MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. The American auto industry means a lot of things to a lot of people. It's an economic engine that helped cultivate the country's middle class. It's a symbol of American innovation, ingenuity and promise. But the U.S. auto industry is also a symbol of the country's recent economic collapse, the recipient of an $82 billion government rescue that's thrown our definition of capitalism for a loop. So what do the events of the past two years mean for the future of that industry and the future of American capitalism?

MR. KOJO NNAMDIJoining us in the studio is the man who President Obama picked to lead the government's rescue of the auto sector. Steven Rattner is former counselor to Treasury Secretary Timothy Geithner on the restructuring of the automotive industry. He previously served as managing principal at the Quadrangle Group, a private equity firm in New York City. He is the author of "Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry." Steven Rattner, thank you for joining us.

MR. STEVEN RATTNERThanks so much for having me.

NNAMDIYou're a finance guy, an investment guy, a role that needed massive government intervention to stay afloat in 2008. When you were tasked with keeping the auto industry afloat, how did things compare to you with the banking industry as far as what was at stake?

RATTNERIn terms of what was at stake, it was quite similar. What was at stake was really the future of our country, not to be overly melodramatic about it. But we all, I hope, believe that if the financial sector had been allowed to melt down, the country would have gone into a downward spiral of epic proportions. Our view of the auto industry was the same, that if GM and Chrysler were allowed to run out of money, they would have shut their doors, liquidated and laid off hundreds of thousands of people. Suppliers would have closed. Ford would've closed. The Japanese companies that manufacture and, and the South would have had to close, and literally millions of people would've been thrown out of work across the heartland of America.

NNAMDIWhat do you think are the root causes behind the challenges the auto industry was facing in 2009. How much blame are you willing to put on the industry itself, and how much of it have to do with economic forces beyond the industry's control?

RATTNERThere is some of both for sure. One of the problems was that the companies didn't recognize that there was some of both. Rick Wagner famously testified, the former chairman of General Motors, in front of Congress in November of 2008, and essentially said, we -- management have done everything right. The problem is the yen exchange rate, the UAW contract, oil prices, the credit crisis. He took, really, no responsibility himself. The fact is all of those things were negative forces operating on the auto industry, but the most vivid way to think about this is that Chrysler and GM ran out of money and went bankrupt, Ford didn't. So Ford had the same UAW contract, the same competition, why didn't Ford go bankrupt? Better management.

NNAMDIWe’re talking with Steven Rattner. He is the author of "Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry. I'm inviting your calls at 800-433-8850. You can go to our website if you'd like to raise a question or make a comment. That's Kojoshow.org. You can send us a tweet @kojoshow. Or you can send an email to kojo@wamu.org. What do you think the government's rescue of the American auto sector says about the future of capitalism in America? 800-433-8850. When you first got this job, you were criticized for not having a great deal of experience with the auto industry. You say that from the time you started as a reporter with The New York Times, you've been looking into and investigating things that you didn't know a lot about.

RATTNERBoth of those are true. I knew virtually nothing, maybe nothing, about the auto industry when I took this job, but Tim Geithner and Larry Summers correctly had the view that this was not a job in which knowing the auto industry was the most important qualification. They viewed it as a restructuring job to be undertaken by a team of people who had some sense of the political world in which we live on a major matter like this. So I felt that I could do it even though I was not an auto guy per se.

NNAMDIWell, there are few industries that try to appeal as much to our American mess, if you will, as the auto industry. Let's take a listen to how General Motors has tried to tap into that sentiment over the years.

UNIDENTIFIED WOMAN(singing) Baseball, hot dogs, apple pies and Chevrolet, they go together in the good ole USA.

UNIDENTIFIED MAN 1America is still the land of rugged individualists.

UNIDENTIFIED MAN 2(singing) Like a rock...

UNIDENTIFIED MAN 3(singing) From the East Coast to the West Coast...

UNIDENTIFIED MAN 4After 89 years in the making, this is our truck, the all-new 2007 Silverado from Chevy, the most dependable, longest-lasting trucks on the road.

3(singing) This is our country.

UNIDENTIFIED MAN 5Let's be completely honest, no company wants to go through this. But we're not witnessing the end of the American car. We're witnessing the rebirth of the American car. General Motors needs to start over in order to get stronger. There was a time when eight different brands made sense, not anymore. There was a time when our cost structure could compete worldwide, not anymore. Reinvention is the only way we can fix this, and fix it we will.

NNAMDII'm just interested in your impression of the arc we can follow in those ads, from hot dogs and apple pie, to let's be completely honest, nobody really wants to go through this.

RATTNERWell, I think the arc describes very well exactly what happened. That these companies went from being iconic companies -- there was a time when General Motors sold half of all the cars that were sold in America. Now, it's down to about 18 percent or so. There was a - Chevrolet is still the biggest single brand, I believe, in the U.S., but it, certainly, is much diminished. And then that last commercial, really, said it all. It just said, basically, these companies have to become competitive, have to forget about their old ways of doing business and have to start to embrace a new world. And that is what has happened, and I think it will work out very well for the country and for the American taxpayer.

NNAMDIWe can celebrate the past, but we can't be handcuffed by it. We're right in the middle of political season, and a lot of candidates are making their cases to voters by bashing TARP, the initial bank bailout, or by complaining about government intervention in the economy. You say that the auto rescue plan was a success. Why?

RATTNERI say, actually, even more than that. I say that the entire TARP program was a success, that both the financial rescues and the auto rescues were critical. I find it extraordinary that people out there, responsible politicians, are, actually, suggesting that what both the Bush administration and the Obama administration did with TARP was somehow wrongheaded. It was completely right. If you take the autos as a specific example, as you noted earlier, we invested $82 billion in the auto sector. We saved millions of jobs, and the country will get back the vast preponderance of its money. It may not get every penny back, but it will get back virtually every penny. That, to me, is an example of a good government program.

NNAMDIWhat would have happened if you did nothing?

RATTNERIf we had done nothing, General Motors and Chrysler would have both run out of money sometime probably in March of 2009. They have been given money by the Bush administration to tide them over. But if we, the Obama administration, had done nothing, they would have run out of money March of 2009. They, literally, would have shut their doors. They would have liquidated. They would have laid off all their workers because they couldn't have paid them, except perhaps a skeleton crew. Then all the suppliers would have shut down because the suppliers were already also on very thin ice, and without business from GM and Chrysler, they would have all gone bankrupt. That would have meant that Ford would have shut down, not bankrupt necessarily, but they wouldn't have been able to get parts to make the cars that they sell. The Japanese companies that manufacture in the South would have probably had the same problem. All the dealers and all the other service providers to the industry -- restaurants, messenger services, office furniture companies -- all would have been severely and negatively affected. And I believe we would have what anybody would call a depression in the Midwest of this country.

NNAMDIWould I be wrong if I interpreted what you just said to mean the auto industry is too big to fail?

RATTNERNo. I think you would be right to say that. In that context, when the rest of the economy was so fragile and the financial sector was also so fragile, in effect, you're correct. The president made a determination that these companies were too big to fail, but, equally importantly, the president made a determination with advice from a bunch of us that the companies could be saved. This was not simply kind of intravenous feeding, where the patient is dying, but we're just going to keep him alive by artificial means. We, fundamentally, restructured -- we did open heart surgery just to carry the metaphor along. We, fundamentally, restructured these companies in a way that allows them to compete and be profitable, and General Motors is already profitable.

NNAMDIYou have been quoted to saying, "I'm a free market guy. I'm a centrist. But when markets fail, that's what governments are for." Where in your mind does the public blowback against these programs come from if, in fact, what you say is correct, that there are people -- do you feel there are people who believe that government should have no role whatsoever in markets and that markets can function quite well without any form of government intervention at any point?

RATTNERI don't know that I would be so blanket, but, certainly, in the case of autos, there are many people who felt that the government should intervene. Dick Cheney argued strenuously in December of 2008 in the Bush White House that the company should be allowed to find their own way and that the government should not inject money. John McCain in November of 2009, when he was facing a difficult primary, said the government never should have gotten involved with GM and Chrysler. We should have left it to the market.

RATTNERWhile I've just told you what would happen. If we left it to the market, it would have been a disaster. So, yeah -- and, look, particularly, in what many people called the silly season of an election, there are many politicians out there today probably, literally, as we're speaking, who are saying the government should never have gotten involved in TARP, the government should never have got involved in autos. It is very politically popular, and it is very economically misheaded, misguided.

NNAMDIOur guest is Steven Rattner. He is a former counselor to Treasury Secretary Timothy Geithner on the restructuring of the automotive industry. He's author of the book "Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry." Do you think the U.S. auto industry is too big to fail? Call us at 800-433-8850, whether you agree with that question or not. How would you compare the government's rescue of the auto industry to the assistance it gave to the financial sector as far as what was at stake? 800-433-8850. Or you can send us a tweet @kojoshow.

NNAMDIThe Washington region isn't exactly the Rust Belt. So for a lot of us living here, the auto industry's struggles were most visible in our daily lives when we look at what was happening with the dealerships in our neighborhoods. You write that a lot of your biggest headaches came when politicians started protesting plans to close local dealerships. What were those disputes about to you?

RATTNEREvery expert believes -- every single expert believed that these companies had too many dealers. They had a dealer base that was sized for a completely different scale of operation. It was as if instead Wal-Mart, you had a thousand mom-and-pop grocery stores all over an area. And so everybody agreed on that. And we made the decision -- Larry Summers specially was very emphatic that we were not gonna be involved picking a dealer here, a dealer there. That was the company's job. We were simply gonna support them in shrinking the dealer base. Well, of course, the moment you got to specifics, all the local politicians went crazy. Dealers are very important political force in their community. They are campaign contributors. They are community -- they're involved in the community. They're good people, but they have a fair amount of influence. And so we were besieged. And among...

NNAMDIYou got a call from the Senate majority leader.

RATTNERThe House majority leader…

NNAMDIHouse majority leader. I'm sorry.

RATTNER...who is one of your -- in your -- one of your constituents, so to speak. More than a call from Steny Hoyer. I was summoned to his office for him to, basically, berate me for an hour over this issue. And Chris Van Hollen, who's another, I believe, local congressman, also was on the case. And all this was over a couple of Chrysler dealers in Maryland. And then it turned out the...

NNAMDIThose dealers, Tammy Darvish and Jack Fitzgerald…

RATTNERYes. Jack...

NNAMDI...who also appeared on this broadcast to make their case in April of this year.

RATTNERThat's fine. So Chrysler closed Jack Fitzgerald's dealerships. He then appealed through an arbitration process that the Congress had passed. The Congress apparently had nothing better to do than mess around with dealers. In a world of 9 1/2 percent unemployment, the Congress was focused on dealers. So they mandated an appeal process. Jack Fitzgerald appealed, and the arbiter or judge in the case said that everything Chrysler did was exactly right and Jack Fitzgerald dealerships deserve to be closed.

NNAMDIHow did these conflicts about dealerships compare to conflicts about closing factories or park centers?

RATTNERInterestingly, they were more controversial. There was one park center that was very controversial that Barney Frank stepped in on and insisted it be delayed. The closing was of 90 jobs. It was not the end of the world. We got a lot of calls about factories and we should have. If I were a senator or a congressman with an important factory, I would have called too. But Congress never tried to pass legislation the way they did on dealers. The dealer thing was nationwide. Every congressman has a dealer in his or her district.

NNAMDIThis was political nimbyism, not in my backyard.

RATTNERTotally.

NNAMDII'm all for it but not here.

RATTNERTotally. Totally. Totally and incontrovertibly. Everybody agreed there were too many dealers.

NNAMDIOn to the telephones. Here is Jim in Hedgesville, W. Va. Jim, you're on the air. Go ahead, please.

JIMOkay, Kojo. Thanks for taking my call. You know, just to your guest, what -- we have a very hotly contested senatorial race up here in West Virginia. And one side is all for jobs, jobs, jobs. And then also one thing is that the government just can't snap their fingers and produce jobs. But what I attribute this deal here as far as the auto industry goes, and see if you agree with me, back in the late 1970s, that's when they started parting out all of the parts manufacturing to countries like Mexico and the Philippines and Japan. And they were taking those jobs away from people that were here in the U.S. making those parts, and it just snowballed since then. As far as bailouts go, if I'm not mistaken, didn't the government bailout Chrysler about 1980? And I'll take your rebuttal over the air. Thank you.

NNAMDISteven Rattner.

RATTNERTwo comments. First, you're absolutely correct that jobs involved in all of the auto sector have been gradually moving offshore. This is part of the broad problem we have as a country in competing in the manufacturing area as other countries develop skills. Let me give you a couple of numbers. At General Motors, the entry-level wage is, until now, for the existing workers, was about $28 an hour. In Mexico, General Motors pay $7 1/2 an hour. In China, General Motors pays $4 an hour, and in India, General Motors pays $1 an hour. And they get very high productivity in Mexico. This is just a fact of life today that we as a country have to come to grips with. I don't think it's part of why the company is in trouble today. In fact, if they hadn't done this, they'd probably be in more trouble because they would have had very expensive labor costs. You're also correct that in 1979, we did bailout Chrysler. It worked. Chrysler was a successful company for 30 more years. The government got all of its money back with interests. I was not deeply involved with that. I actually covered a little bit of it as a reporter. But I would argue that was an example of a place where government also intervened in a successful way and saved a company and a lot of jobs.

NNAMDIOn to Preston in Warrenton, Va. Preston, you're on the air. Go ahead, please.

PRESTONYes. Thank you for taking my call, Kojo. My call really is at the grassroots level, these sub-prime mortgages which are not being discussed. It is the elephant in the living room. And I think that we are whistling as we stroll by the cemetery. I have very strong feelings that we are neglecting the major problem which is a grassroots problem beginning in California, Arizona, Nevada and Florida. And it has its sting in Virginia.

NNAMDIWell…

PRESTON...where I live.

NNAMDIWell, one of the things we're gonna do, Preston, after we take a short break is to discuss maybe some of the more exotic products of the banking industry and the effect that they have on the overall economy. So stay tuned. And Preston, thank you very much for your call. You too can call us at 800-433 -- before I take that break, Steven Rattner, care to respond to Preston's comments about sub-prime mortgages?

RATTNERI don't think anybody can doubt that sub-prime mortgages are a huge source of the problems we've had and they created a false boom. They have now led to a real bust. They're working their way through the system like a mouse working its way through a python or some analogy of that sort. And I believe we'll come out the other side better for it. But it's pretty rough along the way.

NNAMDIGot to take a short break. When we come back, we will continue this conversation with Steven Rattner about the auto industry and the economy overall. He is the author of "Overhaul: An Insiders Account of the Obama Administration's Emergency Rescue of the Auto Industry." But first, we've got some business to take care of. I'm Kojo Nnamdi.

NNAMDIWelcome back. Our guest is Steven Rattner. He is former counselor to Treasury Secretary Timothy Geithner on the restructuring of the automotive industry. He previously served as managing principal at the Quadrangle Group, a private equity firm in New York City. He is the author of "Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry." We'll take your calls at 800-433-8850. If you have calls, stay on the line. We will get to your phone call. Steven Rattner, we hear the word innovation a lot from people in the business world. How would you compare the public benefit of innovations that take place in the auto sector, like more efficient engines or safer designs to the innovations that take place in the financial sector?

NNAMDIPaul Krugman wrote earlier this year in The New York Times that there's no evidence to take it unfaith that the cleverness of the financial industry is a net social good. Allow me to add to that, making it an even longer question, New York Times' front page today reported about an asset lending strategy. The JPMorgan proposed to mutual funds and pension funds that basically allow JPMorgan to share the profits of their clients, while pinning the loses solely on the funds as themselves. The Times reported -- described it as a heads, we win together. Tails, you lose alone. What do strategies like these tell you about how the banks are doing business? And what financial innovation means today, and do you see any net social good in a transaction like that?

RATTNERSo -- those are a lot of questions...

NNAMDIOh, yeah, several.

RATTNER...and I'm not an expert in all of them. But let me say broadly, I believe that the financial services area, what is commonly referred to as Wall Street, is a net plus for our country. It was one of our great success stories as a country. We have financial services. We have technology based on what goes on in Silicon Valley, the Facebooks, the Googles of the world. We have entertainment, where we're still the largest factory in the world. And we need to build on these strengths. And financial service provides millions of jobs for people. It makes capital markets work. It allows people to buy and sell securities efficiently. There's a lot of good to be said about Wall Street. The problem of the last couple of years is like many other things that happened in the world, things get take in to excess. And in then, it's the job of government to rain it in, and punish those who are responsible and to set down some new rules to the road, which has happened. And I think all of that is positive.

RATTNERWith respect to the auto sector, there's a lot of innovation that needs to come out of the auto sector just as there is from -- a need for that from other manufacturing areas. But one of the things the president decided about auto rescues, which I agreed with him completely, was that the auto rescues should not be a vehicle to try to accomplish a whole series of other goals. It's very -- once you start having multiple goals, any project becomes more complicated. And the president's instructions to us were save the auto companies. Don't try to make policy about fuel efficiency or labor or this or that. Just save the companies, as if you're in the private sector. And that's what we did.

NNAMDIWell, it seems, I think, you did a little more than that. Here's this e-mail we got -- a comment on our website from Whitney. "It's too bad the Tab didn't require the financial industry to reinvent itself to the same extent that the auto bill law did. I feel much more confident about GM, Ford, et cetera now. I see little evidence that Wall Street is anymore securely structured today than it was two years ago."

RATTNERI think Wall Street is somewhat better structured today, but I understand the drift of the question. And the problem was that we had a bankruptcy process that we could use with the auto companies to do the kind of fundamental restructuring that Whitney was referring to. That process was not available for the banks. There was no real way to resolve the situation of a bank that was fundamentally insolvent. And so you saw this patchwork of different policies that were designed to try to work around that. The new financial regulatory reform law that has just been passed is designed to provide that ability to have a kind of restructuring the way we did with General Motors for financial institutions, whether it will work with -- or no yet.

NNAMDIWhere do you see the potential for auto sector innovations that will benefit both the companies and their work forces? And where do green projects fit into that future?

RATTNERThere's no doubt that everybody is focused on the importance of the auto sector making a transition from gasoline to other forms of fuel. And all the companies, whether they'd be the Detroit Three or the Japanese companies or Asian -- other Asian companies, they're all working on it. So the Chevy Volt is coming out and this...

NNAMDIYeah, and I've been asked to -- in a couple of weeks, to try one out for a week. And it's my understanding that you're not a big fan.

RATTNERWell, yes and no. I drove the Chevy Volt. It drove fine. It was quiet. It accelerated. It didn't make a lot of noise. My questions around the Chevy Volt are first, costs. That -- in order for GM to break even, people would have to pay 40, 41, $42,000 for car that in shape, size, styling is more like a $22,000-car. You'll get a $7,500 tax credit from the government, but that still doesn't get you all the way down. And it doesn't get GM a profit. So this is -- these are early days for these kinds of projects. And the other thing I really did want to drive home, no pun intended, to many people who asked me about the Chevy Volt is -- it's an important project. I think they were right to do it. I think they've gone about it the right way, but it's not gonna change GM's finances in the next several years. It's just not gonna be a big enough factor. So people shouldn't get confuse into thinking that Chevy Volt is suddenly gonna make GM stock go up.

NNAMDIStill hold on for my judgment after I drive it in a couple weeks. We'll see. Here's Michelle in Kensington, Md. Michelle, you're on the air. Go ahead, please.

MICHELLEHello. I wanted to comment about the analogy made with the car dealership that having one big Wal-Mart rather than 50 different little mom-and-pop Wal-Marts, that seems to be promoting the thought of the bigger the better. And the car manufacturers are the perfect example of when it gets so big, you have to get involved, too, because so many people are, in fact, are affected. If you keep the moms and pops around, the mom and pops are the one that can ramp up quickly and save the day, if you will, if the other ones have to shut down. I just wanna plant the seed that I hope the mom and pops are viewed as equally as important rather than making sure we end with a 5 million Wal-Marts. Did that makes sense?

NNAMDIHere's Steven Rattner.

RATTNERI understand your comment and I -- maybe I went a little far when I talked about one Wal-Mart instead of a thousand dealers. But the fact remains that the competitors to GM and Chrysler and Ford, the Japanese transplants as we call them, are building, in effect, Wal-Marts here. They're building very large stores. I'm sure you've seem them out where you live. Beautiful exercise rooms, coffee bars, all the stuff. And they're able to get more customers that way, and that is coming at the expense of the smaller, traditional dealers. I don't remember the numbers off the top of my head, but round numbers, the average Chrysler dealer I think sold something like 100 cars a year before the bankruptcy, whereas the average Toyota dealer sell something like 1,500 cars a year before the bankruptcy. And that just doesn't make for profitable business. And it will ultimately -- I love mom and pops. I love shopping at mom and pops. But you can't deny the efficiency of larger operations.

NNAMDIThank you very much for your call, Michelle. Onto Paul in Reston, Va. Paul, you're on the air. Go ahead, please.

PAULYeah, I just wanted to comment on how, like, the U.S. auto industry's dominance in the past has kind of been an illusion because the -- after World War II, the other countries' other industries where decimate, they didn't have factors and things like, you know, Europe and Japan, they didn't have oil factories, so we had no competition whatsoever. So that's kind of why the U.S. industry was, you know, strong in the '60s and '70s. But when they came back, you know, we couldn't compete with them.

NNAMDICare to comment, Steve Rattner?

RATTNERThat's absolutely true. There's no question that once the Japanese and the Germans focused on our market, they realized it was the biggest, most affluent market in the world and they should be a part of it. And so they came and they did a great job competing against us. And there's no denying that. There's no avoiding it. It's just a -- it's a fact of life.

NNAMDIThank very much for your call, Paul. You too can call us at 800-433-8850 or you can ask a question, make a comment at our website kojoshow.org. What do you think the American auto industry means to the country's economy? Is it a symbol of creativity, innovation, the strength of the middle class? What do you think? 800-433-8850.

NNAMDIThis e-mail we got from Lisa in Silver Spring. "People complain all the time now about the subprime home mortgages and the role they played in the financial sector, but I see television ads all the time peddling the same kinds of loans for cars. After all, at Eastern Motors, your jobs, your credit. I know we're not talking about the same kind of money when we talk about car loans as opposed to home loans. But I'd be interested in getting Mr. Rattner's opinion on why there hasn't been much outrage about the number of people still making car loans to people who might not be the most reliable lendees, to say it diplomatically." I guess this is about the extent to which the government can interfere in the free market.

RATTNERThere's no question that there was a bubble in car loans just like there was a bubble in housing. And there was a time when people could buy a new car and get financing for more than 100 percent of the cost of the car, as bizarre as that may seem. And as you suggest, they were treated much like subprime loans. They were lent to people who didn't have the credit scores. They were sliced up into the securitizations just like the subprime home mortgages. But my understanding is that -- first of all, when the credit crisis hit, there was no lending to car customers, and that was a big part of why the car industry fell into such terrible shape.

NNAMDIBut now, while there is more credit available, and you're correct to see the ads and so forth, I don't believe it's gone back to where it was before. I don't believe it will go back to where it was before in the -- anytime in the immediate future, maybe someday it will. So I actually think that car lending has been recently prudent. And the other thing I that I would say is that the default rate on car loans, even after the crisis or in the crisis, was never anything like the default rate on homes. These are, are you said, these are much smaller loans. People were able to service them. And so it was not the massive equivalent of the foreclosure problem with cars. There were no massive repossessions of cars.

NNAMDIOnto Louis in Northern Virginia. Louis, you're on the air. Go ahead, please.

LOUISYes. I have a question about the recent scandal about the foreclosures that happened with most of the banks not really reviewing the papers.

NNAMDIYes.

LOUISI wonder how is that connected to the loan modification review of papers where it lead to the foreclosures?

NNAMDII don't know that Steven Rattner has studied this specifically, but he's willing to venture an opinion.

RATTNERI didn't know I was -- no, I'm kidding.

NNAMDINo.

RATTNERThey are connected, obviously. (laugh) This is all part of this whole process of unwinding all of these mortgages that should have never been made in the first place. What happened with these documents was that there was such an enormous volume of documents that people just simply gave up reading them before they signed them. Assuming that the whole foreclosure process would continue to move forward, I do think it's interesting that the Obama administration has twice, in the last few days, pushed back on efforts to stop foreclosures and made the point, which I think is valid, that unfortunately, and it is truly unfortunate, foreclosures are important part of fixing the housing problem. You have to basically sort out all these people who can't afford the house they're in and hopefully deliver those houses into hands of people who can afford before we can ever have a healthy housing market again.

NNAMDII foresaw your willingness to respond to that question.

RATTNERActually, that's my...

NNAMDILouis, thank you very much for your call. The tech sector is full of examples of small start-ups growing and flourishing into large companies by force of creativity and will. The barriers to entry are different in the auto sector. But what lessons do you think the auto industry can take from how, you mentioned, the Googles, the Apples, and the Microsofts do business?

RATTNERI think both of your points are right. These are different industries. As industries mature, it becomes harder and harder for new entrance to come in and compete effectively. I don't know the last time somebody tried to start a company that made refrigerators or some other basic kind of product, that these are mature and mature businesses. But having said that, there's no question that the car companies can learn a lot from what happened in Silicon Valley, the enormous success. And the lessons are simply to be innovative, to be lean, to be flexible, to attract the best people, to not be bureaucratic. I remember being struck years ago, back in the days when we all wore suits and ties, about going out to see Microsoft, and nobody was wearing a suit or a tie. And my colleagues back in New York said, well, you can't have an effective business if people aren't wearing suits and ties. And I said, well, Microsoft seems to be doing it because they created a culture of flexibility and a sort of outwardly relaxed nature but internally very competitive and very focused. And so I think there's a lot to be gained by watching the example of Silicon Valley.

NNAMDIHere is Aaron in Washington, D.C. Aaron, your turn. Hi, Aaron. Are you there?

AARONOh, yes. My comment is just about -- is why -- is what you think about GM not going to something like natural gas as opposed to just jumping straight to the Volt. I know that they originally wanted to go -- put up natural gas. They thought they'd go to hydrogen, but obviously that didn't work out for them. And why -- you know, why not just -- why not go to something easier to do, like natural gas -- it's not as expensive -- in the meantime?

RATTNERI can't really answer that question, even though probably I should. When we were out in Detroit, we drove cars that were fueled by a whole number of different sources. And GM told us that they, in effect, had made their first big bet on the Volt. We didn't -- the press of having a few months to restructure these companies, we couldn't become experts on everything. And honestly, I never became an expert on why batteries versus some other form of fuel.

NNAMDIThank you very much for your call. Where did executive compensation fit in to your list of concerns when you took the Car Czar job?

RATTNERThere were two side -- there are two sides to the executive compensation issue. There's one side, which is that this is taxpayer money, that therefore they're entitled for people to be paid on a restrained basis and they have the right incentives and the right kinds of form of payment, more stock, less cash, things like that and have caps on pay. And I accepted all that. Ken Feinberg, who was then the pay czar, sat just a few rows down from me, and we had a very collegial working relationship while he was doing that job. On the other hand, what I tried to tell Ken Feinberg and would say to anybody, we have $82 billion of taxpayer money in these companies. You need the best people in the world running them. You don't wanna have people not there because they can get a better paying job across the street at Ford, which does not have these restrictions. So there needs to be a balance between protecting taxpayer dollars on the one hand, and protecting him on the other hand by making sure that they're gonna come back. And I think we've arrived at a reasonably satisfactory place. It's not perfect from anybody's point of view, but I think it's working.

NNAMDIWhy did the ex-GM CEO, who was fired, Rick Wagoner, ask you, are you gonna fire the UAW chief, too?

RATTNERThat was Rick -- I believe that that was Rick Wagoner's way of sending a message, and the message was this is not my fault. Or if it is, it's much more Ron Gettelfinger, the head of the UAW's fault. And therefore, if you're gonna fire me, he should certainly be fired. And I said, look, I'm not in charge of firing the head of the UAW. And I honestly think that this is a failure of management, much more than it's a failure of any other constituency.

NNAMDIWere you surprised to see that executive compensation was as much of an issue in the auto industry as it was in the financial sector?

RATTNERNo. I was a little surprised, when I was in Washington, to watch the whole explosion over executive compensation occur back in March of 2009 when -- I was almost afraid to leave the Treasury building. It was a pretty ugly time. You know, it did feel a little bit like the Salem witch hunt trials. But I was not surprised that the same feelings would transfer over to the auto sector. They had $82 billion of money. They absolutely should have been subjected to the same restrictions as the financial sector companies.

NNAMDIWhy were you so surprised when it first hit Washington about Wall Street, executive compensation?

RATTNERIt wasn't even just about Wall Street. But there was a fellow called Ed Liddy who was serving as the chairman of AIG for no pay. And he was hauled before a congressional committee and eviscerated over some bonuses that were paid to other people in AIG that were a matter of contract, a matter of law that they were entitled to them. And here's this poor guy, who volunteered to come and save this company, having his lungs ripped out by a bunch of congressmen, and I thought that was overly harsh.

NNAMDIWell, you know that's what we do in Washington. We rip lungs out. Steven Rattner is a former counselor -- he's former counselor to Treasury Secretary Timothy Geithner on the restructuring of the automotive industry. He previously served as managing principal at the Quadrangle Group, a private equity firm in New York City. He's the author of the book "Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry." Steven Rattner, thank you very much for joining us.

RATTNERThank you so much for having me, Kojo.

NNAMDIAnd thank you all for listening. I'm Kojo Nnamdi.