Your new book is called living in plain sight what really caused the financial crisis and why it could happen again. You were a member of the Financial Crisis Inquiry Commission investigating the causes of the 2007 in 2008 financial crisis. You said that only democrats on the committee but the republican appointees what did you see they didnt . Looking at the housing system in the United States with dodd frank and fannie mae and freddie mac for quite a while before i got on the commission so i had a lot of background of what was happening in the housing sector. I was looking for the commission to look into what happened with fannie mae and freddie mac and the role they played in the housing crisis and ultimately the financial crisis and i found the commission was not interested in they would not look at it. s. Host that i was outside i thought, the partisan differences between the republicans and democrats and and am afraid that the republicans felt that they just would not agree with anything that the democrats said they did not want to, indict the Bush Administration. A couple of them had actually been in the Bush Administration so i felt that i had to speak with an independent voice. Host you wrote a lengthy dissent in the late stages of that inquiry that of course grew into your book. Give a lot of unconventional views in this book which we will get into for people who are not understanding, it really focus on the housing and Mortgage Markets in the United States and the governments role in it. When and why did the u. S. Government is so heavily involved in the Housing Market. Pretty are actually began in the 30s and the new deal, when the government intended to assist banks in making loans by guaranteeing those loans and assuring those loans and then fannie mae was established in the late 1938 also part of the new deal to provide liquidity to banks when they had a mortgage, they could then sell it and then they could liquidity for the mortgage and then make more mortgages it was all very helpful in inducing more home sales in the United States. That was the beginning and the government really got much more involved in the 50s when actually started adjusting the fha and the federal housing administrations. The standards in order to improve housing in the United States or increase the amount of housing sold in the United States and its desire to help the economy. That is when we sort of backup of the rails because once the government started using housing as a way to improve the economy in other words, to improve the market peoples view of their government and how successful it is, then it became a political issue and center when it had been before which was simply a question of making sure that the market function well. Sudeep at a across the democratic and republican demonstration, and in housing and encouraging activity. Where do you see the more recent turning points in this development. Peter i think the key turning point here at least from my perspective west 1992. That was when congress adopted something called the Affordable Housing goals printed they work under a great deal of pressure at the time to make sure that the borrowers who were the low million income, they had credit for mortgages and many activists, as part of those borrowers in those communities pressured congress to do something that would provide much more credit to those groups pretty then the congress adopted the affording housing goals which required fannie mae and freddie mac, they were only given to them and they required them, lender bought mortgages from banks and other originators, to make sure that the ones they may, 30 percent had been made to people at or below the Median Income. That authority to require a certain quota was given to the department of housing and it urban at that point in overtime, between 1992 and 2008, they gradually rationed of these requirements and added new ones. For example by the year 2000, 5t fannie and freddie bought in any year, had to be made to people who were at or below the Median Income and by 2008, it was 66 percent that wouldve been in the Bush Administration. So is not a partisan thing. Sudeep not under clinton first. Under bush, the whole idea was carried through by hud. It was designed to encourage americans to save money, to develop and build equity in their homes. Obviously part of this is to ensure the lower income and middle income people can have a home in an asset of this kind. Is there something wrong with this idea in general that people should be able to buy a home and find a home in america. Peter absolutely nothing wrong with that. There are lots of good reasons why homeownership should be encouraged. But the problem with this system was that aforesaid and freddie mac overtime to reduce their underwriting standards. In that way, they floored a number of people into buying homes who could not actually sustain the mortgages over time. In fact, when the year 2008, and this is really an important date in the book by the year 2008, more than half of mortgages in the United States are what you would call, subprime mortgages. About 31 million other week mortgages were by 2008 and of those, 76 percent where the books of Government Agencies which to me, shows clearly there is a government who created demand 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 happened was when those homes failed, when the mortgages failed, they accept all of the people around them as well. All of the neighborhoods and the values of the homes of all of those neighborhoods go down. So what the American People should understand after the financial crisis in which they dont think they really understand today, is that they are older. Within her writing standards are reduced so that those people who had cannot necessarily sustain the standards dont have the proper credit, do not have the downpayments, are enabled to keep the mortgages. Sudeep we have a couple of separate issues that intersected in this. One was was the existence of fannie and freddie and what they had done, for a while and the other with herself and political push, to encourage more homeownership and then combined of course fannie and freddie were there as the vehicle to do all of this. What happened then in fannie and freddie in his existence and its relationship with lawmakers that led to where we got into the crisis. Peter is really quite interesting because the person who ultimately became the president of fannie mae jim johnson, that was his name he realized that he was very political operative before that he realized that fannie mae was under stress because it had a very strong government franchise that it would have sent to sustain over time and i think you recognize that he fannie mae and freddie mac of course if they actually became kind of dip orders of low Income Housing that would give them a strong backing in congress and keep them in their position where they were getting all kinds of support for the government. And making quite a lot of money. Both of those institutions. Sudeep and became fannie and freddie, even though they work essentially started by the government, they became private entities. Peter they were privatized in 1968. In a 1970, they were given the authority to go from where they originally were which was only buying government backed mortgages into the conventional market were the begin to buy regular mortgages. Both. Peter them both on the new york stock exchange. All the way up the became insolvent. But the political relationships became extremely important because as they grow and there was a great deal of pushing the bush and Administration Much more regulation of fannie mae and freddie mac. And from their point of view especially fannie which was much more political from their point of view, to avoid more relation, they had to rely on the democrats of congress. The difference in congress are very focused on making sure that fannie and freddie in lowIncome Housing. Even though they work beginning in the 2000, defined that they were buying mortgages that was ultimately would cause them to suffer tremendous losses, they could go to congress ago to hud and say we wont comply with these anymore. Because it is driving us out of business. They couldnt do that because if they did that, the democrats in congress no longer support them. In the effort of the Bush Administration to place them under much greater regulation. This was in 2003 2004 and 2005. That would become successful and then so profitable so that they were caught in the spice between on the one hand, having to keep the democrats on their side and on the other hand, having to comply with the Affordable Housing requirements that would gradually going to drive them to insolvency. Is the coronavirus continues to affect the economy, were taking it look at the other programs about trade and finance in the 2008 session. Up next, henry former treasury secretary in the George W Bush ministration spoke with investor Warren Buffett 2015 about the actions taken in response to the 2008 economic collapse. Ive read various economists, adam smith, david ricardo, and all that. Ive really never heard of more eloquent statements that distinctly sums up the economic world than george bush made in December Think of 2008 when he said in the memorable words, if money doesnt listen up, the sucker will go down. [laughter]. So jealous, it was like the gettysburg address trooper to the point. [laughter]. Is the book, really have no appreciation for the fact that he understood what was going on and understood what needed to be done. It was overtime the wood through those proposals. Warren phil. He was not well he was always surprised when i was surprised. And i surprised more than once. [laughter]. Was a great surprise. I would say that who spoke to him, wanted anything similar from our previous career, as a matter what you negotiate, that all things and understandings about the relationships we have, if i didnt have the right relationships, it will be my fault. And so i met him a year before the crisis to get to know the president and to work with him. And remember, he went to business school. He understood the fundamental understanding markets. And he obviously cared about them. So the conflict that he dealt with, was the same conflict i dealt with her anybody. Risktakers should bear the responsibility of their own losses. And so the interventions were not something, he certainly did not. But from day one, understood that the Financial Markets were about our economies and jobs. Seventythree i would be coming to him and i would run up to sell him halfway through the conversation. It was a lesson, we will get through this. Its not always going to look good. This is one of the politico only unpopular but we are not going to literally coming at him. We will do the same jobs to save the economy and that was his point of view and you talk about my mother and in some cases it was most likely mother telling me that i need to work out in things will get more so i can give are slim. [laughter]. In terms of the other political stages, going up to the election, he probably felt that barack obama was more knowledgeable in what was going on in the financial crisis than john mccain. It is unfair. Henry no doubt, fear and that they had the conversation that i had with john mccain. They were just as frequent then as they were with barack obama. They were difficult he certainly gave me more anxiety. But all of that. And now president obama was engaged in candid and i felt comfortable he was going to support will be needed to do. But, im quite grateful to john mccain because i have real respect for him as well. Because they tell you, and the election, six weeks away when we were at the congress, there is no way we wouldve been my judgment got the tarp if john mccain had, against it. He had played the populace card, we would have been left defenseless. So as i look back, i am increasingly grateful of the way he handled himself during this period. During the time unless a few hours of sleep. Henry at one point i read what you said and you nailed it. Warren that was when he came back. There is quite a scene. He interrupted his campaign to come back. Michelle davis is here with me today, insisted behind him that i specify,. [laughter]. Roll call vote. She said to me now, someone asks you, that john mccain coming back, just lycee, i welcome the involvement of everyone in this. I think she was afraid of what might come out of my mouth. Henry she talked me down on the plane. But as it turns out he can agaiu talk about anxiety. John mccain, when he was back, started talking with the House Republicans and rallying them. He did his part. And then even after we got to the top, he did not jump on and criticized some of the things we did. And again they work American People in front of the fact that on all levels, the American People notice the bailouts. It was, i look at the whole and in some time, after the election, when things were done and this may be slightly exaggerated to but i recall Something Like 93 percent of the American People oppose the bailouts. And 60 percent opposed torture. So. [laughter]. 70 percent where we were going to suffer much worse in recession. So weve never been able to explain to the American People that this was altered, this was for real. Warren you have these consultations with obama. But i understand they sort of ended after the election but. [laughter]. [laughter]. Both mood president and the administration had repeatedly said that we really didnt anticipate the outcome for the economy. The message that you were giving them, expected things to turn around. The one warren, i would ask you, well i did not expect that. I knew, when we went up there, as saying in the book where we talk about chris cox and i went up on september 18th. Henry to meet with congress. And that difficulty that we had at the time as lauren said, much better than i could, the Financial System, they were freezing up. So i knew with certainty, the business was going to turn down because when you have companies that is uncertain whether they can do shortterm funding, most will go to the ceo is a, bus i may not have all of the funding you would like the next 30 days. So what is the company do pretty you start cutting back. But congress did not see it yet in the district. I knew with a certainty it would get worse. I am not sure i knew it was going to be 10 percent unemployment the new it was going to be bad. So then, and i knew that they did not do something, then it would collapse. In the business would not be able to find itself and pay for the inventories and pay suppliers and let employees go now in ripple through the economy and we have armageddon. So then, when he finally did turn down, we have this terrible situation of as congress sought, they sought to await the American People sing it, lit up and said, give us these authorities and if you dont, are going to be in deep do do. Its going to be bad. They gave us the authorities and we were in deep do do. And it is very hard to give credit for presenting or preventing a disaster. Something that we never saw can see. We are looking at other programs about the economy. In 2015, former Federal Reserve chair, men sat down the Democratic Senators sheriff brown of ohio, talk about the actions that that Federal Reserves took in response to the 2002008 crisis. My grandmother would tell stories about her youth and the 30s when she was living in connecticut. Mr. She told me was that she was very proud because her children were able to go to school mark new shoes every year but the kids in town, lots of them did not get new shoes and in some cases didnt even have shoes and she said the shoe factories had shut down of the depression and the fathers have lost their jobs and therefore not enough money to provide shoes for the kids. I was six or seven years old i could see something wrong with this. All he had to do is the factory. Produce shoes and in the kids would have the shoes. He said no it wouldnt work that way. Its a real intellectual puzzle of the great elections at the factories are still there and the workers are still there but for some reason is not happening that problem is as kane said, this is to visit working. Through puzzle to me i dont one pretend that i was inspired, i was interested in all kinds of things but when he came back to it, and graduate school, and handed to be whatever they would the holy grail of economics. Most important puzzle the congress would have and actually did a lot of time researching and thinking about it. I guess the paradox of the shoes will go down in history. The student 2007. I came to the senate in january and i was been a committee and its called the sleeping banking committee. They had finished with a lot but did not have a lot in their agenda. In my wife and i have now. 441 oh five was zip code we lived it and it will mean mushy about when the mains as it was the first half of 2007, more foreclosures in the zip code of 911 zip code in the United States of america. And it seemed to me, as in 2007 in 2008 until at least until the spring of eight, there was not all that much attention from the feds. The housing issues because we had not on the housing crisis was more because a whole lot of reasons in cleveland it was predatory lending and sort of the synergism. Predatory lending. And obviously whats happening with manufacturing. In a declining base of manufacturing. Why did the feds sort of missed this in some sense and why was the government ove