Jim (cont'd):

David:     It was always a credit crisis. Or it was a credit crisis long before it was a stock market crisis, or an economic crisis.

Jim:     When people watch tonight, will they understand at last the linkage between their stock portfolio and what we hear and read about all the time, but has not been put into what I think an accessible graphic form like you did.

David:     Well, I certainly hope so. We take thru from 2001, after the 911 attacks, when Greenspan aggressively cut rates, he already had been cutting rates, because we were already in a recession, but a mild one. Right through 2007 and the beginning of the credit crisis, right to of course the massive losses taken by all of our financial companies that began then. And we show you, from the first hand accounts, of the homeowners who took out mortgages they knew they couldn’t pay back, to the mortgage lenders who gave them those mortgages, to the investment bankers that packaged those mortgages and sold them around the world, to the regulator himself, Mr. Greenspan.

Jim:     The clip… he is smiling… he seems a little jocular about it… but a lot of it was under his watch, wasn’t it?

David:     Yes, a lot of it was under his watch. Absolutely.

Jim:     He is just able to laugh it off… as if well you know what that was too bad… it is the next guys problem?

David:     It is an interesting question, his point in discussing CDO’s, Collateralized Debt Organizations, was to say that he never understood how these could be triple A rated securities, as they were, of course, the complexity of the ratings agencies, and all of this is a key part of it.

Jim:     And that is all in your documentary.

David:     Absolutely, we have insiders from the ratings agencies also, former, and former employees. He said I don’t understand how they are getting to the point where they could claim this was triple-A, when it was made up of what were essentially triple-B and triple-B- residential mortgage backed security slices.

Jim:     Now, if you had to pull a CDO apart, after the work that you have done for this documentary, would it take months, years to undo it, find out who the people are in it and somehow cut them a deal so that they don’t default?

David:     I don’t know how you would even go about doing that. Because you are dealing with slices of residential mortgage back securities, and those are pools of mortgages, thousands of mortgages, could be up to a billion dollars in value, that have already been pulled together. So you pull those together, then you sell slices of those, then ultimately a CDO is created from the slices of the mortgage backed securities. Only Wall Street could come up with a product like a CDO.

Jim:     But I think it is important because we always use the term toxic… no one knows what that is… and you don’t describe that. Now, another thing that is just freaking me out… and you said this to me a year ago… you said Iceland, Switzerland, Norway… I mean, we tend to think that what we do stops at our shores… it didn’t this time?

David:     No, we sold anything to anyone the globe to finance…

Jim:     Who was stupid enough to buy our stuff? What did we have great sales people?

David:     It was triple-A. Jim, they weren’t reading. And I think part of Greenspan’s point is that nobody actually read the fine print, because if you had, if you had really tried to, you would have said, you know what, this doesn’t make any sense to me.

Jim:     But some did… you got someone who made a billion dollars betting against it? So not everybody was an idiot?

David:     That is right. In fact, in 2006 our hedge fund manager Kyle Banson, there was a handful of these guys out there, said wait a second. Home prices have completely dislocated from income. This is an unregulated market. Can you name any other 12 trillion dollar market direct to the consumer that is completely unregulated under the mortgage market. He saw the signs, he started to around, it is a great story, we tell it in full. He went to Bair Stearns, he went to the Fed, he went to everybody saying, okay am I getting this wrong. And ultimately he put on his bets, and was up 600%.

Jim:     Do you think that Geithner understands the complexity?

David:     I hope he does.

Jim:     I hope he does.

David:     Does he understand what a synthetic CEO is?

Jim:     That is different, that is different.

David:     He probably does. Did he actually know what it was in September of 2007? Did he understand how leveraged the institutions he followed were? I would assume you could figure out a leverage ratio. Frankly, listen I wasn’t looking at leverage ratios back then, or certainly not in the early part of ’07. I didn’t notice how levered Citi had become, how levered Morgan Stanley, how everybody’s leverage ratio moved up. And frankly, I didn’t have the great sense to know what a CDO was until I spent a year studying this stuff. But did Geithner understand it, and understand exactly what it meant keeping the super senior traunch of a ABS CDO and how that was going to crush the bank at that point, and how deep this credit crisis would be? I don’t think he did. Because if he had maybe they would have figured something out, Jim, you and I talked about that.

Jim:     Any hero’s within the government… anybody who tried to stop them… not hedge funds… in the government, said whoa, anybody we know?

David:     Sheila Bair.

Jim:     Sheila Bair

David:     Sheila Bair, FDIC, and Ned Gramlich, former Fed chief. They tried, they tried to get the Fed to get on the ground, to say to thee lenders, to those mortgage lenders, you didn’t need anything to open up a shop, you could open up on a street corner and start giving out mortgages. They tried to get Greenspan to say, let’s start trying to regulate these guys.

Jim:     Okay, this is David Faber's “House of Cards“, it is tonight on CNBC at 8 pm, and midnight Eastern time… we are Sunday at 9 pm Eastern. David Faber, congratulations. I bet you this is better than Wal-Mart. I am not kidding, that is my favorite documentary that you have ever done.