Transcripts For CSPAN2 Books About The U.S. Economy 20240713

Peter your new book is called hidden in plain sight. You remember the Financial Crisis Inquiry Commission investigating the cause of the 2,072,008 financial crisis not only democrats but also from the republican appointees what did you see that they didnt . The housing system in the United States fannie mae and freddie mac for quite a while before a lot of background of what has been happening in the housing sector. I was looking for the commission to look into what happened with fannie mae and freddie mac what role they couldve played in the housing crisis and i found the commission was not interested in that. They would not look at it to the degree that i tried to interest them and given all kinds of signals that is not something they would do but my differences with the republicans came from the fact that my view our responsibility on the commission was to make sure the American People understood what happened in the crisis and i was outside the partisan differences between the republicans and the democrats. And not agree with anything the democrat said and they didnt want to indict so i felt i had to speak with an independent voice. And the link the diff dissent in the late stages of that of the inquiry you have a lot of unconventional views in the book that we will get into. But with those housing and Mortgage Markets and the governments role, when and why did Us Government get so heavily involved in the Housing Market quick. It began and the new deal when the government attempted to make loans by guaranteeing them and then fannie mae was established late 1938 also part of the new deal to provide liquidity to banks to sell the mortgage and get liquidity and then make more mortgages. And that was the beginning the government got to the point where they were adjusting the fha standards in order to improve housing in the United States and increase the amount of housing in the United States and the desire to help the economy. Thats when we were back off the rails because once the government started to use housing as a way to improve the economy and the American Peoples view of their government and how successful it is, then it became a political issue from what it was before which is simply the question of the market. This stretches across the administrations to encourage the housing activity. And then the most recent turning points. The key turning point hear from my perspective was 1992 when congress adopted the Affordable Housing goals they were under pressure that all those that were below Median Income to have credit for mortgages and activist in support of those. But required fannie and freddie when they got the authority to require a certain quota was given to the department of housing and urban development at that point and 50 percent of all mortgages and by 2008, 56 percent would have been the Bush Administration. This is not partisan it was done under clinton first and then bush with the whole idea to be carried through by hud. The theory is that it is designed to encourage americans to develop equity in their homes to ensure lower and middle income people have an asset of this kind there is something wrong with this idea in general. There are lots of good reasons homeownership should be encourage but the problem with the system and forced fannie mae and freddie mac to reduce the underwriting standards so then they leeward number of people that could not sustain the mortgages over time and so by the 2008 more than half of all mortgages in the United States are subprime mortgages and of those were on the books of Government Agencies which to me that creates the demand for these mortgages. I dont think they understand the financial crisis today with the underwriting standards are those who cannot necessarily sustain the standards dont have the proper credit relationships and the downpayments and unable to keep their mortgages. We have some separate issues that intersected. One was the existence of fannie and freddie and what they had done for a while. Also congressional and political push to encourage more homeownership. When do you combine fannie and freddie with the vehicle to do all this . What happened with fannie and freddie and the existence with lawmakers to where we were in the crisis. The person who ultimately became the president of fannie mae, tim johnson realized he was a political operative before that and realized under stress because there was a strong government franchise to sustain over time. And he recognized if fannie mae and freddie mac actually became kind of supporters for low income housing, that would give a strong backing in congress to keep them in their superior franchise position and those are making those institutions. Even though they were started by the government as a private entity. They were baptized 1968 and in 1970 given authority to go from where they originally were to buy the governmentbacked mortgages into the conventional market with a word by regular mortgages that made them very important profitmaking institutions. And a publicly traded company on the new york stock exchange. The largest Financial Institutions in the United States at that time. All the way up until the time they became insolvent in 2008 but the political relationships were extremely important. Because as they got bigger the dangers were always that somehow the government word move against them and regulate more strictly there was a great deal of push in the Bush Administration for much more regulation from fannie mae and freddie mac and from their point of view, especially fannie so they had to rely on the democrats of congress. They were focus to make sure that fannie and freddie supported low income housing. Even though they were beginning in the 2000s to find they were buying mortgages that ultimately would cause them to suffer tremendous losses they could not go to congress or head to one or head to say we will not comply anymore because its driving us out of business. They could not do that because the democrats in congress would no longer support them and the effort of the Bush Administration to place them under greater regulation in 2003 through 2005, would be calm successful. So they were caught in this vice on the one hand to keep the democrats on their side with the Affordable Housing requirements driven to insolvencies i have read various economists but ive never heard a more eloquent statement that succinctly sums up the economic world that george bush made september 2008 and the memorable words instead of money doesnt listen it can go down. [laughter] it is like the gettysburg address short and to the point. [laughter] and as i read the book there was an appreciation for the fact he understood what was going on and what needed to be done. Whatever side you went to in the proposals. Because he was only surprised when i was surprised. I was surprised more than once. [laughter] but i would say that i spoke to him. One of the things from a previous career is what you negotiate i could have all kinds of understandings but if i didnt have the right relationship with the president. One year before the crisis to get to know the president and work with him at Business School to understand the markets and economic issues. So the conflict that he got it was the same conflict through the markets we believe the United States of america the risk taker should be bearing responsibility for their own losses. So i didnt go to washington to do that. But from day number one to understand the Financial Markets were about the economy and jobs. So i word not have to have that conversation but we will get through this. This will be politically unpopular but we will not let the economy go down. And that was his point of view. If you talk about my mother it was like a mother to me and tell me i need to work out or get more sleep. [laughter] in terms of the other, it seems with the election you probably felt barack obama that we were more interested than john mccain. Is that a Fair Assessment . No doubt it is clear those conversations that i had with john mccain is not as frequent with barack obama. They were more difficult and he gave me more anxiety. And now president obama was attentive and engaged in i felt comfortable he would support what we needed to do. But i am quite grateful to john mccain because i have respect for him because let me tell you the election six weeks away, in my judgment there is no way we would have got tarp if john mccain came out against it. He was playing the populist card we would have been left defenseless. So as i look back am increasingly grateful of the way he handled himself during this period but i lost a few hours of sleep during that time i lost a few hours of sleep during that time and it was a threat. And that is when he came bac back. And interrupted the campaign to come back and i was testifying at the time. Michelle davis is here with me today my blood ran cold and said if someone asks you about john mccain coming back, simply say i welcome everyone because i think she was afraid of what might come out of my mouth. [laughter] and she caught me on the way down. So as it turns out, again in a couple that with anxiety but with the House Republicans he rallied them. He did his part. And even after we got the t. A. R. P. He did not criticize the things we had done. Again it was very unpopular. So again at some time after the election, this may be slightly exaggerated, but i recall something 93 percent of American People oppose the bailouts. 70 percent were worried we would go into something much worse than a bad recession. So to explain to the American People this is not for us but for them. You have these consultations with obama so with the members of the administration repeatedly said we did not anticipate the economy but the message you are giving them. And those that you expected i did not expect that i knew there is a scene in the book where we talking about chris cox to meet with congress and the difficulty that we had at that time the Financial System was that we are freezing up so i knew with certainty that business would turn down so we have companies certainly to raise that shortterm funding maybe i cant have all the funding you would like for the next 30 days but congress was not serious yet so i knew with a certainty it would get worse im not sure it would be 10 percent unemployment but i knew it would be bad. So then if they didnt do something and it collapsed that they cannot fund themselves or pay for inventory and pay suppliers and let employees go and then have armageddon. So then when the economy did turn down, we have a terrible situation because the way the American People instituted it to say give us these authorities because if you dont we will be deep. It will be bad. And its very hard to give credit for preventative disaster i used to sit on the front porch and charlotte with my grandmother and she would tell me stories in the thirties and what she told me was she was very proud because her children could wear new shoes every year. A lot of kids in town didnt get new shoes or maybe didnt have shoes. Why not . Because the shoe factories have shut down the depression and fathers have lost job so therefore theres not enough money to provide money for the kids. Was six or seven years old but i can see something wrong. All they had to do was open the factory and produced shoes and the kids would have the shoes. They said no it doesnt work that way. It was intellectual puzzle of great depression. The factories and the workers are still there but it is not happening for some reason. The system isnt working. It was a puzzle to me. I dont want to pretend i was inspired from age six i was interested in all kinds of things but when i came back in graduate school later the holy grail of Macro Economics is the most important puzzle and thinking about it. And my guess is the paradox to go down in economic history. In 2007 you are the fed chair i was put on a Committee Call the sleepy Banking Committee finish for sarbanesoxley but my wife and i lived in zip code 44105. So in the first half of 2007 there were more closures i lived in than in any zip code in the United States of america. And it seems to me in 2007 and 2008 at least until bear stearns there wasnt all that much attention from the fed and housing issues because the housing crisis there was a whole lot of reasons and for cleveland it was predatory lending and obviously what was happening with the manufacturing with a declining base. Why did the fed miss this . Why was the government not cognizant all over the world . Ohio was in the middle of this. With more foreclosures every year that i had from appalachia to innercity. Why did we not see that how serious that was quick. It is such a characterization. I spoke about foreclosures the number of times before the crisis. My concern is that some were unavoidable. But in some cases, it seemed like there wasnt enough effort to modify mortgages and to find a solution where people stay in their homes. Obviously we are very concerned with the Housing Market. And we talk about the general problems of the subprime mortgages. We thought about it from the Macro Economic perspective. But we did worry about the effects on communities and houses causing blight. They did Pay Attention to that issue. I see that and i heard those statements but also i would say the Consumer Protections to stop predatory lending and the responsibilities and the authority the fed had particularly prior to you, im not casting aspersions on any fed chair but to be more in tune and the predecessors. But i began to hear from people in cleveland and other cities on Consumer Protections with predatory lending than any other regulator was there for us. The word predatory is critical because they talk about it at some length in my book. At the time, have to go back even before the time i was at the fed. So one of the big distinctions was made in washington, not anyone to blame in particular but the difference between predatory lending that is illegal or deceitful on one hand on the other hand it was subprime lending. Legitimate subprime lending was a Good Development because it allowed people of more modest means and minorities. To counteract the redlining. To get into a home and participate in the american dream. Quite honestly one of the reasons there wasnt more aggressive effort was the fear of cutting that off. Very strong distinction between predatory lending that was already illegal it was just a question of enforcement. Versus subprime lending which is different. On page 94 you say i dont think the fed staff and how good they were and i agree , and they were captured by the regulated in the sense they were perceived to be in their own financial interest to go easy. However they were open to arguments to some extent would deter poor lending practices. Deter poor lending practices. Society over and over and hear the same song its easy to get socialized. Lincoln used to say he would win the war and preserve the union and free the slaves and lincoln said i have to go out and get my Public Opinion back so the fed doesnt strike me as a place people that the Public Opinion. The fed doesnt strike me that way so it seems to me it is less likely how many that have had their homes foreclosed on and are so likely to see that and understand that. One feature is at least 12 around the country and there is one in cleveland and the president of Cleveland Bank had meetings about what is happening with housing and the like. Your concern is and wrong at all and i think what was happening before the crisis was there was a philosophical perspective not just by the fed and others that the Financial System should be more or less regulated so that it could be more dynamic. We know there were a lot of problems with, that certainly the view was if they have sufficient capital the regulation shouldnt be too burdensome. They didnt all disappear. Someone ended up with them. It is bigger than its been in 100 years between the top one tenth of 1 and the other 90 and the Home Ownership rate is at its lowest level in 50 years and its important that people understand that didnt just go o down in 20 of eight and 2009. It started to go down. Low unemployment, the industrial average, many consecutive orders of growth, wall street is doing great, that america is angry and on the left pretty sanders is doing incredibly well with the same populist message so it seemed like housing would be a fruitful way to focus so i basically started with this question 8 million americans lost their homes. We lost our wealth. Where did it all go, who took it. One of the things i think about when i think about Home Ownership is the typical american family. We follow the industrial average the average american has only about 4,000 in the bank. We are a paycheck to paycheck society where most of the money goes to things like transportation, Health Insurance premiums. All of that disappears in a moment we spend it. Housing is our biggest expense. Either that is going to go a portion of it back into our homes in the form of equity that we can pass onto ou on to our cn and enjoy a healthy retirement or its going to go to our landlord an and they are going f that. So when you say homeownership is at its lowest rate, you are talking about the dispossession of peoples ability to live the american dream. According to the census, the average homeowner in this country is worth 100 times more than the average. Yet 200,000 versus 2,000. This isnt because they make 100,000 times as much money. I make the same amount as my colleagues that i am worth more because i own my house. Im sitting there with my 30 year fixedrate mortgage paying less than most of my friends ranting and saving money. I may have that ability and my colleagues dont if they dont own their home they dont have that ability. Part of the story of phone records deals with reverse mortgages. How did you get into researching about those . I mostly was interested in this stale california bank. Some of you might remember it is the first big thing to feel. And in fact it was the biggest thing since the depression. Also things like these ninja loans that were possible. They call them that because there was this disneyland and they approved it without looking at the paperwork. And when the Housing Market softened the government ended up holding the bank anowing the baa dramatic run on the bank that was out of the depression where people were pushing and shoving on the streets of pasadena but instead of black and white favor of color and there were more channels and then Steve Mnuchin stepped in and bought the bank for next to nothing and then the government made a deal with him where we would subsidize his foreclosures. Guaranteeing that he couldnt get the loss. Like you shouldnt propose because they would lose money but not if the government is picking up the tab, and we agreed to take up 90 , and i got the freedom of information act that required the ticket more than a billion dollars. Its more than 100,000 including 23,000 seniors, so i have this bank it seemed like foreclosed on almost 100,000 people would say homeownership rate at this record low run by the treasury secretary poses with large bills kind of like a doctor evil kind of picture in the worlds Richest Department on the avenue. Its a great story for journalists. Also you mentioned the reverse mortgages. I happened upon this somewhat oddly where i was pulling this as a journalist and then i became interested in the private equity firms that have actually bought the houses after for closure and i found this house that was in South Los Angeles where the guy was living in the house happened to be owned by the best friend of donald trump who bought 30,000 homes after the bust. I knocked on the door and the guy came to the door and was dying of cancer and sick with a man facing a rent increase and i was like my word. So, like any good reporter i looked at the property record. What happened before they bought the company for 180,000, thats when i found that this house had been owned by the same africanamerican family that moved west from mississippi during the great migration, but have finally been able to buy this house in 1973, 1963 the very year drop california banned dissemination in housing that is when they were finally able to become homeowners and they had been foreclosed on by Steve Mnuchin because of one of these reverse mortgages and now i had this house that didnt just butt involve one member of Donald Trumps inner circle, dispossessing the family whose whole wealth was tied up in their homes that involved two of them. And then as i continued i found that this house had been bundled into a mortgagebacked security by j. P. Morgan chase and now there was a 514 milliondollar lien on this 834 squarefoot bungalo834 square footbungalow r florence and then subsequent to me publishing that story in 2017, trumps best friend decided to flip out of the company, he sold his interest and another one of Donald Trumps friends who is the chair chairman of blackstone whose company now owns 80,000 homes and in the same house that had been the hopes and dreams of this family that had been sold to one of these predatory mortgages foreclosed on by Steve Mnuchin postlight banks in the house is bought by donald trents best friend, then they raise the rent on the guy sick with aids, bundled into the mortgagebacked security that reminds us of the worst parts of the housing bust and its sold to another one of Donald Trumps best friends and now they take out another mortgagebacked security and pull more wealth out of the house and now there is a billion dollar lien on the house. I should write a book about these people. [laughter] but the second of his all of what is going on. That is not an article, that is like a really complicated. For the past few decades we know that its been on the rise and security has been on the rise, so we now have a hollowed out middleclass, families are losing jobs and losing homes. That story is mostly told through statistics. Academics look at tax records and job reports and theyve concluded is that right now we have unprecedented levels in equal to the insecurity. By some measures, things havent been this bad since the great depression. And that is a pretty dramatic conclusion. I felt like the dramatic punch of it wasnt coming across in the use statistical charts but meticulously documented and so i felt like somebody needed to go and talk to people about how they are coping. So, underneath these hard numbers or people that without these trends in their everyday lives. So to cope with it we dont know how they are coping and we also dont understand how it is going to divide between the haves and havenots in the society. It changes the way we manage and experience security and insecurity. Thereve been longstanding trends leaning towards economic insecurity and further income disparities. And i think income insecurity for many families. And that is all happening and then 2008 happens into the recession happens. Why dont we talk about the Economic Trends is happening in the economy and how does the recession affect us . That is a big story actually thereve been lots of articles about it. Three of the most important things that happened for familiehave happened forfamiliee middle income jobs. The shift in risk and defend the growing inequality. So, if this on the manufacturing and today its based on services. As of about 80 of jobs are in the Service Sector and in comparison, the Service Sector jobs are able to feel u pay lesd come with fewer benefits and they are much more insecure. And then on top of this is the workers no longer have the leverage that they once did to collectively bargain for better wages and working conditions and that is because the unions are on a steep decline. So after world war ii, about a third are represented by the unions and we have reached a New Historical love which is only 11 . That increase the wage for a lot of other people that were not in the unions, so we have a double whammy. Then the other thing that occurred is what is called the shift in risk and theres been a rewriting of the social contract between employers and employees. It used to be based on the mutual loyalties and mutual protections. So, that means that they give people good wages and good benefits and in return people work really hard and use their talents to help build that company. But what has happened is that increasingly the risk has been offloaded by the government and corporations onto individuals and their families. So if you think about a mentione mention from the pinch into the 401 k including the risk now to save our own money for their retirement so all these things together have really gotten us to the point where the type of jobs that created this middleclass country are harder to find and harder to onto so it is tougher out there than it used to be. And families are experiencing that. The question is how tough and that depends on where you are because youve got left is growing ithegrowing insecurity d been over here theres the rise of income equality and so there are some highly educated and highly skilled workers that are actually doing really well. And they still have really good jobs. The trends play out for different families and in different ways. In the documented here for 50 families. Over long periods of time and what youll find in the book is that the information is detailed and youre not able to just describe how they are living but in deep detail how they feel, why they feel and another sociologist, you talk me through this process is what they are always looking for a reason, but why cannot the underlining reason. But enough methodology, why in these interviews, how did you conduct and how did you get to 5the50 families to invite you io their lives . Because they wanted to understand this more personal emotional side of it. I did interviews and iconograp iconography, so i went out and wanted to find families, which middleclass and poor and interview them about obstacles in their life. But i wanted to add something to that. I found a Smaller Group of families around in a very indepth way and really followed them around. Like they went here and they went here. I was in the car when we picked up the kids. Went to the soccer games, the hardest part is recruiting the families and specifically for people in research if someone ever asks you please say yes because it is really hard. Like when you pick up your kids, for example. But what was the hard as i needehorrid as ineeded to know l and in the normal social interaction you dont walk up to a stranger and say how much they earn. So i had to figure out another way of doing that. Then i met laura the delgado studying the project and shes the problem i knew since she was the cashier how much she probably needed. So i interviewed her and she invited me along with her son to be games and i dont know how much any of you know about Little League but i learned way more than i ever wanted to know. The hourlong games. Sometimes they are not so bad the parents are dying for something to talk about. Yes, they are. Its interesting that someone should study it. [laughter] so, i was there and this is in allstar team from the community the family lived in and im just trying to get a leg of the land. A kid at the volleyball and it goes into the parking lot where the opposing teams cars are. She leans over to me an and sayi hope a car doesnt get hit. They are fancy cars. And i noticed there were like mercedes and bmws and i asked where these others came from and she said the community where the most affluent communities we have in silicon valley. I realized in that moment that they were on the base bill debate co baseball field but for me it was the original story that i was trying to tell, so i rode home with laura and she had this beaten up minivan with a crack in the window and i thought i wonder what its like if i was in one of those nice suvs and that is when i realized that it would be a great way to recruit families because i could tell from the income and wealth. So the next few weeks driving around going to all of these games. The next time you were at baseball games it might be a researcher, not another parent. I got turned down a few times but a lot of people said yes and from the core of the families i ended up working with. You are watching the tv on cspan2. We are highlighting author talks about the u. S. Economy. Although these programs are available to watch in the entirety on booktv. Org. Up next from 2017, Washington Post reporter Amy Goldstein looked at the effects of the 20th wage recession on janesville wisconsin where General Motors factory was closed. When the announcement was made General Motors was going to shut down production eventually into the Unemployment Rate was 5. 4 , in march of 2009 a few months after the last of the jobs disappeared unemployment shot up to 15 . So on the front [inaudible] i wanted to tell the story of what the recession had done. Its important that i find a place that hasnt been previously part of the rust belt because i didnt want to find myself writing about an accumulation of economic dk. I wanted to show what one bad economic time did. So, it was an old story i wanted to find a place where it was new and obviously the General Motors Assembly Plant has been shrinking a little bit and a little bit more over a couple of decades. But it always had a new product. So, disclosing was a very different thing that nobody in town had ever asked. That was very appealing to me, not that i was happy about it, that was appealing in the place to potentially do this writing and this talk with people about what was happening in their community. And i had this sense that it was exactly like every place that as much as possible i thought it would be interesting to find a community to write about where the pattern of job losses matched pretty wild the natural pattern of jobs that went away in this great recession. If you think about what happened nationally, the largest that appeared when the Manufacturing Sector came, that was true of janesville. A lot of the jobs that were lost had paid pretty well but havent required a lot of Higher Education to get. That was true of janesville. More men and women lost. That was true of janesville. So, i thought that this was a community that had a number of qualities and lost jobs other people around the country could understand and identify with. I also had the sense that janesville might fit nicely into the sweep of history and i know the first time i found a Youtube Video for a speech that then senator barack obama gave at the assembltheAssembly Plant in febf 2008. I dont know if any of you remember him coming. I remember the first time i looked into the video saying it is a promise of america. And the fact gave me goosebumps because i heard that video a couple of years after the plant closed there was an irony to run a and of course it had been a part of the strike of the 1930s and it had been a part of the domestic war effort in world war ii and the plant stopped making vehicles and stop turning out artillery shells. And in his own big moments in the 20th century history, so i just like that history. And of course before i knew anything about this community or had met anybody here, i had the sense that i might find interesting politics. I thought there might be Something Interesting about the old town that was represented by scott walker and in the state represented by paul roy and in the state that was led by scott walker. So as a journalist i tried to bring all of my reporting instincts to bear to think about what might be a good setting and i decided i was going to make an exploratory visit to janesville. I first came here in july of 2011 and arranged to meet a couple of people who are part of that first visit i kni met on ts couple of days i was here. The very first person i met in town i set up a meeting with them is obviously an oldtime reporter that by the time had left the newspaper and was on a different radio show than the one hes on now and was working as an Educational Consultant and has been renovated obviously into offices. We talked up the history of the community and whether it was like this when he was here growing up as a boy and what is happening now and we just talked typically two or three hours nonstop. And finally he said to me would you like to see the plant. I said of course i would. So, i got in the car that now id never done before and we drove down center avenue and turned left into there was the plant, and obviously was huge. I had never seen it before, this big bill, 4. 8 million square feet and as we were approaching, he said something that day that surprised me. I hate to go by this. And i said why it wasnt a surprise to me. If you know him he was a tough character. Ive spoken with many people in town. I tried to do is get people in town thought that i dont know all of you come up with trying to get to know people who have serious advantage points. To talk of characters and some of you actually in the room. Until i understand the choices people make and the range of choices so i could figure out who might be good examples of each of those kind of choices. It was two and a half years after the plant have shut down and i knew that i would need to go back in time so i could tell the people from the moment that the announcement happened but the town was going to be changed. I knew id have to find people to talk to. I needed to understand the history of this community. So i spent a lot of time with the Historical Society because i wanted to understand what the industrial past had been and the pride and the work that was done came from. I wanted to understand what it felt like when things were changing so i do a lot of historical work. One of the things that struck me when i started showing up is that when the plant closed theres a lot of dispute these into denial that it was for real. I kept running into people who said just wait. Its a matter of time before it comes back. I thought why was that. It started making tractors in 1919 and shut chevrolets and every time the project went away another eventually showed up. So there was no expectation or experience with if not happening again. When they make these choices the jobs were gone. It took a while to figure out what they were going to do. The coauthor of th the books about the economics in 2013 discussed the impact of the measures following the discussions that they have a mental and physical. It was very heterogeneous. Its very strongly to a certain extent. Its the different correlations so weve all been taught correlations and not causations. The Unemployment Rate and the suicide rate nonetheless places like sweden and offended when the rate continued to decline. It turns out if we investigate a slew of programs one seems to be particularly effective at preventing the suicide, alcoholism and its not in spite of my being in this position. Its not health care spendin het all that the labor market programs. These programs are sort of part caret and artistic. They do get an unemployment check but only in the position they enrolled in this program. It involves a person to assist them. This negative Health Outcome is a side effect. We were seeing this implement it across the u. S. Now they are starting into triple digit recession. This ended for us around the time of the sequester when we started flattening out in terms of the recovery. At around the same time they issued a working paper. To get through the rhetoric its the following all the advice based on the assumption and that assumption is for every dollar the Government Spending how many dollars do we get back into the others had assumed it was 1. 5 and a little footnote in the document you could find it was because of a nice round number and for different groups including us calculated and said how many dollars do you get back. The actual multiplayer is greater you get back about a dollar 70 for every dollar you invest. They were recommending and to undergo the stimulus while recommending for greece. It was across a couple of countries. Are we just going to spend forever. For example in 1997 it would have been a good time to cut back on the variety of Government Spending but it argues for the datadriven approach for actually deciding when to undergo the spending increases and wants to spend on. Any time you do a Safety Net Program people would just be writing the system forever and cheating the system and so on. There is one by the editor of the american journal of economics that found quite a bit of data that on food stamps and assistance people come off at the economics. And those that are eligible on the food stamps are not spending on other things when they are able to get food stamps does this conundrum and Public Health where people can spend on their heating what they can spend on food. And during that. Where theyre able to get food stamps, peoples other spending is able to stimulate the local economy to much more than what it costs. So medicaid and other programs are programs where you have less of a tax base during the recessionary period because more people were unemployed so how are you going to find the safety nets. But is there a better way as well. So which the goal is to simultaneously find the types of programs that we need when we have the least amount of money and at the same time also discourage the things that led to the recessions we all know that risky investments led to the recession. Very few of us participate in this and i doubt any of you went out an and bought a book of mortgagebacked securities or so on. So, the idea is to place a small. 005 which is based on the idea of the tax if any of you have heard of but that on the highest risk commodities the hedge funds and others are participating in. It seems incredibly small but when you are transacting hundreds of millions of dollars and raising the order of 5 billion or more is the stock market volatility encouraging heavy transactions. And because of this mechanism that money will increase the highest risk as people are undergoing an engaging in the highest risk transactions you would end up with the most money and vice versa. The reason why i would argue for such a system is that while we may be in a unique time it isnt actually thats unique. If we look at the periods of recession certainly over the last several years in the decades we havent had a recession this large. Its actually somewhat surprising. My favorite is the crisis of 1995. We have price bubbles in the commodities all the time and so i began by saying that essentially what i learned from understanding the data is if you are to adopt a kid to play to the social Economic Policy we might be better able against these economic shocks and we have quite a bit of data to understand. Costco has there been a cost to the taxpayer . Guest when you talk about a major vendor that can influence the policy and for example in the case of j. P. Morgan chase jamie diamond was someone on the new york board a director of the new york fed board the head of j. P. Morgan chase at the height of the financial crisis. And in the 12 member reserve system he was one of the people with hank paulson who at that time as the treasury secretary and had been when i came into goldman Timothy Geithner for the buck relationships and ultimately came in that he was the president of the time and then became the treasury secretary under obama at the term after that crisis. So we had all these individuals who effectively had the ability to direct policy and money coming out of washington to their own institutions that trade on the exchanges by the Federal Reserve. They are monitored and yet they are individuals with such a tight relationship with the central political powers of the country as they are able to get money effectively to themselves when they need it and far greater figures than individuals are able to galvanize to do that. It goes from taxpayers to benefit them and not just when there is a crisis but from the standpoint of illegal acts that was repealed in 1999 and had been in place since 1933 specifically to protect depositors and the tax paying public and voters from any kind of speculation the banks could choose to bet on all sorts of stuff but if they lost the bet it was on them and shareholders and private partners however they were structured. That was repealed so then we have this merging of peoples deposits and cash and mortgages and institutions that could do with sorts of stuff with that. And then come to the government for help. The fact that they could say we have them. People are not going to get their money back unless you give us all these other things. It meant they influenced the policy that allowed them to have all these deposits. So when we multiple levels they are extracting by their influence and when things go wrong and to remove the rules surrounding their businesses from taxpayers into their own pockets. Host so, jim walsh tweets into you can you explain how someone like you support an Economic System that always fails at tremendous human and Economic Cost or diebold into a dictatorship . She supports progressivism and socialism. Is that true, or even a socialist . Guest i support certain socialist policies because if we think about how economics divides into the needs of society in other words money that comes from the society and helps the society and how the government or used to appropriating those funds to think about things like how expensivexpensive vvictor is fe in this country. I think about how expensive it is for a studen student to go te university. And to come out with 50, 60, 70,000 worth of debt which means they cannot ultimately be the kind of participant in the economy that they could have been without so much debt. When i went to school, i started out in Public Schools and i went to Community College and then i ultimately went to a State College and private nyu for all of my education, but i paid for all of it along the way. And i coul could paper over theg delayed because of what i was burning by working was enough to allow me to afford the courses and books and 20 places at the time but now that is often an impossibilitits often animposst the economy as a whole and think okay do we think it is better for the economy to be more level for more people in order for them to contribute foundation of me throughout these parts of the economy in an easier way and i think about how we also have firefighters and Police Officers and Police Officers and a whole host of elements of the society that are meant to help more than just the shareholders or banking institutions. So, i look at it from the standpoint of a Healthy Society that is healthy economically and educationally and physically and protected. Defense is another level of the society which has a lot of money that goes into it and supposedly to protect everyone, to protect the country. All of those things to me or social goods. And what i support from the economic standpoint and financially is actors within it not to risk the countrys Financial Health and be bailed out to the extent that the tax payers or help to the extent in the Federal Reserve. So, i look at it as being holistic in that respect. In todays political environment, does capitalism has a Tipping Point . I think in general we are a capitalization. We do strive as a nation to do Business Activities that creates profits and of those go in different ways to the people involved in creating them or the societies and peoples futures. I dont think that is going away but i do think that using wall street as an example and the fact that our Federal Reserve still has 4 trillion of assets on the books after what i what n emergency situation we should think because it happened in 2008 and it still subsidizing wall street and larger banks as our tremendous sums of money and so i think that healthy capitalism has to recognize putting too much money in once place has been a cost where the general economy isnt necessarily a good decision. And so i think it needs to be more regulated and we have rules in place that were ignored into the collapse that we are reeling from in these policies. And i think that those need to be reinvigorated a. Host before we go to calls, finally the fed in your view is the federal bank necessary, question number one, then i will follow up with question number two. Host i think what the fed does in terms of providing a subsidy to the banks is not necessary. I think the fact that the fed can raise or lower Interest Rates and terms o in terms of my policy is something that can equally be done in the treasury department. I think that the fact that the fed is structured in a way that allows the private members of the bank which does provide credit with wall street firms because they are the primary shareholders and so wherever the fed is today, there is a major flaw in how it was created and exists to benefit its members. And it is to help the greater economy and public but the reality if you look at the actions they are very visceral when there is a situation where the wall street institutions are in trouble or the is a necessity to help j. P. Morgan chase or the institution that is part of the history and fabric of how it was created and benefited and continues to benefit from this implicit subsidy thats not just the fed but all of the banks provide the largest in their the respective countries, and i think that is a flaw. I will give you a few of the takeaways in case you fall asleep really early. Politicians are good at never wanting to acknowledge that. Some people win, som blame, some lose and they did a better job in this country. People whose lives were disrupted and was sense of selfesteem. They did a bad job of acknowledging that and i think many economists said we are creating 1. 5 million jobs a year. It sometimes gets lost by trade, even if it is 20 or 25,000, that has nothing to 1. 5. Unless youre one of those 125,000 people. A lot of that was concentrated in places like ohio, wisconsin, michigan. Those are smart groups. What do those have in common, every four years they have something in common. And i think that is what kept them in the american psyche for such a long time. Here we are in miami beach and it isnt a surprise that a lot of the cuban population is in miami and florida. Florida has been a battleground state and a lot of it has to do with the geography of where they live in the countries of geography has a lot to do with the trade issue and a lot of the politics and many people on the coasts have enjoyed the benefits of trade that we havent had a firsthand experience of. So thats one of the things i talk about and about. I dont like givin getting all e answers because i dont want to ruin the ending. Another thing is we have a lot of talk about the trade deal fes that the Transpacific Partnership and the china deal. The trade feels are really not about jobs. They are about the labor rights and intellectual property. Its about dispute resolutions and a couple of other things. In the Transpacific Partnership that was between the United States and 11 other countries is a 5,000 page document i wouldnt recommend. It doesnt read like a novel. The word jobs appears six times. There are four references to jobs. There are 11 dimensions so its just a case in point if you look at what it was designed to do in 1994, jobs had nothing to do with it so trade and exports are about jobs and i think one of the things we are also looking at now and im happy to address this in the qanda weve taken we want to work with our partners and there are some films they showed about world war ii. All of these things were to find ways we could Work Together and make sure there is something as horrible as world war ii never happened again. We are in the period now where we are pursuing a policy of the United States much more unilateral. We are going to call the shots and take the view or not. Its a different way than we operated close to 70 years and it is in this vital that we have used in the past to get things done. So, let me give you a flavor of a couple of products. I dont know, does anybody in this room have i use the iphone in the book. Who did their 10,000 steps to a . [laughter] you did 15. How many steps to a . Fifteen. [laughter] so, the iphone and the reason i put it on here is to talk about the bilateral trade deficit. Something the president is obsessed with. So, it was designed in the United States. The mayor of the debate was the sixth rare the democrat and republican congo. The chip that measures through these comes from the netherlan netherlands. The main mechanism comes from samsung the biggest competitor. The glass comes from corning new york. So, this wouldnt have existed without global trade and a sense of this we wouldnt have the iphone. The its in the world is not jusof notjust the United Statesa chinese import, so it comes to the United States in its very proprietary. It costs about a thousand dollars or 9,000. Of the 230, 8. 46 actually goes to china. The. If the iphone and did a very small portion comes from china so i used the example to say this isnt a good way to look at the bilateral trade deficit. I lived there for eight years and i took a picture of him and i just put it on twitter. I ran a substantial trade deficit on an annual basis. He buys nothing from me. I am okay with it and he seems perfectly fine with it as well. So, we cant get very hung up on the trade deficit. When you go to the gas station and put 20 or 30 of gas in your car, you run the deficit to 20 or 30 of gas so we get these products from china and its helped us keep inflation down. Yes, china hasnt been a good actor and has sort of taken advantage of the rules and yes they overly subsidize their Favorite Companies and Stateowned Enterprises as they are called. And we need to address those issues. But they are not really a villain. We as a Global Community need to find ways to sort of put them in line. I cannot think of too many superlatives that describe it. But it is a Purchase Agreement because we are so concerned. I am all for the next to 200 million thats a good thing so thats what i try to comment to give a better understanding of those issues