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JON ERLICHMAN, HOST: We want to start with this idea of the lessons from the crisis, what we'velearned. I know you know lawmakers have spent a lot of hours trying to get to the bottom of what led tothe financial crisis in the first place.Do you think it has been a productive effort on -- on their part so far?MICHAEL BURRY: Well, I think it's difficult for -- for Congress to really get a handle on this. I think it'ssuch a partisan environment and they need to -- and I think they need to be so aware of -- of -- of what their  positions ought to be that it's a little bit difficult. I've seen what could -- the most significant developmentis really the -- the empowerment of the Fed in the wake of all this, which is a little surprising.The Federal Reserve, in my view, hadn't seen this coming and -- and in some ways, possibly contributed tothe crisis as a -- and -- and what we're seeing coming out of this is, is Congress saying we don't know howto -- to regulate this. We don't know how to prevent this from happening. Let's empower the Fed. The Fedcan -- they can -- now they can look over thrifts. They can do this and that and the other. I'd have to have aspecial pneumonic to -- to remember all the different powers the Fed got.But they've thrown it to the Fed and now Bernanke is the most powerful Fed chairman in history. I'm notsure that's the -- the right response. That -- the result tends to tell me they're not -- they're not getting itright.ERLICHMAN: What's the danger of having more power for the Federal Reserve?BURRY: Well, I don't feel that the economic theories and policies that got us into this mess are the same policies and theories that will get us out of this mess. And more to the point, I don't -- I'm 100 percent surethat the policies and theories that got us into this mess won't prevent the next mess from happening.And that's probably my biggest frustration with the whole process. I don't think that -- I think with all the blame on Wall Street and all the focus on Wall Street -- the increase -- the perp walks for Wall Street --these things, in a lot of ways, are non -- are not very productive. I think it's not very productive to blame anarrow set of individuals or a narrow set of institutions. Nobody is taking time to blame anything that anybody in Congress did or the Fed did or the other  businesses, you know, how the banks acted, how the mortgage brokers acted, how people acted, how borrowers acted. There's -- there's a lot of blame to go around. And I think this blame game being orientedentirely toward Wall Street is -- is not overall helpful.ERLICHMAN: Alan Greenspan is aware of at least some of your views on Fed policies. As you know,Bloomberg's Al Hunt asked Alan Greenspan earlier this year -- and Greenspan called your insight, looking back, the insights you had heading into the housing crisis, as a, quote, "statistical illusion."How did you feel about those comments?BURRY: Well, I have to say, I understand. He was crowned the maestro about a decade ago by BobWoodward. And, you know, in -- in those -- in 2003, he said that national bubbles in real estate don'thappen. In 2004, he counseled Americans to in -- to that -- that they're overlooking adjustable ratemortgages, that they should favor adjustable rate mortgages in their financial plan. In 2005, he touted thetechnology advancements that are making credit available to people who otherwise would not receivecredit. And these technology advancements are the same -- that same sort of language is used by IndyMac, New Century, Ameriquest, these subprime loans that ended up failing spectacularly. And, you know, thosenames and a little bit -- they're a little bit dwarfed or eclipsed by the other big names.But the -- what I've seen -- what I saw was a Fed that crashed rates from 2000 -- the beginning of 2001 to2003, it took rates from 6 percent or so down to 1 percent. In that time frame is when we fir -- we saw the-- the divergence where income diverged from home prices. So when you look -- if you chart income --national income or the -- home prices started to diverge in 2001.
 
You know, I think that this was a policy of his, that had gone on pretty much almost entirely -- his entiretenure. The Greenspan put (ph) was established back in the late '80s -- the Mexican crisis, the Asian crisis,the Russian crisis, the long-term capital, the -- the dot-com blow up, 9/11, the accounting scandals, the --his response all along was to -- to lower rates. And then, ultimately, when lower rates were no longer goosing asset prices, he did not see how the types of mortgages that were being introduced further accelerated the housing price game.ERLICHMAN: So what are you getting at, that Alan Greenspan should come out and say I am to blame, Ishould take a lot of the blame for the housing boom and subsequent bust?BURRY: I think it's beyond the capacity of 99.9 percent of humans on this earth to reject their legacy inthat manner, to -- to completely bury themselves for all the rest of history. I think it's very difficult,especially you've had a -- a long and -- and illustrations and as an acclaimed career as Greenspan has had.So I don't expect him to say these things. I think it's just important that people recognize what helped getus to the point we're at today, which is a very bad spot.ERLICHMAN: What about you?Earlier this year in a "New York Times" op-ed, you said: "Nobody in Washington has wanted to hear your side of the story."Is that still the case, that nobody in Washington has called you to ask for some information on how weavoid this happening in the future?BURRY: Well, in -- after the op-ed was published, I was contacted by the FSA -- FCIC. And I actuallywent to Washington and -- and spoke with them for a bit. And -- and so -- so that has happened at this point, yes.ERLICHMAN: And what did they ask you?What kind of questions did they ask you?BURRY: It was largely what caused -- you know, it was largely a question as to what caused the crisis,largely, in, you know, over about two hours, variations -- variants on what caused the crisis, what -- and myactions through it...ERLICHMAN: (INAUDIBLE)...BURRY: -- in terms of shorting the market.(OFF CAMERA REMARKS)ERLICHMAN: So you went Washington, spoke with members of the FCIC for a couple of hours. Theygot your input and what did they do in -- with that information now, as far as you know?BURRY: Oh, I don't -- I'm not privy to that information.ERLICHMAN: But do you -- do you feel like, at this point, at the very least, lawmakers have reached outto you to get your opinions on how this (INAUDIBLE)?BURRY: I don't -- not to the extent they could have and certainly not in a way that would encourage mycooperation. I think that ideally, it would be an informal chat. It wouldn't be a -- a demand for documentsor anything like that.
 
ERLICHMAN: We talked about Alan Greenspan, but what about Warren Buffet, someone who was at anFCIC hearing earlier this year, when he said you and John Paulson saw this housing bust coming but whowas going to listen to you back in 2005, which goes back to something you said earlier. It's a fair point.BURRY: Well, you know, my mother became a real estate agent in 2005. And it's -- it's tough. It's tough.You know, it's no fault of hers. I mean and it's a -- I had business partners didn't listen to me. I hademployees that didn't listen to me. A lot of my investors didn't listen to me.You know, perhaps I'm not a very persuasive person. But you're -- it's correct. Nobody -- nobody waslistening at that time. I shouldn't say nobody. There were a few that were. But by and large, it was not aneasy sell in 2005.ERLICHMAN: Let's talk about the Wall Street players, Goldman Sachs, for example, the role that firmslike Goldman played in all this. You worked with Goldman. They helped you with your trades all thetime.What did you make of the SEC suit against Goldman Sachs earlier this year?BURRY: I think that -- my first thought when I saw that -- it was on a Friday, I think, it was announced.My first thought was they're looking for a scapegoat. And they found some young trader in France and he's probably got some fabulous e-mails and they -- and they've dug through them and found a scapegoat. Thatwas my thought.The SEC is -- has -- has been absent for a long time. They haven't done much of anything that's veryhelpful for -- for investors, in my view.And now they're going after Goldman Sachs. It was a par -- I think it's a -- there's a -- I think it's a responseto some political pressure and -- to find a scapegoat. That's what I thought.ERLICHMAN: But at the same time, Goldman has always maintained that it acts and acted in the bestinterests of its clients. You were a Goldman client.Did you find that to be the case?BURRY: I don't believe that -- I don't believe that any Wall Street bank always acts in the best interests of its clients. I -- I think that's false. I think that I fought Goldman a lot. And not just Goldman. I fought allmy counter parties a lot.It's an incredibly vicious, incredibly competitive world when you're going to go take a position oppositeone of those banks.And I think -- and I think that it's not whole -- a whole lot better -- I think even if you just want to buy acorporate bond and you call up a bond broker, I think you need to be aware that that bond might not -- it --that the advice you're getting might not be in your best interests and turn -- and that bond could be comingout of the broker's inventory.There's a lot of -- there's a lot of issues that could come -- come into play.ERLICHMAN: Goldman has now settled that suit, while the suit was...BURRY: Predictably.ERLICHMAN: Right. Ongoing during that suit, they announced -- the board announced that they weregoing to set up a special committee so that even though we believe we are always acting in the bestinterests of clients, we're going to make sure that there's a committee that's looking out for clients. So thisis something they're doing to avoid any news out there that they're not acting on behalf of their clients.
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