PANIC! The Untold Story of the 2008 Financial Crisis

foreign [Music] [Music] because there's a tower [Music] technology in the middle of trying to mess now you know we have in the middle of the trainer mess I'm going back and forth on that it is a mess Professor Tycoon Tycoon [Music] can you imagine putting different administrations no it's amazing [Music] for somebody I changed my view after going through all this about housing it's hard to keep people in their homes you know if they can't afford to stay in them this dinner is a remarkable moment it brought together all of the players from the financial

crisis of 2008 the people who are actually in the room in the moment to have a conversation about what went right and what went wrong things like that in the 2008 financial Panic there's no playbook for this stuff there's no road map there's no instruction manual on what to do we're trying to think of the most hated moment in the crisis yeah there was a lot of a lot of candidates I think the most hated program was AIG by far but when you think about this group of people Hank Paulson Ben Bernanke and Tim Geithner

and you think about their different experiences their sensibility how they approach life oh my God and Hank you have the deal maker his word is his bond if he says he's good for something he's good for it we've come up with a whole bunch of policies which are about jobs and growth Ben Bernanke he was an economics professor at Princeton it's been his whole career thinking about and studying the Great Depression he was moment I have a research paper that I'm giving on Thursday on the Brookings paper is all meetings and then there's Tim Geithner

you know some people thought he looked too young for the job or he looked like he worked on Wall Street but he was a government guy he had spent his whole career in government working on Global Financial panics I remember McConnell saying to me in January we're against almost everything you're doing and we're going to fight you on all of it and it's working for us it's pretty remarkable to think about how they came together and what ultimately happened 2008 financial crisis was far beyond the confines of Wall Street honorary rebound the bad news is

how the public understands and thinks about what happened because of the financial crisis today there's distrust in government there's distrust in big institutions there's distrust in this idea of Elites it has led to the populism that we see in our politics today it's a straight line um [Music] foreign for millions of American homeowners as a slowing housing market has turned some mortgages into time bombs one failed mortgage might not threaten the whole financial system millions of them could 34 subprime mortgage companies have gone bust in just the last few months hair Stearns is hurting the

stock cut in half investors in general cutting out today and Friday may not have enough money on hand to stay in business if you're used to thinking about the issues it is very intuitive that if you've got a bazooka and people know you've got it you may not have to take it up he has no idea how bad [ __ ] he has no no the Dow tumbled more than 500 points after two pillars of the street tumbled over the weekend Lehman Brothers filed for bankruptcy the DOW Industrials finished with their worst one day point

loss in history down 777 points if our nation continues on this course the economic damage will be painful and Lasting so this is no longer just a Wall Street crisis this is American crisis and it's the American economy that needs this rescue plan how many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills raise their hand unless President Obama are you listening we are tired of the one percent of the one percent and what they have done to the country what they've done to the

world government is finished this American Carnage stops right here and stops right now good morning welcome to the White House in the first quarter of 2006 the U.S economy grew in an annual rate of 5.3 percent the fastest growth in two and a half years we had a 5.2 million new job since August of 2003. when I became chief of staff at the beginning of 2006. the president gave me a mandate to refresh the cabinet I felt strongly that the president needed a Secretary of the Treasury who was experienced in the markets and whom the

markets would respect and Hank Paulson really stood out he is the leader of Goldman Sachs perhaps the most successful financial institution in the history of the world at that time Josh Bolton who was the chief of staff to George Bush called and made a pitch I talked with people around me and no advised me that that was the right thing to do first he said his family would be against it his wife was a friend and classmate of Hillary Clinton my wife Wendy clearly didn't want to I didn't want to so I turned it down

a couple of times I think he's a Renaissance it came largely from the work years ago when I was in the white house I went to the Nixon White House great sense of timing six weeks before the water gate break-in and what Andy didn't like had to do with the whole political scene but a few weeks later they came back and it occurred to me the reason I was turning this down was you know due to fear of failure and I tell you as soon as that hit me I just reversed on a dime I

came up to the treaty room there in the White House he was reluctant but he wanted to serve the country and I assured him one thing that I think was important to Hank and that is when he picked up the phone he called me I'd answer it in other words he wouldn't have to battle his way through a lot of layers of Staff he agreed to come and one of the best decisions I made in my presidency good morning welcome to the White House I'm pleased to announce that I will nominate Henry Paulson to be

the Secretary of the Treasury our economy's strength is rooted in the entrepreneurial Spirit and the competitive Zeal of the American people and in our free and open market it is truly a Marvel but we cannot take it for granted I didn't know Hank before he came to Washington it was customary for the FED chairman and the treasury secretary to meet at least once a week over breakfast or lunch we both liked oatmeal so we used to have an oatmeal breakfast either in my dining room or in or in the treasury dining room Hank was a

markets person he had been very successful on Wall Street he's very high energy he and I are very different people I tend to be personally kind of quiet I was an economics professor full stop I liked being an economics professor and I never expected to be at the fed or in government but in 2002 I got a call from the White House they needed to fill a slot on the Board of Governors of the Federal Reserve would I be interested you know I recognized that I had been spending my academic career studying monetary policy in

financial markets that and maybe I could put some of that to use and moreover it was just a few months after 9 11 and I was kind of feeling that it was important for me to do some public service today I'm honored to announce that I'm nominating Ben Bernanke to be the next chairman of the Federal Reserve you could say Ben was the academic who grew up studying the mistakes made in the Great Depression why Financial systems matter to economies you know Hank has been his life in markets and I'd spend my life in the

in the policy world really dealing with financial crises I first met him when he became the president of the New York fed well the New York fed is probably the most important of the 12 federal reserve banks and the president of the New York fed has traditionally been the fed's eyes and ears on Wall Street I think we all had something in common which is you know anybody who'd grown their life in markets understands that markets aren't always self-correcting so I think we all shared a view about this tenuous fragility of the system we really

did trust each other when I arrived in July of 2006 I thought there was a very good chance that in the two and a half years I was in Washington we would be facing a financial crisis but the things that I was concerned about turned out not to be the biggest problem [Music] it was March 13th which happens to be my birthday I was at avra there's Greek restaurants down here with my parents my family the CEO of bear Stearns called me it was maybe nine o'clock at night and said Jamie I need 29 billion

dollars before Asia opens or we're gonna have to declare a bankruptcy and I said Alan I I can't possibly lend you twenty but nine million dollars overnight they are Stearns one of the most admired firms in America now one of the most endangered firm has been buffeted by constant rumors of a looming liquidity problem what happened at Bear Stearns was the first true demonstration of what the crisis looked like because it was a crisis of confidence prisoners owned a huge piece of the housing business and they had taken on some of the worst risk all

of a sudden all sorts of investors on Wall Street said I don't think that bear Stearns good for the money and not only do I think they're good for money I got to get my money out of there immediately bear Stearns is the biggest casualty yet of the nation's mortgage mess the company has become a poster boy for the real estate bubble we knew that their excesses in housing we missed it totally [Music] homeownership went very sadly from shelter to an investment when I had joined Goldman Sachs in 1974. the industry was growing in many

ways you saw an evolution in modern Finance you began to see different forms of securitizations mortgage-backed Securities really came into being in the 1980s they have started as a really good idea which made a lot of sense which was a way to take mortgages package them up and sell off the cash flows so an investor would buy a portion of all these mortgages and the mortgages would pay that investor and the idea was that made investing in mortgages much less risky because instead of investing in just me you were investing in a thousand people as

we moved to securitization we had cheaper mortgages if you could afford 20 down fine but if you couldn't let's say you have five percent let's say one percent let's say you had zero percent we came up with all these ways to get loans to more people you know it was certainly felt exciting at the time that we were going to spread the American Dream all over the place it's a record year for housing and it shows no signs of a baby in the early 2000s the price of borrowing to finance a house was very low

very attractive these exotic loans have exploded in the last three years interest-only loans adjustable rate loans no down payment options people who were earning like a thousand dollars a month working as a gardener working as a hair stylist saying they were making ten thousand dollars a month because you could do these things called stated income loans which came to be known as liar loans where you could just say here's what I make and nobody would check and so you could get away with murder demand for these Million Dollar Plus Homes has outpaced supplies you got

speculators buying multiple houses people are flipping your neighbor who's not as smart as you are but nevertheless went on bought a couple of houses and flipped them is now driving a better car than you are and you say yeah that does make pretty good sense I wish I'd started earlier [Music] as the housing market heated up there were Asset Management firms around the world that all wanted a way to benefit [Music] most things on Wall Street start with a concept that makes a lot of sense the thing about Wall Street is they take everything to

an extreme they take thousands of mortgages and staple them together and they go to investors and they say what do you want you want safe you want risky we got all these mortgages [Music] there was an incentive to chop up these loans because along the way there was a profit a fee to take for each institution that somehow touched every piece of the loan Goldman Sachs quarterly profits up 93 everyone was making a lot of money because of the housing market included the globalization top Executives will earn as much as 20 to 50 million dollars

each this is the vumoo 2000 people were making so much money I could make 10 15 20 30 100 through 200 million dollars and so there was this competition which was ridiculous Chuck Prince was the CEO of Citigroup and he had an amazing line which was while the music's playing You Gotta Dance big bonuses are driven simply by profits and competition everybody was looking at the success of Goldman Sachs and of Morgan Stanley and of Lehman Brothers all of whom are making more and more profits a company will distribute a record high 16.5 billion dollars

in compensation so there was this remarkable pressure on everybody to keep dancing foreign this was belief that home prices would never go down the shaky housing market starting to crack at the foundation particularly hard hit markets Miami Vegas Northern Virginia and right here in D.C historically house prices have been somewhat disconnected across different parts of the country but this housing bubble did end up being National and it did have implications for the whole economy the real estate bubble everybody knows has bursts this is the hangover after the great frat party you went to house prices

started to fall the economy started to slow those adjustable rate mortgages are now coming due people who have bought these adjustable remortgages when they started to reset they couldn't afford to make the higher payments they tried to refinance them with their house prices decline in value so they couldn't refinance them foreclosures are up over a thousand percent some people start defaulting on their mortgage payments now that begins to Ripple through it was a very very bad a lot of people lost their homes a lot of people lost their savings those falling home prices are like

an infection now spreading throughout the U.S economy the system's not designed to function in an environment where house prices are going down so these mortgage-backed Securities start to unravel and you got problems investor confidence in the mortgage financing space is not doing well there is so little transparency and so a little confidence in these Securities that financial institutions were struggling I looked at one offering of mortgage-backed Securities I would have had to read over 300 000 pages to analyze that mortgage I had some of the smartest people in America couldn't explain to me what some

of these instruments meant and it's just like inventing more and more product in order to achieve higher and higher returns it was taking bigger and bigger risks unfortunately maybe this is the weakness of the street back then maybe a lot I think discipline was kind of lacking it was ourselves Lehman Goldman bear Stearns others them out of risk we were taken was out of control today bear Stern's stock dropped nearly 50 percent a loss of three billion dollars in Rapid change in Bear Stearns over the past 48 Hours it reintroduces anxieties about what's not known

to complete lack of confidence in their Stearns are run on the bank the fed's job for alarm fire if it cleared us that bear Stearns wasn't going to exist on Monday if there wasn't a solution and markets were so fragile and so interconnected in that we were going to have to do some pretty repugnant things if we were going to save the American economy for the American people and I came in and said bear Stearns is failing and we got to do something about it and my first reaction was why they made bad Investments hey

and sadly the people that invested in Bear Stearns and sadly those who worked were bear cerns are going to have to pay the price of working for an entity made bad investment he said you don't understand if they fail it's going to affect the International Financial system [Music] I've been told there is no Authority for the fed or anyone else to guarantee the liabilities of a failing non-bank there is nothing more terrifying than feeling a great sense of responsibility and not having the authorities you need you know we had each other in some sense to

talk through options and strategy and that helped a lot Ben 10 and I we talked multiple times a day we always treated the three of them kind of as one entity and the president always wanted to know when he was getting a recommendation from Hank would have been in timfield I remember having a conference call where Hank and Timmy and I talked about what the implications might be for the financial system if bear Stearns failed and what we could do what we decided that morning was to buy some time to get through the weekend [Music]

Congress have given the fed this emergency tool that we could use an extreme crisis to lend to an institution that was not a bank so we had authority to lend but the FED had not done something like this since the Great Depression Ben Bernanke made a really bold decision to extend the loan for 28 days the Federal Reserve agreed basically to help Finance about 30 billion dollars of bears risky assets this was the first important intervention that we did and it was a tough call I was a registered Republican I believed in Market solutions to

to economic problems but I was a student of the Great Depression foreign I went to graduate school I knew I wanted to do economics but I didn't know what area and I said to myself the Great Depression was one of the most important events of the 20th century about a third of all the banks the United States failed and that in turn created a tremendous contraction in the amount of credit available to ordinary households and businesses my grandfather's drug stores kept going out of business in the 1930s and it created enormous hardships for many many

years later on when I was a policy maker took to heart the idea that allowing the financial system to collapse and the credit system to collapse was going to be extremely dangerous for the whole economy and that was why it was so important to make the loan bear Stearns was forced to take an emergency loan funded by all of us the taxpayer bailout prompted investors to dump bear Stern stock as burst Stearns was going down President Bush was scheduled to be in Wall Street to make a speech at the New York economic Club 43rd President

of the United States to president he showed the speech to me he had a line in it that said there could be no bailouts I started off by saying you could take that line out about no bailouts President Bush tried to make light of a grim situation seems like I showed up in a interesting moment I was unhappy about it you know I I was a free marketer I told people that you know uh and firmly believed it and still do by the way but Hank is a persuasive guy and I trusted him then what

became apparent was alone that was permissible for the FED to make no way was it going to stop an investment Bank from disintegrated and fortunately JP Morgan was a buyer [Music] it's a really risky thing buying a big Investment Bank it was a house on fire it was collapsing Hank and Tim were I want you to buy you want to buy you should buy it I said we'll do anything we can to help I can't be irresponsible to JP Morgan I can't end up being a teetering giant after this he wanted to own bear Stearns

there was no doubt about it I'd gone to bed on a Saturday night thinking we had a deal at one point on Sunday I called up hang and say Hank we can't do it it's a bridge too far and then we started working on well what could you do to do it which is why we had this idea well if the FED could Finance this 30 billion we can handle the rest of it Pearson's has a bag let's say of garbage let's just say it's trash and nobody wants to buy all of bear Stearns and

the trash Jamie Diamond says I'll buy bear Stearns but you guys are gonna have to share the trash with me you Tim Geithner and Ben Bernanke and Hank Paulson you got to take the trash out it would be like Fox bailing out NBC JP Morgan Chase joins the Federal Reserve at a frantic attempt to rescue their Stearns that was very controversial because that was in essence the first Proto bailout people woke up on Monday and thought that it was the highest of the century people thought Jamie had stolen bear and people thought that Hank had

basically given away the store by taking on 30 billion dollars of terrible crapola [Music] and that was the beginning of this debate in the country about what was what was happening how bad it was going to be and whether we should whether we should be doing any of this [Music] during the crisis none of us were able to convince the public that what we did was not for Wall Street but it was for the American people [Music] [Applause] should have done a better job of explaining the financial system was so concentrated and so intertwined that

if you want to stop the bleeding you've got to go to the source and the source is Wall Street and if you don't stop the bleeding at Wall Street you kill the economy an extraordinary period there was his presidential election going on we had these two candidates both running against President Bush because he was very unpopular we need to bring real change to Washington and we have to fight for it that was a bad period for President Bush remember we're still in the midst of the war in Iraq and President Bush was generally unpopular in

the public partly as a result when you're president you don't make decisions based upon your personal popularity you don't have to be a PhD to know some popular spend taxpayers money on Wall Street that may be okay in New York but you get out to Midland Texas it's not okay you know it was pretty clear what the public wanted to hear it's very easy to tap into that popular stream and be against bailouts and putting government money in thing became the operating standard while Regulators were asleep at the switch both are important but at the

end markets went the housing market in plain English is coming apart is 2008 progressed the crisis intensified we were all concerned about Fannie Freddie but we didn't know how bad it was Fannie Mae and Freddie Mac are the backbone of the U.S mortgage Market holding roughly half of all U.S mortgages Fannie and Freddie may not have enough money on hand to stay in business the first thing you have to understand about Fannie and Freddie is that they are so important to the Machinery of everyone's everyday life any person who has a mortgage it's pretty likely

that Fannie and Freddie touches you they were publicly traded companies like any company you would invest in like Starbucks like apple like Google and yet they were known as government-sponsored Enterprises because there was this idea that the US government stood behind their debt so that if they ever couldn't pay their debt the US government would step in they got a government money printing machine in which governments implicitly says if everything goes wrong we'll we'll foot the bill that was a guarantee it was written nowhere on paper it didn't actually exist and so it came to

be known by this term called the implicit guarantee there was no guarantee but the market assumed that there was so you had management teams and shareholders making money off a government guarantee they insured something on the order of five trillion dollars something close to half of all the mortgages the United States were insured and resold by Fannie and Freddie the fear was if Fannie and Freddie defaulted that would throw the Global Financial system into chaos the company's stock prices off more than 85 percent since the credit Crisis began last August they've announced huge losses their

stock is diving so I needed to ask Congress for enough money to calm the markets thanks secretary Paulson and the chairman of the Federal Reserve we thank chairman Bernanke for his involvement this was a tough political ask with members of Congress I felt we needed expansive authorities one of the proposals that you've suggested was an increase in the treasury line of credit for Banning credit I have some concerns and my suspect my colleagues do too about having no cap no limit at all if I asked for 100 billion it wouldn't be enough and I certainly

knew I couldn't ask for a number that started with a t trillion how much money are you contemplating here I would ask for it to be unspecified for some of us it sounds a little bit like a a blank Checker you're talking about potentially spending a trillion dollars here we're a little skeptical one of the tough things about testimony was that you had multiple audiences so you're sitting at this table the glass of water you're looking up at the Senators and so you're trying to answer their questions but you know at the same time that

you're talking to the TV Camera which is going out to American public and then you're a staff member behind you gives you a piece of paper that says Dow Jones down 180 points so you're also talking to the markets I looked at those hearings as largely theater here I was worrying about saving the financial system for the American people these guys want to save the financial system but they wanted to get elected but I really believed what I said when I was testifying I said you know if you give us unspecified authorities it'll be so

powerful that we won't have to use them if you've got a squirt gun in your pocket you may have to take it out if you've got a bazooka and people know you've got it you may not have to take it out you're not likely to take it out by having something that is unspecified it will increase confidence and by increasing confidence it will greatly reduce the likelihood it will ever be used you know he had this tremendously valuable skill which is how to convince people to do something they did not think was in their interest

it was Hank in that instance and in others who kind of lay down the law and said you know this is what's going to happen I'm about getting something done that can get done it will make a difference and my judgment is in in the best interest of the taxpayer the sense of urgency is something I think all of us at least most of us here appreciate look we're in the middle of this thing and it's getting worse and the Secretary of the Treasury says I've got it I need these some of these tools we're

in the eye of the hurricane at that point I got the Bazooka and I didn't think we were going to have to take it out but the most aggressive investors get very quickly to where the most fearful investors are faster than you can imagine and so it was only a matter of time until we had to use the Bazooka [Music] the Takeover of Fannie and Freddie was like a military operation Hank was the General [Music] Fannie and Freddie were politically powerful entities I mean really powerful they made people rich most of them were very well

connected we had to do it in a way that they didn't anticipate otherwise they would have used political and other forces to prevent it I remember talking to President Bush about this and he was asking how can you possibly get this done without them knowing and fighting and I remember I just it came out of my mouth the first sounds they're going to hear was when their head hits the floor [Music] oh this is the full Paulson there were some bitter pills the CEOs were replaced they were going to lose their golden parachutes history was

made when Washington took the reins at the two organizations that back or guaranteer nearly half of America's Home Loans today's action should accelerate stabilization in the housing market ultimately benefiting financial institutions naively and thought maybe we brought down the Hammer as I told President Bush maybe this is what it's going to take to put out the fire it began with a more than 300 Point bound Fanny bang we called it on Saturday night I was sound asleep it was an optimistic sleep my phone rang it was Barack Obama [Music] on that call he said look

I know I'm going to be president of the United States yeah at that point I was fairly confident I was going to win the election and I already felt as if I had some responsibilities for um an economy that I was going to have to manage fairly soon this company for my home state we lose track all right appreciate it to Hank's credit uh he was consistently straightforward and honest and transparent with us and I ended up developing a a good relationship with him and trusting him and it had been impressed upon me that if

this thing went sideways we could have a depression and whatever short-term political Advantage I might gain from it was not something that I was going to be interested in in plane he very nicely warned me you better take care of the Republican candidate because if I start hearing populist anti-bailout Relic for him I'm going to have to start talking that way two years ago there was one man who stood up and warned us about the problems at Fannie Mae and Freddie Mac it was John McCain talk for John McCain and Sarah Balin I encouraged everybody

to call me Hank I did not want to be Mr secretary but somehow or other I don't know what it was on that first call the way she immediately started saying Hank the tone of voice it just it rubbed me a little bit the wrong way people in Florida are and should be outraged huge financial institutions going under because of their own bad practices and now asking the public to bail them out despite what her other feelings may or may not have been she certainly understood where the public was with regard to bailouts [Music] early

September there was so much bailout fatigue there was so much oppositions not just what we've done in Beres Turner's case but to the Fannie Freddie receivership people had no sense for The Perils of what was happening the economy is like a house of cards but the bottom could still drop out sending markets into a free fall I grew up in the treasury in a series of crises that happened to other countries beginning in really 94 with the Mexican financial crisis I then lived through a whole wave of it's really devastating Emerging Market financial crisis in

Thailand Korea Brazil Indonesia in Indonesia fears of financial disaster hit the streets with long lines formed outside supermarkets I could see you know how deep the depressions were how tragic were the costs and how hard it was for people to figure out a way to navigate their way through it had a huge impact on me of course panics were different from all other crises and in a panic you have to use overwhelming Force because you have to convince people it's safe not to run not to panic and to do that you have to muster a

wall of money blame him taking a beating right now down about 35 percent it hasn't traded this low since 1998. Lehman Brothers in particular both was leveraged but more importantly had taken on a huge amount of real estate and that real estate every day was being marked down even more another tough day for shares of Lehman Brothers today CEO Dick fold is actively shopping the entire brokerage firm dick fold was looking for Capital he contacted us I had talks with them I came down on a Friday night I remember and and looked through a 200

and some page 10K and scribbled a lot of adults on they still have the 10K and by the time I got all through uh I knew we weren't going to to make a deal by that week in September they were close to that of options the debate now is the role the government will play in all of this president secretary Hank Paulson and veggie Ben Bernanke are behaving like socialists and should resign that is what Kentucky Senator Jim Bunning says they both should be fired first for Bernanke not watching the store and Paulson because he

didn't tell the Banking Committee the truth Hank in particular was taking a lot of the heat for quote being the bailout king and the like if it's 200 billion dollars for this bailout it was 300 billion dollars from the housing bailout it was 30 billion dollars for Bear Stearns I mean where does it end now there are rumors that Lehman might be in Rome of the government would obviously come to the rescue Lehman I made frequent calls to Dick fold we had told him repeatedly that the government can't put in capital Source was close to

treasury secretary Hank Paulson saying there will be quote no government money in the resolution of this situation he puts the word out to the street we are not in the bailout business I did call Hank saying you're going to regret that because it's not going to get solved without more public money he said I understand that this was a tactic plain and simple if we didn't communicate that all the other Wall Street Banks would believe that the fed you know would be there to put capital in we had two potential buyers for Lehman the first

was Bank of America the second potential the choir was a British bank called Barclays we assumed that there would be some Bad Assets to Hope was to keep the FED out of it if possible and to get the CEOs from the other Wall Street firms to get involved in in buying those or holding those assets in some way Wall Street Titans and top government officials have been huddled in emergency meetings scrambling to prevent the collapse of the giant Investment Bank Lehman Brothers I convened the heads of the major firms that in New York that that

evening the best financial brains in the world are in pressure negotiations to resolve the fate of Lehman Brothers this is like the five families every major character on Wall Street this is Jamie dimon of JP Morgan this is John thain of Merrill Lynch a companion of Citigroup Lloyd blankfein of Goldman Sachs John Mack of Morgan Stanley I thought it was exactly the right thing to do they had a problem to solve and their problem was my problem CEOs were all scared and they were scared about what Lehman going down might mean I said you know

you're all exposed to we don't have the means to protect you from this they're effectively being given an assignment Hank and Tim are the school teachers telling telling the children you're going to be broken up into groups to come up with a deal to ring fence these assets no I think oh [ __ ] I don't want to do this but it was complicated I mean all of a sudden you're looking at all this data the banking crisis forcing another long weekend of work in both Washington and New York top Executives of rival Banks met

under tight security to discuss plans to buy Lehman whole or in Parts it turns out that one of the potential buyers really had no interest in Lehman Bank of America is now reported to be an advanced talks to buy Merrill Lynch a shotgun wedding arranged in two days and the fact that Bank of America purchased Merrill Lynch took another serious problem off our hands but Barclays sure seemed very interested and identified the assets that need to be left behind and I think the banks were largely on board to step up and take it we were

all under the impression that this there's one major hitch which is the British government Tim Geithner and Hank Paulson get a phone call there were several people they spoke to including the bank supervisor but the decision maker was the chances of the exchecker the Secretary of the Treasury essentially of the UK who was named Aleister darling and the British said that for Barclays to buy Lehman would be like importing the U.S cancer [Music] Hank called and said the British will not allow you know the British Bank to take over Lehman and it's going to fail

I was very angry that was a very unpleasant surprise Hank told the staff he said the British grin [ __ ] us and Hank walked into the other room and said to the CEOs it's over Wall Street in crisis mode this morning Lehman Brothers says they will file for chapter 11 bankruptcy today the journal and the time the tutorial on Monday morning I would say Express relief that the FED hadn't intervened I'll tell you none of the three of us looked at that as a positive event we didn't know how bad it was going to

be but we knew it was bad good afternoon everyone and I hope you all had an enjoyable weekend yeah Monday afternoon I was standing in the White House in front of the press Corps you know putting the best face I could on Lima as you know we're working through a difficult period in our financial markets right now Lima was a massive mistake and I think maybe those who were involved in that decision will still defend it but I think when you look at the Tremors afterwards I think that goes down as one of the most

colossal mistakes ever [Music] there's a lot of retrospective analysis and so on I think people need to appreciate that all these decisions had to be made in real time and very very time pressured situations we could have lent money to Lehman but it would not have been enough for sufficient to prevent the company from failing there was a broad-based run going on throughout the entire company not just on his short-term funding but on a derivatives and on many other aspects of its business and so the company was not savable for the people who believe that

if they had just saved Lehman then there would be no financial crisis you're being naive if it weren't Lehman it would have been Morgan Stanley it would have been somebody because the fundamentals were so bad the Dow fell by 4.4 today more than 500 points the worst one day point drop since 9 11. after Lehman I remember I called my management team and said you're going to see the worst week ever in the financial History of the United States it was a huge liquidity problem the bank inter-lending Market was drying up you know any institution

across the United States caterpillar GM Ford Chrysler Harley-Davidson anybody whose existence depended on the ability of your customers to borrow or your way to borrow at that point I think people thought that you know it was Dire we were a few days away from the ATMs not working I could see the crisis spreading very very quickly from Wall Street to Main Street that week one of the largest McDonald's franchisees in the country calls Ken Wilson who's working for Hank Paulson the treasury and literally says to him I don't think I'm going to be able to

make payroll next week think about that and you might say so why couldn't McDonald's do this well guess what they rely on Bank of America to roll their paper and they're worried the Bank of America is not going to do it the markets were affecting the real economy the market for closing down people cutting back hiring cutting back investing cutting back spending to protect themselves and you were looking at what looked like could be a Great Depression [Music] I described it as an economic Pearl Harbor the 1929 Panic was nothing like this the system had

stopped a day after the failure of Lehman Brothers and the fire sale of Merrill Lynch attention turned to AIG the world's largest insurance company American International Group is seeking emergency funding as it struggles to stay afloat AIG effectively was ensuring all the other Wall Street Banks wait a minute all your insurance is from an insurance company that's about to go bankrupt now you see how the fire spreads from one company to the next company and then everybody looks and says AIG must raise at least 40 billion dollars and fast AIG the situation kept worsening and

we got told that they weren't going to make it through the day you know they needed balloon so it was 85 billion dollars a bit imagine that fed can lend against collateral and we essentially decided that even though the loan to AIT will be very large that there was enough value in all these insurance companies that we could take it as collateral AIG may not have been too big to fail but it was certainly too interconnected to the economy to fail by Tuesday night the AIG Saga is at least temporarily over they stuffed the turkey

with 85 billion dollars and they fire the CEO [Music] not enough for the market in its entirety now we're talking about Morgan Stanley going under if Morgan goes under Goldman goes under the two remaining in independent investment Banks Goldman and Morgan Stanley are acutely vulnerable we worked quite aggressively with financial institutions I was on the phone jawboning [Music] urging them to raise Equity Hank and Tim and mainly Hank was pushing at least Morgan Stanley to figure out a way to get external financing Tim said pick up the phone and call Jamie he'll buy your bank

I said Tim yeah you'll buy it for two dollars a share he said I don't care what he pays for you I want you to do it and I said in one of my more stupid moments well I won't do it I'll take the firm down first and I hung up on him who the [ __ ] does that [Music] on Thursday hang came in with Bernanke with Geithner I started talking to the president about we're going to need some legislative Authority we're kind of out of ammunition we needed to put Capital into the banking

system but Hank's concern about Capital injections was that it would look like the government was nationalizing or taking over the banking system and so his idea was to buy troubled assets that's why it was called the troubled asset relief program the tarp about halfway through the conversation the president interrupted Hank and directed a question at Ben I asked her we headed for a great depression and Bernanke said you know looks like way and you have to make up your mind you know do you care and what I cared about was people that would be hurting

they were already starting to hurt people getting run out of their homes payrolls couldn't be met and I just could Envision what a Great Depression would mean if it's bad now imagine how bad it would really get [Music] as we left that meeting the president turned to us and said if this is Hoover or Roosevelt for damn sure I'm going to be Roosevelt usually the Secretary of Treasury keeps me posted on the markets but I haven't heard from him in a couple of weeks in that amount of time we've had Lehman Brothers Merrill Lynch and

then AIG so I called him it was three o'clock in the afternoon to say can you be here nine o'clock the next morning to which he said Madam speaker tomorrow morning will be too late so we planned a meeting for five o'clock that day [Music] Frank Paulson and uh chair and Bernanke came in and Sharon Bernanke said to the group if you don't give Hank Paulson what he needs within 72 hours the entire banking system the United States will fail and then the world banking system will fail on top of it one of the most

sobering periods I've ever experienced you got to be kidding why are we first meeting now we've got 72 hours if anything I think I might have understated in my predictions how bad things were actually going to get secretary described what they wanted to do so we've tested many models and we have what we call our break the glass plan we were going to buy troubled assets you know not sure how but we were going to buy troubled assets but every 15 minutes Majority Leader Reed would say how much is this going to cost a hundred

billion dollars no no no no Hank said no no no no we knew it couldn't start with a t I couldn't ask for a trillion I wasn't going to be unable to get unspecified again and so the biggest number we thought we could get was 700 billion and we thought you know 500 billion sounds sounds big but 700 billion 500 billion 700 billion many people don't know the difference basically we wanted it to be as big as we could get without spooking Congress so blow up on our face I said we need the authorities immediately

and Harry Reid says Congress doesn't do anything immediately and so it was after that where we all walked out and late at night had a pressure we reached a bipartisan agreement to work together to try to solve this problem and to do it in an expeditious manner I am very impressed with chairman Bernanke secretary Paulson I've said on a number of occasions we look forward to working with him and we're anxious to see their proposal which we hope to receive in a matter of hours not days we're coming together to work for an expeditious solution

which is aimed right of course that was the best thing that happened for the next the next week because after that it was one difficult process today on behalf of Main Street Congress had a chance to ask some hard questions about the 700 billion dollar bailout of the Wall Street why are we asked to put 700 billion dollars to keep CEOs in their office while families get kicked out of their homes why do we have one week to determine 700 billion dollars that has to be appropriated or this country's Financial systems go down the pipes

I share the outrage that people have it's it's embarrassing to look at this and I think it's embarrassing for the United States of America their view is Right same as all of our viewers if you take risk and you make money that's fine great for you but if you lose money we don't expect the United States of America to be there to save you anything that looks like a bailout is unpopular too many people on Wall Street have been recklessly wagering instead of making the sound Investments we expected of them the other crazy thing about

this this whole thing is happening in the middle of a presidential election if you give me your vote we will win the general election and you and I together we're going to change the country and we're going to change the world God bless you God Bless America thank you not only have I assured Paulson that we are not going to play politics with this I actually reach out to McCain and suggest to him that we should make a statement expressing confidence that we can get through this difficult period that now is not the time for

politics he asks me on the phone what would you think about potentially suspending the campaign and I say well I'm not sure that it's a good idea for you and me to be in Washington that's just going to politicize the situation maybe half an hour passes maybe less before David Pluff my campaign manager gets a call saying listen John's going to be going out in two minutes to announce that he's suspending the campaign I said no no that can't be right I just talked to McCain half an hour ago well sure enough this afternoon John

McCain dropped a political bomb show tomorrow morning I'll suspend my campaign and return to Washington I'm directing my campaign to work with the Obama campaign to delay Friday night's debate so there was some cursing that took place in the room that was irritating to say the least I came and called Bush and said he was going to interrupt his campaign and wanted to come back and help solve the problem and president said that is just the stupidest thing I ever heard there was a flurry of dramatic developments today as economic policy and power politics collided

so I'm sitting there saying oh my gosh if he comes out against what we're doing we'll lose the Republicans we may lose the Democrats and there goes our economy there goes our financial system here comes another Great Depression it appears to me that John McCain is trying to divert attention to his failing campaign it reminds me of Andy Kaufman as a Mighty Mouse August McCain he comes to save the day Barney Frank the chief Democratic negotiator said it was the longest Hail Mary pass in the history of football and Mary's president being a leadership meeting

from both houses of Congress including Senator Obama and myself thanks Dead Set against the meeting he didn't want to meet but you know if I'd have said no it would have really hurt his campaign I called Senator Obama at the time and said I'm having a meeting at the White House and I'd like for you to come President Bush was almost apologetic he's saying look I don't know how well this is going to work we'll try to make it as serious and constructive as possible I say well I appreciate that Mr President I'll be there

[Music] it was high stakes drama [Music] it was the most bizarre meeting you know sometimes history is Stranger Than Fiction I want to thank the uh leaders of the house and the senate for coming I appreciate our presidential candidates for being here as well we are in a serious economic crisis in the country and we know we've got to get something done as quickly as possible President Bush ever gracious defers to me as speaker and I say thank you Mr President leader Reed and I have decided that we're going to yield our time to Senator

Barack Obama he was very wise about it he said listen I've been in touch with Hank Paulson and I'm watching this crisis very closely I had at that point been pretty steeped in these issues and was pretty familiar with them and I've begged my pitch Mr President we want to act responsibly we think it's important that taxpayer money isn't wasted he had a well-crafted presentation that the president then called on McCain and McCain said I'll wait my turn [Music] and there's sort of a deflation around the room John didn't have much to say the problem

was I think John still hadn't really thought through what exactly his approach would be at that point I knew that that campaign was staggering I knew he couldn't possibly have developed another plan McCain doesn't want to talk if I said well I think the Republicans have a perfect right to offer that plan somebody said no one doubts that but what do you think about it and it was so shall we say just not there I didn't believe he had a plan they thought it was a really cool campaign Gambit they were playing checkers not chess

they had only thought one move ahead it was a situation where I felt that he hadn't been served well his team needed to make sure that he had an agenda that he was bringing to bear and and he didn't and the the meeting sort of descended into a little bit of chaos Barney Frank started shouting at him where's your plan where's your plan became McCain would not say what he thought about the plan the meeting broke down into a shouting match it was chaos and disarray this thing turned into a food fight Barney Frank yelling

at some Republican guy and it got out of control and I basically said the meeting's over it brought the meeting to an end it brought to meeting to an end it was the most horrifying and dispiriting meeting in the white house that I I ever experienced I asked him not to use the White House as a political backdrop I said because we're going to Spook the markets you walk out of here and you start giving people what happened in the meeting and this that and the other the markets are shaky as it is and we

don't want to be a part of making them shakier [Music] I think you're waiting on a bigger game than me Richard Shelby went running out and told the press that our plan was a disaster and there was no support for it we hadn't forgotten agreement there's still a lot of different opinions so mine is it's flawed from the beginning and the Democrats all went running into the Roosevelt room we're talking about what Obama is going to say in the press conference afterwards I was a little naive because I thought geez these are all my friends

I've been working with them I've been talking with them regularly and I was concerned that they're going to run out and what they were going to say the Press so I came barging right in like I shouldn't have and they're all huddled around Barack Obama and I went right up to him like I was one of them and they looked at me and they said get out of here this is a famous meeting at which Hank Paulson and only half ingest gets down on one knee and and begs Nancy Pelosi not to torpedo the tarp

legislation Hank knelt down and said Adam speaker please bring the bill to the floor and I said well you know it's not us we want a solution you have to get the votes on your side I was at Treasury and President Bush came over to see me part of the leadership is to kind of recognize what's happening on your team and it was pretty clear that Hank was worried himself to near exhaustion so I tried to go to Wendy his bride and said Wendy you gotta you got to get him to rest I don't know

if it had any effect but at least he had a friend me I said Well if you really want to know what I'm concerned about I don't want to be Hendra Miller you know Andrew Milland was Herbert Hoover's treasury secretary during the Great Depression and he laughed and I said well that's what's so funny I mean no one knows him they know about Hoover the country has got to have confidence and the government's ability to Stave off a crisis I learned that firsthand on 9 11. at one of the jobs of a leader during a

crisis is not only project calm but project confidence that we'll deal with the situation and lo and behold my Administration started with a crisis and it ended with one there will be ample opportunity to debate the origins of this problem now is the time to solve it in our nation's history there have been moments that require us to come together across party lines to address major challenges this is such a moment in terms of getting the tarp there were three or four sticking points but one that was very big was compensation you know Congress said

if you're going to do something for Wall Street they should be willing to sacrifice the issue was are people going to keep their bonuses while we're bailing them out there had to be some Old Testament Justice for the sins you committed that we're all asked to pay for when you go that way no bank will take capital or take help from the government unless they're ready to fail they couldn't get their head wrapped around the idea there'll be some public say in private sector pay what do you mean you would tell the private sector who

could get paid and we looked at Hank and Ben but actually like what do you mean you want 800 billion dollars you know we're not the ones that said the Lehman should go Belly Up when you needed it at 30 billion dollars for Bear starts you figured out where it was what do you mean you won 800 billion the pay was an acknowledgment that you had messed up [Music] Hank's first job was to work out a deal on what the parameters of the tarp legislation would be that we put on the floor sometime well after

midnight in one of those sessions I recall receiving a call from leader Reed who said that Hank had just thrown up into a into a waste basket I was in a little cubicle and I got the dry heaves and I make a lot of noise and so Rahm Emanuel immediately came in he has you know I wouldn't call it chest pains anyway whatever I think it was uh he had some breathing issues Senator Greg and I are with them Robin and I didn't know that this was real or not and I I said to ROM

said well let's get the doctor Hank Paulson said no doctors no doctors I know I've been through this before it's okay I looked at Greg and I we both said the same thing which is this is never going to come out of the room because if it ever got to the market that the secretary treasurer listen I don't know if it was a panic attack or whatever but had basically a challenge breathing the market couldn't handle it psychologically so there was a Blood Oath between Senator Greg and I I never told Nancy never told steady

never told anybody [Music] wrong said we've got to solve this quickly uh the implication being if we didn't so we'd have Secretary of Treasury may be passing out or something worse that was not a tactic but if it had been it was the best thing because it was amazing how quickly we we got together and had a deal good evening for the last several hours chairs of our committees have worked with secretary Paulson and others from the administration to resolve our differences so that we can go forward with the package to stabilize the Market's most

importantly to protect the U.S taxpayers we write the bill and we bring it to the floor and we're coming up to the day before the vote and I said I never lose a vote because I know I have my names I want to see your names president said they have to vote for of course they'll vote for it this is an emergency yet they have to vote for it [Music] small businesses mom and pop grocery stores don't get this break when they make bad financial decisions they go out of business but the Rich and Famous

Wall Street New York City Fat Cats expect Joe's six-pack to Buck it up and pay for all this nonsense it's pretty clear Republicans are for I mean there was a lot of anger and uh I didn't come to Washington to bail out Wall Street you know I didn't either but you know it's necessary under this plan ultimately the federal government will become the guarantor of Last Resort and Madam speaker that does put us on the slippery slope to socialism I remember talking to Senator Kyle and asking him how his constituent calls were going on the

tarp he said well it's about 50 50. 50 no and 50 percent hell no if I didn't think we were on the brink of an economic disaster it would be the easiest thing in the world for me to say no to this John Boehner had warned me he hits that Hank when you're looking at the House Republicans you one-third of them are knuckle draggers another third of them are in danger of losing their seats at this election and believe they're likely to lose their seats and don't want to take an unpopular vote so you're fishing

in a small pond stand up for the American taxpayer reject this bailout and vote no I went into Hank's office and said you know look the speaker brought this up for a vote they wouldn't do that if they didn't have the votes to get it over the top and so we're watching it and watching it and watching it nothing's moving and it's 2 12 to you know just hovering it was a classic political vote it was a bad vote if you were a conservative it was a bad vote if you were liberal so the rank

and file members went in assuming that their their leadership had the votes to pass it they went in early and they voted no they left and they couldn't be found the EAS are 205 the Nays are 228. the motion is not adopted the stock market has moved lower the Dow Jones Industrial Average down almost 500 points I was watching the vote on television and watching at the same time watching the stock market falling and falling and falling and saying to myself the whole U.S economy is at risk and Congress can't get it together to take

the necessary action to help us stop this crisis I was very unhappy very disconsolate we knew it was going to be a close vote but the Wall Street is extremely upset said the Republicans abandoned bush I don't think Boehner and blunt knew that they couldn't deliver but I do remember walking over to him and putting my finger right in John Boehner's chest I said you better fix this and you better fix this fast I said this is your problem not ours we tried to help we need everybody to calm down and relax and get back

to work the primary issue for the market right now is fear I always thought I planned for the worst but I just assumed with all the leaders on board naive me I've been in Washington for a couple years and but I I assumed it would pass part of that was also every step of the way that we would have half the votes and they would have that divorce because we believe that this had to be bipartisan it was very very deflating everyone called me that night and his voice broke and he apologized to me for

you know he's owned this sense of failure because he was unsuccessful that first vote and I remember saying to him I said you're we're you'll get this pass you know where the United States we'll figure out a way through this we need to work as quickly as possible we need to get something done and I'm going to be continuing to consult with Congressional leaders to find a way forward to get something done as soon as possible we need to get something done Dow Jones Industrial Average lost 777 points that is the biggest point value lost

ever the first iteration of tarp goes down and the market corrects by 1.4 trillion which is kind of the ultimate focus group facing increasing pressure from shaky markets Senate leaders pledge to pick up the piece of the 700 billion dollar bill Josh and the team came up with a different strategy and ran it up to send Congress again the Senate the first time the time to act is now if we fail to act Gears of our economy will grind to a halt the Congress started to hear from their from their constituents what's happening to my

401k what's happening to our economy then that led to a reversal the yays are 74 and the Nays are 25. the amendment is agreed to if the second vote are going down uh I I might have found myself a cave someplace in the head for a while we literally passed a bill to send a signal to the markets in the final here's 800 billion dollars we'll figure it out later so how did Wall Street react to the big bailout the Dow actually closed 157 points lower so then while we were getting this legislation in Congress

the situation worsens we had the two biggest bank failures in U.S history with Wachovia and Washington Mutual WAMU the last five days the Dow has fallen more than 1800 points and 18 percent the biggest weekly decline in its entire 112 year history we needed something that was going to work much quicker and be more powerful we had various Capital program ideas to put capital in the banks and we had our teams working around the clock figuring out what would work so as we're working this through on Saturday night I was exhausted I fell sound asleep

my phone rang and I answered the phone and he said Hank this is Warren and my mom has a handyman named Warren I'm saying why is he calling me but it was Warren Buffett he laid out the idea which was a germ of what we did I made a suggestion around the beginning of October of a way to do it where I thought the government would come out doing very well I actually thought that it might make more sense to try and put just put more Capital into the banks than it would to try and

buy these assets so I actually sent that along to Hank came to me and said what we just passed in Congress isn't going to work I said you got to be kidding me man now you tell me his plan was now to give the money directly to Wall Street he says it's the only shot we got I said we're going for it [Music] until if you have some time to chat with CNBC if you want to tell us you're here to meet with the treasury secretary okay sorry [Music] could you be discussing today sir Serena

can you tell us why you're here today Columbus Day weekend after charpet passed Hank convened the heads of the major U.S banks at the treasury I'd walk in and there's you know nine of us lined up there and on the other side there's hang Ben Tim you know a bunch of other officials and they said they have an idea they want us to take this tarp money you know you're 25 billion you're 10. on this basis they calculated roughly two percent I think of risquared assets they also fully knew some people did not need it

and they're a couple of people in there who needed it nobody wants to publicly take the money because if anybody takes it then the market says well they must be terrible let's pull everything out so it actually was quite an important decision twist arms and force everybody to take it he was very popular if you don't take it and you need it later it won't be a six percent preferred and I'm gonna take your firstborn and I fully understood I don't like to be heavy-handed I abhorred some of the things I saw people in government

do that I thought was abusive I really believed we needed to do this for the good of the system he had this document and I said well give it over here and I signed it and flipped it back across the desk and victim said aren't you going to go to your board I said no when the Secretary of Treasury tells me that we don't do this and we get in trouble I'll get punished that's all I need to know and I said look if I get lucky my board will fire me I'll get out of

all this craziness foreign [Music] walking out they try to talk to us every one of us you know brushed them off a little bit they go well to work out here man and so the headline the next day said not only were they bailed out they were ungrateful [Applause] [Music] I'm here to oppose the bailout plan because it's a massive transfer of wealth for working Americans to Elite institutions and the super wealthy Hank called and said I got him to take all the money plus I think 700 other banks around the country probably the greatest

Financial bailout ever the intervention I think saves depression but I can't prove it I mean I can talk to them blue in the face at The Rotary clubs and the heartland of America and say man we stopped a depression and they'll look at me and said no you spent our money to bail out Wall Street [Music] [Applause] [Music] I think there's still many people who believe that we bailed out companies and helped Wall Street because we were trying to help our friends in the financial industry and not out of our interest in defending the U.S

economy that's absolutely not true but you know I think I have to live with that [Music] Obama in New York in late October maybe a week or two after the charts thing and I remember saying to him you know we broke in the back of the panic but it wasn't over yet it's going to take a bunch more stuff still Barack Obama will become [Applause] it's been a long time coming but tonight because of what we did on this day change has come to America [Music] [Applause] [Music] just remember that if this financial crisis taught

us anything it's that we cannot have a thriving Wall Street while Main Street suffers fever plateaus but it doesn't break we didn't know how fast the economy was Contracting foreclosure rate is skyrocketing and there's no end in sight so we're gonna have to have a housing strategy but even as we celebrate tonight we know the challenges that tomorrow will bring are the greatest of our lifetime got at least five institutions that are bombs ready to go off at any time welcome to the witness I had been talking to Barack Obama on a daily basis and

stigmatized my credibility was going fast you seem to be flying a 700 billion dollar plane by the seat of your pants I was looking forward to after the election to hearing from him and getting support and backing and so on and instead I heard from one of his transition team members guess what Mr treasury secretary you've had your last conversation with the president [Music] more big-name companies made plans to shed workers the bank that got billions enough free money from the taxpayers then turns around cuts off credit to a local business and then won't authorize

workers to get a penny upon leaving with three days notice we're outraged the nine weeks between the time that Barack Obama was elected president and when he was sworn in it was holy hell Circuit City will go out of business cutting 3 000 jobs the nation's unemployment rate bolted to a 14-year High we did slow the Panic or stop the panic but the system was very broken at that point really Frozen back on Capitol Hill today the need to keep the Auto industry from imploding we pray that you would remove the veil between the people

of this nation and the people in a thought but Barack Obama had the political courage to do what was right and do what the public didn't want to hear all the money came back and came back with a 50 billion dollar profit the money they put in the banks and the insurance companies so when you look at how the U.S economy recovered you know growing at two percent for the third quarter of 2009 on our system worked really well so the tarp Capital program is the the most successful program that is broadly hated in the

history of mankind we had a dinner at the Federal Reserve for you know to say goodbye to Hank it's really been a really tough time for him and I'm sure he was relieved that he no longer would have the responsibility but we knew that we could still count on him and that we could call him and talk to him as stressful as working for 18 months during the crisis the first year I was out of government was the hardest period by far from me I sort of sat on the sidelines with my heart and my

throat but I look at it now and I say wow you know policy continuity President Obama we first met in late October and he at the end of our meeting he said I might need to ask you to come work with me in Washington and I was deeply reluctant to do it he encouraged me not to do it he said he said Mr President uh you don't want to bring me up um you know I've been on the front lines on this thing maybe you what you need is a clean break but I trusted Tim

as someone who is a technician who was non-ideological he was my best bet good morning you know ultimately if the president asked you to serve your country and you believe in him or her it's a hard thing I'm to do today Vice president-elect Biden and I are pleased to announce the nomination of Timothy Geithner as Secretary of Treasury we did a whole range of things to keep the mortgage markets open lower interest rates help people refinance help people stay in their home President Barack Obama is rolling out the next step in his multi-pronged plan to

revive the U.S economy a 75 billion dollar program to help struggling homeowners but if you remember the public debate there was a huge opposition to bailing out the homeowner too this is America how many you people want to pay for your neighbor's mortgage it has an extra bathroom and can't pay their bills raise their hands President Obama are you listening it's famous rant by Rick Santelli which a lot of people views the you know beginning expression of what became the Tea Party [Music] the Tea Party begins with the announcement of the housing program and they

say this is all for deadbeats and rewarding people who don't deserve it we should form a tea party [Music] I was not surprised by the public backlash because a year after we spent a trillion plus dollars people are still going to feel worse and all they see is that there's a whole bunch of money going to the folks who perpetrated some of these terrible things Financial crises are often followed by a populist reaction but I think it's important to understand though that some very long-term trends in the United States including the stagnation of wages the

reduction in upward Mobility for people lack of opportunity there's a whole number of things which have contributed to the present moment financial crisis didn't help that but it obviously exacerbated some underlying tensions the United States two of aig's former CEOs were grilled about a retreat where only a week after being bailed out by taxpayers its Executives spent 440 thousand dollars on Oceanfront rooms rounds of golf and trips to the Resort's Spa and Salon they were getting their manicures their facials their pedicures and their massages while the American people were footing the bill one of the

worst days I had came when we learned that AIG was contractually obligated to pay bonuses to some of the people in the in the financial products division and I knew that was a catastrophe and there was me a huge problem politically American people had to bail out AIG but most Americans still lost 40 of their retirement plans we not made that action they would have lost 70 percent I think it was clear it was going to be fraud at the at the core of the challenge was again is this basic thing about fairness and morality

how do you figure out a way to protect the public interest without creating a whole bunch of private beneficiaries did the people who took out insurance with AIG to ensure their retirement plans get reimbursed 100 so they suffered very little loss and give me a yes on that answer or no because it's a it's a poorly posed question the fact that the American public hates what we did is is not surprising because in many ways it's un-American [Music] Wall Street demonstration it worked definitely getting screwed over right now and getting hurt by a lot of

the powers that be if we want to see a change in that people struggling to pay their mortgages incomes that haven't gone up all this straight and people at the very top walking off acting like the [ __ ] doesn't stink since 2000 you've taken home more than 480 million dollars are these figures basically accurate I would assume they are and that whole attitude is that people think that there are two Rule books one for the elite one for everybody else and that started off populist Revolt ladies and gentlemen please welcome [Music] the fuse was

lit in 2008 and Donald Trump was the explosion he's the result of the financial crisis there's a lot of Washington bureaucrats transportationists who don't want to see things change that's we're going to take care of this country for our children and our grandchildren and our great grandchildren and we're not going to let people come into our country destroy our country crises breed populism and yes economics go along with politics and if one is broken the other gets gets broken and it's going to take very strong leadership to bring this country together because we're very polarized

foreign [Music] [Music] speech I I it's funny but not that funny right I think perhaps because we were so different in our own ways we had different skill sets we had different personalities we had different experiences but we trusted each other and so I you know to me I I look back and I don't know how we would ever got through it if and if I hadn't had these guys as as partners I remember looking at my wife's face in the morning when she read about something we'd done and like watching how I could not

convince her and really that was as best we could do uh that was the best we could do we designed a strategy that was effective in getting the economy growing in quickly and people thought we gave hundreds of billion dollars away to the banks which they paid themselves in compensation and the country lost those resources but in effect we designed a strategy where we forced them to pay for that and the taxpayer earned a significant direct profit but I don't think that's enough for people at one point Michelle Smith came to me said you need

to have a town hall with the staff people are coming up to them in the grocery store saying what the hell are you doing I guess the thing that makes me a little more optimistic is that we've shown in the past that when there's a real threat whether it's a 911 or a financial crisis or a war or whatever it might be that we can come together and I think we will if that if that does happen and remember we were lucky too you know we had Financial Resources large enough to really do anything not

many countries have that privilege it really fun to see you all again although it's kind of painful too [Applause] [Music] [Applause] [Music] [Applause] [Music] [Music] foreign [Music]