Government program. Its not that things could have been done better. If you read this chapter on this book, i have a number of things where i think it could have and should have been done better. That withstanding, that means about 67 of the time. I dont take it to be a damnation of what couldve been done. The other thing i worry about is the whole country, but especially the Financial System is drifting back to business as usual. Nobody is worried about them, and that is great. But we are starting to see risky behaviors of the sort that people are too scared of. In the days after the crisis, they are becoming braver now. There are places where we like bravery but we might not necessarily be one of them. It starts with an interpretive history the first number of chapters. It is not journalism. Those looking to find out who is eating at an Italian Restaurant and was interrupted by somebody, i dont do that. I have read these books and i have gone a lot of things out of them. A lot of books about pieces of the crisis. Im trying to be more holistic and interpretive and explain to people what happened. Quoting yourself is terrible. Did anyone get the license plate of that truck . [laughter] this is the way a lot of americans feel. We dont quite know why the driver was there at the time. And a bunch of things like that. Those are the kind of thing things that i have tried to deal with. Especially, as i was saying just a few moments ago, especially with the policy responses, which were manifold, complex, often counterintuitive. They left Many Americans feeling that ironically the government turned against them. When, in fact, the government is doing a lot of good things and then got us through the great depression. There was a paper written on this a couple of years ago. It was estimated that without these policy responses, we would have been looking at a rate we have not seen since the 1930s. No one can know for sure, but it would have been a lot worse. I think it is important to have a understanding of why the Federal Reserve did what it did, why we had the stimulus package, it did in fact raise the deficit. We all know that the deficits are a bad thing. Bigger deficits are bad, other things were not all that close and there was a rationale. The biggest message of the book was the rationale, this paradox that there were massive markets that ran amok. They went off the track. The government came in not perfectly, but pretty effectively to try to put things back on track. At the end of the day we witness, and you have all witnesses, is quite sharp backlash. Americans have never liked Big Government. But there was a reason for government interventions. It was a market failure in the financial world. The likes of which we have not seen since 1930s. If we had done nothing about it since then, the 1930s probably wouldve been a preview of what was to happen. Nonetheless, you did have this backlash against the government in general, against president obama, present bush left office shortly after they started. Against the Democratic Party more generally, against the Federal Reserve. Against keynesian economics, i am prepared to defend if anyone would like to ask about that. This was encapsulated to me by two events that kind of book ended the backlash period. My favorite cartoon from the crisis appeared in the new yorker around march of 2009, i think. And it showed a page that was set in medieval courtyard, and the kings head is on the chopping block. The page runs in and says, government is part of the solution, not part of the problem. And that lasted about two or three months. After that, people started thinking that the government was part of the problem. When its book ended, it was appended with the 2010 elections. Which is really angry at him cummins, people that voted for t. A. R. P. And it resulted in the biggest turn of the Republican Party ever. It was this angle that i was talking about. As i take a few more minutes, is that okay . Okay. Very briefly why was this anger directed at the government . Well, first of all, i think there was a terrible thing. People are upset when they or their friends or family members lose jobs, and many people lost jobs. The vast number of innocent victims they got dragged out, i dont know how many people you could actually point to. Human beings that do things that deserved and led them to deserve their fate. They cant be more than a few thousand. Maybe a few tens of thousands. We have 315 Million People in this country, and virtually everyone was a victim of the events that followed the collapse. Despite this, you can count on the fingers of one hand, and you do not need all five, you can count up the number of people that went to jail. This is in stark contrast to the savings and loan debacle of the late 80s and early 90s of something around 750 to 100,000 miscreants in jail for what they did. Now, am i sure that a thousand people should have been a part of this . No. Fraud is a high bar to prove. But five or three, i could actually only think of one. Hes not even that well known. [laughter] somebody said yes. This is a good audience. Number three, this is way above the national average. He was the most prominent guy in the Financial Market actually went to jail for this. Bernie made off is a whole different thing. You are hearing is now in 2013. Its a little bit late. A bank bailout is going to be hated no matter what. If the government does everything perfectly, including explaining things perfectly, which is my next point, it will still be hated. To my mind, there are degrees of hatred. So the next point, if the government had explain better what it was doing and why. Lets include the Obama Administration. The American People still would have been upset by the bank bailout, but i think that they could have a more accurate perception of what really happens when they do, for example, when i mentioned before. As those of you who have been paying attention, now you do have to listen to the backlash of the Federal Reserve. As if it came out of nowhere and started grabbing power everywhere. I can remember the wall street journal attacking ben bernanke for printing money. The Federal Reserve prints money. Who knew . [laughter] this is why we have the Federal Reserve. This is what we have been doing and to a number of americans, this is a revelation of Big Government and you have these unelected people. Doing things that they didnt know they could do, all of which were perfectly legal, by the way. You had the explosion of deficits. Americans have always had a live service level. As long as we have polling data, this was back the least into the 30s, i am sure it was earlier than that as well. It is bad to have a budget deficit. Franklin roosevelt railed against that against herbert hoover, for example. If you look at the polling data, you also see there was a single exception of spending on international affairs. Foreign aid, single exception, americans oppose every single thing that might reduce the deficit. And if any piece of spending and plurality and the majority of americans in this. The response to this crisis to blow up two levels of debt that we never imagined possible, that certainly did not do us any good. Most controversially, and im sure the president of the United States does not agree with us, but in my view, it wasnt just that he focused on the laser beam of the economy. The economy was nowhere near as bad as the one barack obama inherited. He was doing so many things at once. He accomplished an incredible amount of stuff. But one result of that was it was very hard for the american electorate to see all of these things popping up. Like with Good Health Care reform have to do with getting people back to work. The answer is not anything really. It was a good thing to do in its own right. And so you have people watching this burst of activity and not really perceiving the job that the Obama Administration presented as a much worse things that we couldve had. If i have talked to already, i thank you. Let me stop there and see what other questions we have. Matt. [inaudible conversations] thank you. We will take some questions. This is a bit of a town meeting. If you are comfortable saying your name, please do. Please line up at the microphone and please ask a brief question as opposed to a long speech. My question is people were blamed for lack of personal responsibility, but the banks are in a position to see whether people could take it and if they didnt, if they chose not to look, that was their problem, and that wouldve put more money in peoples pockets and we wouldnt have had these hundreds of thousands of people. Did you hear the question . You just posed were the hardest questions about this whole crisis. In order to get this behind us and face the reality, the answer to your question is clearly yes. That would been part of the problem. Given the volume of bad mortgages, had that been done on a large scale throughout the country, a very large fraction wouldve been absolve him. And we wouldve had gigantic claims on the fdic to make good on the positives and the need it seems to me unwilling an unlikely that the taxpayer via the elected representatives wouldve been willing to come up with that much cash. They had the order to a lot of voters and they just wouldnt have the public support. Now you can have these banks to more realistic value, and now we will have and make up a number. 5000acre banks on him. That is what i had on your answer. Thank you. Dick smith, ordinary citizen. Im just wondering if you could say something. I am sure that the book does. Even though we have a look at it yet, about where we stand now in your opinion with respect to financial regulation. The question is where we stand now. I think that we stand i think we stand with the fifth or sixth inning of what could be a good ballgame once over. But its not over. What do i mean by that more specifically . I think the doddfrank legislation, which is the main reform legislation was passed in 2010, it is a pretty good bill. Now, nothing that is 2319 pages long is going to be flawless. Many people have criticized us for a number of reasons, including myself, although i am an admirer as a whole package. But in the United States of america, the legislation that Congress Passes is just the beginning. The Regulatory Agency then has to flesh out many details in this gets ridiculed as if its silly. It is not silly. Congress right skeletal legislation. If you just read some of the things in any law, including doddfrank, you ask what does that actually mean specifically. That is why it is a regulatory bill, the regulators have to flush it out and the pages are goodness knows how many pages. Tens of thousands and its not over yet. Many of those things are still on the drawing board. Many of them are being fought tooth and nail by the industry. I will give you one example, which is one of my pet peeves. Doddfrank goes someway, and i applaud them towards forcing derivatives to be standardized and traded on organized exchanges. Stock options are a derivative. That is a very familiar derivative that has been standardized for decades. It works really well. One upshot of that is that if you decide that you would like these prices of 419. 27 a expire on your birthday, you cant do that. You go to the market and it is closest to what you want to see. If there is a counterparty, if you are in trouble because there is no exchange between you, these were the dangerous ones, these were the ones who got us into big trouble. Doddfrank take some of that on and the industry is fighting back ferociously. I dont think it has gone far enough. But in the right direction. That is one example of the volcker rule making this example. Things are yet to be done. In regards to the fiscal cliff and the cumulative effects and policies in particular, that of maintaining Interest Rates artificially lower, which you call quantitative easing, i ask especially because recently economic journalist William Cohen had an article on the front page of the Washington Post. This is what he said. Quantitative easing not only hurts Older Americans on fixed incomes and loans that are dutifully saved for retirement, and these are people who cant afford to take advantage of historically low mortgage Interest Rates. Mainly the quantitative easing helps the wall street banks and traders with a dynamic that could be setting us up for another financial crisis as investors have highquality investments that wall street is only too happy to provide. I do not agree with the last part. I dont think there are a lot of people that are just provided. They have a lot of winning there, but they like to get more than that. That being said, what you said [talking over each other] what you said about low Interest Rates hurting people in general who live in general, that is largely Older Americans nonetheless, we still need the medicine. This is helping bringing the Housing Market back to life, now it is definitely coming back to life. This last quarter, it and has done a lot of good for business investment. Firms can borrow very cheaply. That is necessary to pull us out of this muck. So there is a reason for the very low Interest Rates. It is unfortunate that they are bad for some people, yet good for others. As to crisis in the future, my guess is that there is a problem for the future that wont be a crisis. When Interest Rates are so low they can basically only go up, and we are pretty much there, that means that eventually they will go up. The key word in that sentence is eventually. This does not look round the corner to meet or ben bernanke and his friends at the Federal Reserve. The city has substantial control over that. When they do go up, there will be capital losses all over the place. Interest rates go up. The prices go down. That includes my wife and i, we are going to suffer capital losses. And the Risk Management system of Financial Institution fails, like they filled in 2000 and 2009, if they do, they do will be serious lawsuits to a lot of institutions. If that happens, we should hit them over the head with a sledgehammer. Its not that they screwed up badly at that time, but they should have learned something from that. If they are not, they are going to suffer significant losses. That is inevitable. The only question is the timing, including the speed. Although you never know for sure with markets. The housing bubble collapses pretty fast. This bond bubble, if you want to call it that. The question, of course, people should be listening. They should be listening. It should not cause a financial craddock wisdom. Hello, i am an ordinary citizen, ordinary citizen number two. Not just a second, but there have been several yankee talk about the efforts made by the government. We talked about it to poor is in the system to stabilize it. The previous system, it is also the increased government debt. As a result, the federal Balance Sheet has ballooned significantly. Do you see this as a threat if it is not balanced soon enough . What you think a timeline is for a good way to wind us up . So how do we get out of that, which is exactly what chapter 14 talks about. Call this a trillion dollars among friends. A trillion dollars, now has about 3 trillion. The fed wants to go back to something much closer to 1 trillion eventually. Lets just say 1. 5 trillion. They have not enunciated a specific one. Is this difficult . No, not technically. When people talk about this, they got into this by going to the marketplace and buying a lot of stuff. Mortgagebacked securities and treasuries, mostly. You can get out of it by selling a lot of stuff. Timing is crucial. They will not dump it all at once. They are not going to do that. They have responsibility and they will sell it out gradually. There is conceptually an absolutely ideal perfect rate of selling down assets. Nobody knows what that is, including ben bernanke, who is a very smart man. The fed will have to try to find that rate by trial and error. Its not selling fast enough, it will see the market reacts. Now, will they get it . No. The inflation target is a part of this. But i just dont see any evidence for. Is that right . I appeal to the church year to answer. My name is justin galt and im also an ordinary citizen. I had a question about something you touched on earlier and i suspect is also in your book about the lack of prosecution towards potential offenders. Its kind of a twopart question. The first question is, why do you think the government did not prosecute where people above that the price is then are we now past the point where we would see prosecution for potential offenders . Speed the second question looks to be easier to answer, which is i dont exude. Its been a frustration of nine and millions. To get to this job, because put off and put off and you can see the administration gearing up to do more about it now quietly. So i think there will be more. Why not . Is asking myself this question for years. Ive been scratching my head, wide day doing some data about earthquakes the main reasons are one i have booted to that fraud is a high bar to jump in and many of these cases may not have been a fraud. Misleading people is not quite a fraud, though if you do it enough, it is a fraud. The government has lost a few cases taking people to court and lost because they couldnt cross the high enough for fraud. The other reason that bothers me frankly is a feeling in some parts of the government for taking too many financial executives to court is going to upset the markets. I hope it was more the first reason than the second. Its hard to get into peoples heads that they were really thinking. Thank you very much for your years of