The Charlie Rose Show- 2 -1/20/2012
worse than others. Clearly the China and Middle East are faring better. But you go toeastern Europe, you go to Spain, Italy, they're all having a tough time.Charlie Rose:And what does a tough time mean?John Mack:Tough time means that there has been either a boom in real estate, there has beenoverleveraging, there has been huge growth, there have been a lot of loans extended, andnow those loans are coming due. They can't be paid. Projects that were being built arestopped. If you look at China, which is a huge export nation, exports are downdramatically. Even though they have very big reserves and will be able to put money intoinfrastructure and keep people employed, they're suffering from this. The Middle Eastclearly has had a boom with the energy prices and what's gone on. Just in Dubai, thingshave slowed down. I don't know if you saw in the paper today that $20 billion is comingfrom Abu Dahbi to help buy the debt of Dubai and keep them on target to pay their debtservice. You go to Italy, you go to Germany, it doesn't make any difference. The banksare leveraged. Just like here in the United States. Just like in the U.K. But I think in theUnited States, we are ahead as far as deleveraging. If you look at Morgan Stanley --Charlie Rose:Explain to the audience what deleveraging means.John Mack:Well, basically you take one dollar and borrow 10 times or 30 times against that onedollar. And at the peak, as I said, when I was Washington, Morgan Stanley hadleveraged 31 times, so we took one dollar and turned it into $31. We had a balance sheetof over a trillion dollars. And we have taken that down dramatically, as the other banks--Charlie Rose:To what? Something like 16 or 17?John Mack:We're below that. We're probably at 12 times leverage. We've taken our balance sheetfrom 1.1 trillion to about 600 billion. So it's come down dramatically.Charlie Rose:When you -- take China, for one example. Secretary of State, who you supported as a political candidate and I assume is a friend of yours is over there, and clearly, she'stalking about, that they can do together, the Chinese government and the Americangovernment, about climate control and things like that. How she's not talking abouthuman rights, gotten some criticism for that. But what she's also taking to them about iswhether they're going to continue to want to lend money to the United States.John Mack:
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