WEBVTT - Interview With Roger Lowenstein: Masters in Business (Audio) 0:00:00.160 --> 0:00:03.120 Masters in Business is brought to you by ex On 0:00:03.200 --> 0:00:10.719 Mobile Energy Lives here. This is Master's in Business with 0:00:10.800 --> 0:00:15.440 Barry Ridholds on Bloomberg Radio Today. On the podcast, I 0:00:15.560 --> 0:00:19.880 have Roger Lowenstein. He is a journalist and author, and 0:00:20.320 --> 0:00:23.720 we spoke for ninety minutes. I'm not gonna make I'm 0:00:23.720 --> 0:00:27.440 not gonna take too much time in this intro because 0:00:27.480 --> 0:00:31.600 there's plenty to hear. The book that I've always adored 0:00:31.640 --> 0:00:34.720 of his uh is When Genius Failed to the story 0:00:34.720 --> 0:00:37.840 of long term capital management, and we do a deep 0:00:37.920 --> 0:00:42.159 dive into that. I use that book extensively in my 0:00:42.280 --> 0:00:45.400 prep work for Bailout Nation, as well as another book 0:00:45.440 --> 0:00:48.840 of Rogers, which was Origins of the Crash, which talked 0:00:48.880 --> 0:00:52.479 about all the factors that led to the two thousand crash. 0:00:52.520 --> 0:00:54.800 We go into a lot of details on some of this. 0:00:54.920 --> 0:00:57.480 Some of this we really just skip over um and 0:00:57.520 --> 0:01:01.200 talked very lightly about. So it's ninety minutes. It's a 0:01:01.200 --> 0:01:04.560 fantastic conversation, and rather than me babil, I'm just gonna 0:01:04.600 --> 0:01:09.160 send you right to the podcast and broadcast without further ado, 0:01:09.640 --> 0:01:16.920 my conversation with Roger Lowenstein. This is Master's in Business 0:01:17.040 --> 0:01:21.480 with Barry Ridholts on Bloomberg Radio. This week on Masters 0:01:21.480 --> 0:01:25.720 in Business on Bloomberg Radio, I have a special guest author, 0:01:25.959 --> 0:01:31.880 Rock Contour journalist Roger Lowenstein. You probably know him from 0:01:31.920 --> 0:01:34.600 what is actually one of my all time favorite books, 0:01:34.959 --> 0:01:37.480 When Genius Failed, The Rise and Fall of Long Term 0:01:37.520 --> 0:01:41.400 Capital Management. But he is also the author of Buffett, 0:01:41.480 --> 0:01:45.080 Making of an American Capitalist, Origins of the Crash, which 0:01:45.120 --> 0:01:48.040 I thought was a really interesting book that I used 0:01:48.040 --> 0:01:51.440 as part of my research for Bailout Nation, End of 0:01:51.480 --> 0:01:55.880 Wall Street, While America Aged, How the pension debts ruins 0:01:56.240 --> 0:02:00.680 General Motors, and his most recent book, An Erica's Bank, 0:02:00.800 --> 0:02:04.920 The epic struggle to create the Federal Reserve. Roger Lowenstein, 0:02:05.080 --> 0:02:08.560 Welcome to Bloomberg Barry. Always good to be on your show. Um, 0:02:08.680 --> 0:02:10.680 is this the first time we've had you on this 0:02:10.680 --> 0:02:12.359 This will well, you don't know if it's good to 0:02:12.360 --> 0:02:15.680 be always good to be with you, so it's always 0:02:15.680 --> 0:02:17.840 good to be in your company. Roger and I know 0:02:17.919 --> 0:02:20.880 each other for a few years from similar circles. We 0:02:20.919 --> 0:02:23.880 had lunch not too long ago, less lunch outside the library. 0:02:23.919 --> 0:02:27.000 I think that while you were working on that book, 0:02:27.040 --> 0:02:30.080 and we talked about your process and your research, and 0:02:30.080 --> 0:02:32.919 I really want to get into it. But before we 0:02:32.960 --> 0:02:36.800 start talking about America's bank, let's talk a little bit 0:02:36.840 --> 0:02:39.799 about your history. You were at the Wall Street Journal 0:02:40.200 --> 0:02:43.000 for a part of a decade longer. I was at 0:02:43.000 --> 0:02:45.880 the Wall Street Journal for fifteen years. Um, you know, 0:02:45.919 --> 0:02:48.799 I always had loved being at the journal, always had 0:02:48.960 --> 0:02:51.959 kind of books in my veins. And you always knew 0:02:51.960 --> 0:02:54.160 you wanted to be a writer from early on? Or 0:02:54.200 --> 0:02:57.680 how did that evolve? Um? Early on? I can't tell 0:02:57.720 --> 0:03:00.440 you. You You know, when I was a reporter the Cornell 0:03:00.480 --> 0:03:02.240 Daily Son, if I was thinking of books or not, 0:03:02.360 --> 0:03:04.960 But I was always what was called an egghead back 0:03:05.000 --> 0:03:09.239 in the day, and a walk that's right. That word 0:03:09.280 --> 0:03:11.880 didn't exist back in my Cornell days. And I was 0:03:11.919 --> 0:03:13.360 looking for a book, you know, as my career at 0:03:13.360 --> 0:03:16.080 the Journal went on, and I knew something about this 0:03:16.120 --> 0:03:20.919 investor out in Omaha. Who actually at the time we're talking, 0:03:21.800 --> 0:03:24.320 we're talking the early nineties, so no one knew who. Really, 0:03:24.720 --> 0:03:27.280 I wouldn't say no one, but not like not. He 0:03:27.400 --> 0:03:30.880 wasn't the icon. He isn't on their radio and put 0:03:30.919 --> 0:03:32.959 him on them all the time. Well I think he 0:03:33.000 --> 0:03:36.080 put himself from the map. But but I was writing 0:03:36.120 --> 0:03:38.360 the Herd in the Street column for the Journal and 0:03:38.600 --> 0:03:41.320 the song which, by the way, there is a number 0:03:41.400 --> 0:03:46.920 of storied Pulitzer Prize winning journalists who have occupied it 0:03:47.000 --> 0:03:49.240 was a good chair and one was infamous. We won't mentioned, 0:03:49.520 --> 0:03:53.480 but um doing that column, and the Solomon Brothers scandal happened. 0:03:53.800 --> 0:03:56.400 Buffett flies into New York and all of a sudden 0:03:56.400 --> 0:03:58.720 people are very interested in him, and so I pitched 0:03:58.720 --> 0:04:02.680 a book idea and did that book, did very well, 0:04:02.720 --> 0:04:04.520 went back to the General, wrote a column for a 0:04:04.520 --> 0:04:08.120 few years, and since then I've written exclusively books. So 0:04:08.200 --> 0:04:11.800 the Buffet story is kind of fascinating. The Solomon comes in, 0:04:11.960 --> 0:04:15.960 save Solomon Brothers, works them out from their headache, subsequently 0:04:16.560 --> 0:04:20.360 does the same thing with Goldman Sachs in the financial crisis, 0:04:20.839 --> 0:04:23.159 kind of gives them a capital infusion they needed to 0:04:23.160 --> 0:04:26.120 stay liquid. You talked a lot and wrote a lot 0:04:26.240 --> 0:04:30.960 in Origins of the Crash about the previous UH crisis, 0:04:30.960 --> 0:04:34.000 the two thousand dot com crash, But the end of 0:04:34.080 --> 0:04:37.960 Wall Street was really your story, not so much about 0:04:38.040 --> 0:04:42.200 the financial crisis, but what happened with Wall Street during 0:04:42.240 --> 0:04:44.800 that period. Yeah, the end of Wall Street, you know, 0:04:44.800 --> 0:04:47.360 it was about the two thousand and eight mortgage bubble 0:04:47.360 --> 0:04:50.640 and everything that happened after the FED interventions that tarp 0:04:50.720 --> 0:04:53.679 all of that, and the you know the difference between 0:04:53.680 --> 0:04:55.680 that story and the one we're gonna talk about America's 0:04:55.720 --> 0:04:58.560 Bank is this was what a crisis looked like when 0:04:58.600 --> 0:05:01.120 we had a federal reserve and we had a strong 0:05:01.240 --> 0:05:06.839 federal financial presence as opposed to before. Were you just 0:05:06.960 --> 0:05:10.840 krene from your you're on your own crisis to crisis. 0:05:11.360 --> 0:05:14.039 Maybe JP Morgan will organize a loan for you, if 0:05:14.080 --> 0:05:17.200 not Sion our maybe and and by the way, sionar 0:05:17.279 --> 0:05:20.040 to the system as well too, So we're gonna definitely 0:05:20.040 --> 0:05:23.200 spend more time talking about that. I would be remiss 0:05:23.320 --> 0:05:26.560 if I failed to mention your dad. Your father was 0:05:27.000 --> 0:05:29.960 Louis Loan Stein, and he was really a well known 0:05:30.520 --> 0:05:34.920 law professor and corporate executive who pretty much spent three 0:05:35.000 --> 0:05:40.040 decades dissecting the excesses of Wall Street. If if he 0:05:40.120 --> 0:05:42.840 was alive today, he would be active on Twitter, he 0:05:42.880 --> 0:05:44.920 would have a blog, and he would be trashing Wall 0:05:44.960 --> 0:05:47.280 Street on a fairly regular basis. Know, I don't know 0:05:47.320 --> 0:05:51.080 about Twitter, because I remember trying to get a dad, 0:05:51.320 --> 0:05:56.080 um My dear and late father to accept photos and 0:05:56.120 --> 0:06:00.400 texting on his cell phone and and different generation. But 0:06:00.720 --> 0:06:04.479 he seriously he was a law professor who, instead of 0:06:04.560 --> 0:06:07.560 just sticking with um, you know, the standard text that 0:06:07.600 --> 0:06:11.279 other professors were teaching, said hey, there's something going wrong 0:06:11.320 --> 0:06:13.799 in business. I don't care if it's business law or business. 0:06:13.800 --> 0:06:16.480 This is in the era of junk bond sales and 0:06:16.560 --> 0:06:19.400 junk bond excesses. And he really he was a pioneer 0:06:19.440 --> 0:06:22.520 and saying the way the prospectuses are written isn't right, 0:06:22.560 --> 0:06:24.919 disclosures aren't right, the risks that they are being taken 0:06:24.920 --> 0:06:27.039 by mutual funds aren't right. And he was out in 0:06:27.080 --> 0:06:30.880 front very much an investor advocate. Is that a fair statement. Yeah, 0:06:30.920 --> 0:06:36.480 he was an advocate for good, fair, open, honest disclosure transparency. 0:06:36.880 --> 0:06:39.800 He also warned about the dangers of short term investing 0:06:39.839 --> 0:06:42.920 and in ignoring the long term. The question I want 0:06:42.920 --> 0:06:46.960 to ask is how did your father's philosophy affect your 0:06:47.200 --> 0:06:49.839 your thinking? You know very much. But we both got 0:06:49.880 --> 0:06:52.880 into we sort of both edged into writing careers or 0:06:53.200 --> 0:06:56.360 authorial careers. He was a corporate lawyer for the all 0:06:56.360 --> 0:06:59.840 of my growing up, and I was a journalist and 0:07:00.160 --> 0:07:01.280 you know, at the beginning of my career, I wasn't 0:07:01.320 --> 0:07:04.560 even a business journalist. And then uh, you know, when 0:07:04.600 --> 0:07:06.480 I went to college, I wasn't even interested in business. 0:07:06.480 --> 0:07:08.039 And then at some point I joined the Wall Street 0:07:08.080 --> 0:07:12.920 Journal around uh, nineteen seventy nine. I joined the journal. 0:07:13.080 --> 0:07:16.720 At that time, Uh, he was a chairman to become 0:07:16.840 --> 0:07:19.120 a CEO of one of his clients, path Mark, the 0:07:19.480 --> 0:07:23.480 s GC, the supermarket chain. H. At some point, uh, 0:07:23.680 --> 0:07:27.280 soon after that, he segues into Columbia University become a 0:07:27.360 --> 0:07:30.800 law professor. And by now I'm writing about finance, and 0:07:30.880 --> 0:07:34.200 as a law professor, suddenly he's writing about finance, and 0:07:34.680 --> 0:07:37.480 suddenly we're sort of doing it. Not the same things, 0:07:37.480 --> 0:07:41.040 but similar things just happened almost simultaneous, Almost simultaneously. He 0:07:41.080 --> 0:07:43.880 wrote his his first two books before I wrote any books. 0:07:43.880 --> 0:07:47.920 But I was a financial reporter, and so you know, 0:07:48.000 --> 0:07:52.240 we really really enjoyed. We would add each other's books 0:07:52.400 --> 0:07:55.679 and it was a relationship. Um. There was no tension 0:07:55.720 --> 0:07:58.240 in it, there was no disagreement. It was just it 0:07:58.360 --> 0:08:02.160 was a pure love and also an intellectual connection which 0:08:02.240 --> 0:08:06.040 I treasured. You're listening to Masters in Business on Bloomberg Radio. 0:08:06.280 --> 0:08:09.760 My guest this week, author Roger Lowenstein. He has a 0:08:09.800 --> 0:08:14.400 new book out called America's Bank, The Epic Struggle to 0:08:14.520 --> 0:08:17.800 create the Federal Reserve, And it's really very much a 0:08:18.040 --> 0:08:23.120 deep dive into the history and creation of the Federal Reserve. 0:08:23.200 --> 0:08:26.400 And and it's really apparent to me you spent a 0:08:26.560 --> 0:08:31.200 long time doing some really archival research on this. When 0:08:31.200 --> 0:08:33.320 we had launched a couple of summers ago, you were 0:08:33.360 --> 0:08:36.600 already a year or two into the research process, and 0:08:36.600 --> 0:08:39.199 here it is months and months later in the book 0:08:39.240 --> 0:08:43.640 is just coming out recently. What was the research process 0:08:43.679 --> 0:08:47.439 like for digging into the creation of the Federal Reserve. 0:08:47.640 --> 0:08:49.640 So that's a good question. Because my other books were 0:08:49.640 --> 0:08:53.080 mostly contemporary stories. This is a history. Although there is 0:08:53.120 --> 0:08:57.280 some contemporary aspects relative to what just took place, but 0:08:57.440 --> 0:09:00.640 most of it is really a deep historical go back 0:09:00.679 --> 0:09:03.480 and interview wood Row Wilson. You can't interview Carter Glass, 0:09:03.520 --> 0:09:06.040 Paul Warburg, Teddy Roosevelt. These are all big characters in 0:09:06.080 --> 0:09:09.640 the book. So you go to archives, and um, you 0:09:09.679 --> 0:09:12.640 wouldn't believe archives all of these famous people either in 0:09:12.679 --> 0:09:16.120 the library Congress or the Woodrow Wilson Library, Like you're 0:09:16.120 --> 0:09:19.520 doing White glove. Original document is white glove. Because you 0:09:19.600 --> 0:09:23.920 go into the say the Library Princeton, and um, they 0:09:24.000 --> 0:09:26.640 almost do a strip search. You can't take in you know, 0:09:26.760 --> 0:09:28.720 I can't take my cappuccino and with me because they 0:09:28.720 --> 0:09:31.160 don't want me spilling my cappuccino one hundred year old 0:09:31.240 --> 0:09:34.120 original pieces of parchment. I can't blame them, can't really 0:09:34.160 --> 0:09:36.360 blame my. I'm not allowed to take cappuccinos, by the way, 0:09:36.400 --> 0:09:38.800 in the living room either at my house. But that's 0:09:38.800 --> 0:09:41.360 for a different reason. All the Bloomberg people in relationists 0:09:41.360 --> 0:09:45.360 the entire places waterproof so's it's quite amazing. So each 0:09:45.400 --> 0:09:47.360 of these and there were about ten different sets of 0:09:47.480 --> 0:09:52.000 archives JP the Morgan Library of different basically bankers and 0:09:52.080 --> 0:09:54.760 politicians at the time. And what you see when you 0:09:54.760 --> 0:09:58.560 get into them is that although you can't to contemporaries interviews, 0:09:58.760 --> 0:10:02.880 there are no emails, people back then really wrote letters, 0:10:03.160 --> 0:10:05.960 and they really bared their souls and give an example 0:10:06.000 --> 0:10:08.400 of of something you can you can learn from then 0:10:08.440 --> 0:10:11.480 you couldn't learn today. Washington, d c. Obviously is a 0:10:11.600 --> 0:10:14.559 very hot, steamy town. Before the ear of air conditioning, 0:10:14.880 --> 0:10:18.000 political spouses would take the summer off. That was true 0:10:18.000 --> 0:10:21.320 in n in the summer when the Federal Reserve Act 0:10:21.920 --> 0:10:24.280 was really reaching a peak in terms of the legislation. 0:10:24.600 --> 0:10:28.880 So Ellen Wilson, the President's rather delicate wife, holds up 0:10:28.880 --> 0:10:32.040 in New Hampshire during the summer. So he's writing her 0:10:32.559 --> 0:10:36.440 virtually every day, and you're seeing in the archives the 0:10:36.480 --> 0:10:40.559 problems he's facing the legislation, which committees and committee congress 0:10:40.559 --> 0:10:43.680 people are giving him trouble, what his strategy is. He's 0:10:43.720 --> 0:10:46.040 telling her, don't worry. The press is writing this. They 0:10:46.080 --> 0:10:48.080 don't know what they're talking about. I'm gonna do an 0:10:48.160 --> 0:10:52.160 end run around him. People bear their souls and letters 0:10:52.679 --> 0:10:55.319 in a way that's more trustworthy than an interview, because 0:10:55.400 --> 0:10:57.360 you know, you go interview somebody, of course they're going 0:10:57.400 --> 0:10:59.640 to tell you what they want you to know. But 0:11:00.080 --> 0:11:02.720 is his Woodrow talking to his wife, or it's Paul 0:11:02.760 --> 0:11:06.800 Warburg talking to his most trusted comrade or something, and 0:11:07.200 --> 0:11:11.400 it just opens up a window into the contemporaneous activities 0:11:11.760 --> 0:11:14.800 back years ago that that sounds like it would have 0:11:14.880 --> 0:11:19.000 normally been dinner table conversation if if the misses was 0:11:19.080 --> 0:11:21.280 in town. But since he doesn't get to come home 0:11:21.280 --> 0:11:23.880 from work, how is your day, honey, here's what happened 0:11:23.880 --> 0:11:28.679 in Congress. He actually wrote specific details. Do these guys 0:11:28.800 --> 0:11:32.080 realize this stuff ends up in archives and libraries or 0:11:32.160 --> 0:11:33.880 is it just Hey, I'll be dead. I don't care. 0:11:33.960 --> 0:11:36.560 What's the thinking that. No, they're saving their letters, they're 0:11:36.559 --> 0:11:39.800 saving duplicates. Carter Glass, who many people may know from 0:11:39.800 --> 0:11:42.680 the Glass Steagel Act, but he's also the father, legislative 0:11:42.720 --> 0:11:45.960 father the Fed Reserve Act, a very fiery guy. He 0:11:46.000 --> 0:11:49.200 goes to the White House one day and Wilson shocks him. 0:11:49.360 --> 0:11:52.280 Glass wants to have on this emergent legislation for this 0:11:52.320 --> 0:11:54.720 new body, the Federal Reserve. He wants to be run 0:11:54.760 --> 0:11:58.640 by bankers, not by federal appointees, not by presidential appointees. 0:11:59.040 --> 0:12:03.120 Lewis Brand, Wilson's adviser, and William Jennings Bryant, his Secretary 0:12:03.160 --> 0:12:05.480 of State, says, uh, this is a new day and 0:12:05.559 --> 0:12:07.959 new a new dawn. This agency is going to run 0:12:08.000 --> 0:12:11.400 the banking system has to be presidential appointees. Wilson lays 0:12:11.440 --> 0:12:14.880 down the line. Glass goes back to his hotel. He's shocked, 0:12:15.000 --> 0:12:17.560 he's outraged. He's a kind of he's a conservative, doesn't 0:12:17.760 --> 0:12:20.880 he can't begins to write letters. You can see them 0:12:20.920 --> 0:12:23.640 today on the Raleigh Hotel stationary. That's where he stayed 0:12:23.640 --> 0:12:27.119 when he was in Washington. Page after page, he's exploding 0:12:27.160 --> 0:12:29.600 off the page, you know he was. He wasn't thinking 0:12:29.640 --> 0:12:32.520 then about his reputation for posterity because he sort of 0:12:32.520 --> 0:12:35.520 embarrasses himself. He's a He's finally says to somebody, I'm 0:12:35.520 --> 0:12:37.240 gonna call the president tomorrow and see if I can 0:12:37.240 --> 0:12:39.440 get him to change his mind. No way, Wilson's gonna 0:12:39.520 --> 0:12:41.920 change his mind. Wilson's made have made up his mind. 0:12:42.280 --> 0:12:46.560 But um, they they they bear themselves in a way 0:12:46.640 --> 0:12:49.400 that that we rarely see today. And it just because 0:12:49.440 --> 0:12:53.240 there's such big characters in history. You know, if if 0:12:53.280 --> 0:12:55.160 you're a nut for that sort of stuff, it's kind 0:12:55.160 --> 0:13:00.319 of fascinating. Let me ask a broader historical question. How 0:13:00.320 --> 0:13:02.960 come in the United States was one of the last 0:13:03.800 --> 0:13:07.600 major industrial countries to get a central bank. You look 0:13:07.640 --> 0:13:10.800 at Europe and Japan and elsewhere, just about everyone else 0:13:10.840 --> 0:13:13.800 at a central bank. Why were we so far behind 0:13:14.520 --> 0:13:17.559 the rest of the civilized world. So the thesis of 0:13:17.600 --> 0:13:20.760 the book is, this is our heritage. We rebel against 0:13:20.840 --> 0:13:23.760 the English king. Uh, we were at rebel against the 0:13:23.800 --> 0:13:27.120 central government. What's the first debate in American history. It's 0:13:27.120 --> 0:13:30.760 Hamilton's against Jefferson. Hamilton wants a central bank. Jefferson says, no, 0:13:31.160 --> 0:13:35.240 that's like the English tyranny that as settlers pushed west 0:13:35.240 --> 0:13:39.160 and the pioneers pushed west. They're continually saying, we don't 0:13:39.200 --> 0:13:42.160 want control by New York, we don't want control by Washington. 0:13:42.480 --> 0:13:45.600 This is recreating everything that we rebelled against. And by 0:13:45.600 --> 0:13:48.480 the way, Barry, look today, look to the Tea Party today. 0:13:48.720 --> 0:13:50.880 You know they don't want a strong central legency. They 0:13:50.880 --> 0:13:53.160 want to under the Fed right now. So in every 0:13:53.200 --> 0:13:55.920 country in Europe they sort of accepted, we have a 0:13:56.360 --> 0:13:59.040 national government, we have a national monetary system. Of course 0:13:59.080 --> 0:14:01.880 we're gonna have a central bank. But in America, you know, 0:14:02.160 --> 0:14:05.200 a good swath the population remains very touchy about it. 0:14:05.240 --> 0:14:07.840 Ask Rand Paul, this is this is our heritage. And 0:14:07.840 --> 0:14:09.760 if you look one whose last book, by the way, 0:14:09.840 --> 0:14:12.640 was and one of the main opponents of the federal 0:14:12.679 --> 0:14:16.239 reserve legislation is Charles Lindbergh, senior father of the Aviator, 0:14:16.480 --> 0:14:19.360 real populist out in Minnesota, so who held this district 0:14:19.440 --> 0:14:21.240 until a few years ago. In our day and age, 0:14:21.400 --> 0:14:24.680 Michelle Bachman, the Tea Party Report. You know, Crusader, This 0:14:24.720 --> 0:14:27.520 is not a coincidence. This is we have this populist, 0:14:27.800 --> 0:14:31.120 suspicious mindset in much of the country that always feared 0:14:31.320 --> 0:14:34.160 in Andrew Jackson's day, in Woodrow Wilson's day, and today 0:14:34.440 --> 0:14:36.800 that if you have a central bank, Wall Street's gonna 0:14:36.840 --> 0:14:39.360 run it, They're gonna be inco hoots against the common 0:14:39.360 --> 0:14:42.160 man and so on, and that's that's our legacy. There 0:14:42.200 --> 0:14:44.840 are people who wouldn't disagree with with those fears. Let 0:14:44.960 --> 0:14:48.760 let me ask you a question about the most surprising 0:14:48.800 --> 0:14:52.040 thing you found about the FED in your research. What 0:14:52.160 --> 0:14:55.360 really leapt out and surprised you. You know, I was 0:14:55.400 --> 0:14:59.040 surprised at how similar the eras were. People. We had 0:14:59.080 --> 0:15:02.840 a financial cray seven. We had a bank panic, a 0:15:02.920 --> 0:15:04.760 real panic. By the way, I don't mean red lines 0:15:04.760 --> 0:15:06.840 in the computer screen. I mean people running to the 0:15:06.880 --> 0:15:09.560 street corner to take their money for fd I c 0:15:10.360 --> 0:15:16.680 pree really and every any federal supervision control of the currency. 0:15:16.720 --> 0:15:19.600 One guy in Washington. That was it. But people were 0:15:19.880 --> 0:15:22.400 some people wanted deposit insurance, some people were afraid of 0:15:22.440 --> 0:15:26.480 moral hazard. That idea was, you know, very current JP 0:15:26.600 --> 0:15:28.920 Morgan steps in. He's kind of a hero, kind of 0:15:28.960 --> 0:15:32.520 like you know JP Morgan Chase today buying up bear Sterns. 0:15:32.560 --> 0:15:35.320 Six months later, people are accusing JP Morgan of having 0:15:35.360 --> 0:15:38.360 plotting the whole panic, and Teddy Roosevelt says, wait a second, 0:15:38.400 --> 0:15:40.600 this is getting out of hand. People are people are 0:15:40.600 --> 0:15:42.760 starting to say that every bank is something rotten in it. 0:15:43.080 --> 0:15:47.280 Their populous fighting bankers. Uh, there's a people who want 0:15:47.280 --> 0:15:49.360 the goal standard, people who are very upset about it 0:15:49.360 --> 0:15:52.120 because they think it's too deflationary, too tough on the 0:15:52.160 --> 0:15:57.120 average farmer, average worker. The the fights between regions of 0:15:57.160 --> 0:16:02.520 the country Republicans and Democrats sounds just like today. It's 0:16:02.560 --> 0:16:06.240 it's it's hard to I was shocked at how current 0:16:06.400 --> 0:16:09.040 the debates sounded as I read them. You're listening to 0:16:09.120 --> 0:16:12.680 Masters in Business on Bloomberg Radio. My guest today is 0:16:12.840 --> 0:16:16.840 author and journalist Roger Lowenstein. You probably know him from 0:16:16.840 --> 0:16:19.720 such books as When Genius Failed, The Rise and Full 0:16:19.760 --> 0:16:24.440 of Long Term Capital Management, as well as Buffett Making 0:16:24.720 --> 0:16:28.280 of an American Capitalist. I found Origins of the Crash 0:16:28.320 --> 0:16:31.560 about the two thousand Crash to be fascinating book, and 0:16:31.600 --> 0:16:37.040 it was tremendously helpful in my own research about compensation 0:16:37.320 --> 0:16:40.720 and stock options. And and I recall you're the first 0:16:40.760 --> 0:16:44.680 person who reported about the Hinz executive who I think 0:16:44.680 --> 0:16:48.760 it was in had gotten a hundred million dollars. Some 0:16:48.880 --> 0:16:53.200 insane that back when a hundred million dollars was real money, 0:16:53.720 --> 0:16:56.320 it was. It was crazy. So let's talk a little 0:16:56.360 --> 0:17:00.160 bit about your your research and your writing process. Us 0:17:00.520 --> 0:17:03.400 walk us through through your process. How do you decide 0:17:03.440 --> 0:17:06.560 on a topic. Where do you begin? Well, if you 0:17:07.240 --> 0:17:10.680 let's look at the recent book America's Bank, it's a 0:17:10.800 --> 0:17:14.000 history of the founding the Federal Reserve. I was interested 0:17:14.000 --> 0:17:16.639 in doing a history. I began that one after the 0:17:16.720 --> 0:17:19.280 last book, which was the End of Wall Street, which 0:17:19.320 --> 0:17:22.240 was a contemporary story about the mortgage crash. I wanted 0:17:22.400 --> 0:17:24.840 something historical. And as my editor and I were talking, 0:17:25.320 --> 0:17:27.560 you know, it was we were very aware of how 0:17:27.680 --> 0:17:31.600 present the Federal Reserve today had been in everything throughout 0:17:31.960 --> 0:17:34.000 you know, throughout this experience in two thousand and two 0:17:34.040 --> 0:17:37.040 thousand and nine. And she said, at one point, you know, 0:17:37.200 --> 0:17:40.399 be interesting to look at what what the country was 0:17:40.440 --> 0:17:43.040 like before we had a FED, How we're crises handled? 0:17:43.880 --> 0:17:45.720 Why was it? The people thought, why didn't we have 0:17:45.760 --> 0:17:48.240 one until so late? Why do they think we needed one? 0:17:48.240 --> 0:17:50.840 How do they get one? And it just seemed it 0:17:50.880 --> 0:17:52.720 just seemed to fit there. Would it would be in 0:17:52.720 --> 0:17:55.200 a sense of great book end to the contemporary history 0:17:55.200 --> 0:17:57.920 we're living today. So you said you were working with 0:17:58.000 --> 0:18:01.640 your editor and she help you shape. I mean, we're 0:18:01.680 --> 0:18:06.520 always throwing ideas back and forth and and she said, um, 0:18:06.600 --> 0:18:10.080 and she's not a financial expert per se. She's and 0:18:10.280 --> 0:18:12.920 got off. She's in my mind, the best editor there is, 0:18:13.840 --> 0:18:17.560 but she's throwing out topic ideas. And then I would 0:18:17.560 --> 0:18:20.080 go back and say, hey, is there something to this idea? 0:18:20.119 --> 0:18:23.720 And started to research, um, what went into the making 0:18:23.720 --> 0:18:26.159 of the Federal Reserve? What else has been written about it? 0:18:26.359 --> 0:18:29.040 How resident is it to today? And you know, it's 0:18:29.080 --> 0:18:33.480 just astonished. There's this incredible, mysterious trip that bankers in 0:18:33.560 --> 0:18:35.879 the U. S. Senator take down to a remote island 0:18:35.880 --> 0:18:38.240 in Georgia. Because the thing is so controversial, they got 0:18:38.240 --> 0:18:41.600 to plot it in secret. There's a Wall Street crash 0:18:41.760 --> 0:18:44.600 very much like the crash that um that we just 0:18:44.960 --> 0:18:50.000 lived through. There are great characters, great presidents, um, financial 0:18:50.000 --> 0:18:52.119 tycoons and so on. And at that point I go 0:18:52.200 --> 0:18:54.160 back to her and say, I think we got one here, 0:18:54.480 --> 0:18:56.320 and she says, okay, put it in paper, because you 0:18:56.560 --> 0:19:00.560 until you write a proposal, anything can sound good, uh, 0:19:00.600 --> 0:19:02.800 in a coffee shop or you know, over the dinner table. 0:19:02.840 --> 0:19:04.960 But and you're I think I wrote a proposal about 0:19:06.280 --> 0:19:08.440 is something like that? And at that point she says, 0:19:08.440 --> 0:19:10.479 wow this. You know you've got something here and let's go. 0:19:11.040 --> 0:19:14.880 And then uh, you do a timeline. That's a that's 0:19:14.880 --> 0:19:17.960 a for me, the most important next apt chronology of 0:19:18.000 --> 0:19:21.680 a chronology of the events. What happens, you know, when 0:19:21.680 --> 0:19:24.600 does the book start? And this book has a background period. 0:19:24.720 --> 0:19:27.920 We go into the Gold Silver debates, across a Gold 0:19:27.960 --> 0:19:30.119 Speech and all that stuff in the late nineteenth century. 0:19:30.160 --> 0:19:34.040 To set the table um, Paul Warburger is a major character. 0:19:34.520 --> 0:19:38.760 He this German financier emigrates the US, is astonished that 0:19:38.800 --> 0:19:40.919 our system is so primitive, and you know, and he 0:19:40.960 --> 0:19:43.040 begins to lobby for the federal reserves. So when does 0:19:43.080 --> 0:19:44.800 he come in? When does he come into this country? 0:19:45.000 --> 0:19:47.360 And you go on with a timeline so that as 0:19:47.359 --> 0:19:51.000 you're getting information, you can add, you can fill it 0:19:51.040 --> 0:19:54.000 into the timeline. So things are where you want to 0:19:54.040 --> 0:19:56.080 find them when you go to you go to writing 0:19:56.119 --> 0:19:58.359 the book. So let me talk a little bit about 0:19:58.359 --> 0:20:01.360 some of your other books. Do you have any personal 0:20:01.400 --> 0:20:04.199 favorites as a finished work? Which one of those books 0:20:04.800 --> 0:20:09.600 the finished products are you happiest with? You know, it's 0:20:09.680 --> 0:20:12.639 really for me as a writer, like asking about my 0:20:12.960 --> 0:20:15.720 which one of your children? Of course, so I like 0:20:15.840 --> 0:20:19.400 my three children best. After that, I like my six 0:20:19.440 --> 0:20:24.600 books right right now, I'm very partial to America's Bank. 0:20:25.040 --> 0:20:31.800 You know, it just came out. The history, the historical characters, Um. 0:20:32.080 --> 0:20:35.520 The process of trying to bring them alive, UM, was 0:20:35.760 --> 0:20:39.240 just enriching and fun for me. And UM, so that's 0:20:39.520 --> 0:20:42.320 because it's so new, you know, you're it's not surprising. 0:20:42.359 --> 0:20:46.119 I would say that you mentioned origins of the crash 0:20:46.200 --> 0:20:50.200 the compensation system, and that for me was really fun 0:20:50.240 --> 0:20:53.320 to dig into what's really wrong with the compensation system 0:20:53.359 --> 0:20:55.960 and and to flush it out in a way I 0:20:55.960 --> 0:21:00.240 hope hadn't been done before. Uh, the Pension book. You know, 0:21:00.280 --> 0:21:02.399 in a way that was too early, because the idea 0:21:02.400 --> 0:21:04.920 of that book was, hey, we have a real way, 0:21:05.000 --> 0:21:06.720 you know, we have a problem. But I think it 0:21:06.840 --> 0:21:10.240 still holds up today that these cities and states you 0:21:10.280 --> 0:21:15.240 can't just keep legislating increases saying you know, we'll take 0:21:15.320 --> 0:21:17.280 up we'll take care of it later. And that I mean, 0:21:17.320 --> 0:21:20.200 look around today, you know, Puerto Rico, Illinois, wherever you look, 0:21:20.280 --> 0:21:23.880 all these cities in California, Detroit, it's it's come home 0:21:24.160 --> 0:21:29.439 to roost um. The Buffet book was really fun to 0:21:29.480 --> 0:21:32.639 write because I was sitting in people's living rooms, partically 0:21:32.680 --> 0:21:36.479 in Omaha, asking him about this little, um precocious kid 0:21:36.480 --> 0:21:38.399 they knew named Warren, who was telling everybody he was 0:21:38.440 --> 0:21:40.280 gonna be a millionaire back in the in the middle 0:21:40.280 --> 0:21:42.879 of the depression in Nebraska, when nobody knew what a 0:21:42.880 --> 0:21:47.119 million dollars was. Um, you know, so you liked them 0:21:47.160 --> 0:21:50.800 all in a different way. When Genius Failed was a 0:21:50.840 --> 0:21:56.160 really tough reporting exercise because as much as everybody wants 0:21:56.200 --> 0:21:59.040 to get in on the Warren Buffet story and say, hey, 0:21:59.080 --> 0:22:01.080 it was Warren and me, you know, I helped him 0:22:01.080 --> 0:22:03.399 out on this, nobody wants to be part of the 0:22:03.440 --> 0:22:05.760