really happening. and when we look, we can see three things that i believe the account for the. one is, these are very large boards. citigroup's boards was usually about 17 or 18 people. when you have that large a board, the psychologist will tell you there is a lot of moral loping, there's a lot of avoidance of personal responsibility. second is, surprisingly, most of the boards of these megabanks had very few financial sophisticated institutions people. citigroup there was only one person who had ever worked for a financial institution on the board. they were distinguished people but they did not have a high degree of financial exp

department justice pirg oneth position ubersauve investigation of 9/11 terrorist attacks in pharm.d enron task force which produce more than 20 convictions including those of ceo's jeffrey skilling and kenneth flight. mr. chertoff's career includes a federal prosecutor including district attorney first assistant attorney for the district of new jersey and assistant u.s. attorney for the southern district of near. as a prosecutor mr. true-up investigated and personally prosecuted significant cases of corruption organized crime in corporate fraud and some of you may have notice on the way and he has a new book, "homeland security: assessing the first five years" which he will talk about. with no further ado let me turn this over to secretary chertoff. [applause] >> i am very impressed by the turnout on a day of i think what is a record, perhaps, since the 1880s, a record snowfall in that jurisdiction of colombia so it is either a tribute to the intrepid this of the people in the audience for the fact there is nothing else to do. the super bowls over nuf got tired of watching television and

are down there but it is the exact same scheme the energy company tried in 2000 and that was called enroned up the wind will and the lobbying practices. there is a chapter called general elected the for-profit arm they spent more years lobbying than any other year. they are number two this year with individual corporations. a rumor obama opens up a new policy, ge opens a new business. high-speed anti-free trail ramps up business and hires a new lobby is. tom daschle is very close to obama and the embryonic stem cell research and she starts a venture with one of the largest of sell companies and the world. you see it again and again. i do not think obama is trying to enrich g. not even because they still on msnbc were they saying the hallelujah obama's on. [laughter] i don't think he is trying to enrich them but they see the way to make money in the world of "obamanomics" is to line up with government. what does that do? saks on to burn your ship and that means you will not have a job when you get out of college unless one of the chosen few google, microsoft, general electric gore boeing t

when cars were made back in the 70's what we looked at was the greed of our country when we look at enrontoday's time but if we look back in the 70's and 80's during that time an american cars will be made to last about five years when the warranty without cars broke down -- >> host: we are going to leave it there. thanks for your call. >> guest: i think there are structural problems in the united states, of course. through my entire career traveling around the world i try to address these three the point i would make it is more evident from outside the united states than most of us may take for granted is the strength we have in being in an arena for people of all backgrounds and all nationalities to come and make their fortune here to the benefit of all. it is a remarkable thing that we have a president who is not simply white but the son of an immigrant, an african professor who is here as our president is something which could not happen anyplace else and i think is part of the again regardless of political party or political policies the chances for renewal is greater here. >> host:

>> the focus on the post-enron reform legislation and regulations has all been on what i call the supplyside of corporate governance, what managers have to do and i counts have to do. we have not really focused on the demand-side come on what shareholders have to do. and the fact is that you should have in here the heads of all the mutual funds, the assistant secretary at responsible for a wrestler, these are people who routinely vote in favor of these boards of directors, in favor of these papers because no one is looking at them, no one is paying any attention to the. i think we need to read mind of a fiduciary obligation is all about and it is in their economic interest to look at pay as a risk factor. i think that would make a big difference. >> i think reforms that we've been talking about both in the demand and supply side are essential. but in the end i think it won't go far enough and what we talked about far here, to sites. one, that those aspects of the structure of the incentive schemes, compensation schemes, that put at risk the national economy and taxpayers money have to be

in that position your solid investigation of the 9/11 terrorist attacks, and former enron task force career includes more than a decade as a federal prosecutor including service as u.s. attorney for the district of new jersey, first assistant u.s. attorney for the district of new jersey and assistant u.s. attorney for the southern district of new york. as a federal prosecutor, he invested in person prosecuted significant cases of political corruption, organized crime and corporate fraud. at some of you may have noticed on the weight he has a new book, "homeland security: assessing the first five years." which he will talk about. with no further ado, let me turn this over to secretary chertoff. [applause] >> well, i am very impressed by the turnout on a day of i think what is a record perhaps since the 1880s, a record snowfall in the district. so it is either a tribute to the intrepid is other people in the audience, or the fact that there is nothing else to do. the super bowl is over. you got tired of watching television and you are getting cabin fever. i am delighted to be able to a

department justice pirg oneth position ubersauve investigation of 9/11 terrorist attacks in pharm.d enronk force which produce more than 20 convictions including those of ceo's jeffrey skilling and kenneth flight. mr. chertoff's career includes a federal prosecutor including district attorney first assistant attorney for the district of new jersey and assistant u.s. attorney for the southern district of near. as a prosecutor mr. true-up investigated and personally prosecuted significant cases of corruption organized crime in corporate fraud and some of you may have notice on the way and he has a new book, "homeland security: assessing the first five years" which he will talk about. with no further ado let me turn this over to secretary chertoff. [applause] >> i am very impressed by the turnout on a day of i think what is a record, perhaps, since the 1880s, a record snowfall in that jurisdiction of colombia so it is either a tribute to the intrepid this of the people in the audience for the fact there is nothing else to do. the super bowls over nuf got tired of watching television and you

department justice pirg oneth position ubersauve investigation of 9/11 terrorist attacks in pharm.d enronch produce more than 20 convictions including those of ceo's jeffrey skilling and kenneth flight. mr. chertoff's career includes a federal prosecutor including district attorney first assistant attorney for the district of new jersey and assistant u.s. attorney for the southern district of near. as a prosecutor mr. true-up investigated and personally prosecuted significant cases of corruption organized crime in corporate fraud and some of you may have notice on the way and he has a new book, "homeland security: assessing the first five years" which he will talk about. with no further ado let me turn this over to secretary chertoff. [applause] >> i am very impressed by the turnout on a day of i think what is a record, perhaps, since the 1880s, a record snowfall in that jurisdiction of colombia so it is either a tribute to the intrepid this of the people in the audience for the fact there is nothing else to do. the super bowls over nuf got tired of watching television and you are getting

your secretary of state just made a statement in the last few days that enron is being more controlled by the guard then rde government. would you try to address that issue or would you, do you think she is right? >> i the she is right. i am not quite sure what we will do about it. i will certainly defer to others to know iran much better than i do. >> that is why i asked you the question. >> i think that it seems clear that iran, the revolutionary guard is slowly but surely taking over the economy and political strings. it is not at all clear. that is an unfortunate development. it is difficult to see forward. getting popular control in the hands of the government. on the other hand i don't know that there is much the united states can do. >> very good. president abdo, you are the first woman president. we are interested in your inside. rodrigo from hair? how do we create a community out of chaos? >> are we still talking about the nuclear question with iran? abcaeight. kid. well, i think on the the nuclear question i think i would de politicize this issue. really move its to only the