But just thoughts generally on everything from id like to hear your assessment of what were doing right and wrong, everything from earned income tax credit to estate tax to Corporate Tax to the personal income tax guest you mentioned two areas. I mean, i think earned income tax credit and other credits that reward work, reward education, that those are constructive, and they avoid some of the tradeoffs that you wore toly about if you that you worry about if you, you know, essentially create a tax on benefits by taking away benefits if you go to work, for example. Corporate taxes, seems like thats an area where theres a lot of bipartisan agreement where closing loopholes, creasing the territorial issues, those are things that i think should be able to get done, it seems to me. So there are some areas where progress could be made, for sure. Host im working with a couple of senators and speaker ryan, im hopeful that we can come to some agreement on a territorial tax so that we can give incentives to companies to bring their overseas dollars back home at a tax rate of 10 or 11 or 12 . But, and that hundred goes to longterm infrastructure and that money goes to longterm infrastructure and at the same time guest well, repatation host but to have a minimum tax from then op on. Guest right. Inis they would of being a onetime thing, you want to make that a transition to a more rational system that doesnt create that incentive host and that part of what were trying to do. Guest great. My last question, of course, is about baseball. And one of things that you love about baseball is one of the things i love about baseball, the statistics. You can sort of compare across eras, but obviously not always, and you were lucky enough to see what some thought was a perfect game where two outs in the ninth inning. My question is this, and i represent ohio, as you know. Southern part of my state, pete rose is not im not asking for your opinion on whether he should be in the hall of fame. Pete rose is not in the hall of fame because of betting on games, and in the northern part of the state, shoeless joe jackson, some of his best years were playing for cleveland. So understanding the blemishes that the two of them have on their careers, there was a rookie player for the new york giants, and this story came up again recently because they were playing the cubs. And the cubs, it was last year. The cubs won world series in 1907, and if the cubs had actually won the world series this year which they clearly werent close to doing, my team, the cleveland indians, would be the longest existing team to have not won a world series all the way back to 1948. But how fair was it that the first baseman for the new york giants who was this young rookie star made one mistake, and he was called bonehead for the rest of his life. How fair is Major League Baseball when it labels him for the rest of his five world series appearances, 15 years in the major leagues guest and 1907, i remember it like it was yesterday. He didnt run out the ball to second base. You know what it was like, it was like this is interesting, you know . They had this socalled neighborhood play, the idea that when youre doing a double play and theres a runner sliding at you, you dont really have to touch second base host just be in the neighborhood. Guest and now they have instant replay, and that has eliminated the neighborhood play. The point is that the standards change. And at the time, back in 1907, as i understand it you can correct me as i understand it, the convention was you didnt have to go to second base host the game ended. Guest so i think it was a little unfair to poor fred merkel who is he related, i wonder, to the german chancellor . Host i dont know, i thought of that, but im guessing not. I would not use that word in connection with her. Guest all right. [laughter] host if you ever want to be in the public eye again. Guest that wasnt my intention. I think it was a little unfair, yeah, that what was a Standard Practice was reversed in a crucial play at the end of the world series host that allowed the cubs to win the world series. Guest at least that was something. Host thank you, ben bernanke, good conversation. Thanks for your service to our country. Guest thank you. That was after words, booktvs Signature Program in which authors of the latest nonfiction books are interviewed. Watch past after words programs online at booktv. Org. And now from 2010, former treasury secretary Henry Paulson talks about his memoir, on the brink. [applause] first of all, i want to thank you for coming. You honor us, and i should declare right off the bat that im a friend of hanks, have been so for some years. I admire him when he before he took the job, i admire him a lot more after the job hes done as secretary of treasury. The name of this book is on the brink, and thats exactly where we were in september and october of 2008. At that time our economy, our financial world went into cardiac arrest. And we had four people in the operating room that we were very fortunate as a country to have in place. We had hank, we had ben bernanke, we had tim geithner, and we had sheila bair, the head of the fdic. I really, i know a lot of people in finance, i know a lot of people in business, and i know people in government. And i cant think of four that would have done a better job of getting us through that. Now, its kind of fashionable now to look back and pick at one little aspect or another of what was happening then, but our countrys Financial System froze up during that period. Some of you in this room were at a party i was at in september of 2008 when the talk was our money market are money market funds safe. Now, when you have 3. 5 or more trillion of funds held by 30 Million People who on a sunday night are worrying about whether they can get their money, that money was half of all the deposits held by u. S. Banks at the time. You have a panic. You had commercial paper freeze up entirely, and you have some of the Biggest Companies in the United States and is some of them are described in this book that worried about whether they were going to meet their payrolls in a horse period of time. You had the sixth short period of time. You had the sixth largest bank in the country, Washington Mutual, fail over a weekend. You had the Third Largest bank, wachovia, that needed a shotgun marriage on a monday porn morning to monday morning to survive. Most interestingly, this book starts in Early September when freddie mac and fannie mae, essentially, were broke. Here are two institutions that guaranteed 40 or so of all the Residential Mortgages in the United States, whose debt was held all over the world in very significant amounts including by foreign governments that would not have taken kindly to a default, freddie or fannie. You had them honing a very large portfolio of mortgages themselves. And like i say, in Early September they both were broke. Its worth noting for those who take shots at some of the people who were operating during september and october that those two institutions, freddy and fannie, were chartered by congress and were ruled by congress. And for those who have heard them criticize the leverage in the banking system, it should be also noted that they allowed freddie and fannie to operate with a 40 to 1 leverage ratio, and they let them guarantee over 100 times the amount of capital they had in mortgage guarantees. So these two institutions, which were vital to the Mortgage Market and vital to the very integrity of the United States and which had received and this complicated hanks problem in a very short period before september the Watchdog Agency that congress had established to watch these two agencies had given them a clean bill of health. And that clean bill of health, it might be pun to go back and read that now fun to go back and read that now. Well, lets get on to hanks book. You know, when i got this book, i got it a little early, and i expected to learn a lot about the financial crisis, and i did. But i didnt realize that id also learn something about how to attract women. [laughter] its a little late, i realize. [laughter] hank had a surefire approach which when he took wendy out on their first date in boston, i would like you to describe it. If you even want to elaborate on it a little bit, hank, id like to hear about it. Let me say before i do that, warren, frawcialg im delighted to be here first of all, im delighted to be here in omaha. Again, ive been a longtime friend and admirer of warrens, and he was just a real pillar of strength and a source of strength for me during the credit crisis. Now, warren was referring to something in the book. I was not a model of maturity when i was a senior at dartmouth college. My first date with wendy, we were at the boston pops, and she wasnt very impressed when i made my program into a paper plane and sailed it at arthur feedler. Did you hit him . Whether no. [laughter] she gave me another chance. But didnt she go home early that night . Yeah, yeah. [laughter] yeah, she went home early that night. Fortunately, he got a second chance. Youre right. And, hank, tell us a little bit about, you know, hanks a he says in the book, you know, im a tough guy. I forget at what point you said that, but he also he was a wrestler in high school, he was all ivy at dartmouth, but when the president asked him to become secretary of the treasury, hanks initial reaction was not to do it. But he decided to do it. But he had one big worry, and i think this crowd might be interested in knowing what makes a grown man tremble. Warren is talking about my mom. [laughter] im quite close to my mother. Shes a strong woman. Shes very engaged and interested in politics and policy. And she was not an admirer of george bush and very unhappy with the war, very interested in womens issues and is so on. And so there had been a fair amount of peculation in the press that i speculation in the press that i might go to washington. And i had turned down the opportunity a couple of times, and i assured her that i was not going to go because i had no intent of going. But then when i had reversed myself and decided very suddenly it was the right thing to do not to say no to my country, i was in illinois where we live and still have our primary residence, and i was there op memorial day on memorial day weekend because the president was going to make the announcement on the tuesday after memorial day weekend. So i was going to see my mom. Unfortunately at church, we were at church together, i had a long totime friend ask me longtime friend ask me about what i was doing next, and i told her. Of course, she went up to my mom and said, isnt this great, marianna. And mom didnt think it was great. So when i arrived up to tell my mom, she already had known about it, and she was and i didnt see her sob that much, but she was sobbing and very angry. Angry and crying. And said to me that id started with nixon, and now be i was going to end up with bush, and i deserved everything i got [laughter] and that i was jumping on a sinking ship. But i will say, i will say this, though, in the end i say that by the time id finished in washington, my mother had a different opinion of george w. Bush. But of it was a, its not a good way to start off. And wendy wasnt much happier with me. So hank, one of the most interesting things i found in the book, and id not heard a word about this before, was your account of how top russian officials had goon to some had gone to some chinese officials with the suggestion, essentially, that they start dumping the bonds of the public freddie and fannie at that time. That almost sounds like a bear raid. I thought that was the sort of thing that just the evil guys on wall street did. Tell me about that. Well, it never happened. But we were very, very concerned about stabilizing fannie and freddie. Because as warren said, there was 5. 4 trillion of securities that were either insured or issued directly by these institutions. Highly levered institutions, and these securities were held i think about 1. 7 trillion outside of the u. S. The biggest portion was inside the u. S. And we had id been trying to get reform legislation are Congress Beginning in 2006 and to get the kinds of reforms we needed, but we were unable to get action until they were just on the edge. And so we were able to go to congress, get the authorities. And then as we needed to really spend time poring over their books, understanding the financial situation. Well, i had in the book i leak out that i was in china for the olympics, and there i had it was given to understand that the chinese had been approached by the russians who with the suggestion that maybe they could sell some of the securities together maybe to test our resolve. Who knows, who knows why. But that got why do you think . Well, i would say probably to just i dont know why. But wed had so many conversations with the russians, the chinese and everyone else i just knew that just any kind of sudden selling would have really spooked the markets. And i would say it never happened, but it was a, you know, when some people say to me just about everything bad that could have happened did happen, i say not quite. It felt that way sometimes, but, you know, we i worried about another possibility of a sudden decline in the dollar or there were other things that never happened. And one of biggest concerns i had was getting fannie and freddie stabilized. And, in a sense, we tell the story of how very suddenly we put them boo conservatorship which was, essentially, guaranteeing their debt. Because it was, it was, in essence, an implicit obligation by the United States of america. It was sort of like the banks had their conduits which are off Balance Sheet and with implicit guarantees. Thats a little bit like what fannie and freddie were. And we were racing against time to stabilize those before we knew some bad earnings were going to be coming out from the Banking Sector and particularly the Lehman Brothers losses. So that was a race against time. And i was fortunate, we were fortunate that we were able to get it done without the markets becoming spooked or unsettled. So thats why i was, you know, why that, what id heard in china got my full attention. Theres a frontpage story in the journal this morning about freddie and fannie, and its very much worth reading. And i believe it said that theres now 111 billion thats within put in thats been put in by the federal government, but its expected much more will. So, in effect, it presently looks like the federal government will lose more money in freddie and fannie than in aig by some margin. Well, warren, i look at these programs overall, okay . We will get every penny we put into the banks back and with a profit. Yeah, i think youre right. And i think when you look at all the other programs, we may be surprised what we get back. And actually even on freddie and fannie, im thinking the fed will make a lot of money by buying and holding those securities. But youre right in terms of the losses. And to me, the important thing about freddie and fannie is right now the u. S. Needs them playing the role theyre playing. But one of the things that got us into this problem is not just freddie and fannie, but if you look at all of our, the weight of all of our programs to stimulate housing, and it just has gone too far. And freddie and fannie are not going to be able to stay in their present form. Its a they need to be, i their Mission Needs to be shrunk, they need to be restructured in very, very fundamental ways. But right now we need them where they are. But i think how we, how we unwind in this situation is going to be very important. When you were getting grilled by congress and they would point out how there was too much leverage in the banking system, did you ever get tempted to say that the institution they ran had most leverage of all . I got tempted to say a lot of things, juan. [laughter] but i warren. But i resisted that temptation. One of the things i am pleased about is that i was able to build enough relationships on both sides of the aisle that congress did act before the system collapsed. And if it had collapsed, we would have easily had 25 up employment in this country. It would have been a terrible situation. And the crisis the book is very, is to a large extent the story of the collision of Market Forces and political forces. And the crisis came at, in many ways, the worst time with an election on the horizon. And so what i needed to do was to get action there be congress from congress. And actually what we got on freddie and fannie which was unlimited authorities, i used the word specified. I liked it. It sounded better. But we needed those. Yeah. I had to keep reminding people that i didnt design this thing and didnt create it. Hank, you had relations with the chinese long before this, ask and you used them to good effect during the crisis. I think you told me youd been to china maybe 70 times or so. What would be the american publics greatest misconception about the chinese and their Economic System . Well, i do believe theres a lot of mess conceptions misconceptions americans have even about our own Economic System. And so, but i think that the thing that we all need to keep in mind is were operating in a global economy, and so when other important economies dont do well, it hurts us. Just like when we dont do well, it hurts others. And so the worst thing that could happen to us and that could have happened to us during the crisis would be to have had the chinese economy faulter and stop growing faulter and stop growing fault falter and stop growing. And looking ahead, we need china to keep doing well. We its in our best interests to have them keep doing well. Now, there are plenty of differences, and there are differences in the economic area and in other areas. But i think the most important thing for americans to understand is that there is a relationship where were both, to the a large extent, dependent upon other. We, of course, in the u. S. We dont save enough. Excuse me. Can you hear me okay . So in the u. S. We dont save enough. We have a tendency to save too little as a people and as a nation be we borrow too much. And so we, you know, chinese be savings and chine