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Charlie Rose Talks to Wilbur Ross


Investor Wilbur Ross, who specializes in restructuring failed companies, talks about troubled banks, the state of U.S. manufacturing, and taxes

Here you are buying banks, small banks. You're not dissuaded by the new financial regulatory reform?

No, not at all. I think having a kind of catastrophic insurance policy is a good idea. And I think that if people do risky things they should put up more capital and that the really big banks that could endanger the system should put up more capital than smaller banks.

Your plan is to buy a lot of these banks and then consolidate them?

Here's what we've been doing. The first one we bought was in Florida, a bank called BankUnited. It had been making very toxic loans, option-adjustable-rate mortgages. And they were extending a lot of that to foreigners who were speculating in South Florida real estate. Well if you're lending 90 percent or 100 percent, and the guy doesn't have to pay interest for five years, and he lives in Venezuela or some other jurisdiction, you can imagine the collections problems when the market went down. So they failed. We brought in a new [manager], a guy named John Kanas. John had built up North Fork Bank from a little bank in Long Island and made it a $60 billion bank. He and I made a joint venture about two years ago. And we bought BankUnited. It's worked out very well.

You worked for a number of years for Rothschild.

Yes, for about 25 years. I had been running the restructuring advisory practice on a global basis, but in 1997 also started a fund to invest in bankrupt companies. I went to the management of Rothschild and said...I'd like to buy the fund from you. On April Fool's Day, 2000, I went into business for myself.

Then you started looking at the steel business?

Around mid-2001. I had done the first LTV bankruptcy half a dozen years before. The second one was a real mess, and [LTV] was in danger of being totally shut down. I went to the leader of the United Steelworkers and said we'll buy this and we'll revitalize it, but we need a contract that's different from the contracts you've had. It turned out he was looking for someone to do just that.

Then the next year you bought Bethlehem Steel.

Yeah, we became the most efficient steel company in America. We were making steel with less than one man-hour per ton. The Chinese at the same time were using six man-hours per ton.

So why did you sell it?

We didn't sell it so much as merge it with Mittal (MT). We had gotten to a one-third market share of the U.S., so there was not much more we could do here. Mittal was in a lot of the emerging markets.

Does manufacturing in the U.S. have a future?

I think it does. What I'm worried about is R&D. You have to have new technologies. We think of China as a polluter. Let me tell you, China is the leader in wind power technology. They already are producing 40 percent of all the wind turbines in the world and exporting 80 percent of those. And they did it in typical Chinese fashion. They ordered that the power grid must take alternative power before it can take anything else. Second, it must do it under long-term contracts, and third, it must do it at a big premium price. So they managed to create a huge domestic market, and now they're beaming in on the export. That's how you have an industrial policy.

And we don't have an industrial policy at all in this country.

No, nor do we have an energy policy.

Here you are, a man who is worth more than a billion dollars. And you're saying what we need from the government is policy.

Yes. I really feel that within 5 or 10 years, we could be a second-rate power. We'll still be big, but we could be behind the eight ball in a big way.

Do you have a solution?

Stepping up R&D budgets would be a good thing, spending more on universities. I think those are more important even than tax policy and other things.

[Congress may] extend a Bush tax cut for people who make under $250,000. But for people like you...

That's O.K. as long as they do something useful. I think it is important to keep the tax cut for people below $250,000. If you want to destroy consumer spending, just eat away at the middle class. Median income in this country went nowhere the whole decade of the 2000s. But people want to live a little better than they did the year before. And the only solution they could find was to borrow. That sociological phenomenon, I believe, is what ultimately led to the subprime crisis.

Watch Charlie Rose on Bloomberg TV weeknights at 8 p.m. and 10 p.m.

Emmy Award-winning journalist Charlie Rose is the host of Charlie Rose, the nightly PBS program.

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