May 21, 2014 - Timothy Geithner

  • 05/21/2014

Mitch McConnell defeats the Tea Party in Kentucky's Republican primary, Jason Jones explores India's media, and Timothy Geithner defends the handling of the financial crisis.

>> Jon: WELCOME TO "THE DAILYSHOW"! MY NAME IS JON STEWART.

OH WE'VE GOT A GOOD SHOW FOR YOUTHIS EVENING. MY GUEST TONIGHT,

FORMER SECRETARY OF TREASURY TIMGEITHNER, WILL BE HERE,

AUTHOR OF THE NOVEL, WELL BOOK,"STRESS TEST."

I CAN'T WAIT TO FIND OUT WHATIT'S ABOUT.

(LAUGHTER)OFF THE TOP, AN APOLOGY.

LAST NIGHT, I MAY HAVEINADVERTENTLY MADE SOME

DEROGATORY REMARKS TOWARDSPHILLIES MANAGER RYNE SANDBERG

AND THE ENTIRE CITY OFPHILADELPHIA. AND WHILE A CITY

THAT FAMOUSLY BOOED AND THREWSNOWBALLS AT SANTA CLAUSE

MAY DESERVE SOME SHADE, IHURT SOME PEOPLE THAT I CARE

ABOUT VERY MUCH, INCLUDING, ONE,PHILIP E. PHANATIC.

PHILLY THEY CALL HIM.

NOW OBVIOUSLY THERE'S NO NEED TOREHASH WHO CALLED WHO

"A (BLEEP) UP JIM HENSONREJECT LOOKING PIECE OF

(BLEEP)."

THE POINT IS, IT WAS SAID.

MOST LIKELY BY THE ONE OF US WHODOESN'T HAVE A BLOW TICKLER IN

PLACE OF A FUNCTIONING LARYNX.

HOWEVER, AFTER OUR TAPING, IREALIZED THAT "MY" PREFERRED

BASEBALL CLUB, THE NEW YORKMETROPOLITANS HAS A MASCOT

ALSO INHABITS THE NETHERWORLDTWIXT HUMAN AND ANIMAL.

HE HAS A GIANT BASEBALL INSTEADOF A HEAD.

WHY AN INDIVIDUAL WITH THATCONDITION WOULD TAKE A

JOB IN A PLACE WHERE HE ISSURROUNDED ALL DAY

BY BATS, SEEMS LIKE A RECIPE FORTROUBLE.

THE POINT IS, I'M APOLOGIZE IF IOFFENDED MR. PHANATIC.

I KNOW HOW DIFFICULT YOUR LIFEHAS BEEN SINCE THAT SEX TAPE

CAME OUT.

SERIOUSLY, WAS THAT THE CARDINALMASCOT IN THE CORNER

PLEASURING HIMSELF. I DON'TKNOW HOW THAT GUY GOT IN THERE.

WITH THAT OUT OF THE WAY, WETURN TO THE MIDTERM ELECTIONS

AND OUR CONTINUING COVERAGE OF"DEMOCALYPSE 2014:

THE RACE TO CONTINUEDINCUMBENCY."

YESTERDAY SAW PRIMARY VOTES INSIX STATES.

BUT NOT YOUR USUAL, BORINGPRIMARIES.

THIS TIME, THE FUTURE OF THEREPUBLICAN PARTY WAS ON THE

LINE.

>> IS THE TEA PARTY OVER?

ACROSS THE NATION,ESTABLISHMENT REPUBLICANS

SEEMINGLY TAMED THE TEA PARTY.

>> THE ESTABLISHMENT WON LASTNIGHT.

>> THE TEA PARTY REPUBLICANSTHEY GOT SPANKED. SHELLACKED.

>> PURPLE NURPLED! SWIRLIED.THROUGHOUT THE NATION TEA PARTY

TITTIES WERE TWISTED. FORPROOF THE TEA PARTY IS

FINISHED, LOOK TOFURTHER THAN KENTUCKY.

>> MCCONNELL WAS THE NUMBER ONEREPUBLICAN TARGET FOR TEA PARTY

>> MCCONNELL WAS THE NUMBER ONEREPUBLICAN TARGET FOR TEA PARTY

GROUPS AROUND THECOUNTRY. AND HE EASILY

BEAT BACK MATT BEVIN, A SELFSTYLED TEA PARTIER.

>> Jon: I BELIEVE WE HAVESOME FOOTAGE FROM THAT

RACE!

>> BUT I JUST LEFT YOU! HOW DIDYOU GET UP HERE ANYWAY?

>> OH, UH, JUST RUNNIN'.

>> AND ALSO I GOT A MILLIONDOLLARS FROM THE CHAMBER OF

COMMERCE, SO THAT HELPED.

AH YUP.

>> MITCH MCCONNELL, THE ULTIMATEMAINSTREAM ESTABLISHMENT

REPUBLICAN, HANDILY DEFEATINGTHE TEA PARTY EXTREMISTS. ONCE

MORE KEEPING OUR GOVERNMENT OUTOF THE HANDS OF CRAZIES WHO SAY

THINGS LIKE PRESIDENT OBAMA IS"DESTROYING THE CONSTITUTION."

>> THE PRESIDENT OF THE UNITEDSTATES IS TREATING OUR

CONSTITUTION WORSE THAN APLACEMAT AT DENNY'S.

>> OR THOSE INSANE PEOPLE WHOSAY WE HAVE TO REPEAL OBAMA

CARE!

>> IF I HAD MY WAY ABOUT IT, WEWOULD REPEAL OBAMACARE.

>> OR JUST THE GENERAL TEAPARTY, OBSTRUCTIONIST, PISTOL

WAVING ALARMIST RHETORIC!

>> GOVERNMENT SPENDING ISCOMPLETELY AND TOTALLY OUT OFCONTROL.

>> THIS IS RUNAWAY GOVERNMENT ATITS WORST.

>> OBAMACARE IS THEWORST LEGISLATION PASSED IN THE

LAST HALF CENTURY.

DENY OBAMA A SECOND TERM.

STOP THIS TRAIN WRECK.

(APPLAUSE)>> Jon: SO, YEAH, TAKE THAT

TEA PARTY!

DOESN'T SEEM LIKE THE TEA PARTYIS SO MUCH LOST AS FOUND A NEW

HOST!

BY THE WAY OUR OWN JASON JONESRECENTLY WENT TO INDIA TO

EXPORT OUR OWN AMERICAN STYLEPOLITICS TO THEM.

TURNS OUT THE WORLD'S LARGESTDEMOCRACY ALREADY HAS AN

ELECTORAL SYSTEM THEY'RE PRETTYHAPPY WITH.

>> I CAME TO INDIA TO GIVE 1.2BILLION PEOPLE A LESSON IN

DEMOCRACY, BUT IT TURNS OUT THEYDIDN'T NEED ONE WHICH MADE ME

SAD, DOWNTRODDEN UNTIL I SAWTHIS. (ARGUING)

THEIR DEMOCRACY MAY BE GREAT BUTTHEIR NEWS WAS WORSE THAN OURS.

SUDDENLY, I HAD NEW PURPOSE, IHAD TO SAVE THEM FROM THE PATH

THEY WERE ON.

HEY, CAN I SPEAK WITH YOURYOUR BIGGEST NEWS DOUCHE?

LOOK ANY BIG, BLOVIATINGTALKING HEAD.

LET ME TALK TO THAT GUY.

YEAH, I'M FROM AMERICA.

I'LL JUST GO SEEHIM. AND HE WAS CNN IBN

EDITOR-IN-CHIEF RAJDEEPSARDESAI.

>> Jon: CNN IBN, IS THATRELATED OUR (BLEEP) CNN?

>> YEP, UNFORTUNATELY.> OH, IT IS.

>> OR FORTUNATELY.

>> FORTUNATELY? YOU SAIDUNFORTUNATELY.

>> NO, I SAID FORTUNATELYBECAUSE I THINK IT IS GREAT TO

HAVE A BRAND NAME LIKE CNN.

>> IT'S NOT A GREAT BRAND NAME.

>> THIS IS NOT ON AIR RIGHT?

>> THIS, THIS RIGHT NOW? NO ITIS.

>> OH IT IS?

OKAY.

IT'S A TERRIFIC BRAND NAME.

>> A NEWS BRAND THAT PROUDLYCHANGES THE ACTUAL NUMBER OF

VOTERS IN INDIA FROM 815 MILLIONTO 1 BILLION BECAUSE IT SOUNDS

BETTER.

>> IF I SAID 800 MILLION YOUWOULDN'T REMEMBER IT.

I SAY A BILLION, YOU REMEMBERIT.

>> RIGHT, I'LL REMEMBER THATIT'S WRONG.

>> IT'S A GOOD AMERICAN WAY OFDOING THINGS.

>> WHAT? THE WRONG WAY?

>> NO, BRAND RECALL.

THE AMERICANS LOVE BRAND RECALL.

>> DO NOT USE US AS AN EXAMPLE,ALL WE DO ON AMERICAN TELEVISION

NEWS IS SHOUT AT EACH OTHER.

>> WE DO A LOT OF THAT.

PEOPLE LIKE NOISE, I'M TOLD, ONTV.

>> THEY DON'T.

BUT OUR NEWS NOISE ISN'T THEONLY PRODUCTION ELEMENT THEY

ENVY.

>> I THINK YOU MAKE TERRIFICGRAPHICS AT ELECTION TIME.

ALL THE GIZMOS. I LOVETHE AMERICAN GIZMOS.

THE HOLOGRAMS. WE'RE TRYING TOBUILD A BIG VIDEO WALL.

>> DO YOU REALLY WANT THAT?

>> YEAH, I LIKE THAT.

>> AND, INDIA IS USING THISTECHNOLOGY TO DELIVER NEWS IN

THE MOST CONFUSING WAYSIMAGINABLE.

♪♪>> I'D LIKE TO BELIEVE INDIAN

TELEVISION IS ACTUALLY BETTERTHAN MOST PEOPLE BELIEVE IT IS.

>> YOU DON'T READ TWEETS ON THEAIR, DO YOU?

>> I LOVE THEM!HASHTAGS! TRENDING!

WHAT'S TRENDING.>> NO.

>> OH, THEY'RE FANTASTIC.

>> HE LOVES TWEETS SO MUCH HETAKES THEM FROM EVERYONE, EVEN

ADOLPH HITLER. BUT THE ONE THING

AMERICAN NEWS HAS THAT RAJDEEPWANTS MOST IS --

>> I'D LOVE TO HAVE MORE ANCHORSTHAT LOOK LIKE SOME OF YOUR

AMERICAN ANCHORS.>> YOU WANT PRETTIER ANCHORS.

>> YEAH, I'D LOVE TO HAVEPRETTIER ANCHORS.

>> BUT YOU WOULD BE OUT OF AJOB.

>> THAT'S OKAY.

I LOVE THEM!

I LOVE THEM.

>> SO INDIA'S CABLE NEWS IS ATERRIBLE LOUD MESS. LUCKILY,

INDIANS LOOKING FOR IN-DEPTHREPORTING NEED TO ONLY TURN TO

ONE OF THEIR 93,000 REGISTEREDNEWSPAPERS. THAT'S RIGHT,

INDIA'S PRINT MEDIA FOUND ASURPRISING NEW WAY TO REMAIN

PROFITABLE.

>> ONE OF THE PROBLEMS WE HAVEENCOUNTERED RECENTLY IS THE PAID

NEWS.

LOOKS LIKE A NEWS STORY AND ITHAS BEEN PAID FOR.

>> YEAH WE HAVE THAT.

THEY LABEL THEM AT THE TOP, THISIS AN ADVERTISEMENT.

>> THAT'S WHAT THEY'RE SUPPOSEDTO DO BUT THAT IS WHAT

THEY'RE NOT DOING ANYMORE.>> IN LEGITIMATE PAPERS?

>> EVEN BIG PAPERS.

OPINION POLLS ARE ALSOMANUFACTURED LIKE THAT.

>> YOU CAN BUY OPINION POLLS?

>> YOU CAN BUY OPINION POLLS.

>>THAT'S CRAZY! >> YES.

>> AND INDIAN JOURNALISTS LIKE

THE MILLENNIUM POST'SPUJA GUPTA ARE UNDERSTANDABLY

OUTRAGED BY THIS UNETHICALPRACTICE.

I CAN JUST GO OUT AND BUY ASTORY WRITTEN BY MYSELF?

>> YEAH.

>> BUT THAT'S SO WRONG.

>> FAKENEWS IS WRONG.

>> IT'S GROSS.

>> YES, YES. I TOTALLY, TOTALLYOPPOSE IT.

>> SO, WOULD YOU WRITE A STORYABOUT ME?

>> IF YOU PAY ME MONEY.

>> SO, I TOSSED THE MILLENNIUMPOST $2,500 AND WE GOT DOWN TOBUSINESS.

>> FIRST QUESTION IS WHY ARE YOUINTERESTED IN INDIAN POLITICS?

>> I'M ACTUALLY NOT INTERESTEDIN INDIAN POLITICS, BUT CAN YOU

MAKE IT SEEM LIKE I AM?

>> I CAN DO THAT.

>> JUST LIKE, I'M DOING THE BESTTO COVER IT.

HOW ABOUT A POLL THAT SAYS I'MGOING TO BEST COVERAGE.

CAN YOU DO THAT?

>> I CAN DO THAT.

THIS IS A VERY PRIVATE KIND OFCONVERSATION.

>> AS A REAL JOURNALIST, YOUHAVE ETHICS.

BUT AS A PAID JOURNALIST, JUSTWRITE WHAT I'M TELLING YOU.

>> OKAY.

>> TURNS OUT IT WAS JUST EASIERFOR ME TO WRITE THE ARTICLE

MYSELF AND THE NEXT MORNING ITWAS PRINTED IN A

NATIONAL NEWSPAPERTHAT HERALDS ITSELF

AS HAVING NO HALF TRUTHS, THEREIT WAS ON PAGE 2,

A STORY THAT WAS 100% LIES.

SERIOUSLY, I REALLY DID THIS.

GO TO THIS LINK AND YOU CAN READTHE ARTICLE YOURSELF.

>> JASON JONES IS GIVING THEBEST ELECTION COVERAGE, IT SAYS.

>> THIS IS YOUR BODY?

>> THIS IS MY BODY, YES. I LOOKLIKE THAT.

DID YOU SEE TODAY'S NEWSPAPER?

>> YES. YOU ARE LOOKING SMART INTHIS PIC.

>> SMART MEANS HOT?

>> YOU ARE LOOKING HOT YES.

>> DO YOU BELIEVE THOSE?

>> NO.

I AM A JOURNALIST.

I CAN FIGURE IT OUT.

BUT THE COMMON MAN, THEY MUSTHAVE THOUGH, OKAY, THE GUY LOOKS

LIKE THIS.

>> YOU CAN'T TRUST THE MEDIA,THAT'S REALLY SAD.

>> YEAH.

>> I HAD TO GET THE WORD OUTABOUT HOW DANGEROUS PAID NEWS

WAS AND THERE WAS ONLY ONE NEWSSOURCE TRUSTED ENOUGH TO

SPREAD MY MESSAGE.

(ARGUING)>> WHY AREN'T YOU GUYS TALKING

ABOUT PAID NEWS? THAT'S WHAT YOUSHOULD BE YELLING ABOUT.

RAJDEEP CUT OFF THEIR MICS ANDTALK AND PAID NEWS.

IT'S AWFUL.

JASON JONES, WE'LL BE RIGHTBACK.

(CHEERS AND APPLAUSE)(APPLAUSE)

>> Jon: WELCOME BACK.MY GUEST TONIGHT

HE WAS THE UNITEDSTATES SECRETARY OF TREASURY

FROM 2009 TO 2013, HIS NEW BOOKIS CALLED "STRESS TEST,"

REFLECTIONS ON FINANCIAL CRISES.

WELCOME TO THE PROGRAM TIMGEITHNER!

(CHEERS AND APPLAUSE)HOW ARE YA?

LOOK AT THIS THING.

LOOK AT THIS THING.

LOOK WHAT I HAD TO CHOKE THROUGHOVER THIS PAST WEEK!

>> IT'S EXCELLENT. IT'SEXCELLENT.

>> Jon: IT IS EXCELLENT.

"STRESS TEST."

HERE'S WHERE I THINK WE SHOULDBEGIN.

IT SEEMS WHAT THIS BOOK SEEKS TODO IS CLARIFY A PERCEPTION

DIFFERENCE.

THE PERCEPTION ON YOUR END ANDMAYBE THE GOVERNMENT'S END THAT

THE BAILOUTS WORKED AND WERE THERIGHT THING TO DO AND THE

PERCEPTION ON, LET'S SAY, THEOTHER END OF PEOPLE WHO THOUGHT

THAT IT WAS THE WRONG THING TODO AND DIDN'T WORK.

SO LET'S TAKE THAT.

LET'S START WITH YOURPERCEPTION.

IT'S LIKE AN OPTICAL ILLUSION.

YOU SEE THE THING WHERE ONEPERSON LOOKS AT IT AND THEY SEE

A PRETTY GIRL AND YOU FLIP ITAND THE OTHER PERSON LOOKS AT IT

AND SEES AMERICA GETTING(BLEEP).

SO LET'S FIGURE THAT OUT.

(LAUGHTER)WHAT IS YOUR PERCEPTION OF THIS

CRISIS AND WHY WE BAILED OUT THEBANKS THE WAY WE DID?

>> THERE'S ONLY ONE REALITY.

>> Jon: ALL RIGHT.

>> OKAY.

IT WAS A TERRIBLE FINANCIALPANIC, AND THE ONLY OPTION, THE

ONLY RESPONSIBLE, JUST, MORALTHING TO DO IN THAT CONTEXT IS

TO PROTECT PEOPLE FROM THE RISKOF MASS UNEMPLOYMENT, WHICH IS

WHAT HAPPENS IN FINANCIALPANICS, UNLESS GOVERNMENTS STEP

IN AND TRY TO MAKE SURE THEYKEEP THE LIGHTS ON.

>> Jon: SO THIS WAS ABULWARK -- YOU HAVE DESCRIBED IT

AS THERE WAS A PLANE GOING DOWN,THE ARSONISTS WERE ON THE PLANE,

IT WAS ON FIRE -->> IF IT WAS JUST THE ARSONISTS,

YOU COULD LET THE PLANE CRASH,IT DIDN'T MATTER.

>> Jon: I SEE.

>> THE PROBLEM WAS, THERE WERE ABUNCH OF INNOCENT VICTIMS ON THE

PLANE WITH THEM --

>> ON THE PLANE WITH THEM,THAT'S THE AMERICAN PEOPLE.

WE'RE ON THE PLANE WITH THEM.

>> AND YOUR FIRSTOBLIGATION IS TO FIGURE OUT HOW

TO LAND THAT PLANE SAFELY.

>> Jon: I SEE.

>> THAT'S NOT YOUR ONLYOBLIGATION BECAUSE, ONCE YOU DO

THAT, YOU'VE GOT TO GET THEECONOMY GROWING AGAIN, YOU WANT

TO TRY TO MAKE PEOPLEACCOUNTABLE FOR THE MISTAKES

THEY MADE, FIX THE SYSTEM SO ITDOESN'T HAPPEN AGAIN, BUT THE

FIRST OBLIGATION IN THE PANIC ISTO MAKE SURE YOU DO WHATEVER IT

TAKES TO PROTECT THEM FROM WHATWE SAW IN THE GREAT DEPRESSION

WHICH WAS 25% UNEMPLOYMENT ANDBREAD LINES FOR A DECADE. AND IF

YOU, IN THAT CONTEXT, YOU HAVETO DO THE OPPOSITE OF WHAT

SEEMS INTUITIVE AND FAIR.

YOU HAVE TO MAKE SURE THATYOU'RE PREVENTING PEOPLE FROM

RUNNING FROM THE SYSTEM, THESYSTEM FROM COLLAPSING.

>> Jon: YOU DON'T WANT THESYSTEM TO COLLAPSE.

>> WE DON'T DO IT FOR THE BANKSOR THE BANKERS.

>> Jon: RIGHT.

>> YOU DO IT TO PROTECT THEMFROM THEIR MISTAKES.

>> Jon: HERE'S WHERE I GUESSTHE PERCEPTIONS BEGIN TO SHIFT,

BECAUSE I THINK THAT'S ACOMPELLING CASE, THAT YOU'RE

BEING TOLD THIS ECONOMY IS GOINGTO CRATER AND THAT EVEN THOUGH

THE ARSONISTS ARE ON THE PLANEWITH US, WE HAVE TO LAND THE

PLANE.

THEN IT FELT LIKE YOU TOOK THEARSONISTS OFF THE PLANE AND GOT

THEM A MASSAGE AND A STEAKDINNER.

(APPLAUSE)(LAUGHTER)

SO THE PLANE HAS NOW LANDED ANDOUR CLOTHES STILL SMELL LIKESMOKE.

>> IT'S WORSE THAN THAT.

THEY WENT AND BOUGHT THEMSELVESA MASSAGE AND A NICE DINNER

>> Jon: ON US.>> ON US, ON US.

>> Jon: BUT WE CONTINUED TO --

>> AND THE COUNTRY WASSTILL BURNING.

>> Jon: THAT IS CORRECT.

AND CONTINUES TO THIS DAY TO LAGBEHIND IN RECOVERY IN LARGE PART

BECAUSE THE HOUSING MARKETHASN'T REALLY COME BACK.

WE HAVE THESE 8 TO10 MILLION HOMES STILL

UNDERWATER AS THEY CALL IT.

>> ACTUALLY, ACTUALLY JUST ONCOMPARISON, THE WORLD'S HAD LOTS

OF EXPERIENCE WITH FINANCIALCRISES,

THIS IS NOT LIKE A HYPOTHETICALTHING, IT'S TRAGIC.

>> Jon: NO, IT HAPPENS OVER ANDOVER.

>> IT'S DEVASTATING.

IF YOU LOOK AT THE RECORD OFTHIS ECONOMY, AND IT'S STILLVERY

HARD AND THERE IS STILL A LOT OFTRAGIC PAIN LEFT OVER FROM THIS

STUFF, BUT THE RECORD OF THISRECOVERY IS VERY GOOD AGAINST

THE LAST CENTURY OF COUNTRIESCOMING OUT OF THESE CRISES.

>> Jon: NOT FOR UNEMPLOYMENTNECESSARILY.

IT SEEMS VERY GOOD FOR THEBANKING SYSTEM AND THE DOW.

>> IT DOESN'T MATTER WHAT ITMEANS FOR THE BANKING SYSTEM.

WHAT MATTERS IS DID THEECONOMY GET GROWING AGAIN AND

DID YOU GET PEOPLE START TO COMEBACK TO WORK.

HOW QUICKLY DID THAT HAPPEN?

>> Jon: DIDN'T THAT LAG BEHINDOTHER RECOVERIES?

>> NOT AGAINST RECOVERIESFOLLOWING FINANCIAL PANICS LIKETHIS.

>> Jon: ARE YOU TALKING ABOUT1929.

>> NO, NOT JUST 1929, BUT IF YOULOOK AT THE RECORD OF -- WE HAD

A BUNCH-EMERGING MARKETS FALLOFF THE CLIFF IN THE '90s.

ALMOST GREAT DEPRESSION-LIKEOUTCOMES.

SO, IF YOU LOOK AT ABROAD MEASURE OF THOSE

THINGS. NOW THAT'S NOT TOSAY IT'S GOOD ENOUGH.

IT COULD HAVE BEEN SUBSTANTIALLYSTRONGER AND IT WASN'T STRONGER

MOSTLY BECAUSE WE HAD A LITTLEPREMATURE FEVER OF AUSTERITY IN

THIS COUNTRY AND FISCAL POLICYTURNED TOO TIGHT TOO SOON, CUT

SPENDING PRETTY SAVAGELY WHENTHE ECONOMY WAS STILL PRETTYWEAK.

>> Jon: WITHIN IN THE PUBLICSECTOR.

>> IN THE PUBLIC SECTOR IN THEGOVERNMENT AND THAT SUCKED A LOT

OF GROWTH OUT OF THE COUNTRYWHEN WHAT WE NEEDED WAS MORE

ACCELERATED LONGER.

>> Jon: I WANT TO TALK TO YOUNEXT ABOUT THE PERCEPTION THAT

THOSE WHO FEEL THE BAILOUT WASUNFAIR AS BEING POPULOUS

RAMPAGERS VERSUS THE REALITY OFTHE UNFAIRNESS OF IT.

WE'LL BE BACK WITH SECRETARYGEITHNER AFTER THE BREAK RIGHT

AFTER THIS.

>> Jon: OKAY.WELCOME BACK

SO WE'RE HERE, WE'RE TALKINGWITH FORMER SECRETARY OF

TREASURY TIMOTHY GEITHNER.

SO THIS GETS INTO OUR NEXTELEMENT WHICH IS THE PERCEPTION

AMONGST THE ENGINEERS OF THEBAILOUT THAT THEY ARE BEING

UNREASONABLY CASTIGATED.

>> NO, I DON'T THINK IT'SUNREASONABLE.

IT WAS DEEPLY UNFAIR.

THE RESCUE ITSELF AT ITS CORE ISA FUNDAMENTALLY UNFAIR THING,

EXCEPT -->> Jon: CORRECT.

-- EXCEPT RELATIVE TO THEALTERNATIVE OF LETTING THE

SYSTEM BURN DOWN.

>> Jon: THAT SEEMS LIKE AFALSE CHOICE.

>> IT'S NOT A FALSE CHOICE.

>> Jon: YOU DON'T BELIEVE THEBAILOUT COULD HAVE BEEN

ENGINEERED IN ANY OTHER WAY THANTHE ONE WE DID IT, OTHERWISE WE

HAVE A DEPRESSION.

>> I KNOW IT'S HARD.

IT'S HARD TO ACCEPT, EXCEPTTHERE'S BEEN A GREAT HISTORY OF

MISTAKES AND ERRORS OF COUNTRIESTRYING TO HAVE IT ALWAYS DO IT

DIFFERENTLY WHICH WOULD HAVEBEEN DRAMATICALLY MORE DAMAGING

FOR THEIR COUNTRIES.

THE IDEA THAT THIS COULD HAVEBEEN A MUCH STRONGER RECOVERY

AND LESS DAMAGING IS MOSTLY NOTABOUT THE DESIGN OF THE RESCUE.

BECAUSE THE RESCUE WAS VERYEFFECTIVE, IT DID THE ESSENTIAL

THING, MUCH MORE EFFECTIVE --

>> Jon: DIDN'T IT JUSTREINFLATE A TOXIC SYSTEM?

>> NO.

>> Jon: THE BANKING SYSTEM WASTOXIC, YES?

>> ABSOLUTELY.

>> Jon: WE PUT A TREMENDOUSAMOUNT OF MONEY BACK INTO IT TO

MAKE THEM WHOLE WHILE KIND OFIGNORING THE HOME OWNER SECTION.

>> WELL, THERE'S SOMETHING TOTHAT BUT LET ME GIVE YOU A

SLIGHTLY DIFFERENT PERSPECTIVEON THAT

(LAUGHTER)IN EFFECT, WHAT HAPPENED --

>> Jon: ALL RIGHT.

>> WE LET THIS CRISIS, INSOME WAYS, BURN TOO HOT.

AND I KNOW PEOPLE DON'T FEELTHIS, DON'T SEE IT, BUT, IN

EFFECT, THE REASON WHY THIS WASSO SEVERE IS BECAUSE WE LET THAT

PANIC GET TO MOMEMTUM AND, INSOME WAYS, WE ALLOWED TOO MUCH

FAILURE AND CRUSHING FAILUREACROSS THE SYSTEM.

NOW, AFTER THE WE BROKE THEPANIC, WE DID FORCE THEM TO

RAISE A BUNCH OF CAPITAL, PAYBACK THE TAXPAYER, UNWIND ALL

THOSE PROGRAMS.

>> Jon: LET'S TALK ABOUTFORCING THEM, BECAUSE I THINK

THAT'S AN INTERESTING WAY OFPHRASING IT BECAUSE WHAT WE DID

IS WE GAVE THEM THAT MONEY ANDTHEN WE OPENED UP A DISCOUNT

WINDOW GO TO AND BORROW AT0%, TURN AROUND AND BUY

TREASURIES AT 3% AND BASICALLYCREATE --

>> NOT QUITE.

LET ME SAY IT SLIGHTLYDIFFERENTLY.

>> Jon: OKAY(LAUGHTER)

>> WHAT WE DID -->> Jon: THEY GAVE US $100, AND

WE GAVE THEM $103.

>> LET ME SAY IT DIFFERENTLY.

>> Jon: ALL RIGHT.

>> WE DID WHAT YOU HAVE TO DO INA PANIC, OKAY, WHICH IS WE, FOR

A PRICE, FOR A FEE -->> Jon: 5%.

>> WELL, SOMETIMES IT WASCHEAPER THAN THAT, SOMETIMES IT

WAS MORE EXPENSIVE THAN THAT. WEGAVE THEM A SET OF PROTECTIONS

WHICH WE MADE THEM PAY FOR ANDWE MADE THEM PAY THE TAXPAYER

BACK. AND THE TAXPAYER EARNED APROFIT ON THOSE PROGRAMS

WHICH ARE GOING TO BE WORTH WELLTO $100 BILLION.

>> Jon: THAT SUGGESTS THEDAMAGE TO OUR ECONOMY WAS MERELY

THE TAXPAYER IS ON THE HOOK -->> NO, IT'S TO SUGGEST THAT IF

PEOPLE PERCEIVE THIS TODAY STILLAS IF WE WENT AND GAVE THEM

MONEY THAT THEY WERE NEVER GOINGTO SEE AGAIN THAT WE DIDN'T NEED

TO DO.

>> Jon: I HONESTLY HAVE NOIDEA HOW WE EDIT THIS.

SO I AM GOING TO SAY, LIKE, TIMGEITHNER, THANK YOU SO MUCH!

(APPLAUSE)THERE IS SO MUCH ON THE WEB

RIGHT NOW ON THIS, I DON'T KNOWIF WE BROKE THE WEB OR NOT, BUT

THE THE BOOK IS CALLED "STRESSTEST."

TIMOTNY GEITHNER WROTE IT, WASTHE SECRETARY OF TREASURY.

IT'S A VERY INTERESTING READ.

I ACTUALLY SAY THIS, IT'S AREALLY WELL-WRITTEN BOOK AND

EASY TO UNDERSTAND AND YOU CANYELL AT CERTAIN PAGES, IF YOU

WANT.

(LAUGHTER)BUT THANK YOU SO MUCH FOR

STOPPING BY AND SPENDING ANINORDINATE AMOUNT OF TIME WITH

US.

TIMOTNY GEITHNER, THANK YOU FORBEING HERE.

(APPLAUSE)♪♪

(CHEERS AND APPLAUSE)>> Jon: WHAT IF WE

RECOLLATERALLIZED THE BANKSAND -- AND -- AND -- UH...

THATS OUR SHOW.

HERE IT IS, YOUR MOMENT OF ZEN.

>> I LIKE FULL-FIGURED -- I'M ALATINO MAN.

>> THERE YOU GO, HE LIKESTHEM LATIN LIKE RIGHT OVER

HERE. YOU LIKE THE CURVES!

>> Jon: YEAH, BABY, THAT'SWHAT I'M TALKING ABOUT.

>> Jon: WELCOME BACK.MY GUEST TONIGHT

HE WAS THE UNITEDSTATES SECRETARY OF TREASURY

FROM 2009 TO 2013, HIS NEW BOOKIS CALLED "STRESS TEST,"

REFLECTIONS ON FINANCIAL CRISES.

WELCOME TO THE PROGRAM TIMGEITHNER!

(CHEERS AND APPLAUSE)HOW ARE YA?

LOOK AT THIS THING.

LOOK AT THIS THING.

LOOK WHAT I HAD TO CHOKE THROUGHOVER THIS PAST WEEK!

>> IT'S EXCELLENT. IT'SEXCELLENT.

>> Jon: IT IS EXCELLENT.

"STRESS TEST."

HERE'S WHERE I THINK WE SHOULDBEGIN.

IT SEEMS WHAT THIS BOOK SEEKS TODO IS CLARIFY A PERCEPTION

DIFFERENCE.

THE PERCEPTION ON YOUR END ANDMAYBE THE GOVERNMENT'S END THAT

THE BAILOUTS WORKED AND WERE THERIGHT THING TO DO AND THE

PERCEPTION ON, LET'S SAY, THEOTHER END OF PEOPLE WHO THOUGHT

THAT IT WAS THE WRONG THING TODO AND DIDN'T WORK.

SO LET'S TAKE THAT.

LET'S START WITH YOURPERCEPTION.

IT'S LIKE AN OPTICAL ILLUSION.

YOU SEE THE THING WHERE ONEPERSON LOOKS AT IT AND THEY SEE

A PRETTY GIRL AND YOU FLIP ITAND THE OTHER PERSON LOOKS AT IT

AND SEES AMERICA GETTING(BLEEP).

SO LET'S FIGURE THAT OUT.

(LAUGHTER)WHAT IS YOUR PERCEPTION OF THIS

CRISIS AND WHY WE BAILED OUT THEBANKS THE WAY WE DID?

>> THERE'S ONLY ONE REALITY.

>> Jon: ALL RIGHT.

>> OKAY.

IT WAS A TERRIBLE FINANCIALPANIC, AND THE ONLY OPTION, THE

ONLY RESPONSIBLE, JUST, MORALTHING TO DO IN THAT CONTEXT IS

TO PROTECT PEOPLE FROM THE RISKOF MASS UNEMPLOYMENT, WHICH IS

WHAT HAPPENS IN FINANCIALPANICS, UNLESS GOVERNMENTS STEP

IN AND TRY TO MAKE SURE THEYKEEP THE LIGHTS ON.

>> Jon: SO THIS WAS ABULWARK -- YOU HAVE DESCRIBED IT

AS THERE WAS A PLANE GOING DOWN,THE ARSONISTS WERE ON THE PLANE,

IT WAS ON FIRE -->> IF IT WAS JUST THE ARSONISTS,

YOU COULD LET THE PLANE CRASH,IT DIDN'T MATTER.

>> Jon: I SEE.

>> THE PROBLEM WAS, THERE WERE ABUNCH OF INNOCENT VICTIMS ON THE

PLANE WITH THEM --

>> ON THE PLANE WITH THEM,THAT'S THE AMERICAN PEOPLE.

WE'RE ON THE PLANE WITH THEM.

>> AND YOUR FIRSTOBLIGATION IS TO FIGURE OUT HOW

TO LAND THAT PLANE SAFELY.

>> Jon: I SEE.

>> THAT'S NOT YOUR ONLYOBLIGATION BECAUSE, ONCE YOU DO

THAT, YOU'VE GOT TO GET THEECONOMY GROWING AGAIN, YOU WANT

TO TRY TO MAKE PEOPLEACCOUNTABLE FOR THE MISTAKES

THEY MADE, FIX THE SYSTEM SO ITDOESN'T HAPPEN AGAIN, BUT THE

FIRST OBLIGATION IN THE PANIC ISTO MAKE SURE YOU DO WHATEVER IT

TAKES TO PROTECT THEM FROM WHATWE SAW IN THE GREAT DEPRESSION

WHICH WAS 25% UNEMPLOYMENT ANDBREAD LINES FOR A DECADE. AND IF

YOU, IN THAT CONTEXT, YOU HAVETO DO THE OPPOSITE OF WHAT

SEEMS INTUITIVE AND FAIR.

YOU HAVE TO MAKE SURE THATYOU'RE PREVENTING PEOPLE FROM

RUNNING FROM THE SYSTEM, THESYSTEM FROM COLLAPSING.

>> Jon: YOU DON'T WANT THESYSTEM TO COLLAPSE.

>> WE DON'T DO IT FOR THE BANKSOR THE BANKERS.

>> Jon: RIGHT.

>> YOU DO IT TO PROTECT THEMFROM THEIR MISTAKES.

>> Jon: HERE'S WHERE I GUESSTHE PERCEPTIONS BEGIN TO SHIFT,

BECAUSE I THINK THAT'S ACOMPELLING CASE, THAT YOU'RE

BEING TOLD THIS ECONOMY IS GOINGTO CRATER AND THAT EVEN THOUGH

THE ARSONISTS ARE ON THE PLANEWITH US, WE HAVE TO LAND THE

PLANE.

THEN IT FELT LIKE YOU TOOK THEARSONISTS OFF THE PLANE AND GOT

THEM A MASSAGE AND A STEAKDINNER.

(APPLAUSE)(LAUGHTER)

SO THE PLANE HAS NOW LANDED ANDOUR CLOTHES STILL SMELL LIKESMOKE.

>> IT'S WORSE THAN THAT.

THEY WENT AND BOUGHT THEMSELVESA MASSAGE AND A NICE DINNER

>> Jon: ON US.>> ON US, ON US.

>> Jon: BUT WE CONTINUED TO --

>> AND THE COUNTRY WASSTILL BURNING.

>> Jon: THAT IS CORRECT.

AND CONTINUES TO THIS DAY TO LAGBEHIND IN RECOVERY IN LARGE PART

BECAUSE THE HOUSING MARKETHASN'T REALLY COME BACK.

WE HAVE THESE 8 TO10 MILLION HOMES STILL

UNDERWATER AS THEY CALL IT.

>> ACTUALLY, ACTUALLY JUST ONCOMPARISON, THE WORLD'S HAD LOTS

OF EXPERIENCE WITH FINANCIALCRISES,

THIS IS NOT LIKE A HYPOTHETICALTHING, IT'S TRAGIC.

>> Jon: NO, IT HAPPENS OVER ANDOVER.

>> IT'S DEVASTATING.

IF YOU LOOK AT THE RECORD OFTHIS ECONOMY, AND IT'S STILLVERY

HARD AND THERE IS STILL A LOT OFTRAGIC PAIN LEFT OVER FROM THIS

STUFF, BUT THE RECORD OF THISRECOVERY IS VERY GOOD AGAINST

THE LAST CENTURY OF COUNTRIESCOMING OUT OF THESE CRISES.

>> Jon: NOT FOR UNEMPLOYMENTNECESSARILY.

IT SEEMS VERY GOOD FOR THEBANKING SYSTEM AND THE DOW.

>> IT DOESN'T MATTER WHAT ITMEANS FOR THE BANKING SYSTEM.

WHAT MATTERS IS DID THEECONOMY GET GROWING AGAIN AND

DID YOU GET PEOPLE START TO COMEBACK TO WORK.

HOW QUICKLY DID THAT HAPPEN?

>> Jon: DIDN'T THAT LAG BEHINDOTHER RECOVERIES?

>> NOT AGAINST RECOVERIESFOLLOWING FINANCIAL PANICS LIKETHIS.

>> Jon: ARE YOU TALKING ABOUT1929.

>> NO, NOT JUST 1929, BUT IF YOULOOK AT THE RECORD OF -- WE HAD

A BUNCH-EMERGING MARKETS FALLOFF THE CLIFF IN THE '90s.

ALMOST GREAT DEPRESSION-LIKEOUTCOMES.

SO, IF YOU LOOK AT ABROAD MEASURE OF THOSE

THINGS. NOW THAT'S NOT TOSAY IT'S GOOD ENOUGH.

IT COULD HAVE BEEN SUBSTANTIALLYSTRONGER AND IT WASN'T STRONGER

MOSTLY BECAUSE WE HAD A LITTLEPREMATURE FEVER OF AUSTERITY IN

THIS COUNTRY AND FISCAL POLICYTURNED TOO TIGHT TOO SOON, CUT

SPENDING PRETTY SAVAGELY WHENTHE ECONOMY WAS STILL PRETTYWEAK.

>> Jon: WITHIN IN THE PUBLICSECTOR.

>> IN THE PUBLIC SECTOR IN THEGOVERNMENT AND THAT SUCKED A LOT

OF GROWTH OUT OF THE COUNTRYWHEN WHAT WE NEEDED WAS MORE

ACCELERATED LONGER.

>> Jon: I WANT TO TALK TO YOUNEXT ABOUT THE PERCEPTION THAT

THOSE WHO FEEL THE BAILOUT WASUNFAIR AS BEING POPULOUS

RAMPAGERS VERSUS THE REALITY OFTHE UNFAIRNESS OF IT.

WE'LL BE BACK WITH SECRETARYGEITHNER AFTER THE BREAK RIGHT

AFTER THIS.

>> Jon: OK, WELCOME BACK. SOWE'RE HERE, WE'RE TALKING WITH

FORMER SECRETARY OF TREASURYTIMOTHY GEITHNER.

SO, THIS GETS INTO OUR NEXTELEMENT, WHICH IS THE PERCEPTION

AMONGST THE ENGINEERS OF THEBAILOUT THAT THEY ARE BEING

UNREASONABLY CASTIGATED.

>> NO, NO I DON'T THINK IT'SUNREASONABLE.

IT WAS DEEPLY UNFAIR. EXCEPTRELATIVE DEAL --

>> Jon: WHAT THIS IS?

>> NO, LIKE THE RESCUE ITSELF,AT ITS CORE.

>> Jon: YES.

IS A FUNDAMENTALLY UNFAIRTHING.

>> Jon: CORRECT.

>> EXCEPT, EXCEPT RELATIVE TOTHE ALTERNATIVE OF LETTING THE

SYSTEM BURN DOWN.

>> Jon: BUT, BUT THAT SEEMS LIKEA FALSE CHOICE.

>> NO, IT'S NOT A FALSE CHOICE.

>> Jon: YOU DON'T BELIEVETHAT THE BAILOUT COULD HAVE BEEN

BONE AND ENGINEERED IN ANY OTHERWAY OTHER THAN THE WAY WE DID IT

OTHERWISE WE HAVE ADEPRESSION? SEE, THAT'S THE PART

THAT I THINK IS, IS --

>> I THINK, I KNOW, I KNOW IT'SHARD TO ACCEPT, EXCEPT THERE

IS BEEN A GREAT HISTORY OFMISTAKES AND ERRORS OF COUNTRIES

TRYING TO HAVE IT ALL WAYS DO ITDIFFERENTLY WHICH HAVE

BEEN DRAMATICALLY MORE DAMAGINGFOR THEIR COUNTRIES.

NOW, THE IDEA THIS COULD HAVEBEEN A MUCH STRONGER RECOVERY

AND LESS DAMAGING IS MOSTLYABOUT NOT THE DESIGN OF THE

RESCUE BECAUSE THE RESCUE WASVERY EFFECTIVE, IT DID THE

ESSENTIAL THING, MUCH MOREEFFECTIVE --

>> Jon: BUT DIDN'T IT JUST

REINFLATE A TOXIC SYSTEM?

>> NO.

>> Jon: THE BANKING SYSTEM WASTOXIC, YES.

>> OH ABSOLUTELY. IT WAS THEWILD WEST.

>> Jon: AND WE PUT A TREMENDOUSAMOUNT OF MONEY BACK INTO IT TO

TRY AND MAKE THEM WHILE KIND OFIGNORING THE HOME OWNER SECTION?

>> WELL, THERE'S SOMETHINGTO THAT. BUT, LET ME GIVE YOU A

SLIGHTLY DIFFERENT PERSPECTIVEON THAT. IN EFFECT WHAT HAPPENED

>> Jon: ALL RIGHT(LAUGHTER)

>> WE LET THIS CRISIS IN SOMEWAYS BURN TOO HOT, AND I KNOW

PEOPLE DON'T FEEL THIS, DON'TSEE IT, BUT, IN EFFECT, THE

REASON WHY THIS WAS SO SEVERE ISBECAUSE WE LET THAT PANIC GET TO

MOMEMTUM. AND, IN SOME WAYS,WE ALLOWED TOO MUCH FAILURE,

AND CRUSHING FAILURE ACROSS THESYSTEM. NOW, AFTER, AFTER WE

BROKE THE PANIC, WE DID FORCETHEM TO RAISE A BUNCH OF

CAPITAL, PAY BACK THE TAXPAYER,UNWIND ALL THOSE PROGRAMS.

>> Jon: WELL, LET'S TALK ABOUTFORCING THEM. BECAUSE

I THINK THAT'S AN INTERESTINGWAY OF PHRASING IT BECAUSE WHAT

WE DID IS WE GAVE THEM THATMONEY AND THEN WE OPENED UP A

DISCOUNT WINDOW THAT THEY COULDGO TO AND BORROW AT 0%, TURN

AROUND AND BUY TREASURIES AT 3%AND BASICALLY CREATE --

>> NO, NOT QUITE RIGHT. LET MESAY IT SLIGHTLY DIFFERENTLY.

>> Jon: OKAY(LAUGHTER)

>> WHAT WE DID, WHAT WE DID --

>> Jon: THEY GAVE US$100, AND WE GAVE THEM $103.

>> LET ME TRY A LITTLEDIFFERENTLY.

>> Jon: ALL RIGHT.

>> WE DID WHAT YOU HAVE TO DO INA PANIC, OK, WHICH IS FOR A

PRICE, FOR A FEE -->> Jon: 5%.

>> WELL SOMETIMES IT WAS CHEAPERTHAN THAT, SOMETIMES IT WAS

MORE EXPENSIVE THANTHAT. WE GAVE THEM A SET OF

PROTECTIONS WHICH WE MADETHEM PAY FOR AND WE MADE THEM

PAY THE TAXPAYER BACK AND THETAXPAYER EARNED A

PROFIT ON THOSE PROGRAMS WHICHIS GOING TO BE WELL OVER

$100 BILLION.

>> Jon: BUT, THAT IS TOSUGGEST THAT THE DAMAGE TO OUR

ECONOMY WAS MERELY THE TAXPAYERIS ON THE HOOK FOR --

>> NO, IT'S NOT TO SUGGESTTHAT. IT'S JUST TO SUGGEST

THAT IF PEOPLE PERCEIVETHIS TODAY STILL AS IF WE WENT

AND GAVE THEM MONEY THAT THEYWERE NEVER GOING TO SEE AGAIN

THAT WE DIDN'T NEED TO DO. ANDTHAT'S A DEEP MISPERCEPTION.

>> Jon: WELL, I DON'T KNOW IFTHEY PERCEIVE IT THAT WAY, BUT

HERE'S, HERE'S WHERE I THINKTHE, THE GENERAL UNFAIRNESS. SO,

HERE'S WHAT WE DID FOR THEBANKS -- $245 BILLION FOR

THE BANKS AND THE FINANCIALINSTITUTIONS. $67.8 BILLION FOR

A.I.G., WE BOUGHT SOME OF THE$18.6 BILLION IN TOXIC ASSETS.

A.I.G. GOT ANOTHER $112.8BILLION IN CREDIT.

BEAR STEARNS'S COMMITMENTS WERE$30 BILLION TO INCENTIVIZED JP

MORGAN TO PURCHASEIT. FDIC TREASURY FED COMMITMENT

WAS $239.9 BILLION TO SHORE UPCITIBANK --

>> WELL, IT'S ACTUALLY MUCHWORSE THAN THAT.

>> Jon: AND THEN THERE'S,WELL, I'M GETTING TO THOSE.

AND THEN THE ZIRP PROGRAM,WHICH WAS THE DISCOUNT WINDOW,

APPARENTLY THEY'VE ESTIMATEDCOSTS SAVERS AND INVESTORS

$350 BILLION A YEAR.THAT'S TO THE BANKS.

YES?

IN PART?

>> IN SOME WAYS, IF YOU LOOK ATTHE FULL SCALE OF THE MAGNITUTED

OF THE RESCUE -->> Jon: IT'S EVEN MORE THAN

THAT.

>> IT'S EVEN MORE THAN THAT, BUT--

>> Jon: I RAN OUT OF ROOM ONTHAT PAPER.

>> RIGHT.

>> Jon: SO HERE'S WHAT WE DIDFOR FANNIE AND FREDDIE.

$187 BILLION TO TAKE OVERCONTROL AND WE ALSO BOUGHT UP

SOME PART OF $18.6 BILLION TOXIC

ASSETS PROGRAMS WHICH BASICALLYALSO HELPS THE BANKS

BECAUSE THEY HAVE ALSO ASSETSTIED UP IN FANNIE AND FREDDIE

AND FREDDIE AND FANNIE AREBUYING THEIR MORTGAGES.

HERE'S WHAT WE DID FOR THEHOMEOWNERS, $6 BILLION.

SPENT FOR FORECLOSURE AVOIDANCE.

>> CAN I GIVE YOU A DIFFERENTMATH?

>> Jon: NO.

NOT YET.

(LAUGHTER)(APPLAUSE)

$6 BILLION FOR FORECLOSUREAVOIDANCE OUT OF THE

$45.6 BILLION THAT WAS COMMITTEDTO THEM FROM THE TARP BECAUSE

THE TARP HAD IN IT THAT YOU HADTO HELP THE HOMEOWNERS.

$3.79 BILLION FOR HOUSINGFINANCING AGENCY INNOVATIONFUND,

THAT WAS OUT OF $7.8 BILLION.AND $60 MILLION INVESTED

OUT OF $8 BILLION COMMITTED FORF.H.A. REFINANCING

PROGRAMS. THE REFINANCE PROGRAMSHAVE BEEN A DISASTER. SO,

IT'S BEEN PORTRAYED THAT THOSE-- YOU KNOW, YOU USE THE PHRASE

"SOME PEOPLE WANTED OLDTESTAMENT JUSTICE."

>> WE ALL DID.

>> Jon: WELL, I DON'T THINK WEDID BECAUSE I THINK THAT OLD

TESTAMENT JUSTICE CONNOTESVENGEANCE.

>> NO, I DON'T THINK SONECESSARILY.

>> Jon: IF YOU SAID TOSOMEBODY YOU WANT, THAT STRIKES

ME AS EYE FOR AN EYE.

>> WELL, IT'S JUST SHORTHAND FORMAKING PEOPLE ACCOUNTABLE,

FOR SOME MEASURE OF JUSTICE. BUTCAN I --

>> Jon: OK, LOOKING AT IT ONPAPER, THOUGH, CAN YOU

UNDERSTAND HOW -->> OH, OF COURSE.

>> SOMEONE WOULD GO YOU DID

EVERYTHING YOU POSSIBLY COULD TO

REINVIGORATE AN INDUSTRY THATHAD UTTERLY CRATERED THE WORLD

ECONOMY BECAUSE OF ARROGANCE ANDMALFEASANCE -- NOT ACCIDENT.

THIS WAS NO ACT OF GOD.

THIS WAS TOXIC SUBPRIMEMORTGAGES, BUNDLED INTO

DERIVATIVES, SOLD MANY TIMESKNOWINGLY, RATED HIGHER THAN IT

SHOULD HAVE BEEN.

THE REASON WE DIDN'T BAIL OUTTHE HOMEOWNERS WAS SO-CALLED

MORAL HAZARD.

>> LET ME GIVE YOU SLIGHTLYDIFFERENT MATH BECAUSE THIS IS

IMPORTANT. AND THANKS FORASKING.

>> Jon: NO, NO I THINK IT ISIMPORTANT.

>> SO, ALL THOSE THINGS YOULISTED THAT WENT TO THE

FINANCIAL SYSTEM CAME BACK TOTHE TAXPAYER WITH A PROFIT.

NOW, IF YOU LOOK AT THE OTHERSIDE OF THE BALANCE SHEET, THE

PROGRAMS THE PRESIDENT SUPPORTEDTHAT WENT DIRECTLY INTO THE

HANDS OF THE AMERICAN PEOPLE,CHECKS THAT WERE WRITTEN TO THEM

THROUGH TAX CUTS OR BENEFITSOR THE HOUSING PROGRAMS WERE

$1.4 TRILLION. LARGERTHAN WHAT ROOSEVELT DID

IN THE GREAT DEPRESSION INRELATIVE TERMS.

>> Jon: BUT, LET ME CHANGE THEMATH ON THAT VERY QUICKLY.

>> SURE.

>> Jon: BECAUSE YOU GAVE THEBILLIONS OF DOLLARS DIRECTLY TO

THE BANKS FOR THEIR TOXICASSETS, YES?

>> NO, THAT'S NOT A GOOD WAY TOTHINK ABOUT IT.

(LAUGHTER)WHAT WE DID WAS TO MAKE

SURE - IT'S NOT TRUE. WHAT WEDID WAS TO MAKE SURE THERE

WAS NOT A RUN ON THE SYSTEM LIKEIN THE GREAT DEPRESSION WITH

PEOPLE LINED UP ACROSS THECOUNTRY UNABLE TO TAKE THEIR

SAVINGS OUT WITH THE RISK OFDEVASTATING MASSIVE

UNEMPLOYMENT.

AND, THAT'S WHY WE DID VERYEFFECTIVELY.

WE DIDN'T DO IT FOR THE BANKS ORTHE BANKERS.

>> Jon: I'M NOT SAYING YOUDID IT FOR THEM, BUT YOU DID IT

DIRECTLY TO THE PEOPLE WHOSCREWED IT UP.

IT WENT TO A.I.G. AND THE BANKS.

>> NO, NO, WE DID IT, AND THETAXPAYER GOT ALL THAT BACK WITH

SUBSTANTIAL PROFIT.

>> Jon: BUT, THAT'S NOT MYPOINT.

MY POINT IS IT WAS TARGETED --YOU'RE SAYING THE AMERICAN

TAXPAYER. WHAT I'M SAYINGIS THE HOMEOWNERS OWNERS

UNDER WATER, THE INDIVIDUALSWHOSE

ASSETS ARE THE ONES BEINGCONSIDERED TOXIC WHOSE MORTGAGES

ARE SUBPRIME, WHO CAN LEASTAFFORD IT, WHO ARE GOING TO GET

FORECLOSED ON, THAT'S NOT THESAME.

THAT'S LIKE SAYING RATHER THANGIVING THE MONEY DIRECTLY TO

A.I.G. OR DIRECTLY TO CITIGROUPOR DIRECTLY TO THOSE PEOPLE, YOU

JUST DID A BROAD-BASED TAXCUT FOR CORPORATIONS.

>> NO.>> Jon: IT'S NOT TARGETED FOR

WAY THAT IT'S TARGETED FOR THEBANKS.

>> NO, I DON'T THINK THAT'S AGOOD WAY TO THINK ABOUT IT.

FIRST OF ALL, REMEMBERNOTHING WE DID FOR THE

FINANCIAL SYSTEM WAS FOR THEBENEFIT OR THE INTENTION OF

REWARDING THE ARSONIST.IT WAS BECAUSE, IF YOU LET THAT

BURN AND CONSUME THE COUNTRY, ITWOULD HAVE BEEN MUCH WORSE FOR

THE RESPONSIBLE HOME OWNER, THEAVERAGE PERSON WHO WAS GOING TO

LOSE THEIR JOB OR BUSINESSOR HOME, AND IF YOU WORRY OR

YOU DOUBT THAT REALITY, THENJUST GO BACK AND

LOOK AT NOT JUST THE GREATDEPRESSION BUT LOOK WHAT IT FELT

LIKE IN THIS COUNTRY IN THEFALL OF 08 WHEN WE WERE AT THE

EDGE OF COLLAPSE IN THAT CONTEXTAND LOOK AT THE HISTORY

OF FINANCIAL CRISES IN THE 100YEARS AFTER

THE GREAT DEPRESSION. NOW YOUSAY, YOU SAY --

>> Jon: BUT YOU ARE CONTINUINGTO PLACE THE ENTIRE ONUS OF HOW

THIS RECOVER WENT ONBASICALLY AN EXTORTION

SCHEME, BASICALLY THEIRIDEA IS THEY COME TO YOU

AND THEY SAY IF YOU DON'TGIVE US A TREMENDOUS AMOUNT

OF MONEY, YOU WILL ALL DIE.

>> LET'S DO YOUR, LET'S DO ANATURAL EXPERIMENT.

WHAT WAS THE PLAUSIBLE, REMEMBERTHIS WAS A DEMOCRATIC

PRESIDENT ELECTEDWITH A SUBSTANTIAL MANDATE FROM

THE LEFT. FROM THE LEFT.

>> Jon: SOCIALLY. RIGHT. RIGHT.

>> WORRIED ABOUT HOW TO PROTECTTHE COUNTRY IN THAT CONTEXT.

>> Jon: CORRECT.

>> SO, AND THINK WHAT HE FACEDAT THAT POINT.

THE ECONOMY AT THAT POINT WASSTILL FALLING OFF THE CLIFF.

IT WAS TERRIBLE.

>> Jon: RIGHT.

>> AND ASK YOURSELF THE QUESTIONWHAT DID HE DO AT THAT TIME?

WHAT DID HE DO AT THAT TIME,PRESIDENT OBAMA? HE WENT AND

GOT, AGAIN, A LARGER SET OFTHINGS PUT DIRECTLY INTO

MAIN STREET, LARGER THAN WHATPRESIDENT ROOSEVELT DID IN THE

GREAT DEPRESSION. AND THENWHAT HE DID, AND THEY WEREN'T

LARGE ENOUGH, AND THEY WERE VERYDISAPPOINTED --

>> Jon: BUT, IT WAS AGENERALIZED STIMULUS, IT WAS

TAX CUTS AND IT WAS A CASHFOR CLUNKERS PROGRAM,

BASICALLY IT WAS SOMEONE WASLOSING THEIR HOUSE, AND THEY

CAME IN AND SAID WHY DON'TYOU SELL US YOUR CAR?

(LAUGHTER)

>> Jon: DO YOU UNDERSTAND WHATI'M SAYING?

IT WAS ILL DIRECTED.

>> NO, IT WAS NOT ILL-DIRECTED.

>> Jon: LET ME REPHRASE IT,THEN.

WHAT WOULD HAVE BEEN THEPROBLEM, THE BIG TOXIC ASSET IS

MORTGAGES.

WHAT WOULD HAVE BEEN THE PROBLEMWITH REDUCING PRINCIPLE FOR

HOMEOWNERS?

>> THERE'S NO PROBLEM WITH DOINGIT. AND IT WAS A GOOD IDEA.

>>Jon: SO WHY DIDN'T WE?

>> AND IT WAS A GOOD IDEA.>> Jon: WHY DIDN'T WE.

>> AND WE TRIED TO DO ITACTUALLY ON A VERY SIGNIFICANT

SCALE BUT THE PRESIDENT WAS NOTGIVEN, DID NOT HAVE THE

AUTHORITY TO FORCE IT. COULDN'TFORCE FANNIE AND FREDDIE TO DO

IT, COULDN'T, LOOK YOU HAVE TOUNDERSTAND WHAT OUR LIFE IS LIKE

IN THSE JOBS. WE KNOW SOMETHINGABOUT THESE THINGS.

WE HAVE LOTS OF IDEAS. NOWTHEY'RE NOT ALL GOOD IDEAS.

BUT, WE GET LOTS OF IDEAS, LOTSOF ADVICE.

>> Jon: SURE.

>> WE LOOKED AT EVERYTHING.WE KNEW AND UNDERSTOOD THE CASE

FOR DOING A MORE SUBSTANTIALHOUSING PROGRAM PRINCIPLE

REDUCTION THEN WE RUN INTO THECRUSHING REALITY

WHICH IS WE HAVE A CONGRESS THATHAS TO LEGISLATE, UNWILLING TO

DO ANYTHING REALLY AT THATPOINT, AND THE PRESIDENT IS

INVESTED WITH NO KIND OFAUTHORITY ON HIS OWN TO COMPEL

IN THAT CONTEXT. SO WHAT WE DIDIS, WE HAD THIS SET OF TOOLS

THAT WERE SORT OF LIKE THISLARGE.

>> Jon: BUT YOU HAD $200 BILLIONTHAT YOU WERE ALLOWED TO

USE BEFORE CONGRESS STEPPED INAND REDUCED IT TO THE LIMIT THEY

REDUCED IT TO, YOU HAD ACCESSTO$200 BILLION.

>> BUT YOU COULDN'T USE THAT TOFORCE OR COMPEL OR PROVIDE

PRINCIPLE REDUCTION ON A LARGESCALE THROUGH FANNIE AND

FREDDIE. WE HAD NO ABILITY TO DOIT. AND AGAIN, IT WAS NOT

BECAUSE WE DIDN'T THINK IT WOULDBE GOOD AND JUST AND POWERFUL

AND RIGHT -->> Jon: WHY COULDN'T YOU?

>> BECAUSE, AGAIN, IT'S NOT LIKENATIONAL SECURITY. YOU KNOW,

PEOPLE THINK THEIR COUNTRY ANDTHEIR GOVERNMENT IS ALL

POWERFUL IN A CRISIS -->> Jon: BUT YOU DID PUT

CONDITIONS ON FANNY AND FREDDIETO TAKE THAT MONEY.

YOU KICKED OUT, THEIRSHAREHOLDERS LOST EVERYTHING AND

YOU KICKED OUT ALL THEIR PEOPLE.

>> WE DID. AND CONGRESS, WHENCONGRESS GAVE HANK PAULSON

AND PRESIDENT BUSH THATAUTHORITY, THEY GAVE IT WITH

ONE CONDITION WHICH IS THEY GAVETHE PRESIDENT AND

THE SECRETARY OF TREASURY NOAUTHORITY TO DIRECT THE RELIEF.

THEY WANTED TO KEEP ITCOMPLETELY INDEPENDENT OF THAT.

>> Jon: SO, WHAT YOU'RESUGGESTION IS THE ONLY

OPPORTUNITY WE HAD WAS TOREINVIGORATE THE

BANKS, RELIQUIDATE, RECAPITALIZETHE BANKS

AND WE HAD NO ABILITY TOREFINANCE OR REDUCE PRINCIPAL ON

ALL THOSE HOMEOWNERS?

>> NO, NO, WHAT WE DID, LET MEJUST GO BACK.

OUR PROGRAMS DIRECTLY ANDINDIRECTLY HELPED 4 MILLION

PEOPLE KEEP THEIR HOMES, ITHELPED MILLIONS OF

PEOPLE REFINANCE.IT WAS NOT ENOUGH.

IT WAS TOO SMALL RELATIVE TO THESIZE OF THE PROBLEM.

>> Jon: RIGHT.

>> BUT THE SCALE OF THE THINGSWE DID IN THE FINANCIAL SYSTEM

AND IN THE STIMULUS WAS DIRECTEDAT THE CENTRAL OBJECTIVE OF

MAKING IT MORE LIKELY PEOPLEWOULD HAVE A JOB AND AN INCOME

>> Jon: STIMULATING THEGENERAL ECONOMY.

>> YES, THAT'S THE MOST POWERFULTHING. AGAIN, IF YOU THINK ABOUTTHIS --

>> Jon: BUT IT'S NOT THE MOSTPOWERFUL THING TO SOMEONE LOSING

THEIR HOME.>> IT IS.

>> Jon: THE IDEA THAT THEGENERAL ECONOMY IS GROWING AT

A 3% RATE VERSUS A 2.3% RATEIS LOVELY TO THE LARGER

ISSUE, BUT TO THE10 MILLION PEOPLE LOSING

THEIR HOMES, IT'S MEANINGLESS.

>> NO, I DON'T AGREE WITH THAT.AND, THAT'S NOT FAIR.

THE MOST IMPORTANT THING YOU CANDO FOR AN ECONOMY FACING THIS IS

TO MAXIMIZE THE CHANCE THAT THATPERSON AT RISK OF LOSING THEIR

JOB KEEPS THEIR JOB, TO MAXIMIZETHE CHANCE THEY GET ASKED TO

WORK MORE HOURS, TO MAXIMIZE THECHANCE IF THEY LOST THEIR JOBS

THEY GET BACK TO WORK.

>> Jon: OKAY.

>> THAT WAS THE BIGGEST CAUSE OFTHE HOUSING CRISIS AND IT WAS

THE MOST IMPORTANT THINGYOU COULD DO. AND, I THINK,

THE MOST EFFECTIVE WAY TO DOIT WAS CLOSE TO THE MIX OF THE

THINGS WE DID. IF YOU ASKYOURSELF IN YOUR NATURAL

EXPERIMENT, LET'SDO YOUR NATURAL EXPERIMENT --

>> Jon: ALL RIGHT. I LIKESCIENCE.

>> WE GIVE NOTHING TO THEBANKS -- OK, LET'S SAY WE DO THE

BANK STUFF. BUT INSTEAD OF DOING--

>> Jon: THERE YOU GO. OR YOU DO,

YOU DO A LOT OF THE BANK STUFFBUT KEEP 200 BILLION OF THAT --

>> OK, LET'S DO IT YOUR WAY.

>> Jon: WE'VE GOT 1.2 TRILLIONIN TOXIC --

>> YOU HAVE $200 BILLION, YOU

WANT TO FIGURE OUT HOW TO SPENDIT.

>> Jon: YES THAT'S RIGHT.

>> LET'S THINK ABOUT THAT.

IF YOU WERE THE PRESIDENTSITTING THERE IN THAT DARK

MOMENT WITH NO GOOD CHOICES ANDA CONGRESS MOSTLY AGAINST HIM

AND YOU'RE ASKING YOURSELF WHATWOULD YOU DO WITH $200 BILLION?

>> Jon: AM I HAL HOLBROOK, ISTHIS A ONE MAN SHOW?

>> NO, I CAN TELL YOU. YOU WOULDUSE THAT MONEY.

FIRST YOU WOULD SAY GIVE IT TOSTATES AND LOCAL GOVERNMENTS SO

MORE TEACHERS STAY IN THECLASSROOM, YOU'D DO IT

FOR INFRASTRUCTUREPROJECTS MORE LIKELY TO

CREATE EMPLOYMENT, YOU DO IT FORTHINGS THAT MAXIMIZE A

CHANCE, THE AUTOMOBILE INDUSTRYDOESN'T FALL OFF THE CLIFF.

THOSE SET OF THINGS. THAT'SWHAT YOU WOULD DO THAT FIRST.

AND THEN OF COURSE, YOU WOULDTRY AND DO WHAT WE DID, WHICH

WAS TO MAKE SURE PEOPLECOULD REFINANCE AND PEOPLE COULD

STAY IN THEIR HOMES. YOU'D DOTHOSE TOO. NOT AS A SUBSTITUTE.

THE FIRST AND MOST POWERFULCLAIM TO AVOID MORE DAMAGE IN

HOUSING WAS TO DO THINGS THATWOULD MAXIMIZE THE CHANCE THAT

YOU WOULDN'T HAVE MORE PEOPLELOSING THEIR JOBS AND MORE

PEOPLE GET BACK TO MORE -->> Jon: I UNDERSTAND THAT.

BUT IN THE MATHEMATICALANALYSIS, IT IS VERY CLEAR THAT

THE OVERWHELMING MAJORITY OF ITWENT BACK TO BANKS.

>> I KNOW YOU SAID IT NOW FOURTIMES.

YOU HAD YOUR LIST OF THINGS.

BUT SAYING IT DOES NOT MAKE ITTRUE.

>> Jon: SO YOU'RE SAYING THATTHE MAJORITY OF OUR DIRECT

RELIEF DID NOT GO -->> IF YOU WANT TO DO YOUR MATH,

DO IT THIS WAY.

$1.4 TRILLION DIRECTLY FOR THEAMERICAN PEOPLE.

TAX CUTS, UNEMPLOYMENTINSURANCE, FOOD STAMPS, MONEY

FOR STATES, ROADS AND BRIDGES,LARGER THAN ROOSEVELT IN THE

GREAT DEPRESSION.

HUNDREDS OF BILLIONS OF DOLLARSTO MAKE SURE HOUSING MARKET

DIDN'T DO WORSE.

HOUSE PRICES FALL.

NOT FOR FANNIE AND FREDDIE ANDSHAREHOLDERS --

>> Jon: SO YOU'RE LOOKING ATIT LIKE OK, WE DID 1.4 TRILLION

FOR THE PERSON PEOPLE, AND THEBANKS WE DID, WHAT, WOULD

IT COME OUT TO? LIKE$900 BILLION.

>> NO, THE BEST THING FOR THEBANKS IS WHAT CAME BACK TO

THE TAXPAYERS.

THE BEST WAY TO DO IT.

>> Jon: NO, IT'S NOT THE BESTWAY TO DO IT.

>> YES IT IS.

(LAUGHTER)

>> Jon: I SUBTRACT FROM YOUR1.4 BILLION. IF YOU WANT TO

ADD IN WHAT THEY PAID BACK, THENI'M GONNA SUBTRACT

FROM THE $1.4 TRILLION THEDAMAGE THIS

CRISIS DID TO THE COUNTRY.

(ARGUING)(APPLAUSE)

IF YOU'RE GOING TO FACTOR INWHAT THEY PAID BACK, I'M TALKING

ABOUT MONEY OUT NOT NECESSARILYMONEY IN.

>> I GET YOU. LET'S DO IT THISWAY.

LET'S AGREE THE MATH THING ISSORT OF DUMB, OKAY?

LET'S DO IT THAT WAY. IT WASYOUR MATH. I'M JUST SAYING YOUR

MATH WAS SLIGHTLY OFF, SO LET'SPUT ASIDE THE MATH.

>> Jon: HERE'S THE NICE THING,I FEEL LIKE I AM STILL OPEN TO

ARGUMENT.

IF YOU'RE TELLING ME TO LOOK ATIT ANOTHER WAY THROUGH THE MATH,

I'M HAPPY TO DO THAT, BUT I FEELLIKE YOU'RE DOING A CHEAT --

>> NO, NOT GOING TO DO THAT. NOTGOING TO CHEAT. OK,

LET'S AGREE, WHAT'S THE BESTTEST, OF MEASURING THE CHOICE WE

MADE?

LET'S PICK ONE.

>> Jon: OK, WHY DON'T WE LOOK ATIT IN THE FINAL TEST, WHERE ARE

THE BANKS NOW AND WHERE ARETHOSE HOMEOWNERS?

LET'S MAKE THAT TEST.

>> THAT'S A GOOD TEST. THAT'S AGOOD TEST.

>> Jon: SO HERE ARE THE BANKS.

>> LET ME DO IT. LET ME DO MY --

>> Jon: THE BANKS AREPROFITABLE TO THE LEVELS THAT

THEY WERE AT PRETTY MUCH PRIORTO THE CRISIS.

THEY HAVE MORE MONEY INDERIVATIVES THAN THEY HAD BEFORE

THE CRISIS AND THEYARE LEVERAGED TO ABOUT

22 TO 1 INSTEAD OF 30 TO 1.

>> NO, THAT'S NOT QUITE RIGHT.BUT KEEP GOING, DO YOUR --

>> Jon: SO, THEY HAVE REGAINEDTHE AMOUNT OF MONEY

THEY WERE MAKINGBEFORE PROFITWISE, YES?

BASICALLY THEY'RE MAKING THESAME PROFITS AS THEY WERE

MAKING BEFORE AND THE DOW ISUP TO WHERE IT WAS BEFORE,

SO THEY'RELIVING PRETTY FAT AND HAPPY, AND

THE 8 TO 10 MILLIONHOMEOWNERS WHOSE HOUSES ARE

STILL UNDERWATER ARE STILLFACING FORECLOSURE AND THEY

CANNOT GET OUT OF -- AND THEECONOMY, GIVEN THAT DRAG ON THE

HOUSING MARKET, HASN'T RECOVEREDTO THE EXTENT IT COULD BECAUSE

POORER PEOPLE WILL SPEND MORE OFTHE MONEY THAT COMES TO THEM

THROUGH STIMULUS THAN ATRICKLE-DOWN BAILOUT AND SUPPLY

SIDE SUBSIDIES.

>> MAYBE I'M MORE ON YOUR SIDETHAN YOU THINK. BUT,

CAN I GIVE YOU MY VERSION OF THEWAY TO THINK ABOUT IT?

>> Jon: YES.

>> THE ECONOMY TODAY STILLPRETTY TERRIBLE, TO BE HONEST.

(LAUGHTER)>> Jon: YOU JUST WROTE A BOOK

ABOUT HOW IT WORKS!

>> NO, I'M JUST SAYING -->> Jon: YEAH.

>> ECONOMY TODAY STILL NOTTHAT STRONG.

DEEP SCARS LEFT OVER,UNEMPLOYMENT REALLY HIGH,

HOUSING STILL PRETTY BAD. >> Jon: I AGREE.

>> PROBABLY WORSE THAN AMERICANS

HAVE SEEN IN A LIFETIME,TERRIBLE.

>> Jon: SLOWER BOUNCE BACK.

>> OKAY, BUT, THE RIGHT WAY TOLOOK AT WHAT WE DID AND IT'S

IMPACT WAS ECONOMY, AFTERFALLING OFF THE CLIFF,

SHRINKING AT A RATE OF 9% ATTHE END OF 2008 WAS GROWING

AGAIN IN SIX MONTHS, HAS GROWNAT AN AVERAGE OF 2.5% SINCE

RECOVERY STARTED AND BY ANYSTANDARD OF RECOVERY IN

FINANCIAL CRISIS IN THE LAST 100YEARS, BECAUSE WE DID THIS SET

OF PRETTY OFFENSIVE, SEEMINGLYUNFAIR SET OF THINGS, WE HAVE AN

ECONOMY THAT IS, AGAIN,TERRIBLE, HARD, A LOT OFCHALLENGES,

BUT MUCH, MUCH BETTERTHAN IT WOULD HAVE BEEN.

NOW, YOU COULD SAY -->> Jon: BUT THE SUGGESTION IS

IT'S MUCH, MUCH BETTER THAN ITWOULD HAVE BEEN HAD WE DONE IT

SLIGHTLY DIFFERENTLY AND MAYBEWE COULD HAVE MITIGATED --

BECAUSE HERE'S THE THING I WORRYABOUT AND YOU WROTE ABOUT IT IN

THE BOOK AND THIS IS SOMETHINGCALLED "CAPTURE."

CAPTURE IS THIS IDEA THAT THEGOVERNMENT IS BEHOLDEN TO THESE

POWERFUL INTERESTS IN A WAY THATIS TO THE DETRIMENT OF THE

AMERICAN PUBLIC, AND YOU WORRYABOUT IT WHEN YOU WERE AT THE

FED.

YOU REPLACED THE BOARD WITH GUYSTHAT WERE BIG IN WALL STREET AND

GAVE THE PERCEPTION THAT THE FEDWAS NOW SUBJECT TO CAPTURE.

ECONOMIES ARE PERCEPTIVE.

SO YOUR REALITY OF, BUT WEAVOIDED A DEPRESSION, DOESN'T

FIT THE REALITY OF PEOPLE'SPERCEPTION THAT THEY HAVEN'T

AVOIDED THEIR OWN PERSONALDEPRESSION, THAT THEY ARE LIVING

UNDERWATER AND THEY LOOK ANDTHEY SEE THESE BANKS HAVE

CREATED THIS PROBLEM.

>> THAT'S TRUE, BUT YOU'RELIVING IN A WORLD WHERE YOU'RE

ASSUMING THAT IT WAS POSSIBLE TODELIVER A PROGRAM THAT WOULD

HAVE BEEN MORE POPULAR, MOREFAIR IN PERCEPTION AND MORE

EFFECTIVE IN HELPING THE AVERAGEPERSON, AND THAT PERCEPTION IS

BASED ON AN ILLUSION ANDMISREADING OF WHAT --

>> Jon: I WOULD SUGGEST YOU'RELIVING IN A WORLD WHERE YOU

BELIEVE IT WASN'T POSSIBLE, ANDTHAT THE REASON YOU BELIEVE

THIS -- AND I MEAN THIS AS NODISRESPECT BECAUSE I THINK YOU

ARE ATTEMPTING TO TELL YOURSTORY IN THE BEST WAY

POSSIBLE -- BUT I BELIEVE THATYOU'RE LIVING IN THAT WORLD

BECAUSE YOU ARE SURROUNDED BYTHOSE WHO CREATED THIS DISASTER

IN THE FIRST PLACE.

>> LET ME JUST REMIND YOU OF ONETHING.

(APPLAUSE)>> Jon: SUMMERS, THOSE GUYS. BUT

LET'S TALK ABOUT THIS. THEDEREGULATION, THE CREATION

OF COMMERCIAL BANKS BECOMINGINVESTMENT BANKS, INVESTMENT

BANKS BECOMING COMMERCIAL BANKS,THE BANKS BECOMING NATIONWIDE,

ALL THOSE FIRE WALLS BEINGDISSIPATED, THAT IS WHAT MADE

THIS HOUSING CRISISALGORITHMICALLY EXPONENTIALLY

TERRIBLE FOR THE WORLD.

>> I KNOW YOU BELIEVE THAT BUTIT'S NOT QUITE TRUE.

>> Jon: TELL ME WHAT'S WRONGABOUT THAT.

>> I'LL GIVE YOU A SLIGHTLYDIFFERENT VERSION.

>> Jon: ALL RIGHT.

>> I'M PRETTY SURE, COME CLOSER.I MEAN --

>> Jon: YOU'RE ABSOLUTELY RIGHT,I FUNDAMENTALLY BELIEVE THIS.

>> I KNOW YOU BELIEVE IT DEEPLYAND YOU'RE A THOUGHTFUL, SMART

GUY, AND A LOT OF PEOPLE AGREEWITH YOU, BUT LET ME SAY IT A

LITTLE DIFFERENTLY.

>> Jon: OKAY.

>> WE HAD THIS FINANCIAL SYSTEMTHAT OUTGREW ALL THE PROTECTIONS

WE PUT IN PLACE AFTER THE GREATDEPRESSION AND BUILT UP ALL THIS

RISK -- YOU MAY THINK I'M MAKINGYOUR POINT BUT IT'S A LITTLE

DIFFERENT FROM YOUR POINT -- ALLTHIS RISK OUTSIDE THE PROTECTION

AND CONSTRAINTS AGAINST RISK WEPUT ON THE BANKS IN FORMS

THAT MADE US TERRIBLYVULNERABLE TO A PANIC AND

RUN IN INSTITUTIONS LIKE THEINVESTMENT BANKS,

A.I.G., FANNIE, FREDDIE,WHATEVER.

>> Jon: RIGHT.

>> AND THAT HAPPENED BECAUSETHERE WAS A LONG PERIOD OF TOO

MUCH CONFIDENCE, LOST THE MEMORYOF CRISIS, PEOPLE THOUGHT THERE

WAS NO RISK AND THAT'S WHATHAPPENED.

>> Jon: BUT THEN, WHY ALLOWCOMMERCIAL BANKS TO BE A PART --

DOES CITIGROUP NEED A BAILOUT IFTHEY'RE STILL CITIBANK? DOES

BANK OF AMERICA NEED A BAILOUTIF THEY'RE NOT SPECULATING.

>> LOOK AT OUR CELEBRATEDFAILURES IN THIS PLACE, IN THIS

CRISIS. LOOK AT THE GUYSON THE OTHER SIDE OF THE

WALL, BEAR STEARNS, LEHMANBROTHERS, A.I.G., FANNIE AND

FREDDIE, G CAPITAL WAS AT THERISK OF FAILURE, ALL THE OTHER

INVESTMENT BANKS, THEY WERETERRIBLY VULNERABLE TO PANIC

BECAUSE NO CONSTRAINTS ONRISKS, VULNERABLE TO RUNS.

LET'S LOOK AT THEBANKS. YOU HAD A BUNCH OF BANKS

TERRIBLY VULNERABLE TOO.COUNTRYWIDE, WACHOVIA, WAMU,

THOSE WERE MOSTLY JUST SIMPLECOMERCIAL BANKS.

NOW ALL THEM WERE TERRIBLYVULNERABLE BECAUSE NONE OF THEM

PLANNED FOR THEPOSSIBILITY THAT HOUSE PRICES

MIGHT FALL AND WE'D HAVE ATERRIBLE RECESSION.

THE GUYS THAT STRADDLED THE LINETHAT YOU WERE REFERING TO

BETWEEN INVESTMENTAND COMMERCIAL BANKS, YEAH, THEY

WERE KIND OF DUMB IN RETROSPECTTOO. BUT MUCH LESS VULNERABLE

IN SOME WAYS TO THOSE OTHER GUYSON THE OTHER SIDE.

>> Jon: BUT AT THAT POINT,THOUGH, IT'S A REGIONAL CRISIS.

WHEN YOU LOOK AT THE HOUSINGCRISIS OF THE '80s AND '90s,

IT CREATED A RECESSION BUT NOT AWORLDWIDE PANIC.

>> THAT WAS A MILD, QUAINT --(LAUGHTER)

THIS WAS LIKE AN EXISTENTIALTHREAT TO THE COMPANY AND GLOBAL

ECONOMY, MUCH GREATER SCALE.

>> Jon: WHY WAS THE SCALEGREATER?

>> BECAUSE THE SIZE OF THE BOOMBEFOREHAND.

>> Jon: WHAT WAS THE BOOM?

THE BOOM WAS THIS BELIEF THAT ITWAS SAFE TO LEND AND BORROW.

>> Jon: AND SAFE TOSECURITIZE. YOU DON'T BELIEVE

DERIVATIVES PLAYED A PART INMAGNIFYING THE CRASH?

>> I KNOW YOU BELIEVE THIS BUTLET ME GIVE YOU MY VIEW OF THE

REALITY.

THERE WAS A LOT OF FANCY STUFFTHAT PEOPLE DIDN'T UNDERSTAND.

>> Jon: YES.

>> WHATEVER YOU WANT TO CALL IT.

>> Jon: DERIVATIVES.

>> BUT THE MISTAKE THAT WASEXISTENTIAL WAS A MUCH MORE

SIMPLE THING. AND IT HAPPENED INMANY FORMS,

SIMPLE LOANS, THINGS LIKE THAT,IN WHICH WAS IT IS SAFE FOR ME

TO LEND AND TAKE ON LEVERAGEBECAUSE I DON'T THINK HOUSE

PRICES ARE GOING TO FALL, IDON'T THINK THERE MIGHT BE A

RISK OF RECESSION, AND THE OTHERFANCY, COMPLICATED STUFF, SURE,

AT THE MARGIN MADE THINGS WORSE,BUT NOT CENTRAL TO IT.

>> Jon: I WOULD SUGGEST THATTHAT DROVE THE ENTIRE BOOM.

THE GUYS START BUNDLING THIS ANDMAKING THE MONEY.

SO THE SUB-PRIME LOANS, THERE'SA RUSH TO GET ON THAT BUSINESS.

YOU DON'T BELIEVE THE MONEYPEOPLE WERE MAKING IN

DERIVATIVES AND SECURITIESDROVE PEOPLE TO MAKE MORE OF

THESE SUB-PRIME LOANS BUNDLEMORE OF

THEM INTO DERIVATIVES ANDSECURITIES, COLLATERALIZED IT

AND STARTED TO SWELL THIS THINGOUT?

THAT WAS THE BUBBLE!

>> THAT HAPPENED, A LOT OFPREDATORY LENDING HAPPENED.

A LOT OF BAD STUFF HAPPENED, ANDTHAT WAS FOR SURE MAKING IT

WORSE. BUT THAT WASN'T THE CORECAUSE.

THE CORE CAUSE OF THIS WAS AMUCH MORE SIMPLE THING.

>> Jon: WHICH IS?

>> WHICH IS THAT A LEVEL OFCONFIDENCE THAT IT'S SAFE TO

TAKE ON THIS RISK AND LEVERAGEBECAUSE PEOPLE DID NOT ASSUME IT

WAS POSSIBLE FOR THIS COUNTRY TOFACE THE RISK OF A GREAT

COLLAPSE AND RECESSION ANDPANIC.

PEOPLE DIDN'T THINK HOUSE PRICESWOULD FALL, AND THAT BELIEF WAS

FORMED BY A LONG PERIOD WHEREPEOPLE THOUGHT --

>> Jon: BUT AS A GUY WHO'SRUNNING THE FED, DON'T YOU SEE

THAT AND SAY, EXCUSE ME -->> WE DID.

WE DID.

YOU ASKED ABOUT CAPTURE ANDPERCEPTION AND MY EXPERIENCE IN

THIS.

>> Jon: RIGHT.

>> LET ME TELL YOU WHAT WAS MYFORMATIVE EXPERIENCE.

>> Jon: SURE.

>>I WAS A CIVIL SERVANT OFTHE TREASURY ON THE

INTERNATIONAL PART AND I WATCHEDAND GREW UP WATCHING THESE

CRISES HAPPEN AND CAUSE GREATDEPRESSION LIKE OUTCOMES

IN A BUNCH OF EMERGINGECONOMIES. I GREW UP WITH THIS

BASIC SENSE OF FEAR OF THEFRAGILITY OF THE SYSTEM, AND

BORN IN EXPERIENCE BY WATCHINGTHE DAMAGE HAPPEN AND COUNTRIES

FRANKLY SCREW IT UPBY TRYING TO EITHER NOT TAKE TOO

MUCH RISK OR NOT LETTING THEFINANCIAL BURDEN -- ALL

THE CLASSIC MISTAKES, WELLINTENTIONED BUT MISTAKES.

>> Jon: THE IDEA THAT YOUAPPLY THE POWELL DOCTRINE OF

OVERWHELMING FORCE IN TERMS OFRELIQUIDATING AND

RECAPITALIZING THE BANKS.

>> ONLY BECAUSE SCARRED BYEXPERIENCE, IT WAS THE ONLY WAY

TO GIVE PEOPLE A MEASURE OFJUSTICE AGAINST THE RISK OF A

MUCH WORSE OUTCOME.

I UNDERSTAND WHERE YOU THINK ITWOULD HAVE BEEN POSSIBLE TO DO

THAT AND OTHER THINGS, TOO, BUTYOU'RE ASSUMING A UNICORN

BECAUSE YOU'RE ASSUMING SOMEHOWWE COULD GET A WAY TO GET

CONGRESS TO LEGISLATE HUNDREDSOF BILLIONS OF DOLLARS INSTEAD

OF DOING ALL THESE OTHER THINGSAND GIVE THEM DIRECTLY TO THE

HOME OWNER AND THAT WOULD HAVEBEEN MORE EFFECTIVE.

>> Jon: THE ONLY REASON I SAYTHAT IS BECAUSE SOMEHOW A

UNICORN DID APPEAR FOR THE BANKSAND SOMEHOW A MYTHICAL CREATURE

AROSE OUT OF NOWHERE ANDPRESENTED THEM WITH BILLIONS AND

BILLIONS OF DOLLARS --(LAUGHTER)

OUT OF NOWHERE.

>> JON, I AGREE WITH YOU --(APPLAUSE)

>> Jon: SO IF THAT'S NOTMAGICAL THINKING, I DON'T KNOW

WHAT IS.

AND YOU SAID IT YOURSELF, THEARROGANCE OF THESE INDIVIDUALS

THAT HOUSING PRICES FOR SOMEREASON AGAINST ALL OF HISTORY

WERE NEVER GOING TO COME DOWN,LIKE THE TULIP BOOM, IT WAS

NEVER GOING TO COME DOWN, THEARROGANCE OF THOSE INDIVIDUALS

THAT CAUSED THIS IN THE FIRSTPLACE HAD TO BE REINFLATED.

>> IT WASN'T REINFLATED.

>> Jon: GIVING THEM THAT MONEYDOESN'T -- LET'S VIEW IT AS

LIQUID.

THEY ARE NOW -- LIQUIDITY IS THETHING.

SO NOW THEY ARE OLD AND WRINKLY.

OH, LOOK AT ME!

LOOK AT ME!

I'M AN OLD MAN!

I DON'T HAVE ANY LIQUIDITY!

(LAUGHTER)AAAHHH!

I AM YOUNG AGAIN!

BRING ME MY COLLATERALIZEDSECURITIZATIONS AND I WILL

REINFLATE MY BUBBLE!

(APPLAUSE)HOW IS THAT NOT WHAT WE DID?

THEY HAVE YET TO PAY ANY PRICEFOR IT.

FORGET ABOUT OLD TESTAMENTJUSTICE, THEY HAVEN'T PAID

NEW-AGE JUSTICE FOR IT YET.

>> I'M AGREEING WITH YOU, IT'SUNFAIR.

I'M AGREEING WE DIDN'T GIVE AMEASURE OF JUSTICE AGAINST THAT

BUT I AM COMPLETELY CONFIDENTTHAT THE ALTERNATIVE STRATEGY

THAT WOULD HAVE BEEN MORECOMFORTABLE TO YOU AT THE

BEGINNING, YOU WOULD HAVECHEERED US AND LOVE US FOR WOULD

HAVE BEEN DEVASTATING TO THEPEOPLE YOU'RE MOST WORRIED

ABOUT.

NOW, YOU DON'T ACCEPT THAT, YOUDON'T AGREE WITH IT --

>> Jon: NO.

-- BUT -->> Jon: AND THE REASON I DON'T

AGREE WITH IT IS BECAUSE IT'SNOT -- I MEAN, IN HINDSIGHT,

IT'S 20/20, BUT THIS IS NOWBEING LOOKED AT BY ECONOMISTS

USING QUANTITATIVE ANALYSIS ANDDATA THAT IS NOT -- I THINK YOU

CAN SHAKE YOUR HEAD AT IT,BUT --

>> YOU WOULDN'T WANT TO INVOKETHAT BECAUSE THAT'S A PERILOUS

FOUNDATION TO THE ARGUMENT.

BUT YOU'RE RIGHT THE STUFF WEDID WILL BE CHEWED OVER FOR

DECADES, NO DOUBT ABOUT IT.

>> Jon: NO QUESTION. AND I'MSURPRISED HOW RESISTANT YOU ARE

TO EVEN THE POSSIBILITY THATPRINCIPAL REDUCTION

OR REFINANCING ON A MUCHLARGER SCALE --

>> NO, YOU'RE MISTAKEN.

THE PRESIDENT -- I WAS FOR DOINGPRINCIPAL REDUCTION, FOR DOING

MORE MASSIVE REFINANCING.

>> Jon: BUT YOU TESTIFIED TOELIZABETH WARREN THAT WOULD BE

UNFAIR.

YOUR DEPUTY SAID THAT WOULD BEMORAL HAZARD.

>> THERE IS GOOD WRITTEN RECORDOF THIS, OF US LAYING OUT THE

CASE. >> IN YOUR BOOK.

>> NO, NO, NOT IN THE BOOK, INPUBLIC RECORD.

>> Jon: I HAVE A GOOD RECORD OFHOW I SAVED EVERYTHING!

IT'S RIGHT IN HERE ON PAGE 52!

(LAUGHTER)(APPLAUSE)

>> WE LEFT A GOOD WRITTEN RECORDIN OUR OFFICE OF OUR TRYING TO

MAKE THE CASE TO FANNIEAND FREDDIE THAT THEY SHOULD

DO PRINCIPAL REDUCTION, AND THEMSAYING TO US NO, WE'RE NOT

GOING TO DO IT YOU CAN'TMAKE US DO IT.

THAT'S TRUE.

WE DID DO MASSIVE REFINANCING INTHAT CONTEXT.

WHAT I'M SAYING IS YOURDISAPPOINTMENT WITH THE SCOPE OF

WHAT WE DID IN HOUSING IS NOTBECAUSE WE DIDN'T THINK IT WOULD

BE BETTER TO DO. OFCOURSE WE THOUGHT IT WOULD BE

BETTER, BUT IT WAS BECAUSE WEWERE OPERATING WITHIN A SET OF

CONTSTRAINTS THAT WE COULDN'TRELAX.

NOW YOU CAN SAY WE WERE INEPTNOT TO RELAX THE CONSTRAINTS --

>> Jon: I DON'T THINK IT WASINEPT. I THINK, HONESTLY,

THEY WENT TO HELL ANDBACK TO GET THE MONEY THEY

NEEDED TO SAVE FROM A DEPRESSIONTHE BANKING INDUSTRY.

THEY DIDN'T GO TO HELL AND BACKAND DO THE SAME FOR HOUSING, AND

I THINK THAT THAT IS WHAT IS THEMOST UNFORTUNATE THING ABOUT

THIS.

>> I AGREE WITH THAT.

AND LET ME TRY A LITTLEDIFFERENTLY.

OKAY?

PRESIDENT OBAMA, OKAY, HE HADAROUND HIM THE BEST HOUSING

PEOPLE IN THE COUNTRY -- SHAUNDONOVAN -- MICHAEL BAR, THESE

ARE VERY TALENDTED PEOPLE. HEHAD PRETTY

TALENTED FINANCIAL PEOPLE,PROGRESSIVE ECONOMISTS AND THE

RIGHT INCENTIVES AND HE WASWORRIED ABOUT THE SAME THING AND

PUT ENORMOUS PRESSURE ON THATGROUP OF PEOPLE, ENORMOUS

PRESSURE.

>> Jon: BUT THE PROGRESSIVEECONOMISM DIDN'T WIN THE DAY IN

THAT ARGUMENT.

YOU WOULD BE HARD PRESSED TOTHINK THEY.

>> IN THE SEATS OF THECOUNSEL WITH HIM AT THE TABLE --

>> Jon: DO YOU REALLY HAVE AROUND TABLE?

DOESN'T ANYONE SIT THERE AND GOTHIS IS AWFULLY EVIL FEELING.

THEY REALLY SIT DOWN AT AROUND TABLE AND TALK ABOUT THE

WORLD LIKE THAT?

>> IT WASN'T A ROUND TABLE.

>> Jon: IS IT LIKE THE WORLDIS THERE AND THEY SPIN IT AND

THEY'RE LIKE, HMM...

BRING ME BOLIVIA! (LAUGHTER)

>> WHAT I'M SAYING TO YOU ISTHEY HAD THE RIGHT INCENTIVES

AND WERE WORRIED ABOUT THE RIGHTTHING.

HE WANTED TO DO AS MUCH AS HECOULD.

SO YOU'RE SAYING, WHY WAS THERESULT DISAPPOINTING?

BECAUSE HE RAN AGAINST THEBRUTAL CONSTRAINTS OF REALITY

WHICH IS WE DID NOT HAVE THERESOURCES OR THE AUTHORITY TO DO

A MORE POWERFUL JOB ALONGSIDETHOSE THINGS.

IT WOULD HAVE BEEN GREAT IF ITWERE OTHERWISE, IT WOULD HAVE

BEEN BETTER, IT WOULD HAVE MADEA BIG DIFFERENCE, BUT IT WAS NOT

POSSIBLE IN THAT MOMENT.

BUT, AGAIN, LET ME JUST SAY --LIKE, HE WAS A PROGRESSIVE

DEMOCRAT ELECTED A AT TIME WHENALL HIS INSTINCTS WERE LIKE

YOURS IN THAT CONTEXT AND HE HADREALLY TALENTED HOUSING PEOPLE

AROUND HIM, TOO.

SO ASK YOURSELF THE QUESTION,HOW COULD IT BE POSSIBLE THAT

LEVEL OF CREATIVITY YOU SAW INTHE RESCUE OF THE UNJUST WAS NOT

BROUGHT HERE?

YOUR EXPLANATION IS YOU SAIDWELL, WE HAVE NO IDEA WHAT WE

WERE DOING OR HE WOULD HAVE -->> Jon: NO, HERE'S WHAT I

BELIEVE -->> BUT THE REALITY IS WE RAN

AGAINST THIS BRUTAL SET OFCONSTRAINTS WHICH WE TRIED TO

RELAX AND COULD NOT RELAX THEM,AND THAT'S UNFORTUNATE --

>> Jon: I BELIEVE THE REASONTHAT IT HAPPENED THIS WAY --

IS NOT BECAUSE PEOPLE ARE INEPTBUT BECAUSE THERE IS A CERTAIN

CAPTURE BY THE FINANCIALINSTITUTIONS -- THE FINANCIAL

MARKET IS NOW 8% TO 9% OF OURGDP WHEN IT USED TO BE 4,

AND THESE COMPLEX DERIVATIVESHAVE DRIVEN A MIRAGE

BUBBLE OF PROGRESS ANDECONOMICAL -- MANUFACTURING IS

11% OF OUR ECONOMY,USED TO BE 27%.

FINANCIAL IS NOW 24% OF OURECONOMY.

WE ARE UPSIDE DOWN FOR A COUNTRYTHAT SHOULD BE HEALTHY AND

FUNCTIONING.

THAT'S WHY I THINK WE LEANTOWARDS THE BANKS --

>> I DON'T AGREE TOWARD THAT ANDI DON'T THINK THAT'S FAIR TO

THEIR INTENTIONS OR MOTIVES.

>> LET ME TRY IT DIFFERENTLY.THE STUFF THAT YOU LIKE,

THAT YOU THINK WOULD HAVEBEEN BETTER IF WE'D DONE ON A

LARGE SCALE, SOME OF WHICH WETRIED, SOME OF WHICH WE DIDN'T,

IT WAS DISAPPOINTING. IF WEHAD DONE THAT THE WAY YOU

DESCRIBED, THE BANKSWOULD HAVE LOVED IT.

THEY WOULD HAVE BEEN CRAZYABOUT IT.

SO DON'T ATTRIBUTE THAT FAILUREOR THAT DISAPPOINTMENT TO A SET

OF STEPS THAT THE PEOPLE INSIDETHAT ROOM THAT THIS NEW

PRESIDENT BROUGHT TO OFFICE ATS7 THAT TIME, DON'T ATTRIBUTE THAT

FAILURE TO THOSE PEOPLE WERESOMEHOW SITTING THERE TRYING TO

FIGURE OUT -->> Jon: THEN I DON'T KNOW WHAT

TO TRIBUTE IT TO.WHAT CAN I ATTRIBUTE IT TO?

>> YOU ATTRIBUTE IT TO THECRUSHING REALITY OF THE

CONSTRAINTS IMPOSED ON US WHICH

IS WE DID NOT HAVE THE AUTHORITYOR RESOURCES TO DEVOTE TO

HOUSING ON THIS SCALE, THOUGH WETRIED, AND THE PRESIDENT TRIED

TO LEGISLATE MORE, BUT HE GOT NOSUPPORT FOR IT, COULDN'T RELAX

THE CONSTRAINTS.

WITHIN THE SCOPE OF THECONSTRAINTS, WE HELPED MILLIONS

OF PEOPLE.

NOT ENOUGH, BUT MILLIONS OFPEOPLE.

>> Jon: OKAY.

HERE'S WHAT I'LL SAY -- I FELLASLEEP 30 MINUTES AGO

(LAUGHTER)(APPLAUSE)

SO I DON'T KNOW -- I'M NOTEXACTLY SURE WHAT'S HAPPENED,

BUT I FEEL LIKE WE BOTH WOKE UPNAKED AND BRUISED IN AN ALLEY.

(LAUGHTER)I GIVE YOU CREDIT.

YOU KNOW, I SAT NEXT TO DONALDRUMSFELD FOR A LONG TIME TALKING

ABOUT THE IRAQ WAR.

>> THIS CAN'T BE GOOD.

>> Jon: NO, IT IS GOOD.

>> THAT IS DEEPLY UNFAIR.

>> Jon: NO, IT IS NOT.

I'LL TELL YOU WHY -->> I SHOULD STOP YOU.

>> Jon: YOU'RE TROUBLED ANDYOU'RE SEARCHING FOR ANSWERS AND

YOU'RE REFLECTING ON WHAT YOUDID AND I DISAGREE WITH YOUR

CONCLUSION ABOUT JUST HOW TIEDUP YOU GUYS WERE BECAUSE I THINK

THERE'S AN AWFUL LOT OF POWER,WHEN A GOVERNMENT AND A FED CAN

OPEN UP A WINDOW AND JUST GIVEAWAY MONEY FOR FIVE YEARS TO

BANKS, I THINK THERE'S AN AWFULLOT YOU CAN DO WITHIN STATUTORY

LIMITS WHEN YOU HAVE CHECKS THATYOU'RE WRITING THAT ARE THAT

LARGE.

THAT BEING SAID, AT LEAST WHEN ILOOK BEHIND YOUR EYES, THERE IS

SOMETHING MOVING BACK THERE.

AND WHEN I LOOKED INTO HIS EYES,AFTER THE IRAQ WAR, HE WAS

LITERALLY, LIKE THIS, LIKE THISWAS FUN.

I WAS THINKING ABOUT INVADING

ANOTHER COUNTRY.

WANT TO HEAR ABOUT THAT?

(LAUGHTER)IT'S COMPLICATED AND I DON'T

WANT TO IMPUGN THE PEOPLE THATARE DOING THERE.

AND I APPRECIATE YOU HAVING THECONVERSATION. AND YOU'RE RIGHT.

I HAVE VERY SET BELIEFS ON IT.

HOPEFULLY THEY ARE OPEN TOARGUMENTATION.

I DON'T KNOW HOW COMPELLING ANARGUMENT IT IS TO SAY THIS WAS

THE ONLY THING WE COULD HAVEDONE.

>> NO, I WAS PRETTY HONEST ABOUTWHAT WAS MESSY, WHAT I REGRET

AND WHAT OUR MISTAKES. I TRIEDTO BE HONEST ABOUT THAT.

>> Jon: THE CENTER FOLD SPREADIS WORTH THE PRICE.

(APPLAUSE)LET ME ASK YOU A QUESTION, DOES

IT FEEL GOOD TO TALK ABOUT IT?

IS IT CATHARTIC IN ANY WAY OR ISIT, LIKE -- OR IS IT -- OR IS IT

STRICTLY LIKE, YES, I AMFULFILLING MY CONTRACT TO THE

BOOK COMPANY?

LIKE, WHAT DOES IT FEEL LIKE?

>> ACTUALLY, I KIND OF THINKIT'S AN IMPORTANT ARGUMENT TO

HAVE.

>> Jon: YES!

AND I LIKE HAVING IT.

(CHEERS AND APPLAUSE)>> Jon: HERE'S THE ONE THING I

DON'T KNOW -- I HONESTLY HAVE NOIDEA HOW WE EDIT THIS.

SO I'M GOING TO SAY, LIKE,TIMOTNY GEITHNER, THANK YOU SO

MUCH!

(APPLAUSE)THERE IS SO MUCH ON THE WEB

RIGHT NOW ON THIS, I DON'T KNOWIF WE BROKE THE WEB OR NOT, BUT

THE BOOK IS CALLED "STRESSTEST."

TIMOTNY GEITHNER WROTE IT.

HE WAS THE SECRETARY OFTREASURY.

IT'S A VERY INTERESTING READ.

I ACTUALLY SAY THIS, IT'S AREALLY WELL-WRITTEN BOOK AND

EASY TO UNDERSTAND, AND YOU CANYELL AT CERTAIN PAGES IF YOU

WANT.

(LAUGHTER)BUT THANK YOU SO MUCH FOR

STOPPING BY AND SPENDING ANINORDINATE AMOUNT OF TIME WITH

US.

TIMOTNY GEITHNER, THANK YOU FORBEING HERE.

(APPLAUSE)