The Wall Street Bailout: A Conflict Of Interest?

DATE September 23, 2008 ACCOUNT NUMBER N/A
TIME 12:00 Noon-1:00 PM
NETWORK NPR
PROGRAM Fresh Air

Interview: Financial reporter Gretchen Morgenson on how we got
into the current financial crisis and what the ramifications of
the bailout could be
TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

Why are we in this financial crisis? Why was it allowed to get to the point
where Treasury secretary Henry Paulson now warns that we will face dire
consequences unless Congress approves a $700 billion bailout? What are the
consequences Paulson's warning about? And even if we go forward with the
bailout, what kinds of problems will we still face?

We've invited Gretchen Morgenson to explain what's going on. She's a
financial reporter and columnist for The New York Times and won a Pulitzer
Prize for her coverage of Wall Street. We recorded our interview this
morning.

Gretchen Morgenson, welcome back to FRESH AIR. Now, we've been told by Henry
Paulson that, unless the Congress agrees to the proposed $700 billion bailout
package, we will face disaster. Give us a sense of what he means. Like, what
would likely happen if we didn't do this big bailout?

Ms. GRETCHEN MORGENSON: Well, everyone, probably, who's listening, and I'm
sure you, Terry, know that we already face disaster, regardless of whether
this plan goes through or doesn't go through. That's the very reason why
they're scrambling to put together a plan. We are facing financial disaster
or armageddon or whatever word you want to use because of a combination of
very lax lending, extremely large uses of borrowed money, also known as
leverage, and a deregulatory viewpoint or approach that really took a
hands-off kind of approach to the financial system. Those three things
together have led us to the edge of the cliff.

GROSS: And what is the cliff? Like, what happens at the other end of the
cliff if you fall off it?

Ms. MORGENSON: Well, as you know, several firms have fallen off the cliff.
Other firms have been driven into the arms of larger financial entities that
can possibly, you know, absorb them and not cause them to fail outright.
We've had the failure of Bear Sterns. We've had the failure and bankruptcy
filing of Lehman Brothers, two venerable names on Wall Street, as you know.
What has happened here is that these firms took outsized risks with their own
money, and then borrowed more money to take those risks. And when you have
that kind of a setup, when you have borrowed money and your assets that you've
borrowed to buy decline in any value, you really are then asked for more
money. What happens is the underlying assets that you've purchased are the
collateral that support the loan that you have taken out. It's like a
mortgage on your house. If your house declines in value and your loan then
exceeds the amount of the house value, then you're underwater. It's
essentially the same thing that these brokerage firms were doing. They were
borrowing money. They made bets. The bets went bad. And then they had to
put up more collateral, which they didn't have.

GROSS: So at the risk of sounding stupid, what does that mean for everybody
else?

Ms. MORGENSON: Well, you need to have some certainty among the population
that such things as money market funds, for instance, are not going to fail as
a result of this. Money market funds have become a real choice of most
people, really, to sort of--a place to stash their cash when they're not
investing it or when they might need it. It's a very kind of, you know,
liquid form of sort of safekeeping for your money. And, you know, there were
some situations earlier this week and last week where money funds did start to
go below $1, which is their sort of net asset value that they like to stay at.
And people just had no concept that you could actually lose money in a money
market fund. People were thinking that that was the same as having a bank
account that was insured. So you see, this has a spill-over effect, Terry.
These problems at, say, Lehman Brothers have a spill-over effect. It was the
fact that the money market fund owned the debt of Lehman Brothers that was
then in bankruptcy that caused it to go below $1 a share. We're all very
interconnected in this world, and so when one company fails, the potential for
having this kind of domino effect, of spreading failure and spreading problems
into such areas as, like I explained, money market funds that seem to be
completely unrelated.

GROSS: You said something in your first answer that is still sending a chill
down my spine, which is that even with this $700 billion bailout plan, we
could still be facing disaster.

Ms. MORGENSON: Well, first of all, a $700 billion bailout plan that does not
describe to me with certainty how they are going to value these assets that
the taxpayer is going to be backing, that's a disaster right there. Because
how do I know that they're not going to pay too much for these assets that you
and me and my son and everyone else's children and ad infinitum are going to
actually be paying too much for troubled assets to get bankers out of trouble?
And bankers got us into this mess; why should we be rescuing them? I
understand that we're in a very, very difficult position and a frightening
position, but I want to be absolutely certain, and every taxpayer should want
to be certain, that we are not going to be asked to spend more money than we
ought to simply to bail out people who made very big mistakes and took very
big risks.

GROSS: How did the situation go so quickly from the secretary of the Treasury
telling us that the crisis is being controlled to suddenly, `You have to pass
this bill immediately or else the whole system is going to crash. There's no
time to think about it. There's no time to debate. Stop asking for changes.
You've got to do it right now'? How can that happen so quickly?

Ms. MORGENSON: That's a good question, and one that I don't know the answer
to. But I'll tell you this. It really makes me suspicious. I mean...

GROSS: Tell me what your suspicions are.

Ms. MORGENSON: Well, my suspicions are that we were not told the truth in
the beginning. Secretary Paulson, Ben Bernanke, a whole cast of characters
rolled out all through 2007, really up until September of 2007, saying that it
was contained; this problem would be contained to subprime. Well, anybody
with a brain, anybody with eyes in their head knew that it was not going to be
contained because nothing ever is nowadays because we're all so inter-related.
So that was a lie. And so you have very little integrity among these people,
it seems to me. Why should I now believe what they're saying, that I should
hurry up and pass this bill or support this bill or agree to its terms, which
are not even really detailed, when these people weren't telling me the truth
five minutes ago?

GROSS: Well, there's also the question if these people weren't able to rescue
the financial system before, why do we think they can do it now with the 700
billion?

Ms. MORGENSON: And why do we think 700 billion is going to be the number?
Could it be more?

GROSS: Mm-hmm. Let's go through what the basics of the bill say and then
look at what the lobbyists are trying to do behind the scenes. What is Henry
Paulson, the Treasury secretary, asking for?

Ms. MORGENSON: They're asking for approval to have a fund, taxpayer-funded
kind of pool of money to buy troubled assets off of banks' balance sheets.
They hope that this will then allow the banks to kind of re-capitalize
themselves, get healthy and start lending again. One of the unintended
consequences of the period we're in where banks are hobbled by these bad loans
is that they re-trench on lending. They rein in their lending to even the
most credit-worthy customers, whether it be a company or an individual who's
trying to buy a home. So we need the wheels of commerce to be greased, and
lending is that grease. And so as long as those wheels are not turning,
we're, you know, threatening the overall economy. So they want to get these
loans off the books so that the banks can feel confident about lending again.

GROSS: What are the troubled loans that this fund would attempt to buy back?

Ms. MORGENSON: Well, mostly they are mortgages, mortgage securities, pools
of mortgages that have been sold to investors. These are some of the loans
that were made at the tail end of the housing boom--2005, 2006 and 2007--when
really you didn't even have to be ambulatory or have a pulse to get a
mortgage. It was just so much free money floating around that, you know, my
cat could have gotten a mortgage on a house. So these were very, very iffy
loans. They were made with the kinds of aspects where they would increase the
interest rate dramatically after two years or three years, really putting the
borrower in a difficult position if they couldn't pay that increase. So these
are really at the heart of the problem, and there were so many of these loans
made that banks are really troubled by them.

There are also other loans that by sort of association have gotten hurt as
well. Corporate loans, you know, that are also having--they're also feeling
the same effects of the bank problems that we're seeing. Heavy leveraged, too
much leverage on, say, a commercial real estate property. So you really do
see mostly mortgages here, but you'll also see corporate loans and other items
as well.

GROSS: Now, there's also those credit default swaps, and these are the
financial instruments that have been compared to weapons of mass destruction.
Can you give a shot to explaining what they are?

Ms. MORGENSON: Sure, and they really are, Terry, central to the bailouts
that have been made, and they're sort of back to the old inter-relationship
theme that I had earlier. Credit default swaps are a kind of insurance that
are written by, or sold by, financial institutions--mostly banks but also some
insurance companies, like AIG. What they do is they insure against a possible
default by an issuer of debt. Say, take a company, General Motors. Let's say
you own that bond and you're worried that maybe there's a chance that
something bad would happen to general Motors, you can "hedge" your bond
holding or reduce your risk by holding that bond by buying insurance against
the possible default by General Motors. Now, these are contracts; they're not
technically securities. They're contracts that are privately written between
entities on terms that you and I don't know--typically five to seven years,
but it can be less. And they all can be very different. The person, the
entity that sells the insurance gets a premium, and the person who buys it
pays that premium and has the protection.

Now, where these come into the situation is that as more and more entities
have gotten into trouble--financial entities, banks--as more of these
mortgages have failed, the insurance that was written on some of these debt
issues has become more likely to be needed, more likely to be cashed in. It's
like a fire is raging up the streets towards your house that has insurance on
it. Now the insurance that you've bought out and paid for all these years, it
looks likely that you're going to have to put in your claim. And so what's
happening is, the insurance companies, the banks that have written this
insurance are now being asked to pay on it. And a lot of those entities never
thought in a million years that they would have to pay out on this insurance.
They thought it was all just a way to get premium income and that the risk was
minimal.

GROSS: And they don't have the money to pay it?

Ms. MORGENSON: Well, they may have the money to pay it, but, you know,
that's coming at a time when they're also under the crunch of having bad loans
on their books, so, yeah. This is a real risk for them that they're going to
have to raise more capital, possibly, to pay these off. So that's a very
central part to this equation, these credit default swaps, and the amount of
insurance that has been written out there is $62 trillion dollars. Now, that
doesn't mean $62 trillion is going to have to be paid by somebody to someone
else. But that's the amount of insurance written, and so it's a very big
number. And at some of these banks, credit default swaps are huge, huge
exposure.

GROSS: So do we have $700 billion to use in this package if the package
passes, and that's supposed to somehow protect us against these over $60
trillion worth or credit default swaps?

Ms. MORGENSON: Well, I think the thought is, once again, that if we get the
troubled loans off the banks' balance sheets, they can start to get strong
again, and it'll sort of staunch the blood flow or it'll put the fire out, you
know, back to that metaphor, that, you know, the fire brigade is on the scene
here and they're trying to, you know, put out the fire, and one way they can
do that is to, remove the bad assets from the balance sheets and move on,
allow the banks to, you know, regain some of their capital strength, start
lending again, then you wouldn't have the risk of defaults, which would
trigger the insurance that would need to be paid, and we can maybe get back to
normal.

GROSS: My guest is Gretchen Morgenson, a financial reporter and columnist for
The New York Times. We'll talk more after a break. This is FRESH AIR.

(Announcements)

GROSS: My guest is Gretchen Morgenson. She's a financial reporter and
columnist for The New York Times.

What are some of the changes that Congress is trying to make to Henry
Paulson's proposal for the bailout?

Ms. MORGENSON: I think that the Democrats are trying to bring a little bit
of help to Main Street, you know, allowing for more modifications of the bad
loans, giving some relief to the borrowers who are facing default and
foreclosure. That's one element.

Another element that I think is crucial before anybody should consider this is
that the taxpayer, if they are going to put 700 billion towards this fund,
should have some upside to it. It should not just be, `OK, here's my 700
billion. Go save the banking world and, you know, maybe pay it back
sometime.' Why not give some, you know, upside, profit potential to the
taxpayer, which is precisely what happened in the Chrysler bailout. And it
worked in that case. You know, it seems to me outrageous that we're being
asked to put up $700 billion and not get something in return that's more than
just our money back. If these loans, OK, let's say these loans that the $700
billion fund is buying, let's say that they perform better than we expect
right now in the doom and gloom era we're in. I want to see the taxpayer get
some of those benefits.

GROSS: Mm-hmm.

Ms. MORGENSON: And how you would structure that is put something in there
like a stock warrant or some kind of a way to capture the upside if there is
any. I think anyone in the business world would structure the deal that way,
so why shouldn't the taxpayer have the deal structured that way.

GROSS: Now, you describe the credit default swaps, which are part of the
problem here in the financial crisis, and you've said that part of the reason
why we're in this crisis is deregulation and lax regulation. These credit
default swaps were never regulated at all. Although they function like
insurance, they're officially not called insurance so the insurance--although
the insurance industry is regulated, the credit default swaps are not, because
they're not officially insurance.

Ms. MORGENSON: Right.

GROSS: So is there a movement now, since these default swaps are such a big
part of the problem, to regulate the credit default swaps?

Ms. MORGENSON: Well, yesterday the governor of New York came out and said
that they want to institute a plan with the insurance commissioner, the
superintendent of insurance in New York, want to institute a plan where anyone
who writes these contracts for an entity that owns the underlying bond would
have to become an insurance company, would have to become registered as an
insurance company. Now, that will have the effect of, you know, I think,
driving some of these entities that are writing insurance out of the business
because they don't want to have to be regulated in that way. But that's just
a proposal, and I don't know where it's going, and I don't know whether it
will actually go into effect.

GROSS: Is the banking industry trying to prevent any regulation of the credit
default swaps?

Ms. MORGENSON: They have always tried to prevent regulation of them, and I'm
sure they are continuing. I don't have any firsthand knowledge of activities
right this minute. But it's always been a big part of that world, that, you
know, it could police itself. It was not something that needed oversight.
These were private contracts by sophisticated parties. You don't need to
protect them because they're not individual investors. However, you know, as
Warren Buffet has so ably said, they are financial weapons of mass
destruction, and so ultimately maybe the individual investor does have to be
protected from them.

GROSS: If lax regulation--or, in the case of the credit default swaps, no
regulation--is part of the problem that created the financial meltdown, and if
the solution to the financial meltdown being proposed by the secretary of the
Treasury doesn't address the regulation of these credit default swaps, are we
kind of putting a Band-Aid on the problem without actually solving the
underlying problem?

Ms. MORGENSON: Well, I think what the secretary of the Treasury's trying to
do right now is just get something going on the books as far as a bailout
plan. I think if he had tried to weave anything to do with credit default
swaps into this, it would have slowed down the process, I'm sure, in his view.
This is really an attempt to try to solve the extremely immediate need, which
is that assets are declining in value, the banks are being hurt by the asset
declines. They're being required to put up more collateral, which they don't
have, and it's a kind of a spiral, a downward spiral. What he is trying to do
is to stop that right now. And so it's not kind of loaded up with a lot
other, you know, regulatory language or that kind of thing. I think it's just
a sort of, `Let's staunch the bleeding right this minute, and then we'll talk
about other things.'

GROSS: Gretchen Morgenson is a financial reporter and columnist for The New
York Times. She'll be back in the second half of the show. I'm Terry Gross,
and this is FRESH AIR.

(Announcements)

GROSS: This is FRESH AIR. I'm Terry Gross. We're talking about the
financial crisis and the proposed $700 billion bailout with Gretchen
Morgenson, a financial reporter and columnist for The New York Times. She won
a Pulitzer Prize for her coverage of Wall Street.

What is happening behind the scenes that you know about in terms of the banks
lobbying for things that they want in the bailout plan?

Ms. MORGENSON: Well, this particular bailout plan presents the typical
conflict of interest that I find so, you know, constant on Wall Street. Here
it is: `I am a bank. My assets are losing value. I'm in trouble. I need
the taxpayers' help. I want to sell those assets at the best possible price
that I can get for them, because if I have to sell them--let's say they're
worth, right now, 40 cents on the dollar. If I have to sell them for 20 cents
on the dollar or 15, I have to take another writedown on those assets on my
books. That means another loss. That means another hit to my capital, and I
don't want to do that if I don't have to.'

Now look at the taxpayer's point of view. Taxpayer says, `Look, I'm being
asked to put up $700 billion. I want a good bargain. I don't want to overpay
for these bad assets. I want to pay what they're worth. What's the value?
If it's 15 cents on the dollar, that's what I'm paying. Not a penny more.' So
you see the conflict. You see the problem. The bank wants the higher price,
the buyer--the taxpayer in this case--wants the lower price. What's the price
going to be? Who is the favored party in the transaction? I don't know about
you, but I have a feeling that, with all the lobbyists lining up in
Washington, that you and I are not going to be the favored party.

GROSS: You know, the banks have their lobbies. It's a campaign season. All
candidates are looking for money right now. One of the scary possibilities
here is that the bank lobbies will be paying money to congressional leaders in
the hopes that they will pass the bailout package in a form that's more
favorable to the banking industry. Is that a legitimate concern?

Ms. MORGENSON: Absolutely. And not only will they throw more money at them
now, but they will be calling in all the chips from the money that they've
given to them up until now. You know, this is a constant problem with
lobbying and donations. And so now the, you know, the special pleaders, as I
call them, have their audiences with the lawmakers because they've paid so
much money up until now. They will continue to, of course. They get their
audiences and they get their say. And, you know, yes, it manipulates the
system. And I'm afraid that the taxpayer, who has no lobbyist, is going to be
on the short end of the stick.

GROSS: Now, these toxic loans and financial products that have been compared
to weapons of mass destruction, a lot of them have ended up in foreign
banks...

Ms. MORGENSON: Mm-hmm.

GROSS: ...because of the global economy. What is the bailout plan going to
do, if anything, for the foreign banks that have this toxicity in them now?

Ms. MORGENSON: Well, I think the bailout plan states that you have to have a
US entity in order to be able to sell loans to the fund, so I think it
keeps--or it's trying to keep foreigners, you know, from sort of dumping their
loans onto the taxpayer. But, again, you know, Wall Street is very creative
and knows how to get around these kinds of dictums, and what you could easily
see someone do is offer to buy a foreign entity's loans, put them on their
books, and then send them to the taxpayer as part of their problem. So, you
know, kind of getting around that attempt to cordon it off only to the United
States entities.

GROSS: Part of the Bush administration's financial philosophy was that free
markets without regulation correct themselves. Our markets are not correcting
themselves. We are bailing them out. Does the situation we're in now
officially disprove that theory that free markets without regulation correct
themselves?

Ms. MORGENSON: Well, I think it does. I'm sure you'll see, you know, people
who are still in the deregulatory mode go into some sort of gyration to
explain why this little impasse does not illustrate that, but I think it
certainly does. I think it proves it, and I think we are going to see more
regulation going forward. But once again, it is extremely dispiriting to see
that because there were regulations in place that could have been implemented
more aggressively, that could have been--that could have helped forestall this
whole mess.

GROSS: Can you give us some examples of what regulations were in place that
could have been enforced and helped to prevent the mess we're in?

Ms. MORGENSON: Well, when you take out a mortgage, you are asked to, you
know, look at the documents. You're presented with what is called a HUD-1,
which is the Housing Urban Development form that tells you approximately what
the fees are going to be that you're going to pay, and there was never really
any oversight of these forms and what the fees were. So there were just--it
was a field day, it was a honeypot for mortgage brokers and mortgage
salespeople to load up fees on these borrowers that really were improper. And
had someone at HUD taken a look at it, they might have stopped that and they
might have put something in place that would have, you know, policed that
better or driven some of the more egregious players out of the market.

Now, a lot of the most aggressive lenders that are now bankrupt were not
regulated at all. They were sort of, you know, off in another--off in a
corner and, you know, if bank regulators had been alert, as they, I'm sure,
were, or should have been, if they had been alert to what was going on at
these entities, this `anything goes,' reckless, lax lending, they should have
moved to include them in a regulatory framework instead of just letting them
run roughshod over the borrowing public.

GROSS: In 2000, there was legislation that was passed called the Commodity
Futures Deregulation Act. What role do you think that played in creating the
crisis that we're in?

Ms. MORGENSON: Well, that act basically guaranteed that credit default swaps
would not be regulated and not be overseen by any entities, so that really was
the legislation that guaranteed that that market could grow like Topsy and not
have anybody paying attention.

GROSS: And Phil Gramm was the person most behind it, Senator Phil Gramm, who
was a consultant--I mean, one of the top people in the McCain campaign.

Ms. MORGENSON: He was one of the true believers. I'm not at all surprised
if he would continue to say that that was not part of the problem, and there
are other things that should have been done and that that was just a fine
piece of legislation and has no ramifications today.

GROSS: My guest is Gretchen Morgenson. She's a financial reporter and
columnist for The New York Times. We'll talk more after a break. This is
FRESH AIR.

(Announcements)

GROSS: If you're just joining us, my guest is Gretchen Morgenson. She's a
financial reporter and columnist for The New York Times.

Is the American capitalist system being remade before our eyes right now?

Ms. MORGENSON: I think it is. Wall Street is changing dramatically,
seismically. You now do not have anymore straight sort of investment banks or
the largest investment banks, which were separated from commercial banks in
Glass-Stiegel, the legislation from the '30s. You now no longer have
independent investment banks; the big ones are gone. Merrill Lynch is now a
part of Bank of America. Bear Stearns is failed. Lehman Brothers, bankrupt.
Morgan Stanley and Goldman Sachs have just recently been asked to turn into
commercial banks, or become banks, so that they can accept deposits, which is
a more stable form of financing. That's a huge change. I also think that we
are going to continue to see bank failures, so I think that that that will be
headlines among the financial world for quite a while.

GROSS: So we no longer have investment banks. What is an investment bank?

Ms. MORGENSON: An investment bank is a financial entity that helps companies
raise money by helping them to issue stock or bonds. They advise on mergers
and acquisitions between companies. They really provide those kinds of
services. They also provide individual investors with investment advice, the
ability to buy and sell stocks. But these kinds of barriers have fallen down
over the years and so, you know, it really isn't that there's going to be some
kind of, you know, aspect of the individual's Wall Street experience that they
can't have elsewhere. They're still going to be able to buy and sell stocks.
They're still going to be able to get investment advice. It's just kind of an
interesting moment in time that the investment bank business model, where you
don't take individual deposits in, that thing has completely gone by the
boards.

GROSS: So as the capital system is being remade before our eyes, is the
government taking a new role in capitalism through this bailout and through
the bailouts that have happened in the past few weeks?

Ms. MORGENSON: Yeah, and that's what I was alluding to earlier. The role is
now one of cleaning up the mess, and this is why it's so crucial that the
bailout or the cleanup have appropriate safeguards in it, so that taxpayers
are not put at a disadvantage, and so that there are elements in the plan that
allow taxpayers to benefit or to even profit from this, you know, disaster.
That's why it's so crucial because, you see, what's happening is all of the
gains that all of these wealthy institutions and chief executive officers and
mortgage companies, all the billions of dollars that they made in recent
years, is now being asked to be paid for by you and me and my children and
your children and everyone else's. That's privatizing gains, socializing
losses. So everybody is allowed to make hay while the sun shines, but when
gloom and doom times come, when problems result because of no oversight and
lax lending and, you know, anything goes approaches to these businesses, then
whose dime is it? It's your dime and mine, and there's something really wrong
about that.

GROSS: The original plan that Henry Paulson asked for asked for authority to
buy assets from any financial institution at any price deemed necessary, and
it says that neither the courts nor any administrative agency would be allowed
to question these decisions. So it's basically saying no oversight at all.
Now, Congress is asking for oversight, but I'm wondering like, how do you even
ask for a program like that, of $700 billion with no oversight?

Ms. MORGENSON: It's pretty brassy, don't you think? I mean, this is one of
the elements that I find so troubling. It again goes back to the question of
what is the taxpayer going to pay for these assets. OK. So if there's no
oversight, how are we to be certain that we're not overpaying? And in fact,
if there's no oversight, how are we to think anything but that we are going to
be overpaying? You know, it's all a part of this, `Hurry up, we can't pay
it--pay no attention to the details. We got to do this right now.' I mean,
I'm sorry, I'm very suspicious. Seven hundred billion dollars is being, you
know, taken out of our wallets. Do we not have the right to examine the
details and know who's going to be valuing the assets and be certain that they
are not going to be overpriced so as to bail out the banks that made the bad
decisions and got us into this ditch?

GROSS: We are so in debt now between the war in Iraq and these financial
bailouts, and we're depending on foreign countries to buy our debt by
investing in our government bonds. China, for instance, owns a lot of our
government bonds. Do you think the American government is confident that
China and other countries that have been buying our debt will continue to buy
it? And are we confident that they won't start selling the bonds that they
already own?

Ms. MORGENSON: Well, this is a crucial question, Terry, and you're getting
right to the heart of the matter. Up until now these foreign central banks
and, you know, huge investment arms and firms in other countries have been
buying our debt, you know, and we are a safe haven. Our Treasury debt is, you
know, sort of the safe haven everyone runs to. But you saw what happened to
the dollar yesterday. It got crushed because people are fearful that this
$700 billion bailout will be inflationary and will also raise questions about
the solidity of our debt. So, yeah, I think we are at a point in time when
foreign countries, foreign investors, have got to be wondering, is there an
alternative that's safer than the United States government? You know, that's
an enormous, troubling question. And I'm not saying that they've made that
decision and that they will start selling but, boy, you sure do know that
they're asking it, because here's a $700 billion bailout, and that has to have
implications to drive the dollar down and to drive inflation up. Neither of
those things are good for anyone who owns dollar-denominated debt instruments
issued by Uncle Sam.

GROSS: So the $700 billion bailout helps avert the banking crisis in the
United States but it makes us vulnerable in a different way in terms of how
appealing our government bonds are. If other governments start selling their
investments in US government bonds or stop buying government bonds in the
future, what are the implications of that for our economy?

Ms. MORGENSON: Makes it harder for us to borrow money. Obviously it would
make the Treasury have to pay more to borrow money, which raises costs, which
is inflationary, which would drive the dollar down further. Our buying power
would decline. You know, none of it is a happy picture. Now, maybe there's a
silver lining in that because the dollar is down, our goods would be more
attractive overseas than they have been. But, you know, that's a very thin
silver lining, as far as I'm concerned.

GROSS: Is there anything else you would like to tell us before we allow you
to leave that you think would help us understand what the heck is going on
now?

Ms. MORGENSON: I'm very discouraged by kind of the government response to
this problem, really starting in early 2007 when people were not willing to
call a spade a spade. They were not willing to own up to what the problems
really were. That has really been, I think, very dispiriting and troubling.
But I really believe that America has what it takes to pull itself out of this
morass. You know, the American people, I think, are extremely resourceful and
extremely entrepreneurial and they know the right thing to do, and I think
that they would really rally behind a plan that made sense and that was
presented in a way that they could be certain was not going to really hurt
them financially. So I am positive on the American people. I just think we
deserve better from our leaders in this very, very troubling time.

GROSS: You know, here's another thing I'm wondering. You know, Henry Paulson
has put together this bailout proposal, and the Bush presidency ends in
January. And whether, you know, McCain or Obama wins, there's going to be
somebody new in the White House and it's likely, well, presidents often
appoint a new Treasury secretary when they arrive in the White House. So, you
know, what are the odds that Paulson, who is putting this plan together, will
actually be the person who follows through on it?

Ms. MORGENSON: Probably the odds are not very good. I think that Mr.
Paulson probably feels like he needs a rest himself. I think that this is
going to be a plan that is going to be somebody else's problem, which makes it
all the more important that we really iron out the details now so that we can
be certain going forward that whomever runs it is going to run it to the best
possible result for the taxpayer.

GROSS: Well, that will be a heck of an important position.

Ms. MORGENSON: Yeah. I don't want that job.

GROSS: Well, I want to thank you very for helping to explain some of what's
going on. Thank you, Gretchen Morgenson.

Ms. MORGENSON: I hope I helped.

GROSS: We really appreciate your appearances on our show.

Ms. MORGENSON: OK. Thanks, Terry.

GROSS: Gretchen Morgenson is a financial reporter and columnist for The New
York Times.

You can download podcasts of our interviews on our Web site, freshair.npr.org.

Coming up, Maureen Corrigan reviews a posthumously published novel by a
Swedish journalist who wrote about right-wing extremism. This is FRESH AIR.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Review: Maureen Corrigan on the book "The Girl with the Dragon
Tattoo"
TERRY GROSS, host:

Our book critic Maureen Corrigan has a review of a novel by the Swedish
journalist Steig Larsson. He distinguished himself during his career by
writing about the resurgence of right-wing extremism in Sweden. He died in
2004 of a heart attack at the age of 50, leaving behind, among other works,
three novels in manuscript. The first, a suspense novel called "The Girl with
the Dragon Tattoo," has become a runaway best-seller in Europe and has just
been published in the US. Maureen says Larsson's firsthand knowledge of the
nastier aspects of Swedish history and culture endow his thriller with a
hard-boiled intensity.

Ms. MAUREEN CORRIGAN: The hard-boiled mystery is as American as apple
pie--poisoned apple pie, that is, with a steel file baked into the filling.
It's a literary genre that was born on the mean streets of early 20th century
LA and San Francisco, mostly sunlit places where, as the sour saying goes, a
person could rot without feeling it.

But one of the most intriguing aspects of hard-boiled history is how the form
has become enthusiastically embraced by writers outside of the United States.
In fact, for the past decade or so, Sweden has been a popular pick for crime
capital of the literary world, thanks to Henning Mankell and his fellow
practitioners of noir on ice.

The newest name in mystery to emerge out of the frozen north is that of the
late Steig Larsson. His debut novel, "The Girl with the Dragon Tattoo," was a
blockbuster when it was published in Europe, selling an estimated two million
copies. Now an English language version, translated by Reg Keeland, has just
been published here.

A veteran mystery reader could spot the clues to this novel's runaway
popularity as easily as Poe's detective, Auguste Dupin, spotted that purloined
letter. "The Girl with the Dragon Tattoo" is a super-smart amalgam of the
corporate corruption tale, the legal thriller and the dysfunctional-family
psychological suspense story. It's witty, wrenchingly violent in a few
isolated passages, and unflinching in its commonsense feminist social
commentary.

The social vulnerability of women is the underlying mystery--with a capital
M--here, specifically the abuse--psychological and sexual--that's perpetrated
against young and dependent women. Very late in the novel, one of our main
characters, a reporter named Mikael Blomkvist, asks a serial murderer whose
victims are often female immigrants to Sweden the simple question: "Why?" The
monster calmly answers, "Because it's so easy." Clearly, "The Girl with the
Dragon Tattoo" isn't geared toward those readers who favor gentle Agatha
Christie cozies, but its plot does consciously bow to Christie and her locked
room/isolated island brand of puzzle.

Here's the barest bones summary: Journalist Mikael Blomkvist is a man down on
his luck. He's just been convicted of libeling a corporate mogul and he's
been sentenced to a jail term plus hefty fines. Out of the blue, Blomkvist
receives an offer he can't refuse from a rival industrialist. Henrik Vanger
is in his 80s and has been tormented for the past 40 years by the mysterious
disappearance of his grand-niece Harriet. On the day of Harriet's
disappearance, the island where the Vangers lived was blocked off from the
mainland by a truck fire on the connecting bridge. How, then, did Harriet, or
her corpse, vanish?

Henrik tells Mikael Blomkvist that if he moves to the island and works for a
year re-investigating Harriet's disappearance, he'll receive not only a huge
salary, but also inside information that will clear him of the libel charges.

Blomkvist bites. But fortunately, through a turn of events too deliciously
complicated to go into here, he's aided in his investigation by a 24-year-old
brilliant computer hacker named Lisbeth Salander. Salander is a pierced,
tattooed, painfully thin goth with major attitude problems. She's also the
gal pal you want on your side when the creeps slither out from under their
rocks. Larsson's multipieced plot snaps together as neatly as an Ikea
bookcase, but even more satisfying is the antisocial character of Salander,
whose movements are described as quick and spidery.

Certainly the utopian allure of traditional detective fiction had something to
do with the omnipotent Sam Spades and Philip Marlowes who made criminals quake
and femme fatales swoon. The liberating fantasy of Salander, at least for
this female reader, has something to do with watching a woman operate who
doesn't give a darn whether she pleases people or not. Salander doesn't
smile, knock back boilermakers or eat moose burgers. She's not out to win
friends or votes. But I'm betting that this offbeat bad girl will win a lot
of readers' affections.

GROSS: Maureen Corrigan teaches literature at Georgetown University. She
reviewed "The Girl with the Dragon Tattoo," by Steig Larsson. You can read an
excerpt of the novel on our Web site, freshair.npr.org

(Credits)

GROSS: I'm Terry Gross.

We'll close the show with a recording by trumpeter and author Richard
Sudhalter, whose books included a biography of Hoagy Carmichael. Sudhalter
died Friday at the age of 69. This is his 1998 recording of the Earl Hines
tune "A Monday Date."

(Soundbite of "A Monday Date")
Transcripts are created on a rush deadline, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of Fresh Air interviews and reviews are the audio recordings of each segment.