tv After Words CSPAN October 19, 2015 12:00am-1:01am EDT
are importing co. importing companies but why don't you start by telling us a little bit about why you wrote the book and why they are so important to the populace. >> guest: i started covering it in 2004 in the wake of this accounting scandals each company had a big scandal and at the time i was shocked to find out that companies like this existed. what is the government-sponsored enterprise and what the government-sponsored enterprise did was created in the wake of the depression by roosevelt in
order to help the home ownership and the idea was if you have this institution that could buy up the loans that banks lenders have made that would free them because they wouldn't have to worry that their capital was all tied up in a loan they had made so the idea was this would help foster home ownership and that was the beginning of fannie mae. no other country has it and most people credit data to the existence and so these companies have grown to be absolutely and orbis. frankie and fannie together as large financial institutions they own or guarantee $5 trillion of mortgage related debt. they are an honest and critical
to the functioning of the global financial system and part of the hidden machinery that makes our lives possible. when you go to the bank and get your mortgage you expect to have it quoted to you right then and there and so for decades in particular it's part of what has made that function seamlessly. >> host: in recent history people know one of the first two companies to be taken over by the government of as some people say that they were at least partly responsible for the financial crisis and a lot of people think that this is a problem that the government fixed a long time ago. it is now kind of here we are and how far we've got in. >> the idea there was a silver lining in the global financial crisis if i can go back a little bit you are right they were the first two companies that were
bailed out by j.p. morgan. they were put into the state called conservatorship where they were supported by the line of credit from the treasury and effectively managed by the government agency and when they were taken over in the fall of 2008 the idea was this would be contemporary. conservatorship was to be temporary to figure out how to reform the finance system and we can talk about why people think of as problematic before hand and here we are these giant companies are still in the state a state called conservatorship and there's a big public policy question whether we want to finance to be like and it's still totally unresolved area that is an issue for every american with in mortgage. it's an issue for every investor because these $5 trillion of securities moved through the
global financial system like water. they are everywhere and if there is a change in the value of the securities and lack of confidence that will have the global economic effect. >> host: a lot of people don't understand what the function to go to my bank lender to get a mortgage and be granted to me so what happens then? >> guest: when you go to the lender and get a mortgage but those lenders don't keep the mortgages anymore at least they mostly don't keep marketers. they sell them off and most of them in the financial crisis the great majority of them get sold off to fannie mae and freddie mac survey taken and package them up and sell them off as securities to investors around the world and they act as an
insurance company and guarantee of the timely payment on those mortgages. so the investor has to worry the interest rates might change that they don't have to worry that you won't be able to pay because they are guaranteeing that so the system has turned american mortgages into something that the pioneers of the world can invest in without thinking twice because they don't have to go through and analyze them hundred thousand and make sure all of you will pay your mortgage they can justify the securities knowing or feeling that they know the securities are safe and the way that system has developed means they can and they do purchase a home in kansas so it's ironic in a way it's turned american home ownership much more domestic than a home into a global financial issue.
>> host: and this is unique to the united states and other countries. so what does having the system in place gave americans that somebody in the united kingdom getting a home would get? >> guest: they say there would be no impact and private capital would fill the role they play. i want to pause on that for one second. the fact that fannie and freddie are government-sponsored needs to explain this perception in the years before conservatorship that the government would stand behind fannie and freddie meaning that if they couldn't pay and you default on the mortgage and they didn't have the money to pay the government would step in and pay and that is what happened to them because they were put into conservatorship. that system has given americans access to the fixed mortgage which is something people are going to the globe don't have come into that mortgage is a
total fixture of american life. 80% of the buyers are choosing a 30 year fixed rate mortgage. >> host: others would have a shorter term with interest rates have of change often. >> guest: you might have one where the interest rate flows around so you don't know what your mortgage payment is going to be every month because it moves. the existence has made the mortgage a stable instrument for the homeowner. >> host: you talk to that the government guarantee and giving this implicit suggestion over whatever we want to call it. what did that get before the
crisis? >> guest: the argument is always it got a lower rate on the mortgage and they would than they would otherwise have. the fact that they had this behind them meant that they could pass along lower interest rates because it is perceived as safer so it costs less to those that could pay lower rates on their mortgage than they might have to pay in the system without fannie and freddie and it certainly meant this longer term mortgage. there's always a debate about how much of the benefits benefit did that actually give the homeowners and maybe that deviates the financial crisis in the wake of the financial crisis to private capital completely fled the mortgage market if we hadn't had them there that wouldn't have been the mortgage market and arguably a downturn that followed the crisis would have been a lot worse.
so they served to provide mortgage credit when the private sector won't do you get >> host: you spent a lot of time talking about the rise and development of a sort of accumulated political influence in washington. can you talk a little bit about how they did that and sort of opinions that came as a result? >> guest: there were always people in government that said what are we doing for the presence in the housing market clicks we are a free-market economy in a. connie. what is the government-sponsored enterprise. there's the ideological resistance and they developed
the muscle for the congressman who used to say tammy had the most sophisticated operation he'd ever seen in his entire life. they felt like there were forces that were trying to kill them and they were right. they developed this outside aggression to any threat of their existence or any threat to take away the advantages they have from this perception that the u.s. government would stand the sight of them -- beside them and they became a political force and i think that in some ways intensified resentment against them and found themselves on the wrong side and this was led by fanney primarily so they were the more powerful of the two economies. i think people that ended up on the wrong side felt that way
they behaved in for the way they behaved in the 19 '90s you had the executives the democratic power players. bill clinton had been in the lmb they were democratic power players and so there was a lot of reason around about into the mortgage market is one of the biggest in the world. private companies, banks and even mortgage insurers they totally presented the profits because it meant less so fannie became a part of this housing industrial complex sometimes fractious unhealthy kind of alliance for everybody that has
a stake in the enterprise. >> host: to raise a nonprofit that was offered a grant by fanney. >> guest: we can come back to this but one of the criticisms in the 1990s one of the responsibilities that was given to them by congress was a sort of quid pro quo from the perception goes to the u.s. government they have specific quotas that they had to make that would satisfy these portable housing goals. during the 1990s, the constant cry from the activists and ironically from people on the right who didn't want them to exist was able to do enough, they are not doing anything. they are about their own profits and they are not doing anything to make it more widely
available. so the activists were criticizing them for doing that only taken his organization a grant to get a call saying sorry, no more money. and he actually called jim johnson and said you can't possibly be that small minded. >> host: i remember a call from the book of someone describing their lobbying like they will cut you, got you and throw you in the river or something like that. >> guest: it was a great quote in the 1990s and i think it is another great irony because fannie mae sounds like a candy company or grandmother it sounds sweet and harmless but in reality it's a monstrous financial empire that had at the time of unparalleled political clout.
>> host: seems like part of presentiment. it's on the guarantee for business model and on the other hand you are spending all this money threatening people around washington. >> guest: great quote in the book from the former treasury secretary, and he says if you were going to design a scheme to extort money from the u.s. government you could do better than this. there was an implicit guarantee the u.s. government would stand behind fannie and freddie but it wasn't explicit. it was kind of this free money they could then turn around and exploit in order to pay their executives really well and to have huge lobbying muscle. >> host: how do we know that implicit guarantee was going to homeowners as opposed to the
profits of fannie and freddie? >> guest: there was a big argument done in the 1990s but said most of the benefits were flowing through to executives and shareholders -- most they use to argue it was a small amount like 25 basis points which is a quarter of a person so if you say the monthly mortgage market payments are $100 it would reduce it a little bit if the math was right. i think that is a good interesting debate but i think it is irrelevant in the context of 2008 because the value of fannie and freddie is that they are there when the private market isn't. we may not be dependent dependent at times but we need them in bad times, so to say in this giant decade in the 1990s tammy and freddie were not providing much value into them to ignore what happened in the fall of 200 lead 08 would be completely deserted the market
seems to me like a funny way to look at the issue. >> host: they did build a lot of reasons but among the people that were kind of looking for that chance to. >> guest: it helped the resentment. what do they do anyway and why do we need these companies? what about these people but said they are too big to fail and they are going to land on taxpayers with a giant side which is exactly what happened even if it wasn't precisely for the reasons that were predicted. president obama a few president obama a few years ago described as we wind heads we win, tails you lose. so no matter what happened they would win because they would pay their executives and in bad times they would get jilted by taxpayers. >> host: you feel a lot of that even today. congress can't pass anything it seems like and then just a few days ago one of the things the senate agreed on was to put a new cap on the payment for the
ceos. it seems fashionable to dislike these companies even today. >> guest: it's become extremely fashionable which is ironic because without them, the government dependent -- the mortgage market dependence has never been more than before the financial crisis so you would think that would have given them some sort of a mojo but the history is intensified and i think there is a reason for that. the narrative took hold and its popular that fannie and freddie and the goals they had to make housing affordable was responsible in the financial crisis. and it's kind of a religious board in many ways because if you can save fannie and freddie and the government were responsible for the financial crisis than there that there was no problem in the private sector. they don't need any more regulation and the answer is get
rid of the government and we will all be just fine. as a result of the narrative even fannie and freddie once a staunch supporters. barney frank was the congressman most closely associated in the 1990s as a defender of theirs and even he said they should be abolished. >> host: there with was an intern scandal is : there with n intern scandal is he to forget intern scandal is he to forget even though it was easy to forget because the financial crisis was less than 20 years ago. so it just happened in early 2000. >> guest: this was my first exposure to fannie and freddie these accounting scandals in the mid-2000 that led to the ouster of the senior management teams of both companies. they were slightly different and the idea is that they were actually understating the earnings and the idea that was manipulating a complicated accounting statute about the
better good and overstating its earnings and it was a huge scandal. the management team was kicked out of the company had to do this restatement of earnings. the regulator even called it a government-sponsored. can you imagine the citigroup regulator saying they are government-sponsored? those are big words. but the really striking someone said to me it's like a mixture that house all these strange twists and turns. when they released the statement of earnings to shareholders equity went up, not down. despite all this rhetoric about how they ran that are charged by the justice department or by the fcc they ended up throwing out several claims against him
saying there was no evidence that any man did anything wrong. you would expect when they call the company government sponsored that this is what is going to end with a bang. but it ended with a little emperor. >> host: why do you think the government kind of overplayed? >> guest: i think that it was deep-seated. i think people that were very well-intentioned started to see how frustrated the sense of the
two companies were a systemic risk. the unfortunate thing about it is that after the management team both companies were ousted just at the beginning of the most dangerous bubble in american real estate and history. congress was still unable to pass any new legislation with fannie and freddie. we have republican in charge of the white house. it helps explain where we are now and you know as well as i do republicans are reluctant to score to disrupt this issue as some democrats are. >> host: we had to start a conversation talking about the
conversation talking about what these companies do. it's not something you can fit into the speech very easily unless you're going to get a blanket shift lets get rid of them. so let's talk about the housing boom and i guess with fannie and freddie participation really was. you started to say that they didn't really go as far out in some of the private lenders that were they doing? schenectady definitely contributed to the bubble and they need to satisfy these affordable housing goals definitely contributing to the problem. i just think that it's the sole cause of the financial crisis. by the by the nader 2,000 scum mid-2000, the market share has been cut in half as this sort of sub i'm lending where instant of the mortgage originators is going to market just to fannie and freddie were totally bypassing fannie and freddie cutting them out of the market and that is what all of them wanted to see happen. the problem is the standards for
the loans were getting riskier and riskier. so around the 2005 they started buying some of these wall street securities for their own portfolios and using them to meet their affordable housing goals and they decided we need to get into this business, too. you can base back through the interviews with executives through executive presentations. they were terrified that they were losing their profits into their hold on the market, so they began to guarantee the risky loans. you can see in the numbers they guaranteed for never as risky as the private sector loans that helped bring down the system in the default rate on the loans like a fraction of the default rate. but nonetheless it's totally contributed is totally contributed to the crisis and it was enough to create the perception that they needed to bail out.
>> host: one of the things people a ledge in the allege in the crisis is that it was not only fannie and freddie. >> guest: i think the companies to do some of what they did to satisfy a affordable housing goals but they did a lot a lot of what they did in order to increase the market share and keep and produce profits and you can see that through executive presentations at the time how do we keep the profits to ask you can't be simplistic about it and say that it's one thing or another, it was both a mixture of reasons. >> host: whose job was it to make sure that didn't get out of hand? >> they had a government agency.
i think it's a confidence issue in some ways. the private sector knew what they were doing and it's wonderful making these loans and as they were buying them up everybody knew what they were doing and everybody was analyzing the risk and making sure people could pay their loans back. and no one realized until it all went to hell in a handbasket that no one was doing that work if people couldn't pay it back. >> host: in addition they started to invest in some of the securities that the market was putting together.
>> guest: that's the biggest irony and one of the things that brought them down that created the losses that have led to the perception they need to be allowed so when the securities started to lose value, fannie and freddie had to take losses and what they were doing buying the loans that had already been sold off was one of the more screwed up things and they were trying to satisfy those products with the loans had satisfied them as they were trying to satisfy the housing goal. but i want to pause on the issue of the crisis because i think that there is a widespread misperception that is actually kind of worse than people that understand the issue.
risking loans packaged up into securities. they take the cash and use it to pay off bills and pay down their debt and may be remodeled warehouse. if you haven't done all of the crazy investment loans where people are buying seven or eight properties there wouldn't have been a financial crisis. so, the crisis becomes a referendum on the homeownership if it approves this idea that we should never extend credits to people who might be on the margins of being qualified it's not a referendum on that one way or another.
it's a referendum on people who can't afford to pay it back to those partners at every income level that is not on the homeownership rate >> host: there've been entire books written even recently that claim any and freddie for the crisis so i guess why did this become a kind of slept for -- >> guest: i think that it is a clear way to simplify the issues in the clarity if you can see the government caused the financial crisis you have a simple explanation if you don't have to say it was all these complicated factors you can just reduce it to this one simple thing.
if the appeal if you can save fannie and freddie into the government did all this than you can say we don't need any more regulation. don't get me wrong i don't mean to sound sound proregulation i'm actually quite mixed on that but you can get rid of dodd frank if the whole problem is fannie and freddie then you don't need dodd frank. then on top of that you can get rid of fannie and freddie because look what it led to so i think that it's a very appealing argument and it's gained an enormous amount of currency despite the fact if you spend a lot of time thinking about it. >> host: since 2008 when everything started to go downhill when does it starts to start to become apparent that there were serious problems?
and what would have happened had the government not stepped in? >> guest: this directly relates to the idea that caused the financial crisis because here about the loans that were backed started trimmers that led to the market loan just categorically not true. they were at all-time highs and the first was when the money markets could pay because they were certainly wall street mortgage-backed securities nothing to do with fannie and freddie and then this giant lender went bankrupt in the spring of 2007 e4 there were even trimmers but as the year
went on the financial crisis was so wide people got increasingly worried and if you have a giant housing downturn. they hadn't ventured into seeking these risky mortgages. in then the stock prices are plummeting and they wouldn't be able to raise money in the market and the whole machine would grind to a halt and i think it's fascinating because we think of it as a good thing.
they tell a great story about speaking in beijing and that they were trying to get get them to cut their holdings of fannie and freddie to create chaos in the global economy into and of interest this official telling bloomberg that the u.s. government lets fannie and freddie feel it's going to be the financial system as we know it so there was this idea that if they were to go down, the securities were everywhere and it would disrupt the pain is into every catholic through all the banks bank that held securities and it would shut down the mortgage market. there was this perception that we couldn't let these companies fail. >> host: having so much interconnected us and large market even if you're not sure what the probabilities are if
the consequences are so dry here that you have a consequence like you were saying you would rather act and be wrong. stucco >> guest: i tend to cut them slack for what they did in the crisis. it's easy to look back now and say people could have some things differently. maybe they didn't need to be allowed. hindsight is really 20/20/20 so i tend to think the arguments about 2008 are little beside the point holdover there are arguments which is why i cathy kathy not what i say. >> host: the way they put them into the conservatorship is the genesis of why things are so screwed up right now. talk about why they use this
process. the wall that is governing the conservatorship is lifted and how they rehabilitate the failing banks which wasn't like the idea of conservatorship was anything new. one is that the terms of the bailout were so much tougher than that of the big bank. they are back to being a publicly traded company. fannie and freddie has become a kind of prison from which it seems like they will never be
released and there's been some arguments by the former fdic that say this is and what conservatorship is. it's rehabilitate and put companies back out there. it's not a license to steal forever. it's a whole separate law where it was passed for the infrastructure and people thought they were familiar in the concept of conservatorship and a lot of times these conservatorship is a stopping point to the receivership which isn't what the government wanted about when the government bailed out it's not like they took away the publicly traded shares so what did they leave behind? >> guest: the government
(-left-paren 20% of the securities of fannie mae and freddie mac. these predators of the staff any value because the government was taking a huge 10% dividend. what was left for the two companies to lose money from here until eternity so shareholders were supposed to be wiped out even though there was this stump but at the time the government did it they even said this might have a value someday. i don't care if they set it or not they meant it so even though
now they may wish they didn't and i heard arguments from people in the government that we only did that because we had to because they didn't want to put their debt on the balance sheet so you should know that actually you are wiped out in that's not what he said at the time you should know better. >> host: for a period of time after the conservatorship they were wiped out but then what happened they said all these losses that are taken are $187 billion in taxpayers money to bail them out but what isn't understood is that that is a as a made up number. they had to take money based on the kind of concept of the net worth and that means if they are
less than the than the liability it was a road is zero then you have to draw money to fill the hole. this concept takes into account not only today's losses if you're going to lose money on this in the future that's going to reduce your network today so they took a lot of money based on the losses that were supposedly coming in the future and so in truth they didn't lose that much money on a cash basis they had to draw this anyway and they said they hope so what do we do with companies that have gotten into company trouble? we restructure them so this is great. >> host: and then what happens? >> guest: the government in 2012 for the reasons that are the subject of great debate and controversy sent instead of
having pay a 10% dividend on whatever money we put in, we will take almost every penny of profit you make from now until eternity. >> host: so described. >> guest: they argued they would keep losing money and that they all thought they would keep losing money but they didn't see it and that it would be required to pay this dividend so instead they take everything that they have been to make so if they made money on one quarter and lost money in another obviously they would get money. it's a little bit if you lend me money and i was supposed to pay a dollar of interest every month and i couldn't pay so you said i won't won't pick that won't take the dollar if you don't have it but if you do have money i will take it all.
>> host: my understanding as it kind of come back to the interactive miss for a certain period of time in the extent that you start having investors thinking do i have to start worrying about this? >> guest: if this global connected a system that we have why we don't want the bank as china to be worried they don't have enough capital. we want to make sure they are safe and protected his mistakes that he see for sees her than the requirement for the dividend they may not have. >> host: you mentioned in 2012 the market is already showing
signs that it's going to get better again. i guess what do you -- we know the government said of the reason they did it. what do you think is the reason they didn't? >> guest: this is a subject of the lawsuits and there could be things that come out on both sides are interesting and i hope this goes to trial because it will be fascinating to the inner workings of the government. but it's hard to see the government didn't understand the two companies were about to become profitable. there was interesting stuff that came out saying they knew we were about to become really profitable. i guess i am in the camp of if the government has a good reason for doing this i would like to know what it was and that makes
me very nervous because i don't like feeling that we are being lied to and that there was something else going on and we don't know what it was because the reason doesn't seem to quite make sense. it's possible that everyone on wall street understood the companies would start making enormous amounts of money and the government just doesn't. i guess that's always possible. it's just somewhat hard to believe. >> host: sometimes it felt like you have to remember these are huge organizations and sometimes the right people don't know. >> guest: it is at odds with what happened they paid
$241 billion in the treasury so it's not like they squeeze out a few pennies here and there, $241 billion. >> host: so you think that maybe the reason they started sweeping the profits goes back to the '90s and early 2000. these are companies people were afraid of and maybe you thought this was an opportunity to -- >> guest: i don't know it could be that the explanation is absolutely true. the facts don't quite line up so that makes me a little bit nervous there's plenty of speculation that came out of other reasons they might have done it. they might be profitable again and there will be pressure to bring them back to life. i think there's speculation it
is true they have been used as a tool to reduce the budget deficit, so there's speculation that the government wanted billions for its own purposes rather than having freddy and fanny keep the billions of dollars that they were making and that could be possibly part of it. and i think that some of the presentations suggest also in this kind of environment of not wanting to see where the investors get paid even the wealthy investors have been to manage the money their school is kind of anti-hedge fund we don't want to see them get rich and there was a feeling we don't want them to have a payday. >> host: we are talking about paulson & co. and the hedge fund manager which was a very popular
retail fund and a lot of people. they analyzed the legal case after the profits. >> guest: you have a little less sympathy for this because they change their mind was possible to now come after words what people say it is a very fair point that what if this is wrong. you can't do this. this isn't the way the system is supposed to work. it's like they took 80% of the house in a financial crisis and you came back and started paying there are people that would argue that they were always
anti-american. >> host: do you feel like the involvement of the hedge fund is kind of complicated the issue? >> guest: i think the good thing for a couple of reasons but it's complicated the issue because it's meant that you have these very powerful wealthy people in the nation sort sorted and they're suing the u.s. government fighting trim outcome that is not what the administration said it wants. the investors have very much come to push for it and that's precisely what the administration said it doesn't want. so that's certainly complicating matters. i argue a couple things one is we don't want the government can have a free to have a free hand to make decisions behind closed doors.
it affects the ability of mortgage credit that the value of your house. i don't know that we want the government making the the decision behind a closed door that will affect everybody without some sort of a public debate. i also think what happens in 2012 isn't it good to have transparency and who can afford to sue the u.s. government? i'm always a believer in more transparency and let's see what happens and so i have come to believe that the investors while they are certainly after their own payday and raising awareness of the situation in a way that is probably good. >> host: what are the great
frustrations of the cases so far as they are going through this discovery process. it's not even available to the hedge fund. and also, the plaintiffs appear to be three confident in their filings and asserting the government life that every but every filing it will go something like such and such permit official in the redacted package that's clearly not the case. if all you've got is a plaintiff's attorney if you're the governor signed characterizing the documents.
this came out a couple days ago. some don't want a litigation the litigation to go all the way to the supreme court. if we can make the discovery public it will be so embarrassing and of the threat of it is toward the settlement. what did you think of that strategy? >> guest: i don't like that as an answer. i want to know what the government is thinking when they did the amendment and when they decided to take off the process. so i don't like the idea of possible government behavior
being squelched or covered just so they can have a settlement. i feel like that is kind of anti-transparency. with that said one of my fears about where we are today if there will be an expert on chalk like victory in the lawsuits for the hedge funds or an incredibly interesting document the government doesn't want to see public. or there will be some sort of a shock that will force them to go back to the treasury and take more money and then it will become a huge political football again and so instead of making a well-thought-out decision of output structure of the market could look like come an issue that matters to every american into some sort of a half-baked answer in order to avoid the discovery. as a frightening prospect. >> host: so the administration has been adamant for a long time
that they want to see congress for. >> guest: the obama administration has been more poignant than that in this issue are asked me if i'm wrong they have been clear they want freddie and fannie gone. obama even said in a speech in phoenix a couple of years ago it was heads you win, tails you lose. so they've been insistent that they want private capital to finance the american mortgage market. so we have a kind of disconnect going on. tell me if you sense the same thing but there is a kind of acceptance that if it were not for some sort of a government backstop in the market, the texture of the american life and the 30 year pre- papal mortgage within to be there for most of the population in all economic times it might be there for the very wealthy were more people in
economic times but it wouldn't be the fixture of american life as we know it so there is an acceptance we don't want to pull the plug on there is this rhetoric so it's kind of a stalemate of what do we do. was it the spring of 2014 -- >> host: that seems like a long time ago. >> guest: if we created fannie and freddie. but you have a government backstop in the housing market is that if you're going to have it ask top weight of the reformed tv and freddie to get the better regulation and big sure that they are -- their incentives are not profits for their shareholders, structure
them differently maybe even some countercyclical ventures see a pullback from the market. but why wouldn't you try to fix what you have instead of starting from scratch but a totally untested system that is going to support the most important asset. >> host: what do you feel it should be happening right now than? >> guest: is part of me that has always disliked the ownership even though it's part of our society from the beginning. i felt like we needed to do a larger rethink of the notion and how we finance home ownership down to if you are doing the cash out refinancing should it be treated as if it is is home ownership widely also encourage people to treat their home as a
credit card they are not just different they are antithetical so why does the system of the tax law and mortgage credit enable both equally? shouldn't we do this larger rethinking? not sure that we are going to do that. so i started to believe i would rather see the reformed with much tighter regulation and limits on what the executive can make and they be struck true like the utility rather than a kind of swing for the senses make whatever you can. it's like winston churchill's line they are the worst possible system unless they consider all of the alternatives. so i guess i've become an advocate of fixing what we have idle recognizing that it's not perfect and that there are dangers in the system is another
side that's private capital. it's only by its private capital. they they have had to be bailed out by the government. so if we fix that now with the financial legislation if they control the mortgage market don't you think they would have to be bailed out? so they undo everything that has been done in the banking system. >> host: so if we start to let them in the capital again with regulations do you feel there is any risk he would send out 20 years from now the same places as before? >> guest: with the financing of home ownership as we saw
build a huge political base the rest of the system is that it will go bad for the same reasons that went bad before. they will start to push the weakening of the regulations and oversight slowly but surely into will end up right where we were before. that is a risk. i am just not sure i can come up with anything better. it would be the major source. there is a risk without having the government and the market at all that we would have such a radical shock to the economy. here's what it would look like if we had private capital. we've had the system in place for 80 years. we don't know what it would look like. we don't know if ordinary
americans would be able to get mortgages. >> host: thank you for this discussion. so we've been talking with bethany mclean on the strange saga of the u.s. giants. it is a complicated topic that this is a good reading on the topic and thanks for the time. >> that was "after words," booktv program in which authors of the latest nonfiction books are interviewed. watch past programs on linux booktv.org.