even though ironically jpmorgan had invented it. they said it is kind of use will but it is only useful as part of the set of techniques measuring risk. so i think that contributed to the stand it. the other key thing about diamond it was he was prepared to face up to the analysts on wall street and say no and that is critically important because from 2005 onwards at chile's jpmorgan worked brilliantly and there was a huge chorus of criticism from equity analysts saying why are you lagging behind? we thought diamond was this wonder kid he was going to come in and solve the problems, in fact, it revenues ain't that great. now there were other banks who were responding to that intense shareholder stock market pressure and saying, yes, we have got to try and start chasing after credits revenues as fast as we can and there was this real what people used to call goldman and become everyone wanted to be like goldman sachs. diamond on a number of occasions actually said it no we aren't going to go down that route and beat everyone a purely

sold jpmorgan had a conservative attitude towards risk. but then they merged with chase somewhat sastre -- disastrously. then when he arrived he brought a set of attitude towards risk that in a strange kind of way time very well with a lot of the culture that was there among the jpmorgan guys and so from 2005 and all words they appear to have taken as far as i can tell having talked at length to the jpmorgan guys and other banks they talk a lot to words risk from some of their competitors. they were more systematic in terms of trying to model and analyze and they were not just rely on a few models. the case for example where they were looking at the super senior product primarily through disastrous effects and using a unidimensional measuring risk wasn't the case with jpmorgan even though ironically jpmorgan -- having invented the said yes to this kind of useful but only as part of this set of techniques measuring risk. so i think that contributed. the other key thing was about j.p. dimond he was prepared to say something to the analysts o

but suddenly it was the jpmorgan of light that seemed to be all over the place. so i asked by neighbor what is going on, why they all work at jpmorgan or why they all used to work at jpmorgan and he said sentence that later in sap if you like changing my life for shaping the last year, you've got to understand there's one thing about eckert of the world that is up simply key, it is the morgan mafia. they are everywhere and they created it. now, like many quick cliches that wasn't entirely strip and i would stress they were not the only ones who created the modern structure credit buy any means but it turns out to have a lot of veracity as i later discovered. so i left that conference and feedback to the ft determined on the one hand to try to on a pick this strange new credit jungle and on the other hand, to try to keep an eye on why and how the alumni had come to play such a key role in building this credit world, and the next two or three years we labored away in the capitol markets team and i stress we because there was a group of less, not just myself, trolle

so i picked up on the jpmorgan group and essentially the book the rise into three parts. the first part is called innovation because i try and tell the story about how this group developed a set of ideas starting in the early 1990's which proved absolutely crucial in terms of taking credit risk which were traditionally treated as something which stuck to the banks and slicing and dicing it in a way that could be sold across the system and parceled out to investors all over the world. they initially did that with credit risk and, in fact, stuck with corporate credit resco and they did that partly to the derivatives. and as they develop these ideas and came out as a much longer stream of international development occurring in finance in the late '70s which was all about trying to find ways to try and fill rest between banks and banks and investors amid the financial system more efficient and effectively they hoped less risky, that was the theory. so there was this body of experimentation and development that took place in the '90s which was pioneered in the corporate deriva

but suddenly there were the jpmorgan alumni all over the place. so i asked my neighbor, why did they all used to work at jpmorgan, and he said a sentence which later ended up changing my life or at least shaping that last year, oh, you've got to understand. there's one thing about the credit world that's absolutely key, they're everywhere, and they created it. now, like many quick cliches, that was not entirely true, and i would stress the morgan guys were not o the only ones who created the modern world of structure, but it turned out to have a lot lot of veracity as i later discovered. i flew back to the fp determined, on the one hand, to unpick this jungle, and on the other hand keep an eye on why and how the morgan alumni had come to play such a key role in building this world. and for the next two years we labored away, and i would stress we because it was a group of us, not just myself, trying to make sense of this vast, shadowy debt and derivatives world that was growing apace. and, i mean, it's become very fashionable to try and unpick or

ordinary sound won't do not of you pay jpmorgan $30 million a year.ou have to pay normal salaries that make sense in the marketplace. the new york banks are not interested in that. i assure you. host: our guest is a professor of international business at the university of maryland. he is an economist. he is author of 18 books. he has taught of the university of maine. our next call is from indianapolis. you are on the republican line. caller: if we pass the cap and trade, do you believe that as nancy pelosi and president obama have said it will create all the jobs they say it will, or will we lose more jobs and hurt the economy? guest: i think it will hurt the economy because the chinese are not required to undertake the similar activities. we will not reduce global pollution. the jobs that are here will go to china. what we do here will go to china. some of the things in households would be better left to better energy conservation by reforming the automobile sector which this bill does not do. the bill seeks to achieve a lot of social goals. it allo

the same goes for jpmorgan. host: we have read about the . . . it would give more power to the fed. is that a good idea? guest: it is a gd idea to have a systemic supervisor. the real question is can the supervisor see what is going to happen? the banks bundled the sub-prime mortgages into bonds and not sell the mall. sell the mall. they put them i@@@@ i can show you textbooks. there was nothing unorthodox about this. the fact is that no one including henry paulson who was treasury secretary at the time saw any problem with it. we were told that essentially those siv's would not come back to haunt the balance sheets of the banks of their work trouble, but in reality they did. the reason we have massive crises is that we fail to see the threat or peril and banks doing what is apparently ordinary things that turn out to be extraordinary after the fact. asking them to be clairvoyant. it is simply not that. the notion of resolution according -- the fed is emphasizing this at citigroup. it's essentially owns the place. it is trying to cut citigroup down to size. that is what you do durin

in the early years of the last century someone saw jpmorgan on the street, and said, mr. morgan, what will the market do. and he said fluctuate. and it's down now and it will be back. my worry is this, stimulus money, they are throwing trillions of dollars into the system, is like a defibrillator, it will restore the pulse of the country. but you can't live on a defibrillator. and the problem of throwing all of this money will cause inflation. and just as we get a heart beat and get the green shoots of the economy coming up, high-long-term interest rates dictated by inflation premium will snuff out the vigor of recovery. host: next question, this is frank from democrats line. caller: yes, i have a couple of points. you spoke of the stimulus package, you said the idea of only spending about 10-20%. host: yes, sir. caller: yes, but yet you are forecasting -- i mean, all of these economic issue on the horizon. i mean, don't you think that -- host: lost, i think he got anxious about expressing his thoughts. next caller is from washington, d.c. and this is daley. caller: yes,

i have an open floor plan line with jpmorgan chase, profitability, well capitalized, nearly all new facilities, great location, and have won every major award from chrysler over the past 20-plus years. we are currently five-star certified. unquote. and i would just simply add that he's certainly hoping to be pulled off the, quote, rejected li li list. wants to be given time for his brother and him to work out a reasonable deal between them. and operate the three bands under one roof. this is the type of real-life situation that we face today. and i hope that the testimony will answer these types of scenarios and i look forward to hearing the information. >> thank you, senator. senator udall? >> thank you, chairman. great to have you back and senator hutchinson, thank you for your amendment on the floor that i think provided -- that tried to provide a more orderly process to dealership closings. we need to ask tough questions regarding geel dealer closings. there's no doubt that it's become an integral part of the stroir. if you ask any american, they'll remember fondly their first car, even if

in the early years of the last century someone's on jpmorgan on the street and said mr. morgan, what will the market do and he said fluctuates. it is fluctuating now, it is down three days in a row, it will be back. my worry is this -- that the stimulus money, throwing trillions of dollars of the system is like a defibrillator. it is going to restore the pulse of the economy, the trouble is you can't live on in the liberal leader. the problem. is that true in all this liquidity into the system will probably cause inflation. too much money chasing too few goods is what inflation classically is defined as one some my worry is that just as we begin to in a heartbeat and just as we begin to get so, the green shoots of the economy coming up high long-term interest rates dictated by an inflation premium will snuff out the vigor of the recovery. >> host: max call from the washington suburb on the democrats' line. >> caller: hi there. i have a couple points to make. you just recently spoke about the stimulus package, you said we'd only spent 20%. >> host: yes our. >> caller: but

so, yes jpmorgan did deal with aig quite a bit and kept on dealing with them through this decade. morgan never would have lost a lot of money. >> not to the scale of its other competitors. if you broke it into, it's pretty stark. jp morgan is not even up there in the top half dozen from my memory. yeah, you can actually see the breakdown who benefited most from the rescue. i think jp morgan was somewhere around 10 or 11 but i can get the figures for you >> but what about -- >> and the model i think -- they thought it was nuts. there was a discussion with bill -- this story is so many of the mistakes and the terrible things -- you know, egregious things that were done in 2005/2006 were discussed by the original jp morgan team back in 1998 and 1999. one of the things he used to do was try to put as many shorts on the monolines because he thought they were stupid. very prescient. in 2005/2006 when they were having a discussion what should with doe with super sr. they had the discussion, you know, shall we basically do what's called the negative basis with monolines and they recognize

>> [inaudible] from jpmorgan, rightsome. >> yeah. >> and worked very hard, did you not, mark, to prevent it from being regulated. do you think he was right? >> well, i'll say what i would like to say, and then maybe we should let mark say in the interest of fairness. .. self-correcting mechanisms and you improve the success in finding its own rhythm. and the problem with that was really twofold. which is one when you had -- when it was a very small part of the overall financial system then perhaps you could afford to have a few ebbs and flows even in the extreme not stabilizing all of it. and initially when derivatives were developing you were talking about numbers now seem small. the problems came when the expansions became so explosive that in a sense suddenly it stopped just being a small part of the financial system and began to populate the system in a way that that if you have ebbs and flows that could be destabilizing but the other problem was that you didn't really have a free market in a sense of having true information flow, equal access information and equal competition. you a