>> re: welcome to the broadcast. tonighpete peterson, the author of "the education of an american drmer. >> we've never had anything approaching these kds of defits. we have nevebeen this dependent on foreign capital. you've g the housin situation, god forbid that housing pricesall significant because they can. well y would hsingrices fa? because interest rates might well go up. why? because foreign lenders demand higher intest rates. we have a whole new s ofariables. >> rose: pete petersonor the hour nex. >> funding for charlieose has been provided the followg:

captioning sponsoredy rose commucations from our studios in neyork city, th is charlie rose. >> rose: pete person is here. during a remarkable reer in business d politi, he has served a commerce secretar chairman & ceo of lehman brothe, and chairman of the new yorkfederal resee. he also co-foded the blackstone group one of wall reet most successful private equity -- equity farms -- firms. last year he retired from the firms senior chairman. today s life is focused on what he says is the threat

of national insolvency, he committed 1 blion of his for tune into hifoundation to rai awareness about the countrs fiscal challenges. he just published his autobiography, it is called" the education of an american drmer "how son of gre immigrants lrned his way from a nraska diner to washgton, wall street and yond. i'm pleased to have him here this table. weome. >> thank youcharlie. >> re: back, i should say. now i want to talk about many things. d i want to come back to the book but was writing the book cathartic, was itifficult? how did you approach it? >> you ve only covered half of it. itas exhausting. it was lihatark cloud, you know, of who was it not pollas in the cartoons hanging over yr head. you wake up every day say what ai going to be done with this mn thing but y can't not do , you know. >> ros yes. >> so one of the happy days of my life is when i turned

in the mancript. >> re: how did you go abt writing it? >>ell, i did itt nights. and i did it onweekends because i was working at blackstone at e time. >> rose: butand what was your -- you read ls of memoirs. and many ofhem as you have sa suffer from heavy doses of boredom and an inability to find any weaknesses and flaws in tir life. >> i would say selecve recall is and so i tried to think of som things tt woul embarrass me if they were known. an they -- i said to myself at age 82 what can ybody do to me anyway. so why don i just let it hang out. >> rose: just let go. i mean the things tt's here that manyeople are struck by incling reviewers. and you got a very good view in "the wall street journal," it is th you talk aboutersonal failings. >> precisely. >> rose: in busine. you talk about failed maiages. you talk aut being a workahic.

speak to that. >> it has the virtue of being true. >> rose: to coin a phrase from henry kissger. >> right, rht. >> rose: but wheyou look back the was one thing that botheredyou. whatever the responsibilys are to family and childre and marriage. yeah. well, i -- admitted something else that i s told i shouldn't admit and that i had a very intensi psyctherapy. rose: right. >>ecause i began to realize that i wa neurotic and i was obsessed with achievement and work. and itried to go back and understand wre did this come about. and we finally conclud the folling situation. my father was a greek immigrant, comes over atage 17. has a few pennys in his pocket. doesn't know a word of english, third grade ucation. goes to nebraska and tes a job body wants. namely, washin dishes in the caboose of a railroad. he takes that job that

steaming kitchen. he sleeps there. he eats the, and saved most everything that he d. and then he ops up the inevitablereek restaurt, 24 hrs a day, 7 days a we, 365 day a yea f 25 years. and when hefinally shortened the hours, he had no key to the front door because it had never closed. and was kind of my model of the work-oholic. and kindf the gree husband, you kn, in which he's the paternal figure. and he's the number one figure. and 's the one tt provides. >> rose: so the psycho therapy was that youere constantly trying to measure up to your father's stdards? >> well, that was part -- that was pt one. part t washe flowing other was, again, a woerful greek wife. and she had a daughter. and througher daughter she was rorn. and tragically, my sister diedt agene.

and my mother went into dp melancholia. and as a child yo think are you the centerf the solar stem an y're respsible for everything. and i must have done something that caud herto abann me. which of course is ridiculous. it's irrational. so i had to come up with a stragy, charlie, of how do get her attention. so iecided i would get her attention by getting more gold stars better grades an achieving and achieving and achieving. and that doctoronce said to me i a knew row siis an endless repetition of an obsolete feeli or perience. and i s trying to get her attention. and who would myole model be well, iuess it would be my faer. so they kindof combined in a quiet coniracy to create this han being, if tt's what i was,hat always had to be a serachiever regardless of the persona

cost. rose: in terms of the cost to family. >> cost family, and marriage, yes. rose: why does it take all of us so long to realize those things? >> well, do you want to have a discuson of psychotherapy. >> rose: i do, yes. >> we hide the things from ourselves, charlie, because they're painful. no one les to admit, do they, tha th're nrotic. noneikes todmit that they are obsessed with something they shoul't be obseed with. because revls a certn weakness, certain vulnerability and so forth. and i used to, finall i decided to have double sessions because when you araserbose as i am, you know --. >>ose: you need a lot of time. >> the first 50 minutes i can kind of talk myselfnd talk h, avoidhenner ha realities. >>ose: how often would you do ts. >>h, twice a week for two hours. >> rose: is that rht, and it really -- >> ireally made a dierence, made a huge difference. >> rose: madyou a -- >> i dided in this book i

was going to let it all ng out. and i'm perfectlyaware of the fact that wall street ghtens -- titans or whatever t hell mi shouldt go around admitting that they are that vulnerable or --. >> re: why do you think th's true? >> ll, because we prest this ige of bng strong and decisive and self-sficient and all that kind of thing. and i just decided i would let it hang out. >> rose: allight. i'going to come back tual of that t a scinating story. but let me go ttoday, the global economy and tell me how you think it is, and what you think -- how you think we're doing. because for a while the people were saying wl ybe the recovery, maybe we bottomed out. now when you look at wt the world bank is saying and you look at wh warren buffett is sayg and others, not so fas it may not be su. what does pete petersonsay. >> i tell u what pete peterson is principally ncerned with. i guess you have h somebody on the show from the ill-named peterson institut >> rose: yes, we have.

>> and the foundatn asked et peterson institute if th would put their brhtest guys on the question o whe amica's foreigdebt is goi. and chare,it was enoh to really, soberly wake one up. e numbers were totally unstainable as tohe foreign debt. and we've develed this daerous, and i think dysfunctnal dependence on foreign capital. and whatonrns me as much asnything, if we don' start getting our act together, is the foreign lenders ok at our current deficits which ihink are going to be at least $2 trillion. d then they look at the long-term entitlemt problems and so forth, and see us doing nothing. and st say, you know, i dot have much confidence in what the people a doing. now why don't i justot just withdraw all my current money b just be much less willg to lend or --. >> rose: stop taking a more american debt. >> yeah, or have hher

interest rates. once youave higher interest rates, you've got ination, you have th housing cris being re-energized. anthat is the one to me big vulnerable. you ve had paul volker manyimes for whom have enormous respect. he thinks the chans are 75% --. >> rose: that in fact ey will stop lendg money. that there will be a llar crisis in five years. 75% chce. and at does that mean? >> rose: the dollar falls suddenlyinterest rates go way up inflation, recessi, housingproblems all over again and so for. and that's the vulnerability. and this country has just t to learn to save mor which means the government not dissaving, and more rsonal savings. we just can't continue. >> rose: b in the mean tim we need a stimulus toet theconomy moving. >>hat's right. but think we nee to send a signal to the foreign lenders at we also are aware we ve a longer-term problem thatwe've got to move on. >> rose: okay,et me just talk about tt for a moment. because of your ow experien. for a number oyears you were on the boarof the

sony corporatio, the japanese. ina hashe most arican debt. japan, i think, is second. >>econd. >> rose: wt do they tell you, becse there was a time, the last moh in which one of the chine officials said we have so concern about america's future because othe economic crisis. precisely. >> swhat are they sing to y now,what signal would say to them weave to pull back. >> i had seniorhinese ficial that i have known for 30 years. ll me the other day and say he wanted to come in for a strictly f the record meeting and he said peter, you'v been concerned about t debts and deficits fosome time. but the numbers we're talking about now are in a totally different catego. you know, it's e thing to ta about $200 billion, $300 billion. are you talking about2tel -- $2 trillion a year. now let me ask you a question have you peoplesked yourself where's ts money going come from? and what pce do you think people are going to charge

for lending you this money? well, isaid tell me about your point of view. he said well, i remind you first of all pete, that our stimulus program is much bigger stimulus program as a percent of gdp thanours. secondly, i remind you that our eort revenues areown 25 and i then remin you that we've got a triion 400 billion or something, whh is an awful lot. and we're having to seriously coider what we'r going to do. and i don't ble them a damn bit f feeling tt way. so that's the vulnerability that i am most worried about. >> rose:kay, but -- what might trigger their decision? --to top lending mon to e united states, to stop buying american securities. >> thereould be ecomic reasons. and geo political reasons, let's ke them one at a me. the economic reasons cou be, and you know whetheir dollar crashes they're oen

secrary of treasury mas a stupid comment or sothing happens that ignis a loss of confidence. we're not spendinenough time, crlie, looking at the geo liticalspects. and i'm sure you've done th on this show. doou recall in the '50s the --ell, you're not quite th old. >>ose: yes, i am. >> where the french and the british nt troops in to egypt. >> rose: yes. >> take ov the suezan all anwhat happens, of course s that we were then a huge creditor nation. had he amounts of french surities and britis securities. and it was very much against our licy to have a litary intervention on e cal. >> rose: right. so one of our top officis calls the senior officials in great britain and franc and says th is veryuch against american policy and i will tell you what going to have to happen unss you change your policy, we're gng to have to seriously consider dumping a lot of your

serities. well, those economies were so vuerable they coun't tolerate it. ten days later they pulled eir troops out of the suez canal. >> ros so economic policy trumped politil policy. >>recisely. and why couldn't the chinese do the same thg,hy codn't the mideast do the same thing. that's what i mean wh i say were dangerously dependent on foreign capal and 've got to sav more. >> rose:here is also this argument, it's always made, the chise lend us mon because we're aonsumption societand they can sell thr products to us. d they need our marke. and it's a very nice,ozy little relationsp. >> wl, let me tell you how e chinese are looking at it, if i'mearing them correctly. theyow understand the long-ter unstainability of selling this much to us and our borrowinghis much. becae there are unsustainable levels. incidental, unsustainable, i was in a white house that had an nixon humourous that

is a rather oxy moronic concept named herb stein. >>ose: yes, indeed, the chairman of th council of onomic advisors. >> remember, if sething is unsustainable it tends to stop. but he also said to one day ifour horse es i suggest you dismount. and we're riding thihorse as though we can keep borrowing and borrowing and borrowin the chinesenow that. so what are they doing? they're putting tremends resource and stimuling domest demand. and that's ectly what they ought to be doing. they're very, very smart. >> re: what's interesting to me is even the bger picture than this. there was recently meeting in rusa in which you had china, india, prime ministers of both. esident of one, prime ministeryou had brazilnd russia meeting, you know,as to whether,here are w in tes of arica's role in the global economy. and in tms ofhe trends for future growth in the developing world. >> well, ias talking to

fareed zakariahe other day about thelinkage of economics d foign policy and theecline of nationent and he took me through each of the declines that he taken place in the world. rose: in the history of vilization. >> rome and spai and great britn and so forth. and he said ery single case, the tggering event was debt that just got toe excessive. anthat's the position we'rmoving in. >> rose: so the deficit we are having both in term of the current acunt -- >> t foreign debt, the foreign debt. and incidentally -- >> the fiscaldebt is also reachingistoric proportions. >> icontributes mightily to tha and then thi peterson institute study theyid, their cclusion was very melancholy. the nuers were so b in five oten years whe we start oking like a developing count, that they in turn said that long before it hits these numbers there will b a crisis. >> rose: okay, but you a saying to the questiothat often is said the chinese need our markets.

the chinese don't nee our marketand don't believe ov the long run it's a good idea for them be dependt on american rkets. >> they're now putting much more emphasis onomestic demand which the know will take time. ey're not putting a -- and they areow putting a t of emphasis on eouraging trade in the -- with the other asian emerging market countries. >> rose:hen will china have theargest economy in the world? >> oh, how do i know? it depends on whether we get our act togeer, frankly. >> rose: speing of getting our act together, what is your assessmt of the obama economic pocy so far. d especially ithe context of what were talkg about >>ell, they will no alternative t to have a stimulus pgram. d we can spend the rest of the day arguing whether it's precisely the ght mix. but they were aling with some political realities. and i'm su if the had been ae to tailor th program, they wod have done it differeny. what conces me --. >> rose: polital realities

being the congress. >>hat bothers me more, charlie s that we're takin on the health-careroblem. and that is carly the biggest problemn the worl the medicare funded promis are a snning $35 trillion, five times as ch as sociasecurity. soe's right to say health-care costs. the question is, what are they dng to reduce those costs long-term? >> rose: wl, they say that they are building in prevenon as one thing. >> buiing in prevention. but y don't we talk about some oth problems. d given my senior a, i brougha little card to make sure. let's gohrough them quickly. >>reporter: all ght. >> there areome long-term stctural problems with our health-care system. it is going to take us a lot of time and pn to fix. >> rose: like? >> we're thenly country i the world at has no health ca budget. it's totalpen-ended. and let herip. secondly there are variations that ke place between regions in this

country that no compa in the world wod permit. where we have six time the backperations and six times the prostate removals. y do we have that? because we have the most perverse incentive syem. you and i couldn't have defined onesthat's more perverse. on the one hand, the consumer of the product pays nothg. it's free. onhe other hand, it's loaded with pcedures, visits,ests, all kinds of things. and e providers have found out somethg quite obous, the morehey do, the more they prescribe, whether it's over, the more money they make. so they're doing, somebody has got to do something about that idea. we've t these tax subsidieshere fat cats like charli-- rose, i believe ur name is. >> rose: i think so. i just remembei had a stock offering in which i ought in 1.5illion dollars. >> well, hypocrisyis not

something i ve totay lost. then you have a -- there's a highly encouraging tng taking place,which is what they ca integrated healthcare. and they've discovered that places le mayo and others can achie what we ought to be aft, better health outcomes and --. >> rose: but how do they do that at yo, for example >> how do they do that? >> rose: yeah. >> because they thk of the patient in an integrated way. i just had one of my closest friends o is having major surgery tell me, a kind of a bizarre case in new yo. he's going t have maj surgery on his hea valves. he's a personhat has had some health-care problems. and he discovers that th heart surgeon has never talked t his cardiologist. >> rose: i just nd that hardo believe. i know -- >> but it happens, chaie. >> rose: i know the rson are you talkg to. and mclearly -- he speaks the truth. t doesn't that -- confound you that a cardiologt and surgeon wod not have a nversation. >> iture does. >> rose: and that's your point. >> but you see in an

integrated healthcare clinic systemhe data are a there. they're organizedround the patient. sothing else. we spend 25% to 33% of the medicare budget in the last months or year ofife. nobody wts to talk about at because it raises some very centr issues. but othe countries have looked at at problem. litigation. >>ose: all right, but so i hearou. and i hear you where the weaknesses are. what would be the peterson recommendati for a health-care reform d when? kay. given that we already have $2 trillion deficit, i would haveeither said we'reoing to demonstratup front that we'vgot the heal-care costs problem on its way. and he's how we're gng to rorm the system. and link it to w system instead of saying we're gog to have universal health care and in some rather mysterious way, health-carecosts are going to be reduced. chlie, there are lot of

health-ce cost changese can make without havin universal heth care. and why is that thease? because politically, we become a countryhaven't we, where sacrifice is politically terminal. where askingeople to give upsomething. and we with aren' going to soe the health-care st oblem if we're overprescribing and overopering without us giving up some -- some treatmen that may have me benefit. but what does thatarise? the questionis rationing well, what on earth is no rationed? this wor? >> so how wou you go about rationing health care? well, for example, we ought to have a health care budget. ifou have a budget what does that result ? d you're not going to spend more tn this, is the people running t program have todecide where they're going to put the money. yoremember what happened wi oregonin the early bush one administration? they we going broke becaus medicaid, you know,

consumes a largeart of the of the budget and t states have half of i those ne people listed 715 diagnostic related groups which is the rean you go to hospitals. and theyisted them. and ey said we'renly gointo spend so much money. d we're not going to spend money for these purposes if we runut ofmoney. so if you want a second liver transplant because you're an alcoholic o whatever it, wee not gng to do it. we're not going t spend money in the last months of life for her oic intervention if it doesn't imove the quality of life. so a good place to start is why don't we have a dget for healthare. >> it is inetable though that the government -- that we wl need to have government heah car coeting with private health car >> whether it is this community prram that senator coad is talking about or some -- and wouldn't -- i wouldn't mind trying out two orthree ways and finding out which is the

best way to it. >>ut should it be deferred because ofhe cost of healthare today and because 've got all t economic issues at you talkedbout? and not be part of as the president says we need fix these this now. so he points t health ce and education and climate change as things that need immediate attention. >> well, i'not sure why they need immediate attention. cidentally, i'm for universal health car, perhaps phased in. if y want to askme where i think we're going to end up he, we're going to end with the cost concerns are so deep now given the normaludget defic, we're going to probab have a smler program. we may have to phase in some stuff over two, three years. but if i read congress, they've beenso frhtened byhe statistic,nd you knows a deficit, not for some time --. >> rose: you are at they call a deficit hk. >> wl, i thi -- closer

to the reality. but you saw the sty the other day, and never thought i wou see this, wherthe american people said their concern over the budget deficit jt due to the sheer magnitude isore important thantimulating theconomy. i nevethought i would hear such a thing. and don't think that congre --. >> rose: but do you thin they are rht in that judgement. >> it doesn't matter ether they are right. that is the potical ality that congress is dealing with. >> rose: so congress now alizes it has to deal with e deficit. >> with the cos. and charlieone of the odd thingss let's assume we achieve airacle for the moment. anwe have a deficit neutral objective her that the heth-care costs savings are least as much as the added costs. >> rose: so is as the esident says, deficit utral. >> let's assumee do that. we still have 5 triion dollars public debt and regular socialsecurity and medicare deficits. what are we going to do about those? and it is that realization

of what the future holds --. rose: but here's what is intesting about, i mean you have been speaking about that for a lontime. >> muctoo long. >> rose: no, you haven't. and people gave you credit for it and you've written books out it, they're not as interestingbout this e, but you have. >>ou remember the great line, don't you once you put it wn, you won't be able pick it up. >> rose: e soreenson said at. t you've be on this case of the future danger peril of our entitlements. >> that's righ >> rose:hallenge. th president for the first me is talking about -- >> he's talkin about it. >> now the questiois what action oug he take? what should bethe action that backs up the recognition of the iss? >> i would do two this if i were in chae. first of all, we need a processere that is politically re likely to be succeful. you know w we clo military bases.

>> you appoint a commission. >> and suffer wn vote. would personally and my foundation o our fouation has propod just such commsion that includes entitlements a tax reform d budget processes. need the following tee things. on bget process we have to do what they did in the '90s that was vy successfu we had spendg caps. which we remember got rid of in '02. condly, we have to set up a conpt here or somethi, of putting evything on the ble. because you know, i a rockefeller publican. there e two o us left. rose: not many of you around. >> maybe david and myself are the only two. i'm not sure about dav at the moment. t what happened there is tiedpending caps to pay go res. and as result, weouldn't increase speing unless we figured out how to pay for it. so you need budt processes.

>> rose: t president supportive of that idea, is he not? >> well,e say he is. let'see it. i have great admirationor th man but i want to see m start taking some tough actis where we ask amerans to give up something. anif you can --. >> rose: but l's make sure we understand what you mean byhat. what should he askhe countrto give up? i mean clearly you've said they have tohase in health care. that's onehing. >> all rig f you put in thespending caps and the pay as you go rules it's going to force us to give up some sff. >> rose: social spending. >> on ending gerally. >> rose: defense >> across-the-ard. mber two, tied with pay. number two, i would t up this commission d put everytng on the table. becae we now have a triangle tha just doesn't mpute. my replican friends have nevemet aax cut they didn't like. and the democrats have had trouble seeg an entitlement program they didn't want to snd. >> rose: well, this president campaigned on a middle class tax cutut the people who made more than $150,000 -- what was the

number. >> ica 250,000. >> re: is that a wise tax poli in your judgement or t? >> well, we need to loo at our wholtax policy. and , for example among others wou like to see some tax rerm in wch gets at the bas problem of this country's saving me, which is a very important part of this count's problem. and that suggests toe some kind of progressi coumption tax. so i would like have this commsion --. >> rose: sales tax. >> a sales tax but progressive so that e poor di't get hurt. i would like thi commission not just t look at t spending. becae the democratsill then say oh, all you guys nt to do is spending cuts. and arlie, we ve to face it. we need more renues. and fat cats likyou and i are going to have to pay more as indeed are other. >> rose:kay. we neemore venues from rich people. >> well, we need more renues from a lot of people. cluding the middle a upper-classs. because the . >> rose: so don't, iother words, youould not have

continued the tax cuts that e bush administration had in. >> that's right. i was against the tax cuts to begin with. >> re: are you against the tax cuts for the middle ass that presint oma -- >> yeah, but let me te u why tax increases aren't going to solve it. charlie, if you got ri of all the burktax cuts and nobody is proposing that, that i have seen, it's 1 percent of the gross national product. do y know how muchhe spending increas are for entitlements? >> rose: ion't. but i know you do. >> 9% the gdp. if we tried-. >> rose: so if we took away all the tax cuts we would only gain 1% and the entitlementbligation is 9%. >> so 's time we tell the erican people the truth. of course wee going to need some revenue increas. >> rose: do the ameran people ha and do politicians have the politil will to tell them thtruth. and should they be ared of the ameran -- of the public's response because they don't have confidce in the government. that's one of the reons

we need a bipartisagroup. yoknow, i was brought up in nebrask used to sething cled the feeanta shoot, or the tuey shoot. and thpoor turkey that stuck hi head up, ba, got his head shot off. you can't make this partisan. requires presidential leadership a bipartisanship. >> rose: so you're recommending this ening that the psident appoint a commission. >> right. >>ose: to deal with all these broad range of issues and make recomndations on cutting -- oboth cuttg spending and raisingaxes. >> on budget processes,n taxes, and on the benefits emselves. >> ros who are we going to put on ts commission? would you air this commission? >> well, ere would ar better choices tn i. >> re: who do you want on the commissi. >> i am a great respecter o paul volker. and heould be a great guy, think, to --. >> re: buffett, people like that? >> well, perhaps. i don't ow how wren would feel aboutt. but there are ite a few people i could think of. sam nunn would be t kind of person whoranscend politics. >>ose: let me tell you for a mite about what you are

dog. you did have ai referred to earlier, you've got a chk one day for $1.56 biion. >> pretax. >> rose: pretax. >> i want you to fee soy for me, charlie. >> rose: and so therefore, which was,our timing was eck questionty, a public offering of blackstone and you said i will sell a lot of my stock and you did. >> a i said i'm going to put a billion dolls into a foundation. rose: that is what i comi to. you said i wl do this foundationecause i think we need to haveor the survival and -of the country as we know it, you know, a hard look at our economic policy. so i agoing to fund a fodation that will ke aware the political and economic realities that we face. >> i'm saying there ar several challenges tt are undeniab. that are unsustainle. and th are politically untouchable. and we not only have to educate the amecan public, charlie, whave to mivate them and act to express themselves politicall because at the prese time if are y a pitician, and you are conrned about the next election, which you are

concerned with. >> rose: right. >> you've got to confront the fact tt if you ask people to give up something, itosts them when they get elected. we've got to make it painful forhemot to do something. and 're going to spend a lot of money on advertising and mtv and we're trying to get young people involved. we've got veo games. we got all kinds ofhings. we're trying to motivate th people, notustducate. >> rose: so you e ready to with that, that program. >> we're very close to gettg. and i would pernally like to see somethingnd we're exploring thisit's kind of like themerican sociation of young people, yoknow. >> rose: sure. >> and say to them, hey, kids, it your future. >> rose: well,hey showed a certain intest in politics in the 200 election. >> thedid. now we got to translate that sohey understand that it's their fure that's ing threatened. >> rose: let me just uble back to two thingsealk about. one su personally. but first, the economic picture today, i mean, ackstone where you co-founded is a major private uity firm.

its stock went -- tanked would be fair say aft it, the public offerin. how do you see the economy today? today? in tms of, from the perspective of private uity firms and your business awell as other aspects of our ecomy? >> charlie, nce i'm not encumbered by being an economist itasy for me to sit here and ponticate. >> rose: the point ithat you see e reality of the economy cause you're making hard investments >> no longe i'm retired. >> rose: i know, but y are are. i knowre you not thereyou goout and retired so you would have te to write the book. modesty is my middle name as you know. >> rose: are you the oy person i know who said that reass all right. >> rose: h do you saying it, for a while we talked about een sprouts and maybe it bottlingut, bottoming out. and you know, larry summers said that it lik something lling off a tae that h thought itwould stop. >> kmarmee, a lot of these

economic rmulas like a lot projections are based on the pa being likethe fure. thfuture rather being like the past. >> rose: right. >> rig. and that assuming that -- assumes that in the pasyou had recessions and there's a sharp v-shapedecovery. and so thatssumes that this situation is likehe other os. have never had anything approaching these kinds of deficits. we he never been this dependenon foreign capital. you have g the housing situation. god forbidhat hsing pricesall signicantly because they could. well y would housing pric fall? because interest res might well go up. why? because foreiglenders dend higher interest ras. so we have a who new set of variables that make t future much harder to predict. >> rose: okay, we've seen om thised a mrtion, i want to talk about the economy and all the pblems that are confronted. but we haveeenthis adnistration try to do a number of things.

e a stimulus program. are you ppy withhat? do you think that it is about right in terms of what it did oer than trying t do too much? >> well, i would have been much happier but it wouldn't have passed. this is a theoretical objection. ifhey put more money in infrastrucre which was go for the futurof our economy because an investment --. rose: that exactly what they say about education and heal care and climate change. >> well, i think tt's far lessikely to creat jobs. >> rose: and also they say about infrastructe t takes time fort to kick in. >> except there e a lot of projects the they could is have lined up. but it sms to me th i would have preferr to have more of it ithat form. >> let's go to the fancial sector and what ty have done in tms of the tarp program and in terms of what has happened the. are they on thright track there? >> well, iam a prudiced observer. because i chaired the new york fed when we picked tim quitener and i think tim quitener is one he of a guy myself. >> and his choices have been in terms o policy,

implementations, treasury, have beenbout right as far as are you concern. >> as far as i'm concerned, ey had to do what they talked aut. with regard to stimulus programs. what you and ion't know unless 're in politics is what doe it do to ge the program passed. not what does the profess or president othe new york fed bank think has got to be done sitting in this nonpolital environment. >> but what would you recommend theyo about all these toxic assets tt are still being held by the banks. >> well, you kno you've got this whole concept of theood bank, bad bank which runs you, are you gog to nationalize the bas or not. m not an expert. >> but these are basic fundamentaeconomic things. u came out of chicago. i mean you -- did you nogo to the unirsity of chicago. >> i was presumedly educated there. >> rose: that'right. >> and milton freedman was my hero, right. >> rose: b do you worry about to much government involvement in the private

sector today? or do youay i don like it butit's necessary >> it's necessary for the ment. but what i wanto see is how we ex -- exit froit. >> rose: do you see exit strategy. >> i s an exit strategyf we start rebuildg the economy and taking some moves so interest res don't go up and have another housing crisis wch worries me. >> rose:s this private public relationsp going to worko buy these toxic assets of the people me in and take them off e balance sheets of th banks? will the banks slhem if? >> again, i'm prejudiced about tim quiter, if you were sitting where he was tting and he's got x 100 billion dollars worth of toxic securities, dealing with the real world istead ofou and i sitting he talking, polically, was he going too to the congress and y hey,olks, i've discoved another problem. wir is the toxic asset inveory is larger than i thought it was and m going to need $500 llion.

>> rose: you're sayi politicallhe copt do that. >> theresn't anyway in the world th are going to ve him another $500 billion. so what did hedo? he had to leverage the ount by saying the public puts up something a weut some stuff on the balance sheet. and it's not a direct payment. so i don think he had many alternatives. >> rose: will that wor though s my queson? >> wel we're about to find out, aren't we. >> re: soon. >> soon, they're about to --. >>ose: will blackstone be bung them probably. >> would y be buying them and i be buying them because they aretrying to ge all of us involved if buying these securities >> rose:ut people like blacksto, a private equity firm, i'm asking a question. prave at equity rms are lookinat these assets thinki they will make a lot ofoneyfulooking at distressed deb saying is the another fortune to be de buying these things. >> that's precisely rightment and they're doing it out of necessity. because the credit finanng is not there to fund big private equy projects. >> rose: ssovereign wealth funds anall that are t there any more f you to go in andet a lot of money

from. >> that's right. >> re: what damage, or whatifference, what's gog to be the impact of th economic climate on hedge funds and private equityunds. >> it depends how quickly the credi crunch -- i'm i the at alllose but they ll me it is still very hard to get lots of money for fincing. and one of the reasons they're attracd to buying ese securities is they thk the upside is sufficient. ey're not going to need tremendous amounts of financing. >> rose: do you beeve this is back to another estion that, you know, if china is a saving country and we're a consumption country that we can change our -- we have to change t charli we have toave more. there st is -- when you look at thes numbers and some day you ought to ha somebody from theeterson institute to sca the hell out of you. the bts get to be so big that you can't posbly get there, the foreign debt. so we ha toonsume less. we have to csume -- spend more. theye going to have to bud nor domestic demand. it's just at simple.

and it's very hard t do because theirultures have been built arounit. and so h ours. >> rose:et me move backo this boo. the education of an arican dreamer, youconsider yourself a dreamer? >> is there su a word. we created this word in america. it's someone who has enjoyed the american dream. and lord knows i have. in my early daywe used to talk about david -- john rockefeller, a ty had $1 million or$2 million. if you think had any idea, not only tt i wouldn't be a millionae but t thoughof having ahousand times that much. so i g myself in a frame of mind what do i do with all this money, charlie. d the first thing i looked at is maybe i could take did with me. i haven't been abl to figure out howo do that. second thing y don i spend the rest of m life, i'm after al3 years old, counting the money and trying to make a little more. y would i want to do that? i looked arod at the people i rllyrespected. davi rockefeller,eorge

so owes, bill gates, warren buffett, ted turn ter. and i dcovered something. >> rose: they all created foundations. >> ty all created and put a lot of money them. d guess what, everybody says it'sore lessedo give and receive. well, i hadn't realized until i lked with the people it's f giving money aw. particularly if it's abo something you care about. soi have nev had a better time in my life. >> rose: b bill gates chose, you know, global health. >> he chose globalealth. >> i chose these sustainable long-ter challenges that we're not addressing. i've cided that's where my missio is andwe got a great guy running the foundation t dave walker. rose: your life, it is said that you deeply regret even are angry sll about ur lehmanrothers experience. >> that isn'really true cause that turned out to the best brk i ever had. >> rose: because it made you go out and start over. >> and start blacktone.

d -- blackstone and there's no way in the world i could have me a billion dollars at lehman brother, ven what's happened. >> rose: i will me to that. in fact, i wanto come to that. but -- but will m brothers was -- at the time, iean this great ory. here a guy whoad bee secrety of the commerce. who comes to wall reet and he becomes ceo of lehman brothers. and then there is co-ceo. and th all of suddenix mohs later, peterson is out. >> right. and igine how ft becauswhen i got there there were stories in the "business week," lehman back from the brinkf bankruptcy. and i ner worked so har in my lifeo save an institution. d i was thereor ten long, hard years. decided it to share the power and the gly with soone. and low and behold b fiv wes after we s up this thing, this person says've got to be soley in char.

had a decision to make. was i gointo start al over aga, you know, in whichcertain people, i sn't in the trading buness, would leave and go shall did -- i said to hell about it i did thaten years ago anthey would call on me and say we want you to come back. and i sa no, ion't really want to go thrgh this again. and was -- i belie in dumb luck, charlie, tt luckiest thing tt ever happed to me wasetting up blackstone because it would have neve happened d we not had the co at lehman. don't think i planned it. i didn't. >> rose: but weryou scared the time? were youorried. you had enough money, clearly you had millns of dollars that time. >> i h remarkably few million, if you want t know the truth. i had a fewillion colors t that's all i had at the time. and howould i -- how could have igined that little ackstone with four people could have developed io what it did. so iad two or three of the roughest yea in my life all over ain. >> rose: you also talk here

aboubeing kicked out ofive. ment m.i.t >> yeah, i did. rose: what happened? >> well, i had ner been to new york. and onof my close flends wa jebroso pope, powerful italian. and hadn't kno this guy haany money. he was so modes and gi to new yo. and all of a sudden this hick, cntry hick from nebraska is expos to a great apartment 10 45th avenue and going to the operas and broadway, you know, and all this stuff. and here is this country boy. ani got all excited about this woerful life. and one ofis friendsas roy cohen the inmous roy cohen. an m.i.t. didt give a damn at the time about undergraduates they were doing dar and nuclr bombs. and ere was very -- ver little aention to the undergraduates and erybody in our fraterty was turning in term papers they'd never written. and one dayene pope said

my friend roy has a term paper and you and i got to submit it. why dot we use h. and i was about 50% integrityo as i friend ce called it. and i said i' going to take this paper a spend a lot of time improvinit. he turned it in just as it was to anoth class. and i go ught. >> rose: how didou get caught >> well, theylooked at that time and theyaid this isn't plausie that you did this paper yourlf becae roy cohe was thi bright lawyer. and wead concepts in tre like -- all th kind of tough. by questioning me they discovered i didn't know enough. rose: so you confessed. >> and aga, that is a piece of dumbuck. i uld have been t world's louseies engineer. and stead i go to northweste and go into business and it was a fabulous eak. >> re: by age 32 you become the ceo of bell and howell. >> theoungest ceo and so forth. so i think life, who is this y, pluck et, wasn't it or

pink -- something like that, who said i see my oppounities as i took them. my lif is a series db luck situations. that somehow i took vantage of and they turn out to bthe greatt thing in t world. for example, w did i have a career in government that's changed my life? one simple ason, i worked at 39 south lasalle street and i s walking home one day. >>ose: in chi i can for the of you that don't know lasalle street. >> 19 south lasal street and there wathe university of chicago. i hadn planned on going ther and i said well y don't i goere for night school. it 100 feet from my office. so i wen thereand it changed my life. i met all thes great profesrs. i taught part-time there. and one of my close friends s george schult and george schultz callone day and says the psident wants to see y. and thnext thing you know my whole le changed. >> rose: was he then director of office and managent. director of office and management. >>ose: so you went to work

for richard nixon. >>s his assistant f international econicsment and my wle lifehanged. now i had not worked at 39 soutlasalle, had i not walked by9 south lasalle, my carr would have been to the tally different. >> re: what is the moral, make sure you get caut anerizing so you get kicked out of the coege. make sure yo work in a certain ace so you will meet a certain pern, is this theoral of thistory. >> if you ve duming luck and lord ows i've h a lot of it, take advantage of it, and turn it in an opportunity. >> re: okay. but be cdid with me too about -- about thi idea of hard work and the sacfices you have made. i mean would you have been able tdo the things you have done if you h not been a workaholic if you had not had focused. >> twohings hadn' happened if i had n been a workaholic, t you can learn things too well, if you get my meaning. and if i didt have the parents i di cause what i learned from

them isake responsibility for the future. save, and my father used to y god ble him, because he lovedamerica, and tear was roll down his ches wh i sang god bless america. he put in me t notion that i had a responsibity for the next generatn as well. and had to, and he sav the moy and he used t say to me, my son,'m saving money so i can buy you the best education money can buy. and i learned that less on so i'm a lky guy to have been born in this countr and to have these parents. >> rose: well, first of all, nixon, what d you think of nixon? >>e was the most complicate character ever met. >>ose: because? >> he was in the first place you're going to have trouble believinthis. how can aolitician be a ss an throp. but fundamental he didn't like people very much. he pretended he d but he really didn't. he had remarkably few friends. bebe rubo and apple nelp.

one or two, one or two. secondly, ho can a politician not have a sense of self-este. he didn have a very deveped sense of se-esteem. i've give you the example. john bodeenonwayrom tes. i used watch john walk into theabinet room a nixon's eyes wou lht up, ta, grerious, good oking, booming voi, all this kind of, you kw. and nixonas, i don't mean it in a peror diffilt sense, kind in love with him because he rep represented whatixon --. >> rose: he wanted t make him vice president. and then president. and joonnelly could talk him into virtuallynything. wage and price controls i will never forget our meeting at cam david where we were --we closed the

gold window, you remember that i was very much involved in. buthe wage and price controls. and herb ste and i an other so-calle fiscal conservatives say a nixon, a republican administratn is ing to put in wage and price controls? john connelly single-handedly convince richard nixon. so you had th -- and tn youad this --. >> re: but what is interesting about nixon, just some stuff was out this ek as they began to publish more and more of the tapes aneverything else, and th papers. had this thg whee was thereere contdictions,very strong. >> when iay complicated that's an understatement t he also had a touch o panoia. and i often aed w is my lst favorite character in tt pale guard. and that's a hard choice because there were two or thre of the and coln was the one that i think in some ways had the most damaging effect.

and this was a very gross metaor. t he was what i would call a scab puller. and he ud to walk in the prident's office and the president d a touch of paranoia. and he wld sayou know, thison of a pitch so-and-so, l me tell you mr. president, what they're doing toou. an shall to yo and the blood would start flowg. and then out o that would come let's break into psychiatristoffice and blow up the brookings, you know, all ese horrib --. >> rose: did you hear any of the anti-sellityism tt sometimes is sugsted. >> no, but henry kissinger was jewish and sometimes you ought to he henry in here and tell you some of his storyshat he heard about anti-semitism. but they were there. >> ros let me take the reining couple minutes and k this one question. so you are at 82, 83, i is a greaamericanstory. you have done many this beyond yr business sucss at t council foreign relations and lots of othe places. you eated the petern

foundation. but young peop gradting from college tay looking aheadt life, givee an essence of what your adve is to them. >> we'reoing to snd an awful lot of money and i hope aot of imagination fosing on young people. because chlie, you rememberhe old philosophy joke wch the pfessor says to theclass which is worse, ignorance or apathy. and some sleepy kid from the backays i don't kno and i don't care. the yog people do not know what confrts them. they've goto be educate about and we'reoing to use the new medi i don't even do e-mail. anwe got allhese --. >> rose: b i hear you on that i talking about someing else. what kind of life dowant to lead. wh are the principless they need to carry forward what are the thingsthat pele like david rockefeller and othe have that you admire, take the men and men that you admirencluding your wife, what qualitydo they have that has enabd them to ke a real coribution and

live a life that is both admired and succeful. >> well, myareer advice costs you nothing. maybe that's all it's worth. buthere are several thing i've learn from painful mistakes i'vemade. focuss adam smith said on your comparative advantage, focus on the things you do best. secondly as jeph camel said, follow your bliss. your "passions". and wheneve i have been involved in sometng i loved, that played to my strengths, that's when i did paicularly well. th askourself howmuch doget from this country and how much have you given ck. and one of the rsons i was happy to pledge abillion dollars is i have taken a lot more out of this country than i have put back. focus on the future. are gre denyers of the future,charlie. we've become so short-term oriented. so instagratification oriented. that we don't think about the future any more. and r politicians think only not about the next generation, buthe next

ection. so focus o the future. take responsibility for it, get inlved in public policy. >> rose: theook is called the education o an american dreamer,ow the sonf a greek immrant learned his wafrom a nebraska diner to washington to wall street and beyo. pete peterson, ank you. >>hank you, charlie. >> rose: thank you for joining us see you next tim captioning sponsoredy rose commucations captioned by media access gup at wgbh acss.wgbh.org