About to see can be viewed in entirety by visiting our website booktv. Org and using the search function at the top of the page. First in february of 2015 the American Enterprise institutes peter appeared on our Author Interview program afterwards where he argued that Government Housing policy caused the 2008 financial crisis. Peter, your new book is called hidden in plain sight, what really caused the worlds financial crisis and why it can happen again. You were a member of the Financial Crisis Commission which was investigating the causes to have 07, 08 financial crisis. What did you see that they didnt . I had been locking at the housing system in the United States, doddfrank and well, im sorry, doddfrank and fannie mae for quite a while before i got on the commission. I had a lot of background on what had been happening in the housing sector, so i was looking for the commission to look into what happened with fannie mae and freddie mac and what role they had played in the housing crisis and ultimately the financial crisis and i found out that the committee was not interested in looking at and to the degree that i tried to interest them i was just told that i was given all kinds of signals that that was not something that they were going to do so i decided that i would descent. Now my differences with the other republicans came from the fact that my view was that our responsibility on the commission was to make sure that the American People understood what happened in the crisis, that i was outside, i thought, the partisan differences between the republicans and the democrats. Im afraid the republicans felt that they just would not agree with anything the democrats said and they didnt want to they didnt want to invite the Bush Administration, some of them had been in the Bush Administration, so i i felt that i had to speak with an independent voice and thats why i descent. You wrote a lengthy descent for the commission and for the late stages that focuses on the housing and Mortgage Markets and the governments role, heavily involved in the Housing Market . Actually it began in the new deal back in the 30s when the government attempted to assist banks in making loans by guarantying those loans and ensuring those loans and then fannie mae was established in late 1938 also part of the new deal to provide credit to banks, when they made a mortgage, they could then sell mortgage to fannie mae, made more mortgages. It was helpful in inducing more home sales in the United States. That was the beginning. The government really got much more involved and adjusting and federal housing standards in order to improve housing in the United States or increase the amount of housing sold in the United States in in and desire to help the economy and thats when we sort of got off the rails because once the government started using housing as a way to improve the economy and ways to improve the American Peoples view of the government and how successful it is. Then it became a political issue instead of what it had been before which was sort of a question of making sure that the markets functioned well. This stretches democratic and republican administrations. The interest in housing and encouraging housing activity, where do you see the more recent turning points in this development . Well, i think the key turning point here, at least from my perspective was not 1992 when congress adopted something called the Affordable Housing goals, they were under great deal of pressure at the time to make sure that the borrowers who were below medianincome or lowincome borrowers had credit for mortgages and many activists in support of those borrowers in those communities pressured congress to do something that would provide much more credit to those groups. Congress then adopted the Affordable Housing goals which required fannie mae and freddie mac, those goals were only applicable to fannie and freddie and when they bought mortgages from other banks and originators to make sure that of the mortgages they bought 30 had been made to people at or below the Median Income. That the authority to require a certain quota was given to the department of housing and urban development at that point and over time between 1992 and 2008 they ratcheted up and so that, for example, by the year 2000, 50 of all mortgages had to be made to people that were at or below Median Income and by 2008 it was 56 that would have been in the Bush Administration, it wasnt, it was done under clinton first but then after bush the whole idea was carried through by hud. The theory behind this is encouraged americans to save money to build equity in their homes. Part of this is to ensure lowerincome and middleincome people can have a home and asset of this kind. Is there something wrong with this idea in general that people should be able to buy a home and find the home in america . Absolutely nothing wrong with that. There are lots of good reasons why Home Ownership should be encouraged but the problem with this system that it forced fannie mae and freddie mac over time to reduce overwriting standards and that way they lured a number of people into buying homes who could not actually sustain the mortgages over time. In fact, by the year 2008 and this is really an important date in the book, by the year 2008 more than half of all mortgages in the United States were what you would call subprime mortgages, 30 million subprime or other weak mortgages by 2008 and of those 76 were on the books of Government Agencies which to me shows clearly that it was the government that created the demands for these mortgages. Now what happens when underwriting standards decline, its not simply that the people who have bought homes are unable to carry those homes, what also happens when the mortgages fail, they affect all of the people around them, all of the neighborhoods, the values of homes and all of those neighborhoods go down so what the American People should understand after the financial crisis in which i dont think they really understand today is they are all hurt when underwriting standards are reduced so that other people dont have proper credit and unable to keep mortgages. We have a couple of issues that intersected in the period. One was the existence of fannie and freddie and what they had done for a while and the other was the congressional and the political push to encourage more Home Ownership. Thats right. And when the two combined fannie and freddie was there as the vehicle to do all this. What what happened then in fannie and freddie and existence and relationship with lawmakers that led to where we got in the crisis . Its really quite interesting because the person that became the president of fannie mae, johnson, he was a political operative before that, he realized that fannie mae was under stress because it had very strong government franchise that it would have to sustain over time and i think he recognized if fannie mae and freddie mac actually became supporters of lowincome housing, that would give them a strong backing in congress that would keep them in their superior franchise position where they were getting all kinds of support from the government and making quite a lot of money. Both of those institutions. And it became fannie and freddie, even though they were essentially started by the government, they became like private entities . They were privatized in 1968 and in 1970 they were given authority to go where they were originally were, buying backedmortgages into vengessal market where they would buy regular mortgages, that made them very important profitmaking institutions. But the political relationships became extremely important for them because as they grew and got bigger and bigger, the dangers were always that somehow the government would move against them, regulate them more strictly and there was a great deal of push in the Bush Administration for much more regulation and from their point of view especially fannie which is much more political from their point of view to avoid more regulation they had to rely on the democrats in congress. Democrats in congress were very focused on making sure that opiniony and freddie supported lowincome housing and even though they were beginning in the 2000 to find that they were buying mortgages that would ultimately cause them to suffer tremendous losses, they couldnt go to congress or go to hud and say, we we wont comply with the quotas anymore because its driving us out of business. We are going to fail. They couldnt do that because if they did that, the democrats in congress would no longer support them and the effort of the Bush Administration to place them under much greater regulation in 2003, 2004, 2005, would have become successful and they wouldnt have been so profitable. They were caught in this vice between on the one hand having to keep the democrats on one side. As the coronavirus continues to affect the economy, we are taking a look at Author Program about trade, finance and the 2008 recession. Up next henry paulson, former secretary in the george w. Bush investigation spoke with warren buffet about the actions taken in response to 2008 economic collapse. I read various economists, adam smith, david ricardo, all of that, but i really have never heard a more eloquent statement that succinctly summed up the economic world than george bush made in september, i think, of 2008 when he said in a memorable ten words, he said if money doesnt loosen up this sucker can go down. [laughter] it was like a gettysburg address, short but to the point. [laughter] as i read the book an appreciation for the fact that he understood what was going on and understood what needed to be done. Was there ever time with proposals . No, he was only surprised when i was surprised. I was surprised more than once. [laughter] then i would say that i felt spoke to him, one of the things i learned, warren, from my previous career is no matter what you negotiate, i could have all kinds of understandings about the relationship we would have but if i didnt have the right relationship with a president , it wasnt his fault, it was going to be my fault. I had a year before the crisis to get to know the president to work with him and remember, he went to business school, he understands good fundamental understanding of markets and issues and cared about them and so the conflict he dealt with was was the same conflict i dealt with or anybody who was in the markets. We believe in the United States of america that risktakers should bear the responsibility for their own losses and that so big interventions were not something i didnt go to washington to do that. He certainly didnt, but from day one he understood that the Financial Markets were about economy, i would have to sell him half way through the conversation he would buck me up, listen, hank, we will get through this. We are not always going to look right. That was that was talking about my mother. It seemed that going up to the election, that you probably felt that obama was both more knowledgeable and more interested and what was going on in the financial crisis. No doubt, with john mccain, with barack obama. They were more difficult, above all of that, and president obama was was attentive, engaged and comfortable he was going to support what we needed to do. Im quite grateful to john mccain because and i have real respect for him because let me tell you an election 6 weeks away and theres no way in my judgment got the tarp that john mccain had come out against it. If he had played the populist card we would have been left defenseless and so i look back, im increasingly grateful of the way he handled himself during this period, during the time he gave i lost a few hours of sleep. Hank, you describe one place in there, you have something where you say you issued a veil and i read what you said [laughter] well, that was that was when he was when he came back. There was quite a scene. He interrupted his campaign to come back and i remember i was testifying at the time and Michelle Davis who is here with me today, is sitting behind me, testifying and my blood sort of went cold right there and she said to me, if someone asks you about excuse me about john mccain coming back, just simply say i welcome the involvement of, you know, of everyone in this and so on because i think she was afraid what might come out of my mouth. [laughter] so as it turns out, again, the it was a couple of days of anxiety but, again, john mccain spent time with the house republicans, rallying them, and, you know, so he did his part and and even after we got the tarp, he did not jump on or criticized some of the things we had done which, again, were very unpopular. American people none of us like bailouts and so again it was some time after the election, but after we had done several things we had done and i think this may be a slightly exaggerated but i recall 93 of people opposed the bailout and 60 other opposed torture. So 70 were we would go into something much worse than a bad recession and so we never were able to explain to the american this wasnt for wall street, this was for them. You had consultations with obama as i understand at the end leave out the sort of part. [laughter] both the president and members of the administration have repeatedly said during the past year that they really didnt anticipate how tough things would be in the economy, but the message that you were giving them, you expected things disgusted. Am i wrong on that . Well, id ask you what you expected because i i did not expect them, i knew that we went up as seen in the book where we talk about ben bernanke and chris cox and i went up to meet with congress and tell them we would need these authorities and the difficulty we had at the time was as warren said much better than i could, the the arteries of the Financial System were freezing up and so i knew with a certainty that business was going to turn down because when you have companies that that its uncertain that they would be able to raise shortterm funding, most cfos are going to ceo, hey, boss, i may not be able to have all of the funding youd like for the next 30 days and what does a prudent company do, start cutting back. Congress hadnt seen it yet and hadnt seen it in their district and i knew with a certainty it was going to get worse. Im not sure i knew it was going to be 10 unemployment but i knew it was going to be bad and so then when the i knew if they didnt do something and it collapsed, then the businesses wouldnt be able to fund themselves, wouldnt be able to pay for inventories and and pay supplyiers and would let employees go and that would ripple through the economy and we would have armageddon so then when the economy did turn down. We had this terrible situation of congress because the way the American People had seen it we went up and said give us thighs authorities and if you dont we are going to be in deep dodo. Its going to be bad. Well, they gave us the authorities and we were in big doodoo. And preventing disaster that people never saw or could see. Weve opened archive to look at Author Programs about the economy. In 2015, former Federal Reserve chair ben bernanke sat down with democratic senator sharod brown of ohio to talk about actions he took during Obama Administration in response to 2008 financial crisis. I used to sit down in the front porch with my grandmother and she would tell me about her youth when she was living in connecticut and the story she told me, she was very proud because her children were able to go to school and able to wear new shoes every year but lots of the kids in town, you know, didnt get new shoes or in some cases didnt have shoes. I said why not, the shoe factories in the connecticut factory had shut down in the depression and fathers lost their jobs and therefore not enough money to provide shoes for the kids and i was 6 or 7 years old i saw something wrong with. All they could do is open up factories and they could produce shoes and she said, no, it didnt work that way. Thats the real puzzle that the factories are still there and the workers are still there for some reason its not happening. The system isnt working. It was a real puzzle to me. Im not going to say that i was inspireed from age 6 to study the Great Depression. The most important puzzle that economists have and i did spent a lot of time thinking about it. Im thinking that the paradox of the shoe wills go down in economic history. I came to the senate in january of 2007, i was put on a committee that leader reed is calling the Banking Committee and didnt have a lot on their agenda. Where i came from it was very different. My wife, wont mean much to you but in the first half of 2007 more foreclosures in the zip code than any zip code in the United States of america and and you it seemed to me as in 2007 and 08, at least until bear stearns, there wasnt much attention from the fed, housing issues because the housing crisis was more caused, a whole lot of reasons, in cleveland it was predatory lending and sort of a centerrism, predatory lending and and obviously what was happening with manufacturing, declining base of manufacturing. Why did the fed sort of miss this in some sense . Why why were why was the government overall not cognizant that there were places all over the country and, in fact, ohio had in the middle of this story had more foreclosures every year than it had the year before all over the stays from appalachia to inner city. Why did we not see that as a country. How serious that was . I dont agree with characterization. I spoke about foreclosures before the crisis. My concern was that some foreclosures were unavoidable and not effort to modify so people would stay in their homes and, you know, i just speak about that, we were very concerned about the Housing Market which was beginning to slow as early as 2006 and i talked both about foreclosures and the general problems in subprime mortgages in system and speeches as well. We thought about it partly from our Economic Perspective what were the risks overall, but we did worry about effects on communities, for example, the empty houses creating like and affecting and the like and the fed did Pay Attention to the issue. I would argue ive seen that and heard those statements but i also would say that the the Consumer Protections to stop predatory lending and some of the responsibilities and the authority that the fed had particularly prior to you and im not im not casting spergeons but i just dont know, i began to hear from people in cleveland and other cities that predatory lending, that the fed or any other regulator was really particularly there for us. Well, the use of the word predatory is critical because i talk about in some length in my book at the time and in my book i have to go back even before i go back to the fed, extends back to the 90s, some of the issues and debates and one one f the big distinctions was made in washington and im not blaming anybody in particular, one of the big distinctions was between predatory lending which was illegal lending and on the other hand legitimate subprime lending. Legitimate subprime lending was touted as being Good Development because it allowed people of most modest means, minorities and the counteract red lining. Exactly. Get into a home and participate in the American Dream and quite honestly, wasnt of one of the reason that is there wasnt more aggressive effort to police subprime lending was the fear of cutting that off. Very strong distinction made between predatory lending which was already chairman greenspan said was already illegal. You can debate about enforcement versus subprime lending which is viewed of different kind of thing. Let me take it from a different angle, page 94 of your book, i dont think that key fed staff, you spoke about how good the staff was and i would agree with that. I dont think the key fed staff were captured by the firms they regulated in the sense that they perceived it to be in their own career or financial interesting to easy, they were, however, opened to arguments, Regulatory Burden should not be excessive in the competitive Market Forces would to some extent deter poor lending practices. I work in an institution where lobbyists are on the present as different environment from regulators but regulators here from some some of the some peop. You may remember after doddfrank passed, the Financial Service said now its half time and they were going to lobby regulators and im in a place in the senate where lobbyists come at you over time in part because you and i and our staffs and your regulators back when you were not when you were noncivilian tend to hear from the most elite in society over and over and hear the same song that its easy to get socialize. So it seems to me that is less likely to be aware of the pain of how many regulators really know people who are foreclosed on and likely to see that and understand that. One feature of the Federal Reserve system is the use 12 Federal Reserve banks around the country, theres one in cleveland. And what was happening in cleveland, housing in the lake. Your concern is not wrong at all but what was happening before the crisis was a philosophical perspective that the Financial System should be less regulated and more dynamic. We now know there were a lot of problems with that but greenspans the was if banks had sufficient capital you didnt have to watch this too carefully, regulations shouldnt be too burdensome. Our look at the was economy continues with aaron glantz who spoke at the carter president ial library about his book home wreckers. It takes a critical look at the people and businesses that profited off the 2008 Housing Market crash. They were foreclosed on. The wealth gap in america today, it is bigger than it is in 100 years the top tenth of one and the homeownership rate was at its lowest level in 50 years. It is important people understand that it didnt just go down in 20082009. It continued to go down in 2011, 12, 13, 14, 15 until it bottomed out in 2016. A book takes a few years to put together and i was certain in 2016 watching donald trump with this populist insurgence campaign for president , when the economy was supposedly doing really well, low unemployment, high Dow Jones Industrial average, many consecutive quarters of growth, wall street is doing great but america is angry and on the left Bernie Sanders is doing well with the same populist message. It seemed 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 . The home wreckers. One of the things i talk about when it comes to homeownership is the typical American Family has a lot of their equity in their home so when you lose a home, your family loses a home that you cant leave dear child or grandchild that is a significant wealth depletion event so it is not only 8 million homes but that will happen in intergenerational impact. Homeownership is the only way most people in america can save money. We follow the Dow Jones Industrial average but only 12 of americans own stock. The average americans has 4,000 in the bank. We are paycheck to paycheck society where most money goes to things like transportation, Health Insurance premiums, clothing, food. All of that disappears the moment that we spend it. Housing is the biggest expense, either that is going to go back into our home in the form of equity we can pass on to our children or enjoy a healthy retirement or it will go to our landlord. When we say homeownership is at its lowest rate in 50 years 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 yet 200, 000 versus 2,000, this is not because homeowners make 100 times as much money. I make the same amount of my colleagues who rent, but im worth more because i own my house and not only that but i live in San Francisco which is rapidly gentrified. People are getting evicted. Their rents are going up. They are being displaced. I am sitting with my 30 year fixedrate mortgage paying less than most of my friends were bending and im saving money and god for bit i have a medical event that requires me to dip into that equity or cant afford to send my children to college or want to retire god for bit at some point, i may have that ability. And my colleagues dont if they dont own their home. They dont have that ability. Host the story of home wreckers, part of the story deals with those mortgages. How did you get into researching those . Guest i mostly was interested in this failed California Bank called in the mac, the first big bank to fail in the housing cycle and it was the biggest bank to fail since the Great Depression and the government ended up holding this disaster of a bank and this was a bank that became famous not only for reverse mortgages but also things like ninja loans that were popular during the boom standing for no income no job no assets no problem, they had disneyland loans, this disneyland as la bank, making 90, 000, disapproved without any paperwork and when the Housing Market softened it went bankrupt, the government ended up holding a bank and there was a dramatic run on the bank that was out of the depression where people were pushing and shoving on the streets of pasadena but the pictures were in color and there were more channels and then Steve Mnuchin who is now our treasury secretary, stepped in and bought this bank from the government for nothing and then the government made this deal with him where we would subsidize his foreclosures. Host guaranteeing he couldnt take a loss. Guest you would lose money but not if the government is paying the tab and we agreed to become 90 of the tab. I had records through freedom of information act that indicated his group more than 1 billion. To foreclose on people. He foreclose on with 100,000 people including 23,000 seniors. I had this bank seemed like foreclose on 100,000 people with the homeownership rate at this record low, run by the treasury secretary who poses with large chief of bills like a doctor evil kind of picture in the worlds richest Apartment Building on 740 park avenue. But also you mentioned reverse mortgages. I happened upon that oddly where i was pulling this string as a journalist and i became interested in private equity firms that but these houses after foreclosure and i found this house in los angeles, where the guy living in the house running for private equity funds that 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 who came to the door was dying of cancer and sick with aids and facing a rent increase. I was like oh my lord, and i went to the property record. What happened when they bought this house for 180, 000, that is when i found this house, owned by the same africanAmerican Family that moved west from mississippi during the great migration that was able to buy this house in 1963 the very year california banned discrimination in housing, that was the year we became homeowners and they been foreclosed on by Steve Mnuchin. That i had this house that didnt just involve one member of Donald Trumps inner circle, dispossessed the family whose wealth was tied up in their home involving two of them. As you pull the string i found this house had been buttoned into mortgagebacked security by Jpmorgan Chase and there was this 514 million lien on his 834 square foot bungalow, and subsequent to me publishing that story in 2017, trumps best friend decided to flip out of this company. Another one of Donald Trumps friends, steve schwartzman, chairman of blackstone, owns 80,000 homes and in the same house that had been the hopes and dreams of the african American Family that sold these predatory mortgages foreclosed on by Steve Mnuchins bank, bought by Donald Trumps best friend, and reminds us of the worst part of the housing, and another of Donald Trumps best friends and they take out another mortgagebacked security, leveraging again for more wealth out of the house. Now there is a 1 billion loss by these people. It is really complicated. In september of 2014 sociologist Marianne Cooper looked at how economic recessions exacerbated inequality in the United States. Is a portion of this event. The past few decades, on the rise, losing jobs, losing homes, that story is mostly told through statistics. Academics look at tax records. What they concluded is right now we have a most unprecedented level of inequality, security, by some measures things havent been this bad since the Great Depression and that is a dramatic conclusion, but i felt the dramatic punch wasnt coming across in these statistical tables and charts that so meticulously documented so i felt somebody needed to talk to people about how they are coping with it. Underneath these hard numbers are people who live out these trends in their everyday lives. They are experiencing insecurity, we know more of them are on their own to cope with it but we dont know how they are coping and we dont understand how the growing divide between the haves and have nots in our society changed the way we manage and experience security. So lets start there. There have been longstanding trends leading toward economic insecurity and further income disparity and income insecurity for many families, that was happening in 2008 happens at a recession happens. Talk about the Overall Economic trend. What is happening in the us economy . How does the 2008 recession affect us . It is a big story, lots of books and articles about that. Three of the most important things that happened for families is the decline of middleincome jobs, what we call the shift in risk and growing inequality. It used to be our economy was based on manufacturing and now it is based on service. 80 of jobs are in the Service Sector. And comparison to manufacturing jobs Service Sector jobs pay less and come with fewer benefits and have much more insecure and then layered on top of this is workers no longer have the leverage they once did to collectively bargain for better wages and better working conditions and that is because unions are on a steep decline. After world war ii into the 1950s, a third of employed people were represented by unions and we reached a New Historical low that only 11 of workers are represented by unions. That has another effect. Not just workers cant collectively bargain to get a better deal but this has eroded a moral commitment to fair pay. It used to be even if you werent in a union, unions set the wage and employers respected that so that increased the wage for a lot of people who werent so we got a double whammy here in the other thing that occurred is the shift in risk. There has been a rewriting of the social contract between employers and employees. It used to be based on mutual loyalty and mutual protection. That means employers gave people good wages and good benefits and in return people work hard and use their talents to build the company. What has happened is increasingly, risk has been offloaded by governments and corporations onto individuals and their families. If you think about the movement and pensions to 401 k s, share risk with us, we are saving our own money for retirement and any miscalculations we make. All of these things together have gotten us to a point where the types of jobs that created a thriving middleclass are harder to find and harder to hold onto. It is tougher out there than it used to be and families are really experiencing that. The question is how tough . That depends on where you sit in relation to this. All the growing insecurity and the fear of the rise of income and wealth inequality. There are some highly educated and highly skilled workers doing really well and they have really good job so these trendss play out for different families in different ways. Host you interviewed 50 families over along period of time. The information is detailed and is intimately. You are not just able to subscribe in these situations but in deep detail. And what we are looking for, the reason, the underlying reason and the methodology of these interviews, how do you conduct these interviews, how did you get deeply into their lives . I wanted to understand the more personal, emotional side of this. And ethnography. I went out and wanted to find families rich middleclass and poor, and obstacles in their life. I wanted to add something to that so i followed a small group of families around in a very in depth way and followed them around. You went here and they went there. Picked up the kids, went to the soccer games, got to know them. The hardest part is recruiting the families. It is always hard for terrific people to be in their research, it is really hard. What was extra hard as i needed to know what income level someone was in. You dont walk up to a stranger and say how much do you learn . Then i met lori delgado working in a cashier when i was crafting, starting this project and seems really nice and the problem was how much the catheter how much the cashier new. Then she invited me along a Little League tournament, i dont know how much there are really long games. That means you can go home. They are dying for something to talk about. And interesting place. So i was sitting with her. This is an allstar team, trying to get a lay of the land, a kid hits a foul ball and it goes into the parking lot, the opposing teams cars are, hope the car doesnt get hit, those are fancy cars and i noticed mercedes and bmws and is uvs. I asked where this came from, one of the most affluent communities in Silicon Valley. I noticed on the baseball field before me was a miniature version of the story i was trying to tell. When i drove home with laura, she had this beaten up minivan and i said to myself i wonder what it is like in one of those nice suvs and that is when i realized it was a great way because i could tell from where they were from, what the level of the family was. The next few weeks driving around Silicon Valley with all the stuff, you see someone, might be a stanford researcher, not another parent, i got turned down a few times but a lot of people said yes and that formed the core of the families that i ended up working with. You are watching booktv on cspan2, we are highlighting author talks about the us economy. All these programs are available to watch in their entirety at our website, booktv. Org. A look at 2017 Washington Post reporter Amy Goldstein spoke of the effects of the 2008 recession on janesville, wisconsin where a General Motors factory was closed. In june of 2008 when the announcement was made that they were going to shut down production eventually the Unemployment Rate was 5. 4 . In march of 2009, a few months after the last of these jobs disappeared, unemployment shot to 13 . On the job loss front, you were a winner or loser. Beyond that i had the sense that i wanted to tell the story of what this big recession had done so it was important to find a place that had not been previously part of the rust belt. I didnt want to find myself writing about an accumulation of economic decay. I wanted to show what one bad economic time did. Send, michigan was an old story. I wanted to find a place where economic trouble was new and obviously the General Motors a semi plant had been shrinking a little bit more over a couple decades but it always got a new product so this closing was a very different thing that nobody in town had ever experienced. That was very appealing to me. Not that i was happy but very appealing to me as a place to potentially do this writing and this talk to people about what was happening in their community. I had the sense that their place was like every place but as much as possible i thought it would be interesting to find the community to write about where the pattern of job losses matched the National Pattern of jobs that went away in this great recession. If you think about what happened nationally, the largest reports of jobs disappeared when the manufacturing sector, that was true of jamesville, a lot of the jobs that were lost were jobs that paid pretty well but had not required higher education. That was true of jamesville. More men than women lost jobs, that was true of jamesville. I thought this was a community that had a number of qualities in lost jobs that other people around the country would understand and could identify with. I also had the sense the jamesville might fit nicely into the sweep of history. I remember the first time i found the Youtube Video for speech that senator barack obama gave it the Assembly Plant in february of 2008. I dont know if you remember him coming. I remember the first time i listened to the video saying the promise of jamesville is the promise of america and that line gave me goosebumps because i heard that Youtube Video after the smb plant closed. It was an irony to what the president ial candidate who became president was saying. Jamesville had been part of the sitdown strike of the 1930s and he is only part of the domestic war effort in world war ii when the plant stopped making vehicles and started turning out artillery shells and parco pen had been from here and there were big moments in 20thcentury history. I got that sweep of history. Before i knew anything about this community or met anybody here i had the sense i might find interesting politics. There might be Something Interesting about an old uaw town represented by scott walker in a state governed by paul ryan in a state that was led by scott walker. As a journalist, i tried to bring my reporting instincts to bear to think about what might be a good setting and i decided i was going to make a visit to jamesville and i first came here in july of 2011. I had arranged to meet some people. A couple people in the room here were part of the first visit on the couple days i was here and the very first person i met in town was dan mylan who is obviously an old time gazette reporter who by then had left the newspaper and was on a different radio show than the one he had done now and was working as an educational consultant. He had an office at World Headquarters and turned into offices. We talked and talked for a couple you hours about the history of the community and what it was like when he was here growing up as a boy and what the Assembly Plant meant and what was happening now and we talked for 2 or 3 hours nonstop and finally he said to me would you like to see the plant . I said of course i would. We drove down central avenue, turned left and there was the plant. It was obviously huge. Had never seen it before, this big, 4. 8 million square feet closed auto plant. As you approach, he said something that surprised me, i hate to go by this. I said why . It was a surprise to me, he is a pretty tough character, a veteran reporter who calls himself the senate, i tend to agree. He did not strike me as someone who was reticent to go through something in town. What he told me was his father had worked at the plant. As a boy he remembered how proud his father was of his General Motors wages that let him by his first chevy. When this man i had just met that day said that to me i thought that is something in this community, about the relationship between this closed plant and peoples sense of work and what life ought to be like and wasnt anymore so i kept coming back for a lot of years. I have met and spoken with many people in town where people sit even in a book that has a lot of people in it. That is where my gratitude comes in because i have learned from all of you who i met with in the past 6 years and what i tried to do is tried to get to know people with various vantage points in this community, people who were at the suppliers, or teachers taught how to help kids whose families, people who understand how this thing looked from lots of peoples perspective. I was really slow to figure out the main people in the book because i felt i couldnt pick, talking about characters, your real people but also book characters and i felt i couldnt really pick who would be the main characters in the story i wanted to tell until i understood the choices people made in the range of choices so i could figure out who might be good examples of those choices and i arrived in 2011 which was 2 and a half years after the Assembly Plant shutdown and i knew i would need to go back in time so i could tell the story from the moment the announcement happened that the town would be changed. I knew i could find people to go back a few years with me that explains what life would be like before i showed up on the scene. I also had the sense that i needed to understand the history of this community. I spent time at the Historical Society because i wanted to understand what the industrial past of jamesville had been. I wanted to understand where the pride in the work that was done here came from and the identity and expectations of jamesville were so that i could understand what it felt like when things were changing. Just a matter of time before he comes back. Does that sound familiar to you . I thought, why was that . That was because this plan started making tractors in 1919 and started making chevrolets on valentines day 1923 and every time a product one away from this plant another product eventually shut up. So there was no expectation no experience with it not happening again. So what i began to see was that people made choices about what to do next or as i sometimes came to think about it what choices do people make when the best working class choices of jobs were gone . People began to make choices but a lot of cases i found that it took people a while to settle into what they were gonna do up next in our view of authors on the economy as doctors sanjay basu coauthored the book the body economic in 2013 discuss the impact that austerities measures following recessions have a mental and physical health. In the u. S. With suicides we see specs overall even above preexisting trends but they are very heterogeneous. Its not across all cities in the United States. Even similar cities which faced massive unemployment in some cities we see the suicide specs and others we dont. It seems to relate very strongly to a certain set of social programs. Those social programs are the answer to a major question which is, why unemployment is and always correlate to suicide rates. Weve all been taught correlation is not causation. Thats precisely the point and why we want to investigate when correlations do occur like for example in the u. S. Unemployment rates very closely followed by suicide rates as shown on the left but in places like sweden and finland despite great discussions for example in 1990s it had its own banking crisis suicide rates continue to decline. So how do we explain this . What are they doing . Is that the swedish alexa robust . My sweetest friends would like to think that but its not true. It turns out as he investigate a slew of different programs people were exposed to one set of programs seems to be particularly effective at preventing these recession associated suicide alcoholism Mental Health related other Mental Health related problems. Its not in spite of my being a physician i have to admit it has nothing to do with healthcare insurance. Its not healthcare spending at all but something called the labor market programs these programs are part i and part stick and when someone comes through unemployed they get an unemployment check but only on a condition that they also enroll in this program. This program, heres the stick part, involves a person to assist them with everything from job reach training to actually working with the firms were also required to display the companies are in order to find parttime employment and quickly reintegrate them into the workforce. Turns out that preemptive spending on these programs actually results in the economic stimulus and ends up paying for itself in downstream costs but then theres the question of what if its just the swedish from others like weird people. Maybe its like european thing. A number of us have worked on the multistudy randomized controlled trials in the u. S. Including recently in the city of detroit where people were randomizing the standard programs, go off on your own if you find Unemployment Office and good luck to you. Or this kind of active labor market program. All of the cities now in four different continents the same results have been found of reducing Health Outcomes negative Health Outcomes as a side effect really is what it ultimately comes down to. We were seeing this implement it across the u. S. And in much of the u. S. The economic recovery seems corresponded to stimulus whereas the pure country the uk which had a recession around the same time underwent Austerity Program and the austerity clipped the recovery now that they are starting into a triple digit recession. This ended for us around the time of the sequester when we started flattening out in terms of our recovery and around the same time the ims issued a working paper major policy document and Public Statement from its chief economists, which basically amounted to 400 pages that said boops. The fascinating documentary you can get to the rhetoric in it but what amounts to is the following all the advice grievously during the east asian crisis and Current Crisis based on an assumption about a number that assumption is for every dollar of Government Spending how many dollars do we get back . The ins and others assume the numbers was 12. 5 little footnote to earlier document you can find that the reason for. 5 is because it was a nice round number and thats about it. Four different groups including us actually calculated out from prior recessions and said during recessions how many dollars to get back . What i mean about getting back . When you invest in food stamps or jobs to get a program, how much do end up stimulating the economy and getting back in terms of net job growth and overall dep. The actual multiplier is greater. You get back about a dollar ab 1. 70 for every dollar you invest. The irony is that jimmy figured this out a while ago while they were recommending for greece to undergo austerities they calculated this number called fiscal multiplier for themselves and decided to undergo stimulus internally while recommending the opposite for greece. We are at the first one to figure it out either, texas figured out during the savingsandloan crisis in 1880s california and massachusetts help bail out texas. Changes are correlated to the changes in recovery over time across a number of countries. This begs the question of are we just going to spend forever . Fiscal multipliers often go below one example in 1997 wouldve been a good time to cut back on a variety of Government Spending. But it argues for a datadriven approach to actually deciding when to undergo spending increases and what to spend on. Food stamps are a good example. A number of people have concerns with anytime you do a Safety Net Program welfare will be permanent. People will be writing the system forever. We will be cheating the system and so on. Theres been very good studies, one recently by the editor of the american journal of economics that found that there was essentially no data to support these that for example on food stamps in general welfare assistance people come off as the economy recovers and furthermore, this multiplier on programs like food stamps are particularly high because the people who are eligible for food stamps are often not spending on other things when they are unable to get food stamps is a classic dilemma called the heat or eat conundrum in Public Health where people can either spend on their eating what they can spend on food. abspend on heating what they can spend on food. And other spending is actually able to still like the local economy to much more than what the food stamps so even if you didnt care about Public Health just appeared count the net result is actually a deficit reduction. I will say that it is, however, important to recognize that its difficult to find funding during recessionary period. Medicaid and other programs are classically programs where you have less of a tax base during the recessionary period because more people are unemployed. You can do deficit spending but is there a better way as well . Some of us have been working on this International Initiative of which the goal is to simultaneously fund the text programs we need when we have the least amount of money, find a novel Funding Source at the same time also discourage the kind of things that led to a recession. We all know the risky investments led to recession but very few of us actually participated in these risky investments. I doubt any of you went out and bought a whole lot of merit mortgagebacked securities or someone. The idea is to place a small fee,. 005 percent, which is based on the old idea of the tobin tax if any of you have heard of that. That on the highest risk commodities those that hedge funds and others are dissipating that to put in the time and accounts this fee seems incredibly small but we are transacting hundreds of millions of dollars you end up raising on the order of 5 billion or more due to the way that the stock market volatility encourages heavy transactions. Naturally because of this mechanism the pull of that money will naturally increase during the highest risk times. As people are undergoing and engaging in the highest risk transactions you end up with the most money to put in a safety net fall and vice versa. The reason why i would argue for such a system is that while we need the unique time its actually not that like if you look at periods of recessions certainly over the last several years for decades we havent had a recession thats large but weve had it many recessions. Its actually somewhat surprising we were not in recession if you look at the number of crashes that have taken place over the last few decades. My favorite is the tequila crisis of 1995. But it strikes me that we have price bubbles in a variety of commodities over time. I will end by saying that essentially what ive learned from understanding this data is that if you were to adopt the solutions mantra and apply it to your social and economic policy, we might be better at offering people against these economic shocks. We have quite a bit of data to understand what to invest in in terms of safety nets and what they read for us. Or look at the u. S. Academy continues with author and financial journalist naomi prins who appeared on our monthly call in program in depth in april 2019. In this segment she describes the relationship between Financial Institutions and the c government. No me prins, now that we have this 100 year history, 100 year history that youve written about, has there been a cost to the taxpayer . There has been a cost to the taxpayer also the voter. Because when you talk about a major banker who can influence policy and ultimately, for example in the case of j. P. Morgan chase, jamie diamond was someone who was on the new york fed board he was a class a director at the new york fed board. Of Goldman Sachs today . He was head of j. P. Morgan chase. He happened to be in the head of the financial crisis when it occurred also director of new york athe wall street located fed of the 12 member reserve system but he was one of the people along with hank paulson who at that time was treasury secretary but who had been when i came into goldman ceo chairman of Goldman Sachs became the treasury secretary under obama at the turn of the year after that crisis so you have all these individuals who effectively have the ability to direct policy and money coming out of washington to their own institutions which are public institutions. They are monitored supposedly by the Federal Reserve because one of their day jobs is to be the regulatory answer in the over saved body to these banks. They are monitored in yet, they are individuals have such a tight relationship with the central political powers of the country that 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. As result, money goes from taxpayers to benefit them and not just when there is a crisis but even from the standpoint of for example a legal act called the glasssteagall act repealed in 1999 had been in place since 1933 specifically to protect the depositors and taxpaying public from any weird esoteric products or speculation that banks could do. Banks could choose to bet on all sorts of stuff but if they lost those bets was on them it was on their shareholders was on their private partners however they were structured to repay it it wasnt on the government it wasnt on people. That was repealed in 1999 all of a sudden you have this merging of peoples deposits to both cash peoples mortgages come into institutions i could do also to start with that, do badly with it, but wrong and then come to the government for help. The fact they had all these deposits back if they could say we have them. Atm machines are gonna work, people are going to get their money back in this crisis unless you give us all these other things. They influence the policy that allowed them the deposits. On multiple levels there abto remove rules surrounding their businesses from taxpayers into their own pockets. Jim walsh tweets into you could explain how someone so brilliant and economically astute supports an Economic System that always fails a tremendous human and Economic Cost or dissolves into a dictatorship. See support progressivism socialism. I support certain socialist policies. Because if we think about how economics divides into the needs of society in other words, how money that comes from society helps society and how governments are used to appropriate those funds i think about things like how expensive healthcare is for people in this country and think about how expensive it is for the student to go to university. And to come up 50, 60, 70,000 worth of debt which means they can ultimately be the kind of participant in our 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 a Community College and then i ultimately went to State College and went to private nyu for all my education but i paid for all of it along the way. I could pay for all of it along the way because what i was earning by working was enough to allow me to afford courses and books and rent on tiny places at the time. Now thats an impossibility. When i look at the economy as a whole and think, do we think its better for an economy to be more level for more people in order for them to contribute foundational he throughout most parts of the economy in an easier way, i think about how we also have firefighters now we have post offices and how we have Police Officers and a whole host elements of our society that are meant to help more society than just their shareholders or just their banking institutions. Look at it from a standpoint of Healthy Society thats healthy economically and educationally and physically and they are protected. The fence is another sort of level of our society which has a lot of money that goes into it and supposedly to protect everyone protect the country. All of those to me are social good. What i support from economic standpoint and financially as actors in that not to risk the Country Financial health and be bailed out to the extent they were by the country. Is capitalism at a Tipping Point . I think we are a capitalist nation we strive as a nation to do Business Activities that create profits and those profits go in different ways either to the people involved in creating them or to society or tax or peoples features. I dont think that is going away but i do think that using wall street as an example in the financial crisis as an example he and the fact that our Federal Reserve has 4 trillion of assets on our books after what isnt an emergency situation we should think anymore since it happened in 2008 and its still subsidizing wall street and subsidizing larger banks, those are tremendous sums of money. I think healthy capitalism has to recognize that putting too much money in one place where that one place is actually going to cost the general Financial System or the general economy is not necessarily a good decision. I think it needs to be more regulated i think we have more in regulated places that are ignored. Before we go to calls the fed is in your view a set type bank necessary is question number one, then i will followup with question number two. I think what the fed does in terms of providing so much subsidy to so many banks is not necessary. I think the fact that the fed can raise or lower Interest Rates in terms of Monetary Policy element is something that can equally be done within the treasury department. I think that the fact that the fed is structured in a way that allows the private members of that bank, which is how its structured, the fed ultimately does provide credit and does take meetings with the heads of wall street firms because they are the primary shareholders and the feds and they are the historic shareholders in the fed they created the fed so wherever the fed is today, theres a major flaw in how it was created and how it exists which that it exists ultimately to benefit its members and it says it exists to members to help the greater economy and the Greater Public but the reality is, if you look at the actions, they are very visceral when it is a situation where eye wall street Large Institution is in trouble or a necessity to help goldman or help j. P. Morgan chase or help someone who has an institution thats part of the history and the fabric of how the fed was created has benefited from how the fed is created and continues to benefit from this implicit subsidy that not just the fed but all the Central Banks provide to the largest banks in their respective countries. I think thats a flaw. Or look at authors on the u. S. Economy concludes with the former chair and president of the u. S. Export import bank fred hoffenberg. Earlier this year he discussed the impact freetrade agreements have on the economy and workers. A few of the takeaways all give you takeaways at the beginning case you fall asleep or want to leave early you have takeaways. Trade creates winners or losers and politicians are very good at never want to indulge them. The fact is some people when some people lose and we did a really bad job in this country of taking care of people who lost out. Peoples whose lives were disrupted whose sense of selfesteem that communities were emptied out and we didnt do a very good job we did a bad job of acknowledging that. I think many economists said we are creating 1,000,000 and a half jobs a year so if some jobs get lost by trade even if its 20 or 25,000 thats nothing compared to abthat is nothing unless you are one of those 25,000 people and a lot of that was concentrated in places like ohio, wisconsin, michigan, pennsylvania, those are very smart groups. One of those four states have in common every four years . Every four years they have something in common. I think thats partly what kept nafta and trade very much in our american psyche for such a long time and here we are in miami beach it is not a surprise that a lot of the cuba population is in miami and florida florida has been a battleground state and our cuba policy is that a lot of it has to do with the geography of where cubans live in this country. Geography has a lot to do with the trade issue and a lot of our politics and many people on both coasts have enjoyed all the benefits of trade and we havent had a firsthand experience of where its really been hurtful or abreally disrupted family lives. Thats one of the things i want to i talk about in the book you want to give you all the answers because i dont want to ruin the ending. Another thing is, we have a lot of talk about trade deals like the Transpacific Partnership usmca or the china deal trade deals are really not about jobs they are about labor rights they are about intellectual properties they are about dispute resolution being a company and a host country they are about a lot of things in the Transpacific Partnership that was an agreement between 11 countries along the pacific its the 5000 page document which i would not recommend it does not read like a novel. The word jobs appears six times two of the six times is because of the name of the australian and japanese labor department. There are four references to jobs and 5000 pages just a case in point theres not a lot about jobs and if you look at even what nasa was designed to do in 1994 was signed by bill clinton hit nothing to do with it. Trade is about jobs. Exports are about jobs but not trade deals. I think one of the things we are looking at now and am happy to address this in some of the q a is that weve taken we the United States have taken we want to work with our partners and articulate and actually i remember being at john and lindas home in italy and there were some films you showed about world war ii that a number of filmmakers had, and you look at the devastation of world war ii and the United States took a leadership role in forming things from nato to the organization of Economic Cooperation and development double wto was not done but and outgrow all these things were to find ways we can Work Together to make sure something as horrible as world war ii never appeared never happen again. We are in a period now where we are pursuing a policy in the United States much more unilateral its our way or the highway we will call the shots either take the view are not its a very different way than weve operated for very close to 70 years it is seems to work is the style of this present and not the style weve used in the past to get things done. Let me give you a flavor of a couple products. Does anybody in this room have one of these iphones . [laughter] use the iphone in this book but first let me ask him a who did the 10,000 steps today . Very good. How many steps today . 15 . [laughter] the iphone, the reason i put the iphone is to talk about whats called bilateral trade deficit something our president is obsessed with. The iphone was designed in the United States the Rare Minerals used for the circuitry come from rwanda and the democratic republic of congo. The chip that measures steps comes from the netherlands. The gyroscope that makes that you can turn this phone this way or sideways and its always proper comes up of switzerland. The main mechanism of the phone comes from samsung biggest competitor in korea the glass, which i frequently crack comes from cornelia new york. This would not have existed without global trade without a sense of trade moving we would not have an iphone. Its assembled in china and as a result this is considered by the world not just the United States as a chinese import. It comes to the United States its very apple is very proprietary big surprise. It cost about 230 for an iphone that comes to the states sells for about 1000 900. Of the 230, 8. 46, something less than 10 actually goes to china. And yet, the full 230 per phone or 16 to ab 16 billion or 18 million of our trade deficit with china is the iphone a small portion comes from china so use the example of saying this is not a very good way to look at the bilateral trade deficit which i said the president is obsessed with. I put in the book, i have a barber in washington i lived there for eight years name omar i took a picture of him i just put on twitter i bought a substantial trade deficit with omar abwe can get very hung up on a trade deficit. You go to the gas station you put 20 or 30 of gas in your car you have a deficit yes but you got 20 30 worth of gas we get a lot of products from china it helps keep inflation down yes china has not been a good actor yes china takes advantage of the rules, yes they overly subsidize their Favorite Companies state owned enterprises as they are called and we need to address those issues. But theyre not really a villain we as the Global Community need to find ways to put them in line. This fixation this obsession about bilateral trade deficit is wrongheaded and partly because if you look at the china deal that was just touted about in the state of union we are going to listen to or hear 10 days from now we will hear how this is the best trade deal ever done, the most i cant think of too many superlatives to describe it. But its really a Purchase Agreement and at the Purchase Agreement because we got so concerned about the bilateral trade deficit that thats what the deal is about. More television for serious readers. Welcome, everyone, to you shall bound, professor at uc berkeley and i will be the moderator, lively and conversation entitled voting at home