city, this is charlie rose. >> rose: all eyes were on washington today as the united states senate held much-discussed hearings on goldman sachs, the wall street investment firm. the permanent subcommittee on investigations summoned several officials from the banks less than two weeks after the s.e.c. charged the firm with fraud. senators from both parties took turns criticizing the firm and wall street practices. >> it's not investment in a business that has a good idea. it's not assisting local governments in building infrastructure, it's gambling. pure and simple raw gambling. >> they're called synthetic because there's nothing there but the gamble, the bet. you are the bookie, you are the house. >> i think most people in las vegas would take offense at having wall street compared to las vegas because in las vegas actually people know that the odds are against them. they play any way. on wall street they manipulate the odds while you're playing the game. >> you made billions of dollars going short, so you can talk about that as reducing risk. i talk about that as making a hell of a lot of money. you can characterize it the way you want. >> but we only had to short because we had it had long. if we didn't have the long we never would have had the short. >> you blew right by zero. >> rose: the initial group which testified until after 3:00 in the afternoon was followed by the c.f.o.. >> and when you heard that your employees in these e-mails and looking at these deals said god what a [no audio] deal. god what a piece of crap when you read about those in the e-mails, do you feel nick. >> i think that's very unfortunate to have on e-mail. (audience reacts) and very unfortunate... >> on e-mail? how about feeling that way? >> i think it's very unfortunate for anyone to have said that in any form. >> how about to believe that? >> i think that's unfortunate as well. >> that's what you should have started with. >> i... you're correct. it is. ed ed finally at the end of the day came the much-anticipated appearance of the goldman sachs c.e.o. lloyd blankfein who early on acknowledged that wall street was overleveraged and taking too many risks, causing the government to have to rescue the financial system. what we and other banks, ratings agencies and regulators failed to do was sound the alarm that there was too much lending and too much leverage in the system. that credit had become too cheap. that complexity and the fact that some instruments couldn't be easily bought or sold compounded the effects of the crisis. >> rose: for the rest of the hearing leading into the evening blankfein was the subject of increasing scrutiny by senators as he tried to walk the fine line between appreciating the popular sentiment against wall street and wanting to explain and defend his own company. >> it's important for goldman sachs that we take away the notion... this is a very big burden on us if people think we're too big to fail. we don't think we're too big to fail. we don't want to be too big to fail. but a lot of the negativity that's associated with us is because people think we're getting the benefit of being too big to fail and i don't think it's good for the country or for us knob that place. >> rose: joining me now from the "new york times" offices in new york is gretchen her againson, she co-wrote the the "times" story last december about goldman's financial products. welcome. >> thanks, charlie. happy to be with you. >> rose: i have not been able to watch the testimony because i've been in this studio doing a whole range of things. of lloyd blankfein. so as we tape this afrgs he's in i assume, close to the end? but you have a sense of the dialogue and how he's doing and what's coming out of this. tell me what it is. >> well, my sense of his testimony is interesting because he's trying to make this argument that they did not... that goldman sachs did not bet against customers who were buying pieces of these complex securities. and yet the senators have these reams of documents which indicate that this, in fact, was the case. so i think he lost that battle. this is important because this is an argument that they've been making all along. and then there is the questioning about is this the right thing to do. is this the ethical thing to do. and that's very difficult. a very difficult line for him and his colleagues to walk. >> rose: do they have a very difficult thing here, as david brooks said in a column here today? you know in which they've got a lean in which they have to, "a" seem competent but wrong or seem not so competent and less... less accuseable? >> well, i put it this way. they have to seem sort of sorry. but they also don't want to be complicit. >> rose: right. >> and that's a very difficult line to walk also. they want to make the american people feel that they understand their pain. but they also can't be seen to have contributed to the pain. and i don't know. that's hard to do. >> rose: and your assessment so far? i mean, where have they been able to, in your judgment-- for the lack of the better word, using a sports metaphor-- score? >> i think that they've been able to fend off some lines of questioning that might have taken them down a road that they didn't want to go and maybe because the senators didn't have the time left to pursue it, maybe because the senators were not well versed in the materials. so i think what... where their wins have been, have been in questions that weren't asked. >> rose: give me an example. >> well, when they talked about the a.i.g./goldman sachs interaction on that bailout. when goldman sachs received 100 cents on the dollar to rip up the contracts it had struck with a.i.g., there were a lot of questions that could have been asked about goldman's interactions with treasury, with the fed, with the people making those decisions, for example, that weren't asked. >> rose: why didn't they do it, though? i don't understand. because they didn't have enough time? because they didn't understand it well enough? because, because, because? >> i don't know. your guess is as good as mine. there was an interesting news item, i thought, that came out of this, and this was a very well-advertised hearing. we had documents for days to pour over. so, you know, we knew what the broad outlines of this was going to be. one thing that i thought was fascinating was that in the first panel there was a person who was involved with the asset-backed securities group, i think it was josh birnbaum, who said that he then put on short positions or bet against brokerage firm stocks like bear stearns, for instance, and so my question is what's a guy who's got an asset backed sort of area that he works in moving over into equities and putting on short positions for the firm based on that? that was very interesting because it sort of makes you wonder about cross pollenization of ideas which they like to maintain they do not have. >> rose: so tell me what you think has gone on here. in the end, what's this about with respect to goldman sachs? what's at risk for them? >> oh, huge reputational risk. i mean, charlie, i think anyone from main street who's watching this today is saying wow, these people in wall street really live in a bubble. that they refuse to acknowledge that it is a conflict or interest or at least doesn't pass the smell test that you're an underwriter of securities and at the time time you're selling them to your valued clients, you are shorting them, or betting against them. the fact that this doesn't strike goldman sachs or any banker as potentially a conflict for the customer to say "what are you doing to me" is very hard for main street to understand, i think. >> rose: is it hard for the customer to understand? >> i don't know. but i sure would wonder what customers after watching this give-and-take today and knowing the facts that were laid out by the s.e.c. and by these senators the customer's got to wonder. "am i being treated as a loyal customer, am i being treated as a person who's sort of a resentable for securities that you want to get rid of or bet against?" >> rose: the other thing that i'm curious about is the notion of whether goldman sachs, in your judgment, has somehow damaged their future relationships with the level of clients they have? >> i do think they've been damaged from the main street perspective. from the mom-and-pop man in the street who's watching this and really getting educated and how wall street works. and it doesn't look too pretty. so i think that that is a potential damage point for them. >> rose: okay. but it seems to me, gretchen, that that's about the system and not about goldman sachs because they don't... they may be victims of what comes out of this system and therefore it hurts them. but what you're saying is that the system is under scrutiny here and the damage or the demand for change will be in the system. not about goldman sachs per se. >> well, that's true. but don't forget, charlie, that goldman sachs made money on these bets where it bet against the mortgage market while it was selling mortgage securities. goldman came out best situated. they had an amazingly profitable year last year, they are again riding high. so you've got that interplay here. it's not just about what went on then but how they profited from it. and many other firms did not and really got hurt by it. and, yes, maybe they weren't as smart or shrewd, but you do have firms who are left by the wayside. and goldman sachs survived and thrived. so i think that's an element here that you have to consider. >> rose: when you think about this s.e.c. complaint, did what you hear today seem to make that complaint stronger or weaker? >> i think it made it stronger, not necessarily on the facts of that specific matter, abacus 2007 ac-1. i think it made it stronger totality about the firm because there were other similar struck structures where you had goldman salespeople saying this certain bank wouldn't buy it, it's a piece of junk. or this was a really crummy deal. so it builds this idea that the abacus structure or the abacus investment was not one of a kind. >> rose: are they now beginning to say "we better go out and explain our case much better than we have and it's incumbent on us to do that because this was not a great day for us?" >> i think that the takeaway has to be this that this was... there was sort of arrogance on display. not necessarily with mr. blankfein but certainly that first panel. and it does... it sort of shows this wall street hubris that still exists and it's hard to walk that line. i understand that. but you did have the feeling that these were guys who just didn't get it. and so the degree to which they're going to say "that's my story and i'm sticking to it" may not be the plan that they continue to make. >> rose: in the end, do you think it will be really about that? it's not so much about there was wrongdoing or whether there was illegality but in the sense that america has impression about the way things were done. an impression which leads to whatever consequence? >> i think that's absolutely right. and it's an impression of a sort of ugly series of facts where you had winners and a lot of lot of losers and how that played out and the facts of these cases just doesn't put wall street in the best light. >> rose: because in the end there is this connection which people feel. there are a lot of people in the united states-- because unemployment rates suggest it, a lot of other things suggest in the terms of it may be the recovery is beginning, but a lot of people over the last two years have been hurt. >> you bet. >> rose: and they are now looking around and trying to understand why and how long and they look at this and say "it certainly didn't make life better for me, did it?" you >> you bet. and don't forget people's 401(k)s that were severely damaged. so it's not just the borrowers who took on too much home or the people who bought the mortgage securities only to see them fail. it was very widespread, the damage that this particular episode did to people. >> rose: what is the perceived impact on financial regulation reform? >> well, i think that we have obviously a stall at the moment in that. and i think that this hearing today has probably something to do with that. >> rose: thank you for joining us. i know it's been a long day. >> that's right, charlie, i'm glad to be with you. >> rose: from the "new york times," gretchen morgenson. back in a moment. >> joining me now is william cohan who worked on wall street and is writing a book on goldman saks, gillian tett of the "financial times" who is the american editor of that newspaper and evan thomas of news week, i am pleased to have them here to talk about this day in washington in which goldman sachs and a number of its employees, including its c.e.o. lloyd blankfein were being questioned by members of a senate committee. so tell me how you saw this. >> charlie, what you had here unfortunately for the american people to see was the changed ethic on wall street. and that's what really, i think, is the sad part about this. once upon a time wall street was in the business of raising debt and equity capital for their clients, their corporate clients or advising on mergers and acquisitions or investment opportunities. and now you see this spectacle where they're being hauled up in front of senate for seven hours to talk about synthetic collateralized debt obligation. what does that even mean? >> rose: that's why we have evan here. he'll define that. (laughs) >> but the american people are not going to be able to understand. it's a brilliant concept. it's maybe too clever by half to create a security that you can sell to investors that you can construct for another client of the firm or counterparty that's made up of risk. it's not even made up of the underlying mortgages. >> yeah, we just had a day when we've had hours of debate on prime t.v. about synthetic seed owes. now, a few years ago the vast majority of americans didn't care what was happening on wall street. they averted their eyes on how the banks were making their money. so so the fact that we've had the spotlight turning on this-to-this murky world is a good thing. and even better, senior goldman officials in front of politicians being grilled and asked what were you doing is also progress, people are looking back at what went wrong and people weren't asking enough questions a few years ago. >> rose: evan thomas has also written a book called "the war lovers" which is about roosevelt lodge, hearst and the spanish-american war. you've known washington for a long time. is this anything new? >> it actually goes back to 1896 populist anger about the insiders, those awful wall street bankers. >> rose: roosevelt was always running against them. >> this was an ancient... it's the outsiders who are being bamboozled by the insiders. and this provides a lot of political passion. that's what we were watching today was... and i don't... i mean, maybe it was an interesting debate collateralized debt obligation. i think the country still doesn't understand it. to them, this is about those evil people on wall street who are out to screw you and there's the politicians trying to bring that out. >> rose: it seemed to me that the thrust of all of the questions as i watched it was the idea that you guys made a lot of money by having... being able to play the game and having national the rest of us didn't, even though we don't play that game. but because you played that game because you took those risks, the rest of us suffered. >> well, that's one of the biggest complaints that there is about goldman, that they are a beehive of information, that they share information better than any other firm amongst the people who work there. they are... they take that better information they have about their clients or their counterparties or the people they do business with and somehow use it to their benefit. and i think that's what is at the heart of what's going on here. somehow goldman was smart enough in december of 2006 to turn their battleship around and decide the go short the mortgage market, ended up making $4 billion on that particular debt. they made billions in the mortgage market in 2007 when everybody else on wall street took the other bet and lost money. with the exception of the hedge fund guys like john paulson or... >> rose: but that brings you in into the conflict of what the s.e.c. complaint is about. >> exactly right. >> rose: which is they led the guys who were going to make money over the collapse of housing somehow influence securities sold by goldman. >> yeah. you know, there's a difference between the s.e.c. complaint and what... and theater we saw in washington today. >> rose: how do you think it's different?. >> well, i think it's different because the s.e.c. complaint is really trying to parse through a very tiny disclosure issue. they're trying to get that elephant through the needle to get into heaven. it's very difficult. the great thing about this hearing today is that there were 900 pages of documents released. i can't say i've been through them all but i haven't seen anything really that results in a smoking gun on this disclosure issue. i think s.e.c. is going to have a very hard time. but that is a very different issue than is this what goldman wants to be about? sitting in front of these senators and parsing whether or not they were on the right side of or the wrong side. >> rose: this is not a definition goldman wants to have. >> the key issue at the center is goldman at the same time was trying to create securities and tell securities but it was also taking bets and it's confusing those two roles which is at the heart of what's gone wrong in wall street in yes rey cent years. people talking about goldman being a vampire squid, just to use that famous term. in some ways they're almost more like an amoeba. they sit there, suck in all this information and using that information they both arrange business and they trade against it. and that was at the heart of what people were asking about. >> rose: do you think what they did was illegal or not? >> well, i'm not a lawyer, charlie. but what they are doing... the column in the "new york times" that i wrote was in defense of due process. let's not judge them... >> rose: rush to judgment. >> let's not rush to judge them. and i still think we suffer from that. i think that was part of the theater going on today. but i think that part of the problem is that goldman in the last 20 years has confused the idea of having clients-- for which they're long-term greedy-- and having counterparties, which is like the trading term. where lloyd blank feinand gary cone come from. >> rose: the two top officials at goldman sachs. >> they're in the short term greedy camp. there's a strain of goldman sachs alumni who would like to see them being long term greedy. >> what's going on here is an attack at the heart of goldman sachs' business model. if as a result there's serious reform. >> rose: it won't be a result of what happens today we could be seeing goldman sachs being forced to change. >> rose: where do you think financial regulation is and how does that impact on the financial regulation that the democrats couldn't get a vote on... >> i think it's going to pass. i saw senator dodd sunday and he said said it was going to be ugly but it's going to happen. so i think after a lot of washington a bubky of the parties jumping around... the republicans, it's very hard for them or congress generally to be on the side of wall street. it's an untenable position right now and these hearings make it harder. so one way or another i think we'll get financial regulation. but it will take time and be massive. >> rose: so you don't see in these hearings as you witnessed today and they began with... you know, a series of goldman executives working their way up as we tape this at 6:30, lloyd blankfein is still testifying. we'll have a later assessment of him. but do you... it will clearly not have an impact on financial reform that was already there. but you so no one defending goldman sachs except the goldman sachs executive. you didn't see people rushing to say... >> hard to feel sorry for goldman sachs. but there's a stall innis show trial aspect to this. >> rose: stall innis show trial? >> well, they wag their finger at them. the deck is stacked against goldman. goldman is usually the outfit stacking the deck against everybody else. >> rose: because of their competence. >> well, they're a giant aimee that baah that absorbs information. they're smart and outsmart everybody. everybody. now they're in this uncomfortable foreign position of being... i hate to use the word victim. but they're a device, they're a tool being used to make a larger point... >> rose: about wall street. >> about wall street. about insiders and how unthis. is they may not be a giant sucking squid but they're made to look evil and blank fein, it's so interesting to watch him. he looks terrible. he looks like hollywood's idea of a wall street trader and he's going to play badly. >> rose: even though he's a... he grew up as a poor young... poor family in queens, new york. >> he grew up in the bronx and moved to east new york in brooklyn, one of the worst neighborhoods... >> rose: earned his way to... >> earned his way... >> he doesn't come across as having much of a common touch. i mean, what they need right now what they needed to do six months ago was to reach out, be proactive say, sorry and show they had a common touch. paying themselves these bonus is guarantee to make ordinary americans just hopping mad. >> in one sense they have taken certain steps but none of it seems to be working. in other words, they have $500 million for their charitable organization. they took less in bonuses than they could have, even though that doesn't resonate with many people. they could have taken more and others did. they made money during this crisis when other firms lost money and some of them even went out of business. instead of rewarding them for that they've got a big fat target on their back. i think largely because it stems from them being the number one or number two counterparty on that a.i.g. list in april of 2009 and they haven't been able to recover. >> rose: and they used taxpayer money to repay them in full is the point. >> not only that. the fed is giving them low-cost financing for which they can arbitrage and make huge profits as well. >> rose: explain that idea. the fed is giving them... low cost funds so they can use to arbitrage. >> now that they're a bank holding company. >> rose: i don't know what that means. >> well, he's going to tell you. >> once upon a time there used to be securities firm. as a result of this crisis there are no more securities firms, they're all bank holding companies. goad man and morgan stanley became bank holding companies in cement of 2008 and that allows them to go to the fed window, borrow inexpensively, damn cheaply, in fact, 50 basis points and they can turn around if they want and invest in treasury securities that pay them 3% and they're borrowing at half a percent and all that difference goes to their bottom line and it's virtually risk free. so there's a reason that citigroup is making $4 billion and j.p. morgan is making $3 billion and bank of america is making $3 billion because all this free money from us, from the american taxpayers... >> rose: but here's evan's question. will financial reform change any of that? isn't that your question? >> oh, yeah. >> no, that won't... >> rose: nothing? >> that's not going to change in the near term. what fed policy will change and the problem is also that savers are getting minuscule amounts on their savings "s while on our back they're using our savings to make that arbitrage, to perform that arbitrage. and savers are getting nothing and the banks are making profits. >> rose: so what will happen to derivatives? >> well, gillian? (laughter) >> well, if you are a banker... it's the hot topic. well, i think we're going to be moving to a world where derivatives are probably less profitable for the bank than they have been in recent years and that's almost certainly good thing. far too much of the derivatives world has been incredibly murky, shadowy, as we found out today. the public doesn't understand it politicians don't understand it, and yet it has the capability to have tremendous impact on the economy more widely. if you go back to, say, the crash of '29, after that there was a real push to put the equity market on exchange, clean it up, make it more transparent. and in a sense we need to have that same thing happen now with derivatives in the credit world. >> here's another question. as an obama server of american politics and culture, it is that if you're undergoing this kind of scrutiny, especially in an era of e-mail, what's at risk for goldman here? >> i think... it's been said here. far long time their whole thing was clients trust us. that we do... they built an entire culture based on that. but as they shifted from an investment banking culture, basically guiding investors to a trading culture where we're basically running a big gambling casino and just making bets, there is a risk... >> rose: with our own money and other people's too. >> right. and there's a risk we're going to lose it. i thought blankfein sounded really sincere. our existence depends on trust. that part did come across and they are worried about that. that their basic business, as you said, they basic business model is threatened by the... now i think goldman is going to survive all this to i don't want to get too melodramatic about that. >> not worried that much about them >> they'll figure out a way... >> rose: so what damage will... regardless of how well lloyd blankfein and the rest of the executives did today and understanding the mood of the country, what's at risk for them beyond this trust thing? or how will this trust thing play itself out? >> if you're a client and you suddenly because of all of this if you didn't get the message before that goldman had a number of different agendas every time they dealt with you or so it seemed, you could say to yourself i'm not going to do business with them. and if enough clients do do that then they're kaput because in effect they don't have the retail exposure, they don't deal with the public by and large. they deal with institutions, with governments, with hedge funds and other trading types. so if they lose any of those people... i don't think they will but nobody as smart as goldman is in terms of making those markets and providing capital to those people in innovative ways i think they could be at real risk if they lose that confidence. what is wall street? if we learned anything in this crisis it's that wall street is a bit of a confidence game. why did bear stearns and lehman and merrill go out of business? because the people who did business this w them lost confidence in them overnight. i think goldman is better insulated than that. >> rose: once they lost confidence they started dumping their stock. >> one of the interesting things is if you go back to 2004/2005, a lot of goldman sachs' rivals were consumed with what they called goldman envy. there was a real feeling that goldman was doing so well, making such amazing profit that people at citigroup, that merrill lynch had to scramble to keep up. >> but they have a point in that they clearly... i want to get some sense of fairness to them in terms of what points they have to make. that they were smart enough for whatever reason to see the housing market was... had been overhypered and was... and they got it. so they begin to reduce their "exposure." >> really their defense now is we weren't all that smart. >> we lost money... >> i remember there was a time when everybody said goldman's pretty smart. they managed to see that. now they're trying to claim they weren't that smart. >> david brooks made that point in the "new york times" column. i'm paraphrasing. they have to make themselves look stupid and innocent or smart and guilty and they did make a lot of money. this structured product desk, which josh birnbaum was the mastermind behind it. that desk made $4 billion. $4 billion in 2007. >> rose: wow. >> 2007. and the net against that was roughly around a billion dollars of losses. now lloyd blankfein and david viniar the c.f.o. will debate that. but in that mortgage group they ended up making $3 plus billion in 2007 when the rest of wall street was losing billions. >> rose: >> no one would have minded when they had gone short if they had not been flogging securities to some of their favorite clients. >> rose: explain that. they were going short while they were selling housing mortgage securities and... selling them to their clients. so should at no time clients be the people most unhappy? >> this comes back to the issue about transparency and disclosure. that's the heart of the s.e.c. case. did the clients know the full range of goldman sachs positions? did they know the way goldman sachs was create these products or not? >> rose: was that the complaint or was it the complaint that people like john paulson, who were selling short, was helping design securities that he knew would be... do badly. >> hoped would do badly. >> rose: hoped. but he had reason to believe because he was choosing this security is more likely on the-to-go bad than this one. >> there was some give-and-take. a.c.a. management... >> rose: changed some of them. but less than 50%. >> no question that paulson was short and everybody else was long. >> rose: now, is that wrong even if it's not illegal? >> imagine a world where you actually had all of those securities actually listed in a prospectus where people could check it out independently. maybe you'd have an idea of how other investments were positioned. in that situation it wouldn't be. but in a world where only one person, the amoeba, as the information on who's trading what, that's where the potential for conflicts come. >> one thing i think it's important to... goldman sachs has been in rough waters before. as gillian was referring to, in 1929 this goldman sachs trading company, their firm almost went out of business and half their capital was wiped out sand sidney wineberg spent the next five years in the firm's history resurrecting the firm's reputation and culture. even the great comedian eddie cantor sued them in a $100,000 lawsuit. so almost every decade in their existence they've been in trouble and gotten out of it. >> but is goldman sachs a place that the brightest... that the smartest people coming out of universities want to go to work if they go to wall street. >> yes. >> believe me, those princeton kids want to go to goldman. >> rose: is that right? overwhelmingly. even more now. >> rose: subpoena that because you're the magnet to attract the top talent in the world? >> it's really fascinating. the message of goldman has not filtered down to the senior class of princeton. >> rose: you teach journalism? >> i teach journalism. >> rose: so your journalism students want to go to wall street and work for goldman sachs? >> at princeton pretty much everybody does. >> rose: what does that say about the values of the kids in college? >> that's a whole different question. >> rose: that's another show. >> but i'm telling you the mystique of wall street has not died. even as it's trying to... even as congress is trying to destroy it. you know why? because they still think it's a sure bet. they think if you go to goldman... goldman's going to navigate these waters. i'm still going to have a house in greenwich and a boat. it's going to work out. >> but they also are thinking okay, i can do it for a couple of years, i'll still keep my soul and i can get out with money. one of the reasons why the e-mails released by fabrice tourre were so fascinating, is because they illustrated graphically the kind of conflicts a young person joining say goldman sachs would actually face. he hasn't been there that long, he can see the contradictions and hick pocksy of what he's doing in his e-mails yet he's still playing the game. >> rose: two questions, one before we go. one wall street profits are back big time. >> in part because of this trade i was talking about. and i think it was by design. i personally believe that this is what bernanke, geithner wanted to have happen subpoena... and paul son. they wanted to have... paulson wanted to have the banks resurrected so that then it could trickle down the rest of the economy. so we've had the resurrection, we haven't had the trickle down. >> rose: especially in terms of unemployment. >> it's basically the same tactic they used after the s&l crisis where you have cheap money, free money and try and make sure the banks can get money by investing in bonds. >> you and i have seen circumstances in which once you begin unraveling something you all of a sudden everybody comes forward with some point of view in some disclosure that you didn't imagine would not have happened if it hadn't been the public ballyhoo about it. does that feel like one of those things where there is just the beginning opening salvo and then these... >> you know, when dan rostenkowski got in trouble, you could see this momentum. when politicians go down you can see a great tree going down. i don't think that's going to happen with goldman. somehow they're going to outsmart it. >> rose: a stronger spree in >> too strong a tree. not like an individual politician. but i don't know. if i was... obviously goldman is worried about this. i also believe when blankfein said the worst day of my life and all that, i don't think they're kidding about that. >> rose: when did he stay worst day of his life? >> the suit. he said in his testimony the s.e.c. suit... >> rose: the front page headline is "s.e.c. charges goldman with fraud." >> that's an ugly... that's a terrible thing. >> rose: so what do you think about this idea that somehow this is just the beginning and while it may look rough today it's going to look far rougher for far more people down the road? >> i don't know. this has sort of a rear-view mirror feeling to me. this is all what did you do in 2006/2007 aspect to it. the politician cans never keep up with how quickly wall street evolves and moves on to the next thing and. >> rose: the next opportunity. >> the biggest issue is the regulation is going to pass. >> rose: so better question for you, s also what... you just came over here to work from britain. how are the brits looking that the? because you're... your prime minister running for reelection on may 6 has said this is a moral whatever... issue. >> yeah, well basically politicians have learned that attacking goldman sachs right now is a sure way to get voters. >> rose: even in britain? >> even in britain. it's a cheap, easy mayway to make pot shots and stuff. and certainly there's a lot of pressure right now on whoever's going to win the election to keep chravrping down. >> rose: okay thank you very much. congratulationss on your new job here. house of cards is the soft back paperback book book that william cohan wrote about wall street and "the war lovers" by evan thomas. thank you for coming. back in a moment. stay with us. >> rose: we conclude this evening with a segment taped also today with evan thomas about his new book. it is called "the war lovers: roosevelt, lodge, hearst, and the rush to empire, 1898." evan is a journalist and editor at large at "newsweek" magazine. he's a student of history and has written books about robert kennedy, john paul jones and others. i'm pleased to have evan thomas back on this program. here is the subtitle "roosevelt, lodge, hearst and the rush to empire, 1898." those three are on one side and the other side is? >> william james the philosopher who understood the seduction of war but tried to resist it and some that most people have forgotten... >> rose: henry james brother? >> yes. >> rose: taught at harvard. >> amazing family. and thomas bracket reed who is the speak over the house. history has forgotten about him. but he was a powerful figure who opposed war. >> rose: what brought you to this idea? >> in iraq in 2006 i was mulling over war fever, i was caught up in it, a lot of journalists had been and i was thinking about what is it that gets countries riled up and want to fight wars? what is essential and basic about in? so i decided to go back a century and look at an earlier war which really kind of defined war fever. a war of choice where people were pretty blunt about just wanting to fight a war for the sake of fighting a war. i looked at roosevelt who was the quintessential war lover and people around him. >> rose: along with william randolph hearst. >> if anything exceeded teddy roosevelt in his enthusiasm for war. >> rose: so you find the correlations between two strong? >> i don't want to overdue do this. there are obvious parallels. w.m.d. in iraq, sinking the "maine" that's kind of a phony thing. a war that starts kind of grandly, charging up san juan hill and everybody's loving the war, it's a splendid little war, as john hayes said about it. then it turns bad in the philippines kind of unexpected. people have forgotten this. but the spanish-american war went on for four years. we lost 4,000 men, same number we've lost in efrjt it was a virs counterinsurgency, there were atrocitys on both sides. we used waterboarding on both sides. it was called the water cure. we got it from the spanish. so yes, there are some parallels. >> rose: you know war we forget about that was grenada. went in to rescue a medical school. >> because it felt good. i mean, how necessary was it? i really do think there's an atavistic component here that countries sometimes go to war just because they want to. not because they have to but because they want to. >> rose: okay. take us to the spanish-american war and what happened and why and who did what and how this story emerged. >> well, there was... as in always wars, there was a good war here. humanitarian. cuba had been spains property for four centuries and they had been revolting since about 1868. the cubans wanted out from under and the spanish were being awful to them, using concentration camps and all that. so we did intervene with a humanitarian purpose. but it was more than that. the country in the late 1890s was seething with this expansion their desire to be a greater america. there was talk about becoming a great maritime power. henry cabot lodge... they hated the word imperialist, they talked about the large policy. >> rose: how did they feel about the word empire? >> they were very dodgey about it. the british believe in empire but americans were better than that. so they were sketchy about that term. >> rose: so what happened on the "maine" was an accident?. >> it was a boiler blowing up. this is early days for building battleships, there were experiments and as the navy later determined, it was an accident. but that's not the way it played at the time. it was the dastardly spaniard plot, torpedo had blown up the "maine." roosevelt, i think, knew better. he certainly had the evidence to know better. they shoved that under the rug and went to war. >> rose: where do you president president roosevelt on presidents you admire? >> way up there. as a president he was good. >> rose: it seems to me it's... i mean, this is the guy who believed that he wanted to be like this and became like this from his battle with sort of the illness he had to become a strong individual to his emphasis on physicality to his willingness to go out to the da kitas and prove his manhood. >> his drive and desire and all that had a lot of good in it. but there was a sickness and perversity and he was obsessive about getting himself into combat. his letters-- he didn't hide this. he wanted a war either against mexico, canada, germany, britain spain, any war would do. >> for political ambition. or for his own... >> well, it was more complicated. but at the times this hard for us to imagine but at the time they thought there was this great anglo-saxon race that was destined to rule. this is the reigning ideology. anglo-saxons on top. they believed in all that. the problem was if we were so great, how come we have headaches and stomach aches and feel weakness and the women are getting vapors and they were neurotic and they had to explain this. roosevelt's theory was we've become overcivilized. we've become weak and soft and we need to recapture what he called the wol inform the heart. we need to recap xhur what mad had made us a great frontier nation, a dominating nation, a concurring nation. we needed that as a nation to sort of restore our will and i'm not exaggerating. he gave his famous speech in 1897. all the great races have been... have known the wonders of war. all the great races have been fighting races the supreme triumphs of war outweighed the triumphs of peace. he was emphatic about it. >> rose: how do you compare him with bush in terms of his personal psychology or reagan and his personal psychology. >> armchair psychology, here we go but i'm going to do it. fathers. roosevelt loved his father air, dored his father but his father bought a couple substitutes for the draft in the civil war. common practice for the upper classes. >> but the family had others on the competitive side... >> mom had confederate roots. but it was just typical upper class new york. they bought irish guys to go off and fight. roosevelt was embarrassed. the family legend that teddy was embarrassed by his father's cachbness, if you will. so out of character and he needed to make right the family wound. alice rooz used to talk about this. >> rose: teddy roosevelt's daughter. >> a salty girl. >> rose: we need somebody like her now. >> yeah, we do. this is not my fear that erie. jacob weissberg wrote a book about this. >> rose: about george bush? >> about george bush compensating for dad's failure to really execute the... >> rose: do you believe that? >> i think there are always a mixture of things here, charlie. i mean, i believe in the part. it's hard to really read minds but i think you can make a pretty plausible theory that the younger bush was overawed by his father who had this great war record. bush has been in the national guard the father starts the war, doesn't finish it off. bad iraqis try to kill his father. you can make a pretty compelling case that there's some compensation going on. snun how about jack kennedy and his father joe kennedy. >> i don't know about you but i've been trying to live up to my father for about 60 years. >> rose: indeed. but it's about values. my father's most selfless person i ever met so you try to wonder why you're not so selfless. or how do you be more like that? >> jack kennedy had the ability to stand off from his father. i think he saw some of his father's rudeness and crudeness. his father used to say "there's a piece of cake on the table, eat it." jack was more gracious about that. >> rose: but that seemed to be a generation thing. he was less crude because he was... had a different experience. >> that's true. jack was raised to be a gentleman and all that stuff. >> rose: but you could also argue that women... >> my point is jack had detachment from dad. that's important. i think that help make jack kennedy a great man. i think he was ae a step away from joe. i think that actually helped define him. his distance from his father. >> rose: you could also argue that... here we are on the chair at the chair on the couch. you could also argue with him that it was his illness also that had a huge impact on him. giving him a certain detachment. >> one thing about illness, if it doesn't kill you it ha l make you strong. that happened with jack and teddy. that asthma, being a sickly little kid. >> rose: with teddy roosevelt. >> back to teddy. he had to overcome it. it took a toughness to do a kind of competition. so we talk about father bus just overcoming illness. if it doesn't break you and make you weak and pathetic, it can build you up. it's a true cliche. >> rose: were these three guys friends first? roosevelt... >> no. lodge and roosevelt were buddies hearst was a par venn knew and lodge and roosevelt looked... and that drove hearst crazy. hearst was envious of roosevelt. wanted to have his own cowboy regiment. so the way hearst dealt with that was by turning on roosevelt and attacking him. years later when hearst became a politician, roosevelt let loose the dogs of worse on hearst and put his lawyer throughout to destroy hearst. it was not a happy relationship. >> rose: and lodge? >> lodge was an odd cold fish. >> t only person who liked lodge as far as i can tell was teddy roosevelt. they were true buddies. but lodge... lodge was a politician when he walked by people, they'd pretend to shiver. hechsz the caricature of the cold program man. he was sort of more sensitive than that. bra man. when we think of a chilly boston brahaman, you think of henry cabot lodge. >> rose: >> what are you thinking about now in terms of your next book, do you know? >> yes, i'm very excited. i'm working on a book about dwight eisenhower, president eisenhower keeping us out of war. sort of the opposite of "the war lovers." people don't... we think of him as a sleepy golfer. he was a shrewd, tough guy. there were lots of opportunities for the united states to get into war between 1953 and 1961 and eisenhower by sleight of hand, by indirection, by not telling anybody kept us out of war. by war i mean nuclear war. he was a great anti-war president. the great estrogen we always had. >> we know that because of the speech he made about the military industrial complex. which was to make sure they didn't go off and do something crazy. >> he was very smart about institutionalizing risk. good military people... but he had a lot of committees but he was a lonely guy. he never really told anybody what he was doing. not even me. talk about the loneliness of command. >> rose: you got go into trouble talking about obama. >> i heard about that. yeah. i got a few e-mails. >> and a few things said on talk radio. tell me how you think obama is doing now. >> he's saying the right thing. he's doing a great job. but he's not getting credit for it. obama's reasonableness means he gets lost in the shuffle. i don't think he's a force right now. he's doing good things but i'm not sure anybody is noticing. the middle, his natural constituency is disaffected. the extremes... the right hates him and vilifies him. the left is disappointed by him. the people you hear yelling on talk radio, they don't... they're not into obama. >> rose: are the left or... >> either way. i think the left is disappointed in obama and the right uses him as a boogie man, the socialist, the muslim, all that crazy stuff. >> rose: the non-american. >> to me, he's a figure buffetted by the winds here and he can't quite get burr which is a even though city think his speeches make a lot of sense and they speak to me i'm struck by his lack of impact. he's drifting down in the polls. he's not a dominant leader. >> why do you think that's true if it is? >> is he too reasonable? >>. >> rose: meaning he needs to be... >> it's an unreasonable time! >> rose: a time that doesn't respond to reason? the argument about health care was he didn't explain it. he let other people define him. that's not reasonableness. if he'd been more in an explaining mode and more in a sense of taking leap... >> i actually think he did... he did explain health care but nobody was listening. he got drowned out by tea part by death panels, all that nonsense. he wasn't forceful enough. >> rose: you remember teddy roosevelt who called it the bully pulpit? >> i don't think that obama is using the bully pulpit anywhere as effectively as teddy roosevelt. >> rose: it's a different time because there's so many voices. you would agree that. >>? >> yes, i would agree with that. >> rose: (laughs) >> my friend john meacham talks about he needs a bumper sticker. he needs a message. >> what would be the appropriate bumper sticker? >> the bumper sticker i wish he would have is doing something about the deficit. this shows what a boring deficit hawk i am. but if there's one issue he ought to engage on it's the debt that's going to crush our children and grandchildren if woe don't do something about it. there's a huge issue waiting for him to step up to it. if he wants to brave that's where it will be. >> rose: i couldn't agree more. if you want to look at a place that needs political leadership and courage, it's the debt. and if you want to look at a place where there's great concern about american leadership, that's where it is. our economic future. >> it's simple and it's hard. we have to raise taxes and cut entitlements. what politicians want to talk about that? not yet obama. "the war lovers: roosevelt, lodge, hearst, and the rush to empire, 1898." why didn't you include bickford and sglapls the title? >> nobody's ever heard of them. >> rose: (laughs) the great evan thomas, "the war lovers." thank you for joining us. see you next time. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org