This is a rush transcript from "America's Election HQ," October 10, 2008. This copy may not be in its final form and may be updated.
JAIME COLBY, CO-HOST: Well, you probably all know by now. There isn't one person or one company that's responsible for the collapse of our economy, but there are several names that keep getting tossed around as the top culprits of corporate greed. And there is so much greed involved here.
Peter Schiff is here with me now. He's got his top list. He runs the investment firm, Euro Pacific Capital Incorporated, also, the author of "Crash Proof."
Wow. Are we crash proof?
PETER SCHIFF, MONEY MANAGER: Well, we are crash prone right now. But the whole idea behind the book was to try to prepare for this. But, you know, if there was a deck of cards for all the characters that played a part in this, you know, the ace of spades would be Alan Greenspan. So, he is the chief culprit.
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I mean, there are a lot of people on Wall Street that drank his Kool-Aid but the bottom line is.
COLBY: Well, talk to me about.
SCHIFF: Greenspan courted (ph).
COLBY: . the private sector folks that really took advantage of each and every American, start with Richard Fuld, someone, his name comes up a lot.
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SCHIFF: Well, basically, what Lehman Brothers was able to do and what a lot of other investment firms were able to do is they were able to take all this cheap money that Alan Greenspan was supplying, right? The cheap money was what created the market for these restructured products, all these mortgages. If it wasn't for those low-interest rates, there would have been no subprime mortgages; there would have been no teaser rates to package.
But what Wall Street was able to do is they were able to package up these risky mortgages and sell them to the Chinese and sell them to the Japanese that were merely recycling America's trade deficit, which, of course, we wouldn't have had if it wasn't for this easy money policy at the Federal Reserve.
So, certainly, the corporations and Wall Street took advantage of the situation that the government set up and they also took advantage of their boards of directors who allowed them to get away with it. Because remember, we compensated all these CEOs based on short-term profits.
COLBY: But it's one thing.
SCHIFF: They didn't care how much risk they were taken.
COLBY: But it is one thing to take a seasoned opportunity and go to the edge of the ledge, it's another to go over.
SCHIFF: No, I agree.
COLBY: Because when you look at the people, especially, we were going to talk about Angelo Mozilo and Countrywide, and you think about the fact that so many of these loans were people who are mortgage broker and we used to have to document income.
SCHIFF: Yes.
COLBY: They go $10,000 a year, will say he make that a month.
SCHIFF: Oh, sure.
COLBY: We'll go with stated income. Is it possible that someone like Angelo Mozilo didn't know that the volume of loans was a little too high for the number of people who could qualify, and do you see any of these people paying the price?
SCHIFF: Yes.
COLBY: Where are the criminal prosecutions because I think their pictures should be hanging up in the post office?
SCHIFF: Well, I definitely think that Greenspan was in a list of public official, let's prosecute him. But there certainly should be civil liability for people like Mozilo because Mozilo had to know that these mortgages would go bad. I mean, I wasn't even in the mortgage industry.
COLBY: So, will there be? Do you think there will be?
BRIAN SULLIVAN, CO-HOST: Peter, it's Brian Sullivan. Listen, no matter what you think of Mozilo or Countrywide, OK, the guys from the Bronx started the company 50 years ago, and there are millions of Americans who have their home and who are paying it off or have paid it already off that got a mortgage because of Countrywide.
SCHIFF: But remember, that was raised (ph), you know, a long time ago.
COLBY: But, there should be a duty of these companies not to put these people in situations they can't afford so that company.
(CROSSTALK)
SULLIVAN: There's also legal protection of CEOs if there's a few bad apples, the CEOs can't go to jail from scrupulous mortgage brokers.
SCHIFF: Yes.
(CROSSTALK)
COLBY: They have (INAUDIBLE) now insurance, and they have covered themselves, but what about the American public?
SCHIFF: I mean, it wasn't a few bad apples. Look -- Mozilo had to know. I wasn't in a real estate business. I was a stockbroker. I was a writing a book three years ago. I could tell all these mortgages were going to go bad. I didn't even own a house. I was renting.
He had to know. Obviously, when people are taking on teaser rates and when they're qualifying people based on their teaser rates and when they're not even documenting their income, they have to know they can't take a mortgage.
COLBY: It's wrong. You have to know. Even that person who took that, that person is liable.
(CROSSTALK)
SULLIVAN: But everybody else was doing it. If Countrywide didn't do it, they would have gone out of business for not having any business.
(CROSSTALK)
SULLIVAN: And we wouldn't had mortgage market all. Peter.
SCHIFF: They're out of business now. You know, if the lenders had exercised some restraint, real estate prices never would have gotten so high.
COLBY: All right.
SCHIFF: The only reason real estate prices went up because the lenders didn't care because they got all this cheap money.
(CROSSTALK)
SULLIVAN: OK, then, Peter, how about -- is number five on your list, every American bought a home they couldn't afford?
SCHIFF: Well, surely.
COLBY: You're going to blame the American people, Brian?
SULLIVAN: I'm not blaming all the American people, I'm just saying that at the end of the day, when you take a.
(CROSSTALK)
SULLIVAN: Look, let me finish my thought, when you take them.
(CROSSTALK)
COLBY: I'm sorry I've got.
(CROSSTALK)
SULLIVAN: So, it's the problem of the broker that somebody borrowed $500,000 when they made $14,000 a year.
COLBY: No, we're not talking about $500,000 loans.
SULLIVAN: Well, sure we are.
COLBY: I just want to go past to Jimmy Cayne for a second. We're going to talk about him, from Bear Stearns. Do you think that -- look, the American people are angry. Maybe the market didn't do as poorly today as it might have, but they are losing their shirts. They have lost their homes, and they want action.
So, the investigations are underway for some of the culprits. There is so much greed on Wall Street. Will it change and will these people pay the price?
SCHIFF: Well, I don't know if there is going to be any criminal prosecution, civil prosecution, but nothing is going to change unless we change the real root cause of the problem which is the government interference in the free market. And most of the people who are losing their homes, if they're losing them, they're losing liabilities; they're not even losing assets. They're not ending up on the streets.
People are renting homes they can afford instead of living in overpriced homes they can't afford. There is nothing wrong with that. You know, real estate prices have to come down. They're way too expensive. People shouldn't have to borrow so much money to buy homes. It was because of this credit machine that Fed and Wall Street and all these real estate prices got pumped up in the first place.
COLBY: Yes, but -- I truly think these CEOs knew better, they knew the outcome.
SCHIFF: They did know better.
COLBY: They took advantage. And the American person who applies for a loan, Brian, with all due respect, cannot know that the impact of what they're doing is going to affect the whole economy.
(CROSSTALK)
SULLIVAN: You're right. Nobody should also be responsible for any money they borrow.
COLBY: All right.
SCHIFF: We should sue that -- the people who should also be held responsible are the board of directors who approved the CEO pay packages who allowed them to get compensated for taking all this risk.
SULLIVAN: All right.
COLBY: We're out of time. The book, "Crash Proof." Great to have you with us. Thank you so much.
SCHIFF: Thanks.
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