Maryland where several authors will be discussing their books on a variety of topics including politics, race in america and drone warfare. We kick up live coverage with a panel call the American Dream, american greed. [inaudible conversations] good morning, everyone. Welcome its been a good morning. Welcome to the Annapolis Book festival. Be the moderator todays fantastic Opening Panel entitled American Dream american greed. She coauthored the smartest coauthor the smartest guys in the room with the Energy Trading giant and ron but more important she fourth told that a few years earlier when she started to ask questions is it overvalued and transparent . Actually we she says there may be another issue brewing we should listen. To my left is a very talented contributing writer to the New York Times writing extensively on College Athletics but has dived into the of multi dimensional Human Interest tories behind college athletes. And he has my sons dream job and frankly my dream job it is great to have you here and thanks for coming to this years annapolis boat festival. The American Dream american agreed. That is a provocative title and today we are in for a real treat. We will have a lively 30 minute discussion and i will try to leave room for about 10 or 50 minutes of audience questions then we have a hard stop. To kick us off you are so well conveyed and captivating kicked us off with an elevator ride to the top quarter the major points in your book . What do you have to say . Shaky o i will start with bethany but before i do shaky ground is the title it is very timely today unfortunately japan is in the news again and did 2011 i was in tokyo for the big earthquake there that they are still trying to deal with a tsunami. Ater, be 2008 the Global Financial system had a mill down and eight years later there were on shaky ground. Large why a . I have always ben fascinated the largest Financial Institution in the world with 5 trillion of outstanding liabilities the companies were created to serve the American Dream of Home Ownership to have Home Ownership even the financiale world most dont care about fanny or freddie but they are critical companies to have a mortgage or want to get a mortgage to help shape your ability their critical to the price of your house and critical to our economy. The treasury secretary described housing as the wheel within the wheel of the economy so basically everyone should care about the strength and the fate of these two companies and they were taken over by the u. S. Government going into conservatorship and supported by a line of credit from the treasury with the idea this would be temporary and figure out a way to resolve this but instead here we sit going on eight years from fannie and freddie and are still sitting there. Someone told me the greatestst example of government disfunction he has ever seen. That could be a dysfunction that a decision the government made with the profits they produce to cover the budget deficit the problem is the big idea to have whole system safer collectively that instead estrange of capital with no plan for their future that leaves us in a precariousen position. That leaves me with greater chinese from when i read the book than next book is called indentured maybe he has Better Stories talking about taking on that n. C. A. A. And the multibillion dollar industry and where that goes but ith have to make a confession before i read the book why do they need to be paid . A year not to employees. Day you know, that mine is in Jerry Mcguire . You had me at hello . You had to be at page two. I am not that easy some people compare to j. Edgar hoover. Is this fair . G, everybo sadly it think i have more bad news. With College Sports the truth is the money. A 13 billion industry now. There are coaches making 5 million and conferences and tv networks between twoio and 300 million per year. With 3 million salaries. And all of this money to drive the interest what amounts to less than a sliver and the second piece and has a 400 page rulebook. Ar. The way the rules areto applied to the kids, athletes, adults is wildlyt is disparate. The 3rd thing is, john mentioned the scholarship, this College Education. So we have a lot of money, there are a lot of rules. Ely, ta but this is all okay because we are educating these athletes. Well, unfortunately, that is not quite the case. Federal Graduation Rates are hae about 50 percent. Anybody that is seen the news about what happened in North Carolina over the last 20 years of these athletes were filed in the classes at the university knew about,di they did not meet, the classes did not exist, they were meant to keep the athletes eligible. In the majors like fitness studies, bigtime athletes are clustered in. The idea there getting an education is sort of fiction and harkens back to a mythologicalar that might have been around in the 1970s. But it is not anymore. And so between the rights that are taken away in the education that is not delivered and the financial dichotomy exists, system that ends up being, there is no other word for it. All of us, i think, lovelittt americans comeau we love authenticity. We also recoil of hypocrisy. Democracy is a threat in both your books command you mentioned it explicitly. Could you talk a little bit about how it seems like the ncaa beyond being just arbitrary, really kind of picking and choosing who gets rewarded and who gets the blame for who gets punished. I dont think you have to look any further. Udweir the stories are always thist on weird mixture. On. And it is this notion of input and corruption, everyone is in on it. Our two bok everyone has come to take the system as it is fors. Granted. Sometimes you wish there was a smoking gun. People wanted so badly. To have people really pay attention, sometimes you need it. You sort of bill the narrative, a lot of well, obviously something is going on. Without the smoking gun you dont have this moment where everyone goes, of course. Yocour willful deception and wrongdoing. Narrative, we want that turning point to hang the story on. So i think it always makes these stories somewhat unsatisfying on one level, although on another level theyre a much deeper human story, r it always makes the stories somewhat unsatisfying on one level. On another they are much deeper and very human. It is a whole lot of selfdelusion wrapped up with greed, wrapped up with corruption. Well, so no one is focused on these issues now. It seems to take a smoking gun to get action. What is the possible way forward to try to fix fannie and freddie mac before it happens again . Really complicated question is on the surface lets get them out of the Housing Market. Why do we need a government presence. Some of the things we take for granted. They would not exist if you did not have institutions they guarantee that risk. When you look at the cost of getting the government of the Housing Market it becomes a lot less clear that is the right answer. If you didnt have these two giant companies around or something similar thereof mortgage credit will be much harder to come by much harder to come by in parts of the country that are not as well off financially. When you dig into this it becomes a lot less simple. Y thin and that is part of the reason why we dont have any answer to this. Because if you are on the hard right you want to say just get rid of them. Thats just nationalize them have the government not do anything. And the right answer is probably somewhere in the middle and close to the system we had in place. But i think one of the things thats holding up moving forward is ideologying, one, the quest for a perfect which may not exist. Then just this idea that, well, the status quo is fine. That pushing off making a decision is somehow not a decision when, in reality, it is its own form of decision. How about the ncaa . There have been some positive things which have happened in the wake of kind of all these efforts to try to reform. Theres now a concussion protocol in the ncaa. There are fouryear scholarships now. Now theyre, i guess, factoring in the true cost of attendance. Whats left to fix, ben . So there have been a number of lawsuits, and the Union Movement at northwestern really put a scare into sort of the status quo. But the system, there is a little bit of extra money for the players now. There has been incremental movement sort of toward reform. But it essentially is unchanged. And its really hard to go through the courts, because there was a suit over using players names and images in tv without their consent and without paying them for it. And they won. And on appeal, the idea that colleges could now pay trust funds to players was overturned. While still saying that the ncaa had violated antitrust laws. So in essence, it was the rules are illegal, but they can basically continue as they are. And its because, you know, institutions like the courts and institutions like the labor board which weighed in on the northwestern case dont want to hit the eject button on the system that we have here and dont want to be the ones who are blamed for changing College Sports because there are so many College Sports fans, and people really like College Sports. And so to change, fundamentally change the system that we have, i think you mentioned the university of missouri. And basically what happened was there were issues of racism on campus, and they had been percolating for weeks and maybe months. And as soon as the Football Team stood up and said we are not going to play on saturday until something is done, the University President resigned in 36 hours. [laughter] 36 hours. And that is how much power that the athletes on campuses have. And schools have given it to them almost unwittingly because there is so much money now tied up in the games; tv money, espn, cbs and the concessions and the sponsorships. And so if the game doesnt go on, there is so much money at stake. And so just imagine if a team didnt come out for the final four and said wed like to renegotiate the terms of how we play College Sports. I think the system would change in half an hour. It would change so fast. Again, thats also really, really hard to do because these are 18 and 19yearold kids who want to play in the final four. And so to take a stand is really hard especially because many of them are just in college for a couple years, they have a pro career that theyre looking out for. But i think that is what its going to take to fundamentally make the system more equitability with bl. And equitable. Is it something that should be fixed not just for bigtime College Football and basketball . Were in the land of lacrosse here in maryland. How about lacrosse players . Yeah. I think the ncaa rules for all athletes, three things should happen tomorrow that would make it better for everybody. When you talk about salaries and actually paying the athletes, i think thats different for the football and mens basketball players because they are fundamentally on campus to generate revenue for the school and to be visible. And its different even than lacrosse at Johns Hopkins or maryland. But for them i would say you should get a lifetime scholarship, meaning that you can focus on your sport while youre in school and come back and get the education youre promised whenever you want. You should have Lifetime Health care, so if you ever get injured competing for your school, the school covers those bills for life. And the third thing is even at Johns Hopkins or a division iii school, if somebody wants to pay you money for your autograph, you ought to be able to sell your autograph. If the car dealership wants to use you for a commercial to endorse their cars or if nike wants to pay you to wear nike, you ought to be able to have control over your name and image and make any money from a Third Party Vendor that you can. Well, i want to leave some time for audience questions, so why dont i open it up now. Please walk over to the mic if youve got one. [inaudible] sorry, because its television. Ink of as a it even enron which most people think of as a giant fraud was mostly what i like to refer to as a legal fraud which is they have found ways to to rip out the sentence and take advantage of loopholes in the system while beating the letter of the law d such when prosecutors try to go after it was actually very difficult to do it he cuts it turned out accountants andue lawyers and all the people in our system to protect our executives from the consequences of their decisions even when they benefit and prophet directly from those decisions make it really difficult to prosecute but difficult the loan isnt the reason there werent convictions in the wake of a financial crisis. Se part of it was because nobody wanted to wreak more havoc on these institutions that we just bailed out and there was a very real fear that if there were prosecutions that we would crater the fragile confidence of these institutions that we just spent all this taxpayer moneych bailing out. The regulator signed off on aba lot of what was happening so it goes back to my first explanation. A lot of the things we find the most reprehensible that are thes most deeply immoral are not necessarily illegal and what i dislike about her moderate markets is it often seems these immoral decisions arent punished in other ways. We would like to believe there would be a deeper punishment than a career lobster shame felt if the punishment cant be legal and our world doesnt seem to work that way any more. The floor is open. I find mysl thank you all very much for wonderful presentation. Y i find myself utterly blown away by the institution agreed that you have described. Xisted, but i knew at the existed but now im just shuddering. My question is i have read recently that some of the problem with College Tuition exploding is that some of that money is going toward supporting the sports portion of the college. Is that a rumor or is that churro and secondly, the human face of the students who are not able to take advantage of the money, the hunger that they experience, i would like to hear a little bit more about that. Coe you are talking about student fees. There has been coverage of student fees. D at the bigger schools we are talking about the acc and the fcc in the big 10, those student fees there are its much more of an issue in smaller schools that dont have tv money to fall bacy on or to tap, to pay for the things that they want the bigger stadiums and more facilities and more money for coaches. Not, you but at some schools that are not florida, that are not usc there are student fees that fund athletics and over four years he can be as much as 1000. When youre going into debt to pay for your College Education any more money for the Football Team you shake your head out. Hm the student fee as part of the tuition so smaller schools. As far as the human face i can tell you the story of the prologue in our book is a player at the university of connecticut a few years ago, he wass investigated by the ncaa for taking impermissible benefits is what they call the and its really more about what happens to his mother in the family when you are under investigation. Ey she was a single black mother and she accepted money from a family friend to go on a recruiting visit with her son, basic parenting. This wasnt a guy who is trying to steer the player to a school. This was a human kindness, go be a parent and go with your son on his recruiting trip. The ncaa sent five investigators to her workplace and took her to her work and interrogated her for five hours. Four white men and shes a single black other asking her about every single check for she had written the past few years and having to prove that it was not some sort of unseemly back channel money to recruit her son. The ncaa really one of the onlyr places you can think of where you are guilty until you prove your innocence so as soon as you are under investigation you cannot play. Your School Suspends you until you prove you did nothing wrong. The mother had been losing her job also because she was under so much stress and the every si, investigators went to friends houses and friends worked lace is asking about every single deposit in her bank account over the last number of years. On its sort of insane to think about institutions being able to do that in america today. For when you have the human face of teen investigated for doing something that really doesnt seem like a very big deal and is fact it is not a big deal. Unfortunately thats one of many stories like that the joke article than his book that get your lab oiling. Next question. I wanted to take a different perspective from the last couple of questions and hope that nobody throws Rotten Tomatoes at me but human nature to want to bl blame, to want to blame the ncae administers but the reality is that they wouldnt have had the power that they have if we werent the ones tuning into basketball games in the Football Games and we werent the ones that want nice houses and take out loans for home renovation. Im wondering how much your books address the real cultural. Nature of the greed that gets embedded in the systems . I have a linux sometimes usec when im talking about scandals which is that every scandal, every story of this has gone wrong in some ways about the complicity of the victims because we all buy into this belief thats something afterthefact seems too good to be true. Certainly in a financial crisis homeowners bought into the idea that home prices would only go up or ever. Responsi im a big believer in personalty responsibility without sense of personal responsibility. We are all completely lost but i also think something that has gone wrong in our system there is sent off in the corresponding sense of corporate responsibility. Responsibility does have to be a twoway street and i was firmly on the fault of homeowners that took out mortgages they canis afford until i went to presentation presentation from a Price Institution called Washington Mutual that talked about how you persuade people who wanted to her year fixed mo Rate Mortgage should take out a much riskier loan instead because a much more riskier loai was more profitable because they could turn it around and sell it for more money. It was a script for when someone came in and said i won a 30year fixed mortgage and how you change their mind. To your point we are lost without personal responsibility and we are all to some extent complicit in the story of every business gone wrong but that doesnt mean it is all our fault the responsibility has to be a twoway street in there has to be a responsibility from people about the decisions that make it also responsibility from corporations about the decisions that they encourage people to make. I think we have time for one more question. I have a question for bethany. I am an economist by degree but i have gotten to the point of not caring anymore and not following whats going on in the economic arena. Talking about the financial crisis, a simple taxpayer you mentioned the guilt of fannie and freddie but you did mention anything about jenny. How are they structured now . How are my granddaughter supporting the subsidies that are going to these three megainstitutions . Thank you. And theyve ac right now fannie and freddie are essentially supported by a line of credit from taxpayers and they took 187 billion from taxpayers in the form of their bailout. People thought they would neverr be able to repay it. They paid almost 100 billion more than they took back into u. S. Treasury. We have been able to use that to reduce the budget deficit. A big problem with the way they are structured is the taxpayer is totally on the hook to capital is what absorbs losses and in that finance the two should institution they need to absorb n. Unexpected events. Fannie and freddie and at the direction of the government are being drained of all their capital. Ab a few years theyre going to have absolutely nothing what was to absorb any unexpected lossesg so guess where the losses that are going to happen because they happen every finance the two should go . Right back all of us. Thats why i believe its a probably need to fix. I think thats about all the time we have. And then sure did the inside story of those who took on the ncaa. Im converted. On shaky ground, the story of the still unsolved story of the u. S. Mortgage giant. I am very concerned. Other than that its been a very pleasant experience up here and i want to say congratulations to you both and thank you. Thank you very much. [applause] [inaudible conversations]and be that was the may mclean and ben strauss live from the Annapolis Book festival