The banks have taken tremendous losses on loans to Real Estate Investment Trusts. That area isn't much regulated. Do you think those losses would have been prevented with better regulations?

Questioning the REITs and the bum loans we all made on them, is valid. But keep in mind that the largest holders of bad real estate debts in the world are the U.S. Department of Housing and Urban Development and the U.S. Department of Health, Education and Welfare. Together they own 92,000 defaulted one-family home mortgages and are the largest slumlords in the world. And all of those loans were made in accordance with government regulations that cover a shelf eight feet long. So, I am not impressed with more regulation as a solution.

If you say we did a bad job in the REITs, you're right. We did. Whenever the Congress of the United States screws up the marketplace, we all get in trouble. They perceived that the most important priority in America was for everybody to own a house. That's the great American dream, despite the fact that 40 percent of us live in urban centers and apartments. So, Congress decided to give the housing industry a tax incentive. They said to the REITs: "If you pay out 95 percent of your earnings, you don't have to pay any income tax." Well, any enterprise, by definition, that pays out 95 percent of its earnings is not going to build its capital at 30 percent a year. The device was unsound from its conception.

Where the banks went wrong--and ours went wrong with the rest--was in failing to foresee that the worst recession in forty years was going to hit us. If we weren't all so polite, we'd call it a , because that's what it was. So, we overextended our loans to the REITs and to real estate generally. The result was perceived and described as a stupid error. That's true. Congress made it and we compounded it.