Nomi Prins exposes the "House of Cards" behind the 2008 crisis, arguing that decades of deregulation and revolving-door ties between Wall Street elites and the executive branch enabled systemic collapse. She details how the repeal of Glass-Steagall allowed banks to leverage public deposits for high-risk speculation, while credit derivatives masked subprime toxicity with inflated AAA ratings. Prins critiques cosmetic reforms like Dodd-Frank and Federal Reserve policies such as QE and ZIRP, which socialized losses through bailouts while enriching institutions via artificial liquidity. Ultimately, these measures merely papered over structural holes, leaving the financial system dangerously over-leveraged and disconnected from real economic growth. [Automatically generated summary]
Transcriber: CohereLabs/cohere-transcribe-03-2026, WAV2VEC2_ASR_BASE_960H, sat-12l-sm, script v26.04.01, and large-v3-turbo
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The 2008 Financial Coup00:02:35
Hi, this is Dark Journalist.
Today we have a very special guest on the show, financial expert and bestselling author Nomi Prinz.
Now, Nomi has written several classic books on the financial corruption on Wall Street.
Her latest, All the President's Bankers, examines the close relationship between the banking elite and the executive branch over the course of the last century.
Now, Nomi brings more to the table than just economic trends forecasting.
She comes from the very heart of the financial system as a former managing director at Goldman Sachs.
Today, she'll share her experience at the highest levels of that Wall Street world and why she left it to help inform an unsuspecting public of the challenges to come.
We can't afford to miss her powerful message.
Here we go.
Nomi Prins, Bankster, House of Cards.
My question is Is there not a conflict when you sell something to somebody and then are determined to bet against that same security and you don't disclose that to the person you're selling?
You see a problem?
In the context of market making, that is not a conflict.
That is not a conflict.
This was a game that was working.
This was a game where they could basically take these loans, buy them up, repackage them, get someone else to insure them.
Make money on each side, sell them to countries and pensions and everything else, make money on that, and basically take chunks along the way on these very non transparent issues.
You know, for an average person, the statistical nightmare of the digital financial system tends to make them tune out or get overwhelmed by the sheer complexity of the process.
But in the crash of 2008, or as it's sometimes referred to, the financial coup d'etat, our fundamental relationship with that investment world changed.
Let's not forget that huge financial firms brought the world to the brink of economic ruin and then held a gun to our head to bail them out.
Wall Street betrayed our trust, and now there's nothing more important to our future than seeing what they're doing with your money.
So let's meet Nomi Prince.
Nomi, it's wonderful to have you here on the show.
Clinton's Policy Shifts00:15:31
Now, before we get started, I want to say thank you for having the courage to leave the lofty world of Wall Street to share your insights and great experience with us.
Sure.
Thank you.
Oh, yeah.
Noticing.
Now, the new book, All the President's Bankers The Hidden Alliances That Drive American Power, is outstanding.
Thank you.
And it's already a bestseller.
Now, we're going to dig into that, but let's start off with the crash of 2008 and the bailouts that followed.
Now, this destroyed a lot of the faith in the financial system, and actually, a lot of the big banks emerged even bigger and faced almost no punishment for their unethical and destructive behavior.
So, what was it that happened in 2008?
What were the forces behind the crash?
And I should mention here that you predicted accurately in your book, Other People's Money, that this was going to happen.
Clearly, you saw the threat approaching.
But what were the institutions and businesses that caused the crash, and what were they trying to accomplish?
There was a large Push in the credit derivatives market before I left Wall Street in 2002 and before I wrote that first book in 2004, Other People's Money, to take advantage of the credit markets, to take advantage of credit derivatives, which were basically insurance contracts related to whether a credit would default or not default, and then whether groups of credits would default or not default,
and then whether groups of credits wrapped in other types of securities would default or not default.
So it was this whole layering of Contracting and betting on whether something would continue to exist or not effectively.
And that was a really big, hot market in the beginning of the 2000s.
And it was a market that all of the big banks were jumping on.
And as a result, it grew faster than any regulator had the ability or desire, or any leadership had the ability or the desire to contain it or regulate it.
And as a result, it became big and unwieldy and it connected into all of these other loans and different types of securities and so forth.
And it grew and grew and grew, and ultimately it crashed.
And that was the financial crisis of 2008.
Because what was inside a lot of these assets that institutions were either betting against or betting on in terms of whether they would maintain their credit integrity, whether they would default or not yes, there were subprime loans involved, but the subprime loans themselves weren't the problem.
The problem was that the subprime loans were pieces of these much larger and layered securities.
The transactions that were going on back and forth between, say, Goldman Sachs and AIG or Deutsche Bank and Bank of America, or all of these types of transactions going back and forth, were predicated on repackaging these assets and repackaging them again and again and again.
And so sometimes only one subprime loan would be connected to 10, 20, 30, we don't even know because of the lack of transparency, different securities.
So if it defaults, and in itself that might not be a problem, but because it's connected.
And all the other securities it's associated with are connected, everything loses a little piece of itself.
Everything starts to devalue.
And what happened into the crash, into 2008, the financial sort of meltdown, was that the banks knew this was coming to an end well before the population did, or most of anyone did, and certainly any people in Washington seem to have noticed.
And so they stopped selling them, they stopped taking them back from the clients to whom they had already.
Sold these.
So there was no liquidity in the market.
So everything was just sucked out.
Yeah.
They didn't trust each other.
The market stopped and liquidity dried up, and therefore they had nothing left, no sort of grease in the wheels to continue to move the product on.
And that's when they started coming to the government.
Citigroup was the first bank in 2007 to come through the relationship with Tim Geithner and so forth.
He wasn't the Treasury Secretary at the time, he was head of the New York Fed.
Right.
And say, Look, we have a problem to Hank Paulson, who was then Treasury Secretary under Bush, and say, We need some help.
And that was kind of how that started.
They had all these assets that weren't even transparent that were failing.
And they didn't have money to back them up, and nobody wanted them, and they couldn't get rid of them.
And so they came to the government for help.
And that was all sort of hush hush, but that precipitated it wasn't totally hush hush.
I mean, some people wrote about it, but it wasn't made a big deal of at the time.
And that wound up manifesting into a larger and larger crisis because every bank had the same problem.
And then every bank realized they could have the same solution, which was government support of their positions, which is ultimately how all the bailouts were designed.
Right, right.
And this is the kind of corporate welfare that they got into to rescue the failing financial system.
Now, interestingly enough, there wasn't much of a difference between Bush's response and Obama's.
They were basically on the same page.
There was no difference whatsoever at all.
And one of the links between the two was, of course, that Tim Geithner was just one person, but one link, who was the New York Fed president as well as the Treasury secretary.
So he had the most tight connection to Wall Street from the standpoint of the New York Fed being Wall Street's.
Particular Fed bank through their membership in the New York Fed, through how the Fed was established, through close associations, through a physical, you know, they're down the street from JPMorgan Chase and so forth.
So there was a real connection there.
And then, of course, he becomes Treasury Secretary.
So that's one aspect of continuity.
Ben Bernanke was the Federal Reserve Chairman above Geithner under Bush, and he was the Federal Reserve Chairman under Obama.
So that's two degrees of continuity.
And then you had Hank Paulson, of course, who was the Treasury Secretary under Bush, and then Tim Geithner.
Initial continuity pops into Treasury Secretary under Obama.
And all of that was connected to sort of a Robert Rubin Association, which was Hank Paulson helped Citigroup and Tim Geithner and Robert Rubin, who was a former CEO, co CEO of Goldman Sachs, as Hank Paulson was the CEO of Goldman Sachs.
So there was that association which helped Citigroup before everybody knew about the wider crisis.
And then, of course, Tim Geithner was associated with that on the other side.
And Obama got a lot of funding from Goldman Sachs to become president in 2008.
They were his second largest.
Campaign contributor on the corporate side.
So you got all of these kind of associations wanting to reinforce themselves and each other.
So it didn't really matter who was president at that time.
Everything just kind of continued.
Yeah.
And you said the magic words there Goldman Sachs.
Now, you were a former managing director at Goldman Sachs and you ended up leaving in 2002.
Right.
You obviously saw the direction they were going in and you weren't comfortable with the corporate structure there and some of the things that they were doing.
Now, as you've mentioned, Hank Paulson, who was Bush's Treasury Secretary, was a former Goldman Sachs guy, and obviously he had some conflict of interest going on.
But what about Obama's Treasury Secretary, Tim Geithner?
What relationship did he have to Goldman Sachs?
The kind of back relationship with Goldman Sachs was that Tim Geithner was one of the assistant Treasury Secretaries under Robert Rubin, who was the Treasury Secretary under Clinton when a lot of deregulation was happening on Wall Street.
That ultimately wound up benefiting Goldman Sachs, not necessarily that particular moment.
So, the ideologies were kind of aligned back at that particular moment.
So, I mean, things like that was an association with Goldman.
But also, their backing, not just financially, but sort of politically, and sort of garnering the rest of Wall Street support and stuff for the policies from Clinton through Obama, including Bush along the way, that benefited Goldman.
And, of course, a lot of revolving doors in and out on other.
Other less important posts than the Treasury Secretary, but of course the policy, the ideology emanates from that.
Yeah, well, you've done an excellent job of researching and demonstrating that close relationship that Goldman Sachs has to political power, and that relationship is closer than ever as far as I can tell.
Now, something that precipitated a lot of this activity was a major policy shift under the Clinton administration with his Treasury Secretary, Robert Rubin, another Goldman Sachs guy.
Now, he became the key man to help initiate the ending of the Glass Steagall Act.
Right.
I mean, the true ending of the Glass Steagall Act, which had been passed in 1933 to separate these speculative activities, so the idea of taking subprime loans and sticking them into toxic assets and selling them throughout the world, that separation from people's deposits and their loans happened in 1933.
And there were a lot of swipes against that particular act that brought these different services under the same umbrellas or at least pieces of them throughout the years.
They actually started under Reagan.
Yeah.
And Reagan was the first president to hire or to appoint.
A sitting CEO of a major Wall Street bank to his Treasury Secretary position.
That was Don Regan, who at the time was the CEO of Merrill Lynch and also a friend of the Bush family and so forth.
So, again, that ideology from Wall Street into an appointed position as the Treasury Secretary of the White House would have started then.
And Regan, Don Regan was on a task force with Vice President Bush at the time under Regan that was looking at deregulating the banking system.
Okay.
So that's kind of how that started.
And their deregulation task force started to find little loopholes and sort of bend some rules here and there that allowed banks to take deposits in different ways and assets in different ways that started to bend some of the intentions of the Glass Steagall Act.
That continued through Bush's presidency.
And then when Clinton came into office, it ratcheted up another notch.
But Bush's Treasury Secretary, or one of his Treasuries, Brady, Very much went on the floor of Congress and said, We need to deregulate our banking system.
They can't have these barriers.
They can't be told what they can and cannot do.
We need to compete and be competitive globally.
Their global competition banks are doing this.
We need to do this.
And then the exact same argument under President Clinton, voiced by the former COCO Goldman Sachs, Robert Rubin, literally used the same words.
So there were these decades of using the same words to deregulate the major banks, which basically said, Look, we need to compete in the world.
We can't have these old school depression era regulations.
We need our banks to basically have more full services and all the sorts of buzzwords they use because that's just going to make us all better.
And then the culmination of that was Robert Rubin pushed in Congress to do that.
It had passed a couple different versions in Congress.
He left his Treasury Secretary post and it was given to his number two, Larry Summers, right before the actual final version.
A Glass Steagall repeal was passed.
So he left to become a vice chairman of Citigroup, which was a beneficiary of that repeal, right before.
But he waited until the version that ultimately became the law was passed.
So, people say, oh, he wasn't there exactly at the time.
No, he wasn't there when Clinton signed it.
That was Larry Summers behind Clinton.
But he was there until he knew it was going to happen.
And then he quit.
He was very mysterious about where he was going to go.
And then he, like, pops up just a little bit later at his vice chairman position at Citigroup, which, as we talked about before, then became a beneficiary of Bell's later on.
And so, the result of the repeal of Glass Steagall through something called the Graham Leach Bliley Act, which passed under Clinton, that enabled banks.
To use their books, to use their deposit base as sort of collateral against more complex types of trades and to also take insurance trades.
So, to also basically evolve into asset management and insurance precision and all sorts of other speculative things.
So, companies like Goldman Sachs, they didn't have that balance sheet yet when it was first passed.
Right.
So, this is something that like a lot of people in the mainstream media don't really talk about, especially people who wrote things like Too Big to Fail.
Yeah.
Andrew Sorkin over the New York Times doesn't seem to really get because they then look at the financial crisis and say, well, that had nothing to do with Glass Steagall being repealed.
Well, it did because the result of the big banks that already had all those deposits being able to do more funky trades and more speculative trades meant that the other banks, like Goldman Sachs, like Merrill Lynch at the time, like Bear Stearns that blew up, like Lehman that blew up, they didn't have that book.
They didn't have the people's deposits.
That's not how they were structured.
They only did the funky stuff.
Uh huh.
So, in 2004, a few years after the 1999 repeal, Hank Paulson, as the CEO of Goldman Sachs, goes to the SEC.
He'd been there before, but gets them to basically pass this notion of these particular banks, like Goldman Sachs and Merrill and Bear Stearns, to be able to use their bucks in a different way to leverage them more.
So, to borrow against what little capital they had more in order to do more speculation to be able to compete with the big banks that could do more because they had the deposits behind them.
So, all of a sudden, you have these investment banks that don't have our deposits that are taking more risk because the SEC says they can, or they say that these banks can report to the SEC their risk and take their word for it.
They're taking more and more risk.
Big banks are also taking more and more risk.
So, that was the result of this competition that was unleashed after Glass-Steagall's repeal.
Yes, banks merged, like JPMorgan Chase merged, became JPMorgan Chase.
Citigroup was.
Solomon Smith, Barney, plus Travelers, plus Citibank.
I mean, things merged and became bigger and harder to regulate and harder to figure out what they were doing.
But also, these two camps started competing with each other to do the most crazy esoteric stuff in their own ways.
That ultimately was the sort of backdrop for the financial crisis.
Yeah, yeah.
Well, that's very interesting.
And of course, you can see those links there to the Glass Steagall Act when they repealed it.
And like you're saying, suddenly anything goes.
But one of the interesting things about that, when you look back at this period, is that suddenly derivatives enter the picture in this major way and eventually will wreak havoc on the system.
Derivatives came into play because they could be contracted, particularly credit derivatives, outside of sort of the bank's own balance sheet.
So a company like Goldman Sachs could create a security with subprime loans and all sorts of other things stuffed in it, and they could get it rated very high.
Derivatives Wreak Havoc00:13:06
Highly by a rating agency, as they did, you know, these AAA ratings for pieces of that new security, mostly because they could get it what was called wrapped or secured or will take the hit by insurance companies that were rated AAA like AIG.
Right.
So Goldman or Romero, whomever are in these relationships with AIG, where because AIG has a AAA rating, which they don't, they say, look, you know, we'll create this stuff.
You guys give your stamp of approval on it, your AAA.
So that AAA is going to filter through and make the whole security look better.
Wow.
So that's how those insurance companies came in.
And then when that all started to fall apart in the fall of 2008, and Goldman and so forth went to, or went to, they were already part of you, Hank Paulson and sort of Ben Bernanke and the Tim Geithner team, and said, look, you know, we have a problem.
What was really happening was AIG had a problem.
AIG couldn't pay back.
What they had said they would pay back, they had said, we'll guarantee this stuff.
And then they realized, oh, shoot, we can't guarantee this stuff.
It's declining really fast.
We cannot pay enough to guarantee it.
We don't have the cash to guarantee this as fast as you want it from us.
Okay.
So that was the problem.
So Goldman wanted their cash back.
They had these guarantees.
So the only way to get it back was to either get directly from the government, which they didn't do.
They got AIG to get bailed out by the government.
And identically, the amount of bailout that the government did.
For AIG went to Goldman and Merrill and other companies that had engaged with AIG in this manner, where AIG was their guarantor, but then couldn't do it.
So then the government did it.
So that's basically how all of those things tied in together.
Now, those practices are still going on.
Right, right.
Now, how unusual in the history of the financial world was the bailout?
That's a good question.
There have been bailouts in the financial world.
They started in Well, they were not after the West Eagle Act was passed in 1933 until the mid 70s at all.
And in the mid 70s, the first bailout happened because what's now Citigroup, Citibank at the time, and other banks, Chase at the time and so forth, had loans out to something called Penn Central, which was this conglomerate company that had interests in all sorts of different things from trains to financials to theme parks to sort of everything all wrapped in one.
And you couldn't really see what they were doing.
These banks had loans out to this company and they were going to go bankrupt.
And so a group of these bankers went to Washington and said, We need this to not happen.
And Nixon, under the guise of national security as the reason, bailed out the companieslash these banks that had lent money to the company and would otherwise have lost it.
So that was sort of the first like break where they realized, you know what, we can kind of go to the government and get our loans fixed that we took the risk on.
But we have so much money.
It was like a $500 million amount, which was huge at the time, outstanding, that we don't really, if we can find a way to work around this, then great.
Now, Walter Wriston, who was head of what was Citibank at the time, National Citibank, which became Citibank at the time, a lot of these things went through many name changes over the years.
Oh, yeah.
In my book, it was like what year were they called what because they merged.
Right.
But he and David Rockefeller, who was head of Chase at the time, basically were leading this force to say, You know, we need to sort of get some help here.
And they realized they could get it.
And then they did the same thing with a deal with Lockheed Martin under national security.
If you don't bail out Lockheed Martin, it was also under Nixon around the same time, then that's going to create this whole cascade effect and that's going to be bad for national security.
So, under the skies were a couple of the first bailouts.
But then they got really big in the 80s because, as a result of other things that were going on in the 70s, which is these same banks were discovering their relationships within the Middle East and that oil could make them money.
And what was called petrodollars, or the sort of link of getting dollars for basically the profits of petroleum, were were monetized in dollars, they could take that money out of the Middle East who they were having all these partnerships with Middle East financial entities and use it to lend to Latin America.
So they basically recycled what they call, that was the word they used, they recycled this profit from petrodollars.
This is outside the United States through their offices in Latin America to basically indebt countries in Latin America.
So they were basically lending and therefore getting interest and Securities and private collateral and commodities and all sorts of things out of the countries in return for giving them money at these rather harsh terms.
And so when it turned out that these economies could not support these harsh terms, they started wobbling and whispers of default happened.
And so under Reagan and then also under Bush, we started the major Latin American bailout, which is what it was called.
It was actually the Latin American lenders bailout, but that's not what history calls it because what happened was the government.
Found ways and also used the World Bank and I to find ways to support the countries in a way that gave the money back to the banks that had lent them the money.
Right.
So it looked like they were supporting these countries, but in fact, just like with Penn Central, they were supporting the banks that had lent them the money.
It's the payback.
It's the payback.
So that was bigger.
So that bailout was bigger.
And then there was a Mexican peso crisis because that didn't fix things in Latin America, it didn't fix things with Mexico really.
It was just sort of papering over into the banks, not into the countries.
Okay.
And so in 1994, there was a Mexican peso crisis under Clinton.
At the time, he said that was the biggest crisis of his presidency.
When he looked back at it, it was the biggest financial crisis of his presidency.
Robert Rubin was Treasury Secretary at the time.
Goldman Sachs had deals extended to Mexico at the time and other things.
And there was a congressman, the name escapes me, but it's in my book, who basically called Rubin out on this in Congress.
And there was an investigation into whether there was too much conflict of interest with Goldman Sachs.
And of course, Rubin was like, no, Has nothing to do with Goldman Sachs.
I mean, even though it's just there minutes ago, no, that has just nothing to do with it.
This is about something else.
And so the government came up with a bailout for the banks that had lent money to Mexico in the wake of the Mexican peso crisis in 94.
So it just kept going.
And then we get up to 2008 and we have a massive bailout.
So it wasn't the first bailout that had happened in those decades, but it was like completely epic in terms of size and scale, the number of banks, the amount of money, the types of ways.
They got money from Congress, from the Federal Reserve, through different loan agreements, all sorts of different ways were come up with to support basically their bets through the credit derivatives market against these subprime loans and all of the sort of manifestations of how they created assets around them.
Now, Nomi, do you think of the 2008 crash as an intentional act, or is it really the bad outcome of risky and reckless decisions that they were making over a period of time?
I mean, I think it's more the latter.
It was a bad income of risky decisions, but there was the moral hazard there of knowing along the way that there could be an out.
I don't know if any of those firms actually knew how much they were going to get bailed out from the government.
I mean, they scored huge.
Wow.
But I think that given the sort of history and the sort of same people, you know, the Rubens, the Paulsons, everyone who's sort of involved in this circle, that there was some indication that if things went bad, they would be bailed out.
But I think it was different.
It was more like this was a game that was working.
This was a game where they could basically take these loans, buy them up, repackage them, get someone else to insure them.
Make money on each side, sell them to countries and pensions and everything else, make money on that, and basically take chunks along the way on these very non transparent issues that had been rubber stamped as AAA by rating agencies.
So the banks were like, why not?
We have a balance sheet.
We were deregulated.
We have the balance sheet to do this.
We have the sales force to sell this stuff throughout the world.
There's a lot of money in it.
It's not particularly transparent, which means in Wall Street, the less transparent it is, the more money there's in it.
And so that was just a game that kept going until it couldn't go.
And I think that's what happened.
And it all stopped around the same time.
It started in 2007 with the collapse of Bear Stearns and then Citigroup, who had extensions to Bear and so forth, coming up and asking for money to support their positions in 2007.
And then it festered another sort of year, year and a half into the fall of 2008, because Bear Stearns collapsed in the spring of 2007.
So it took a while to get completely public.
But the banks all along that time were finding themselves choked.
But until that happened, and even in the beginning of that, they were still trying to sell these securities to anyone who hadn't heard that there was a problem just to get rid of them.
Fascinating.
Well, Goldman Sachs was famous for that, right?
What they did is they bet against their own investors, right?
Well, they bet, and they say that was just them doing business.
But yes, they bet against the investors that were assuming they would be on the other side, they would be aligned on this trade.
And of course, they weren't necessarily aligned and they made money on that deal.
But then also, you had the other type of thing, which is like Citigroup salesmen going into tiny towns in Norway and Convincing little local banks that they should buy these AAA assets because they're good deals when they knew it was hemorrhaging daily as they were having these conversations and winding up having small municipalities and so forth holding these bags, which they still are.
I mean, there's still lawsuits going on about this stuff all around the world because the sort of least equipped to understand what was going on places were the ones that were like last in line to get the stuff as it was really going bad.
Right.
And in some cases, they borrowed money from their own municipalities.
In order to be able to buy these great deals.
So, like, they're hit twice.
The deals go sour, and they have to somehow repay money that was going to come from these deals that they borrowed to buy them.
So, everyone's kind of screwed all along the way.
So, I don't know that it was intentional, but what was intentional was to make it continue as long as possible, knowing that it was already failing.
That was intentional because you see the position shrinking, you see the value of these securities going, you know that, you have the data, which publicly is not available, and you're still convincing people to buy it.
By withholding information, whether it was in the case of Goldman Sachs with the abacus deal, not telling people who were buying into the fact that these securities would actually go up in value because they had someone big on the other side slamming them down.
That's an omission.
Whether it's a Citigroup guy going into small towns and saying, hey, this stuff is really great.
Look at these spreads.
You'll get such a great return.
This is wonderful.
Knowing it was deteriorating.
That's all.
So that part is all absolutely specifically done to move the risk, to move the loss away from.
The books of banks into the places that don't know what's going on or didn't know what was going on at the time.
And so that is definitely orchestrated.
That is known.
That was something that happened in full knowledge.
Now, these banks went to Congress and your bankers and said, No, that's not true.
We didn't know the market was going to fall apart.
How could we?
Yes, they knew because they have the core data.
They see things not getting repaid.
They know from the reports that the extent to which it was failing and failing quickly.
All this is known.
Huh.
But Congress was like, oh, okay.
Oh, they took their word for it.
Sure, of course you weren't profits.
Sure.
But you didn't have to be.
I mean, this stuff was happening.
And people were writing about it.
I was writing about it in 2007.
There were people before that, but I mean, there were a lot of sort of smart journalists who were trying to point this stuff out between 2005 and 2007.
So before it even all started coming apart, that things are overheated, that you're starting to see foreclosures, that these securities are related.
Things that were apparent and that were ignored by regulators.
They were ignored by the New York Fed.
They were ignored by the Treasury Secretary.
They were consistently ignored by anyone on the political side.
Evading the Volcker Rule00:14:21
And that sort of fit anyone on the banking side because they had their best years as it was gearing up, and even in the final year where they were trying to get out before everybody else noticed.
Right.
The amazing thing that happened after the crash and the bailouts were these outrageous banker bonuses that these executives got.
And the juxtaposition between that and people being thrown out of their homes because of the bank's mortgage deals.
So, somehow, in the clash of those two worlds, these bankers looked so greedy and absurd that it was almost like what's left for these guys?
A firing squad?
So, we had these material omissions from the investment banks when they were selling these securities to their clients.
Now, let's talk about the proposed financial reforms.
When Obama got in, everybody said, good, this guy's going to clean up Wall Street.
But what actually happened?
Well, he didn't.
I mean, ultimately, these banks got bigger in the wake of the crisis.
The big six banks Goldman, Morgan Stanley, Bank of America, Wells Fargo, Citigroup, and JPMorgan Chase all got bigger as a result of the crisis.
They were subsidized by the government, they were subsidized by the Fed buying their securities.
JPMorgan Chase, which is Obama's banker, aside from the fact that he had been on, I think the view it was, saying how Jamie Dimon is sort of one of the greatest banks.
The greatest bank in the country, he happens to have a million dollars of his own money or so, more or less, with JP Morgan asset management.
So, not only does he like the guy or does he sort of approve of him publicly, his own money is there.
So, there's definitely a tight connection with JP Morgan Chase just on that.
Oh, yeah.
Goldman Sachs, of course, as I mentioned, had been his second largest donor in the 2008 campaign.
Robert Rubin was very instrumental in his people and sort of helping him to attain the presidency as well.
So, there was a lot of that going on.
But in the wake of the crisis, all of these banks benefited tremendously.
And in the wake of the crisis, they all still enjoy a very strong position in their derivatives trading.
The top six banks control about 95% of all derivatives trading in the United States of U.S. banks.
And almost half, 46% to 47% or so percent of global derivatives trading is done by our biggest six banks in the wake of the crisis.
Whoa, 96%.
It's between 95%, you know, give or take.
That's up there.
Not transparent.
Of the United States.
That much, though.
Wow.
Almost half of the world.
And it's a similar statistic of 97 or so percent of all trading assets.
So, if you pile in things that aren't even derivatives that trade, these big six banks control that market.
So, you're talking about a very sort of expansive control of the riskiest part of the financial system in the hands of these six banks in the wake of the crisis.
And they were certainly big beforehand, it just happens to have grown.
But it was their irresponsibility, really, in collaboration with others that caused the crash in the first place.
So, it seems like a strange reward that they're bigger now somehow.
Happened under Obama.
Now you go back in time to when FDR, for example, broke up these banks.
It was certainly a different time.
We had a Great Depression.
This time we had a Depression, but it was all measured differently.
So it's still hard to know.
A lot of things, a lot of data got massaged recently.
Right.
It wouldn't get massaged, but the technology wasn't as good for massaging it back then, let's just say.
Well, you call this the Great Recession, right?
Right.
But worry about it.
I mean, it was negative, but at the time in the Great Depression, we had a president who was very close to Wall Street.
I mean, FDR was his father.
And JP Morgan created the Metropolitan Club in New York City, where all the bankers and politicians of their day and sort of the elite classes, and it still exists today, could hang out.
You know, these were very entwined families and individuals.
So it wasn't like he came from outside of this tight circle.
They went to school together and so forth.
But he realized when he came to office that the country needed more confidence in its banking system, among other things.
And that was part of the reason he was behind Glass Steagall, which was something that was already percolating under.
His predecessor under Herbert Hoover.
So it's not like Hoover did nothing.
He did try because something needed to be done.
And I think it's important to know both the Republican and Democratic president were both trying.
It passed, the Glass-Steagall Act passed under FDR to separate these risky activities from people's money.
But also, something that I discovered when I was working on all the presidents' bankers, which I did not know, and I've been writing about this stuff for like a decade beforehand, is that two of the biggest bankers at the time in the 30s, Winthrop Aldrich, who became part of the Rockefeller country, who Ran Chase at the time, and James Perkins, who ran National Citibank at the time, which has become Citigroup, they both offered to split up their banks before Glass Steagall was passed.
Winthrop Aldrich took out a front page article in the New York Times to say why that was necessary.
James Perkins told his stockholders it was going to happen regardless of legislation.
Winthrop Aldrich helped FDR in Congress convince the Congress people that were on the fence that this was necessary.
So the difference.
Of leadership and collaboration at the time to do something that made sense, you know, to create stability for the country at the time, completely didn't exist in this Obama world.
Yeah.
Well, you actually had sensible bankers back then in that period who wanted to save the system.
Right.
You had sensible, more sensible bankers, but you also had a leadership that knew how to sort of engage.
It was a bit of a quid pro quo event.
They were sensible, but also FDR gave them.
It kind of made them feel good.
I mean, you know, they were friends.
They knew each other.
It was kind of like, look, hey, you be my guy in Congress.
So there was also a sort of a keen political talent going on there and desire that just didn't exist under Obama.
So, though he was talking about, you know, get the big fat cats, and we're not going to get them, but, you know, whatever he said about fat cats.
I mean, he said stuff like that, but in the final outcome, yeah.
Well, you do an excellent analysis and critique of the Dodd Frank Act, which is what got passed under Obama to supposedly restrain the banks.
And I think you refer to it as toothless legislation.
Yes.
Because it doesn't really go to the core.
It's more cosmetic.
It's completely cosmetic and it gives the banks something to complain about, which gets picked up by the press.
Oh, we have too much regulation.
This cost is going to come on the back of our customers, poor little customers who are already getting nothing on their deposits because we have zero interest rate policy at the Fed.
So no one's getting anything from banks.
They're not paying more than they should for anyway.
But banks are saying this little, I call it a very little legislation.
It's very long.
It's like 828 small type pages, or whatever that was in actual pages.
Very, very long legislation that everybody had a piece of.
And ultimately, whatever it says, the result is these banks are bigger, have as much risk, and have as much market share of the riskiest stuff as ever before, or as more than ever before.
So the details don't matter after that.
Right.
So there's debate about the details.
And one of the things that sort of generally annoys me is when you have politicians, and they tend to be Democrats because President Obama was Democrat, but the party doesn't actually matter, but who say, oh, you know, we have this.
So the Democrats are like, we have this.
This isn't perfect, but it's.
You know, it's good and we passed it and that's awesome.
And the Republicans are like, no, it's too onerous.
It's not good.
And the reality is that they're both getting it wrong because it just doesn't matter.
It just doesn't actually do anything one way or the other.
So they're both sort of arguing their side over something that hasn't fundamentally changed the system.
I see.
It's just semantics on top.
They're just arguing about the language of the thing and it hasn't been effective.
Well, you mentioned this about the vocal rule also.
It's just sort of something that's easy to get around.
The Volcker Rule was meant to be the trading component to sort of make sure that banks couldn't trade their own books, so technically couldn't trade against their clients or whatever, or take risks for themselves.
That anything they did had to be in the capacity of facilitating a trade, which was how the language ultimately came out.
So, again, supporters of the Volcker Rule say this is great.
See, banks have to get rid of their trading desks that just trade their own stuff.
They have to go back to just being sort of a middleman.
But the reality is.
Most of what they did was being a middleman.
Right.
It's so easy to sort of trade along the way to say, hey, I'm going to hold this part of a position until this other part of a position builds up because I might sell this, or because I have a customer who might buy it, or I have a customer who might sell it.
I mean, there are so many ways of getting around if you have the ability to trade and you have deposits or assets or government support ultimately behind your trades because you're still in the same institution that the Volcker rule, again, cosmetically changed maybe a couple traders.
You know, left or went into hedge funds or whatever.
But the reality is, it didn't fundamentally change the ability because it had so many omissions to it.
The Volcker rule, whatever the number of pages was, about like 80% of it was exceptions to the rule anyway.
So if you physically count, I have a piece on my website somewhere, but if you physically count the pages that were exceptions versus the pages that were rule, there were many more exceptions anyway.
And exceptions related to, you know, for trading government bonds, for trading municipalities, if we're acting as, you know, the broker, if we had, you know, if it's raining on Tuesday, you know, whatever it is.
You know, there's so many omissions in there that there's almost nothing that wasn't done that can't still be done.
Yeah, yeah.
Oh, that's fascinating.
Well, it's a very dangerous position, too, because a lot of people think, well, you know, that happened and they cleaned it up and, you know, the Dodd Frank Act, great, you know.
But of course, like some of your great research has pointed out, it hasn't really changed anything.
Now, how about the Fed's role in all of this?
You know, where would you see Because really, they had a big role in making this bailout happen and how our money got sort of sent overseas to support those banks.
Can you tell me a little bit about that?
Well, part of the bailout that was kind of focused on by media came from Congress, but the major bailout did come from the Federal Reserve.
It currently has a book of $4.5 trillion worth of assets doing nothing.
You know, 1.7 of them are mortgage related assets.
And that book, that $1.7 trillion of assets doing nothing, which were basically mortgage securities that the Fed chose to buy to give money to the banks that created them because they couldn't sell them to anyone else but the Fed, that book.
As being managed by JPMorgan Chase.
Oh, that's interesting.
The Fed is paying JPMorgan Chase money to manage the assets it bought from banks, including JPMorgan Chase, and for which they gave them funds to do other things with.
So that's kind of what we're dealing with.
And the other two and whatever trillion is of treasury bonds that didn't need to be created because they're not doing anything.
They're just sitting on the Fed's books.
But by creating debt and by buying.
Securities and putting and printing money, or as you call it, or what someone calls it, or putting money into the system, into these financial behemoths to do this.
The Fed basically created this appearance of liquidity where it was just fully artificial.
It wasn't like there were profits that were going into taxes that were then being used to do anything productive.
I mean, this was all just sort of money to a large extent created out of thin air because they could.
And it was the most epic amount of Fed.
Support that had ever been given, has ever been given.
If you add up any Fed support from any year altogether since the Fed's existence for the financial system, I mean, we're now going on almost seven years of this policy.
So we can see the ZERP QE policy was almost like a gift from the Fed to the banks that keeps on giving.
Now, when we come back, we'll go deeper into the global ramifications of the Fed policies.
We'll be back with bestselling author Nomi Prinz.
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And we are back.
This is Dark Journalist with financial expert Nomi Prince and her recent book, All the President's Bankers, now a bestseller.
And the paperback edition is also now available.
So this is really just a great read.
Now, Nomi, you were describing the Fed's role and the implications of their policies.
It sounds like they had quite a hand in this new debt leveraged world.
The Fed had a tremendous role in this, and it's become a global policy.
So the ECB, the European Central Bank, which is the European component of this whole sort of global let's support the banking system and pretend it's supporting the economy policy is doing the same thing.
I mean, it's still buying bonds from large players that were also helped by, for example, the AIG bailout and things the Fed was doing, like Deutsche Bank.
So now, just again, six, seven years later, we have the ECB paying money to Deutsche Bank, which was one of the recipients of Fed money and AIG money.
They're all still the big players.
To buy what's called covered bonds, which are basically assets with like mortgages or whatever behind them.
Uh huh.
Europe's Debt Peeling Away00:15:40
That's not helping the people of any country.
Yeah.
And yet, the policy seems to be accepted and pushed, and the ECB is able to create this cash to buy these covered bonds from banks.
So it's the same thing under a different name.
Exactly.
And the perception of, or the pushed perception that the government and these central banks want people to believe is that somehow this is helping the economy or helping real people or something.
And it doesn't, even if you think about it logically, creating money.
To buy securities from banks that are otherwise imploding or insolvent or just faltering, there's no reason that should help the economy.
And yet, that's what all of these leaders are saying.
It's just the bankers helping the bankers with our money, basically.
Well, it's the political financial establishment.
It's that collaboration that exists between governments and bankers and central banks that's helping the banks, that's not helping the economy because the banks are effectively sitting on a lot of that money.
So, it's not even like because they're getting money at 0%, it's filtering into more small business loans or reducing people's credit card rates or any of the things that could be done to actually help benefit financially other people the way it has benefited banks.
Because there's no strings attached to any of these policies.
There's no strings attached to the Federal Reserve buying mortgage assets from any of these banks at full value and saying, all right, well, we're giving you full value.
We know or we should know it's actually only worth like $60.
60 or 70 cents.
So, you know, you're going to take that 30 cents and you're going to somehow subsidize your customers in a sort of knock on way.
There is none of that.
And so these policies really stopped at the doors of these banks.
Amazing.
It's really amazing.
Now, would you say that the danger then exists since we never fixed, I think you call it kind of a hole in the upholstery or something along that line?
There's a hole in the structure and we sort of papered over that hole a few times, but actually, In the grand scheme of things, we're in the same position that we were in in 2008, or worse, in a sense.
Yeah, I think we're worse because of the plastering over.
So, you have a hole in the system.
You have assets that were created that devalued but were rubber stamped and for which money was given into the system from these central banks, for which the governments were all happy with that process.
So, it's not like the assets got better.
It's not like the process by which they were created to begin with has changed.
So, that's one thing that's still going on.
And then you have the fact that there was so much cheap money pumped into the system that we have these artificially high stock values.
And we have the major corporate clients, major multinational companies who have issued more debt in these years because it's a smart thing to do.
It's very smart to issue debt for which you have to pay very low interest.
It makes sense.
But so they basically take more debt on their balance sheets and then they use some of that cash to buy stock.
We've had the last few years have been some of the biggest in terms of corporate stock buybacks.
So you have this money that sort of filters.
Into the banking system gives it the appearance of solvency without changing anything.
And then the only place it also sort of goes is to the large corporations who then also put more debt into the system, more private debt and more corporate debt into the system, and then also buy back their shares to make it all look like they're very healthy as well because their shares go up.
And so that we didn't have going into the financial crisis.
We just had sort of the over leverage and the bad securities and selling situation.
Now we have it being all backed by all of these additional trillions of dollars and policies from central banks and governments.
So it's like we've kind of made the situation worse by giving it the appearance of things being fixed by virtue of Obama or whoever.
Look, look at the stock market.
It's doubled since I got into office, and that's true.
But nobody's salary has really doubled, or at least not of most of the country.
So there hasn't really been a correlation.
Between where this cheap money has gone and the overall foundation of the economy.
So I just think we're in a worse position.
It's just that we keep pushing and plastering over.
And that could continue for a long time.
I mean, the amount of plastering that's been done has been so epic anyway and unimaginable anyway that it can continue a little bit longer.
But it's not really fixing the core problems in the financial system or in most economies.
Let's take a look at that for a minute.
Now, so the government would turn around and say, this administration would say, well, we've got a better stock market.
Unemployment is lower, although we know, in fact, there's a much higher unemployment rate because they've sort of changed the way that they calculate the numbers in the last 20 years.
But so they would say these things and say, you know, we're on a good course.
Last year was 2.2% economic growth, not very good.
And the first quarter of this year, they just announced on CNBC, it was 0%, 0.4%.
And that's with seven years of.
Propping it up.
Yeah.
Absolutely.
So it's amazing, actually.
And a lot of the jobs that they create are sort of part time Mick Jobs, as they say.
So, really, you know, what's going on in their head?
Are they thinking, well, we'll keep this game going as long as it'll go?
Or what is it that's going to break it?
Because, of course, once they stop, there has to be a point at which they stop the interest rate game with the zero.
And they have sort of announced that they're tapering off, but you actually don't think that that's legitimate.
Well, they announced that they were going to taper.
And what's happened since then is that the banks have been buying the Treasury bonds to sort of make up for what the Fed isn't buying.
So, on a net basis, rates are kind of staying within the same range, and the Federal Reserve policy is still to keep them where they are.
Yeah, every sort of month that the Fed's supposed to talk about its meeting minutes, there's all this are they going to raise?
Are they not going to raise?
Are they going to raise by June?
Are they going to raise by the fall?
But in the background, the debt.
Is still being bought, which means if you buy the debt, it keeps, you know, the price of the debt, the price of the treasuries go up, the rates stay down.
That's how that whole quantitative easing game works.
It's just sort of been passed on to the banks doing some of the work of the Fed and the ECB, who's just doing it specifically in Europe as other banks are coming into play too.
The Central Bank of Japan has its own version of easing and so forth.
So, you know, that continues to happen.
Now, if it starts to move up though, because there's only, At some point, I do feel it has to stop.
The ECB's plan is supposed to go on, for example, into 2016.
So they're going to continue to buy bonds into 2016.
So there is some semblance of this big bank out in the world buying stuff.
And that does give a boost to all of the markets, believe it or not, because it's a lot of money funneling into the system that really has no reason to be there.
Yeah.
Economic reason to be there.
No long term sort of growth reason to be there.
So that kind of keeps a little bit of a prop up.
And I think politically, The Obama administration just wants to get out of this before things crash.
So, you know, to say, look, hey, he just might make it.
He makes everything, right?
The market's up, unemployment, all these sort of big stats.
We did the right thing.
It was all great.
Everybody's solid.
And like any political administration, you just want to get out before things get worse because you don't tend to get elected when things are bad.
And your party doesn't tend to get elected when things are bad.
And that's just how it works.
So politically, I think there was always this idea of trying to push it as far as one can into that term.
And so I think even if the Fed does raise rates by a quarter of a basis point or whatever, it's not going to be a tremendous real rate raising exercise that's going to happen between now and the election.
Right, right.
Well, I think that's very interesting that you've said that they're basically moving the entire process out of the Fed and into these other banks.
This money that they haven't used for, they're very capitalized, these banks, because they did have the gift of, you know, think about it, they did get rid of a lot of assets for far more money than they were worth.
Number one, because of the Fed, and number two, because they were priced much higher than they were worth, they could price what they didn't sell much higher.
Because they can be like, look, that asset that just went out the door at 100 cents on the dollar.
I got like the whole rest of my book is like that.
It's all 100 cents on the day.
So there's just by virtue of things being scooped up at higher than they were worth, allows these banks to sort of magnify the value of what they keep.
Right.
To higher by just saying it's like that stuff.
So there's a lot of that going on as well, still.
Well, that's very interesting.
Now, I know it's very tempting for people when they interview you to say, well, when is the financial crash going to come?
And I don't want to do that.
What I want to do.
See, I know that you can look at this economic picture that's out there and you can see it realistically and give an accurate assessment.
So it's more like you feel that we're actually in a more vulnerable position than we were in, say, 2008.
You know, now whether or not that system collapses, it's not that you're predicting on X date the crash is going to come, you know, a new Black Tuesday.
It does seem, though, that your real assessment of the situation.
Is that it's a very fragile, vulnerable financial system now, and in a way that is worse than in 2008.
And we saw that 2008 almost took the whole thing spiraling down into oblivion.
So, would you say that's an accurate assessment of your position?
Yeah, let's have you on.
And what I've been saying on interviews and stuff is that a few years ago, I would have said it was going to crash because the illogic of all of the various QE and ZERP and global policies relative to.
Economies that were in such a faltering position, and the fact that banks were getting all this money in and not just not lending it out, not helping to restructure, not helping to create better terms for individuals on any financial service, was going to have to give.
But the fact that it went beyond that, that the ECB took it on as doing more quantitative easing, that we have a global quantitative easing thing going on right now, and that's this whole race to make money worth zero, had made me rethink.
Whether there's going to be a crash or whether it's just this very, you know, as you used a good word, fragile system that has the ability to crash, but is more likely to have moments of increased volatility going on right now because these programs are kind of coming to an end, even though there's some stopgaps that are sort of trying to squeeze all of the bits out of them.
At some point, you can't go much below zero.
Right.
So, globally, so there is still this.
Squeeze out of these policies going on.
And as long as that's going on, but no one knows what's going to happen when it's over, there's going to be a lot more volatility in the market, a lot more risk to the market because it is so fragile intrinsically.
And that's going to create these sort of spills downward.
So I still believe it's going to start to unravel.
I just don't know that it's going to unravel in a bang.
It's going to be much more sort of lots of up and downs.
Like we're going to go down and down.
Oh, the ECB bought some bonds.
We're back up.
You know, that kind of thing for a while until the juice of those policies.
Really is squeezed out.
And so I do think it's going to be negative.
There's a lot of vulnerability, but rather than the crash that we saw, it's going to be a lot of mini kind of crashes.
I see.
And maybe a kind of general depreciation of the value of our dollar.
Right.
I mean, the dollar, that's something that people are obviously very interested in.
It's the major world reserve currency, it's very powerful.
The US created the policies.
That everybody's following right now.
If the US hadn't done Zerp and Huey and decided that was really great and hadn't exported it to Europe and that hadn't gone to Japan, that might not be happening.
So the US was this leader in a really bad policy, but because it was the leader, the dollar has continued to enjoy the benefit of being sort of the best in a bad class.
Sure.
Which is why the dollar has stayed strong.
I mean, because we were just first and biggest and already from a position where the dollar was preeminent.
So all those things together.
Even though the idea of printing money, the idea of creating debt, the idea of our debt going to over 100% of GDP, none of that should be good for our currency.
But on a relative basis, because we've gotten everybody else to follow along, the dollar maintains its strength.
But again, when these things start to taper off, when there starts to be nowhere much below zero, central banks can go, when the problems of the actual economy start to continue to get worse, that's when.
Also, the dollar falters.
So, this whole idea of volatility and a sort of downward slope is also what will take the dollar down a little bit as well.
But because we're not at that point yet, it still maintains its strength.
So, you think that something, you know, sort of like a big occurrence, like a war or something along that line, could be a trigger in a vulnerable system?
It leaves us more vulnerable to an international incident in the fence.
Well, it does.
But I mean, if there is a war and if they're, you know, say the US and Europe are involved in it, Europe still gets the bang on the euro.
Before the dollar gets the bank.
So we still have that sort of best in a weak class.
So the slow burn down or the sort of volatility and burn down is what's going to move the dollar down.
I think even if there is a major international incident, again, because if it is international, everyone else is involved as well, the dollar is going to look safe and good relative to other currencies.
So it'll really be taken down by.
The slow peeling away of these policies may be related to other international incidents, but the incidents themselves won't, I don't think, take the dollar out or take it down substantially just because of, yeah, it's being propped up by a lot of fictitious stuff, but it's been working.
Right.
Now, if you were to look into the future, and I know you've done a really excellent job over the last decade or so in accurately analyzing where the trends are going, and really in this economy, I have to say, not a lot of financial people can really say that.
So, it seems like you have a great sense for what's happening out there in the money world.
The Petrodollar Narrative00:07:48
So, my question is since the dollar is now largely a petrodollar, it seems with innovations in energy and technology that this is going to need to change.
So, the oil economy can't last forever.
So, where do you think they can peg the dollar to moving forward?
You know, what asset is going to emerge to take the lead?
And, you know, could it be food, perhaps, or agriculture?
Maybe where is this dollar going?
And what global asset can they tie it to?
The thing with oil is, and even though it's obviously gone down recently in price, it has political value.
And that's part of why it's been pegged to the currency.
It's been related to the ascent of the power of the United States, aside from the dollar and its relationships in the region, in the Middle East, and so are the banking relationships.
So I don't necessarily see the peg falling.
I more see other countries coming in and trying to take away.
From some of the dollar supremacy by creating their own trading or currency partnerships, like the China Russia partnership or so forth, where other things might be pegging away at the dollar from the outside as opposed to the dollar necessarily shifting how it's valued.
And just the fact that, one thing is, but it's also the fact that because the US has created such a large creator of debt, and because so many countries hold our debt, I mean, China and Japan are the top two, but so many countries hold our debt, there's dollars.
Proliferated out that are sort of debt attached now.
And the reason that they have value is because if these countries really sold off those bonds, that debt, to depreciate the value in that way, they would be taking a hit on the bonds.
Right.
So, in a way, it's moved a little in this whole policy, particularly in the last seven years.
I think it's moved a little bit into also being related to how much debt there is in the world and how much debt the United States has out with some of the major countries.
And the fact that there is this necessity, even though they might not like it, to support the dollar by holding the debt because otherwise, again, the whole value of the debt they hold is going to decrease.
So, to that extent, there is something else that the dollar is pegged to.
It's not real, but it's.
I see.
Yeah, it's the perception then.
And it's debt.
Right, right.
Well, it's really interesting when I think about the mentality in that financial world.
And, you know, you've been there in the heart of that powerful system.
Working in senior level positions with these top firms.
And it's always the mentality in that upper echelon that I think is hard to fathom.
You know, we've all heard the story of the kamikaze banker and the way some of these people operate is shocking.
But what do you think is going on in their heads?
I mean, is it just win and crush anyone who's going to be in your way, even your own clients?
Well, yeah, I think there might be a little bit more carefulness because, and I don't think they want to blow up.
I mean, I think there's still a balancing act between what can we get away with.
And who's going to support us if things go wrong?
I mean, we've had so many fines and settlements on the legal side for just a host of various frauds that if a real person committed them, they would be in jail for like many lifetimes, right?
I mean, money laundering, LIBOR fixing, FX fixing, I mean, just mortgage lack of transparency or fraud.
There's so many things that the major banks have been hit with and paid for just in settlements without admitting that you kind of.
The lesson is that this stuff's kind of okay.
Yeah.
It's okay beyond a couple of fines and a couple of uncomfortable meetings between lawyers.
Right.
And that could just be the cost of doing business.
Oh, I paid a fine.
And it's a little cost if you know, especially in the wake of this crisis, that there was such a high level of support for your institutions.
So it's not so much they're trying to hit a wall and see how fast they can go before they crash.
I think it's much more of an awareness that you can continue to push the envelope until and if something goes wrong, and at that point, deal with it.
So you're not trying to make it go wrong.
You're trying to just push and push and push and find loophole and find loophole and find loophole.
And then if it does, yeah, then you have to deal with the uncomfortable settlement, but nothing intrinsically happens to anybody or to the institution.
And why do you think it's too big to jail?
Is it just because those political alliances are too close?
Yeah, I definitely think it's a political alliance, a historic alliance.
The idea that the power infrastructure of, particularly the United States, because it's a very close association between the banking industry and the White House and Treasury Department, Washington in general, is so tight.
That you don't tend to jail your friends.
And so rather than trying to find the actual criminality, you know, there's some processing, there's some investigation, but nothing is actually found, and then cases are dropped or settled.
And that's a leadership issue, and that's a relationship issue.
Right.
Well, you make good examples in this case.
One is Bernie Madoff versus John Corzine.
Right.
And in that case, Bernie Madoff basically, you know, committed this Ponzi scheme.
And he went to jail, all right, and suffered for it.
But Corzine, who basically did the same type of thing, is now back running donation parties for Obama.
Right.
So, again, it helps to have friends.
I mean, and also then the narrative starts to change.
So, in MF Global's case, in John Corzine's case, it's like, yeah, we misplaced a billion and then we found it.
And yeah, we used it in the wrong spot, but we didn't know.
Like all this sort of back and forth language.
And ultimately, the media moves on, the Justice Department moves on, it all gets dropped.
Whereas in Bernie Madoff's case, Case, it's much easier to like, and he was a villain.
I mean, you know, it's easier to stay with him and look at the jail thing and look at his sensational thing because he's not actually, he wasn't actually associated with power.
So it's like if you're associated with power, particularly financial power, it protects you.
And yeah, Obama or Hillary needs John Corzine as a friendship circle to be one of the many circles of campaign contributors because it's not about just the physical dollars, it's about the circles.
Sort of the expansion of their power base.
Now, why do you think the media doesn't cover the financial story, the real story?
And do you think it's the similar type of playing up to power?
Because they certainly have had the facts, but they show very little bravery.
Yeah, I think they buy the narrative.
Some places are braver than others.
Like I think Bloomberg, in terms of mainstream, has done a really good job, and their reporters have done a good job of digging in.
Oh, I agree with you that Bloomberg has tackled some big stories.
But, you know, but other places like the New York Times, you know, with Some reporters have been good, like Gretchen Morganson.
But for the most part, you get the sort of Andrew Ross Sorkin story, which is that Tim Geithner took one for the home team.
It was difficult, but he did the right thing and things were fine.
So the narrative has sort of been to accept the political narrative, which is that we fixed it, it's fine.
We threw in some legislation, it's fine.
And it's really complicated to dig behind that.
What's your view of someone like Jamie Dimon, who's so big at JP Morgan?
All the Presidents Bankers00:03:16
He's basically probably the best known banker of all.
When you look at a guy like that and you know that he's behind a lot of these derivative deals and a lot of things that crashed the economy in 2008, how do you see him?
You've been around a lot of these financial types, you know them very well.
What do you think of a person like that?
Well, I mean, I don't know him personally, but certainly he is sitting atop the most powerful institution, not just today, but historically.
The legacy institution, JPMorgan Chase, back to JPMorgan's days and its ties with the White House and so forth.
He's sitting.
On top of the tightest connection to all of those present and past ties to the White House, to the Fed, and so forth.
And he hasn't shown remorse or humility or leadership like back in the days of the bankers I was talking about.
He could have chosen to do that.
That would have been really magnificent.
Why not?
Right.
But instead, he's been defiant and defensive and he has stayed in position.
Amazing.
You know, they keep running these ads.
Everywhere I go, because I look at a lot of the financial stuff, and it's Lloyd Blankfein, and he's sitting there talking about how he's helping Patagonia with its environment.
And I think about all the stuff that he's done.
It's really remarkable the kind of PR these guys have.
They're putting up with that.
They're making money for that PR.
That's not jokey PR.
That's not like a tweet here and there.
Right?
That's hardcore stuff.
Now, your book became a bestseller.
It's an amazing book, All the President's Bankers.
And you, just before that, wrote a novel about the Great Depression.
And this is a very interesting step because it includes all that history.
So, how did you get to write this book?
And the new paperback edition is out now.
Yeah, it's just out now, out last week.
Amazing book, by the way.
Thank you.
Really incredible.
Thank you.
Yeah, Black Tuesday, which was a novel I wrote before All the Presidents, Bankers, was on the 1929 crash and the depression that followed.
And it sort of looked at a fictitious member of the Morgan Bank, but other than that, there was a lot of the history that happened and the sort of connection of him and sort of the immigrant class.
So it was very much, before we talked about the 1% and the 99%, it was very much sort of that association, but through that, really what was happening in the country, in the halls of power, and then also in the streets of Manhattan and the Lower East Side.
But there's a scene in it where the big six bankers are hanging out at the Morgan Bank, which is on Wall Street.
Which is Catacorner from the New York Stock Exchange, and they're trying to figure out what to do, what they can do when the market starts to fall in the fall of 1929.
And that's what gave me the idea for the All the Presidents Bankers book.
You had these actual, they were called the Big Six at the time.
We now call these banks the Big Six.
The term was coined by B.C. Forbes back in 1929.
Wow, amazing.
Which a lot of people, I didn't know that.
But I realized that going through the research for the novel.
And so the kernel, the idea for All the Presidents Bankers came out of the Six and the Six and the Bankers and their associations with Hoover and now, you know.
JFK and Wall Street00:06:09
All the other presidents before and after.
And that's where I started doing the research into all the archives and coming up with all the presidents' bankers to really see why is it six?
And all these six bankers that were in that room, all their banks still exist.
None of their banks ever failed.
Amazing.
So this power relationship has held before that, after that, and will continue on.
One of the things that you brought to light was that Kennedy had a very interesting relationship with the bankers.
He kind of kept them at arm's length.
His successor got very close and cozy with them, and that's kind of the style of it.
But Kennedy really was like, you know, no meeting longer than 20 minutes or something along that line.
I found that very interesting, and it kind of fits with that Kennedy character of not being compromised in a sense.
Yeah, he was really strong and really sure, and he didn't really play ball with the bankers, although he did towards the end of his presidency before he was assassinated.
He had an association with David Rockefeller, which was rather antagonistic.
But Rockefeller had written a piece about Kennedy's policies in Life magazine, and Kennedy had responded, and he actually thought it was great that this sort of Private citizen, even though Rockefeller was kind of more than a regular private citizen, could sort of be so open about policies.
And so did he engage with him.
But I thought, and I talk about this in the book, it was actually critical of his policies.
But for the most part, yeah, until the very last bit of his presidency or his life, JFK did not have a strong opinion or association, like a friendly kind of warm and fuzzy with the bankers of Wall Street, even though he kind of came from the same pedigree.
David Rockefeller, in fact, had dated JFK's sister back in 1938 for a minute.
Wow.
London, when JFK's father, Joe Kennedy, was actually the ambassador to the UK and the whole family was over there.
And John F. Kennedy was over there and his sister, Kathleen, died soon after that.
So there's an association of families, but they just didn't have a collaboration.
And then when LBJ came into office, he had a very friendly, you know, come down to my ranch and have.
Yeah.
Cue with me kind of association, but and he got stuff done and they did stuff for him.
So, in a way, actually, a lot of social stuff was done under LBJ with bankers supporting it or not getting in the way because he was more friendly, which actually wasn't able to accomplish because he wasn't.
So, it's you know, it's a lot of shades of gray in that, yeah, absolutely.
They weren't willing to do those favors for JFK in a sense, right?
Right, exactly.
How do you contrast that with Obama's uh relationship, which seems very cozy with the bankers and it seems like he?
It's a strange kind of coziness, too.
It's almost like a strange compromise on his principles.
Well, I mean, I think Obama is very much an opportunist, but he, you know, he became president out of, you know, an interesting trajectory because his family was not like so many other families that their sons became president.
I mean, he really had a very outside track to the whole thing.
Sure.
And so he was never really associated at the level of, say, JFK in terms of having the same pedigree.
I mean, he did go to Harvard, so there was that.
And many of our presidents have come from Harvard or Yale, but he wasn't really like an.
Family kind of associate, you know, went to weddings, went to yacht clubs with these people.
So I think, on the one hand, and I don't know, he wanted to, I mean, it's kind of like I think he probably part of him wanted to be accepted by these people, and he certainly was.
Yeah.
And part of him maybe needs to somewhat sound populistic because he's a Democrat, and so he does that.
So he kind of plays both sides.
I don't know if that.
Well, I know that hasn't actually effectively changed anything.
Well, he certainly gave them one of the best things they could possibly wish for when he got in right away.
So he became the best friend of the banks for sure.
Yeah.
And again, they supported him into the White House.
So all this sort of, he's great for a very progressive one.
I never found that.
I've written about that, particularly with respect to the finances in Wall Street, to be particularly authentic.
I mean, he's never shown any kind of indication.
He'll say Dodd Frank is great sweeping regulation, but we've already talked about that.
He's never really shown an indication of doing anything against the bankers.
I mean, nor have any major Democrat president.
It's not like he's different.
It's just that he had an opportunity that he could have taken, which he didn't take.
It seemed like the country would have been behind it because of the crash and everything else.
Absolutely.
He didn't seize the moment at all.
Right.
Yeah.
Were you surprised when he put together that economic team, which were basically the architects of the crisis in the first place?
No, because, and again, if you look through my book, these same people were at the core of helping to finance his presidency.
Okay.
So the fact that he put a whole lot of old Rubenites, including Larry Summers as his economic advisor in his team, that was all stuff that was done in the background.
That was sort of like inevitable.
If you're going to have an outsider in the White House, you're going to have the insiders next to him.
Absolutely.
Do you think when you look at it now, you know, and you see looking into 2016, you know, is it going to be Goldman Sachs left and Goldman Sachs right as far as the election goes?
You know, that would not be a surprise.
It'd certainly be Wall Street left and right.
How that divides along party lines.
I mean, certainly Goldman Sachs will be very supportive of Hillary Clinton.
I mean, you have all the pictures of her and Lloyd Blank fine and smiling.
Obviously, that history goes back forever.
So there's no doubt on that side.
In terms of who supports, if it's Jeb Bush, he has very strong ties to the whole Merrill Lynch Bank of America thing from back in the day of Reagan and Bush and those family associations.
Banks Are in It to Win00:03:09
So it's going to be Wall Street, Wall Street, regardless of how the banks line up, if it's those two people.
And, Nomi, finally, I just have two questions left for you.
One is How do you sort of, you know, when you think about the public and how they see the financial system, what do you think is the biggest misconception that they have when they're doing business and investing and hearing about these firms?
What's the big thing the media leaves out?
I think it leaves out that people should have a much greater skepticism of what their money is being used for or what the associations are and what these banks do with their money.
So, how banks actually operate with their money and in decisions to lend them or provide them money for different things, whether it's as a mortgage or credit card for a small person, whether it's as a small business loan, but then what they really do with their deposits and that interest income and everything else on the other side.
I think people don't realize that banks are really in it to make, not just to make money.
I mean, this is the capitalist moral, they're making money is intrinsic, but really.
Simply to use individuals as fodder for much more complex transactions that make a ton of money away from anything that really benefits these individuals or these small businesses.
And I think that gets left out of the media a lot that small association between.
And also how much importance banks have in our policies, whether they're foreign or domestic, that by protecting them, by their associations, they really dictate a lot of policies that.
Might affect anyone individually and certainly collectively the population.
And if somebody said, Well, if that were true, the media would tell me, what's your response on that?
The media likes to keep it very simple.
So the media will, you know, they'll do the left right thing.
They'll do the Dodd Frank good, said the Democrats, Dodd Frank bad, said the Republicans.
The media really tries to water down complexities and they also try to not repeat what they believe to be the same story with a different angle or digging in deeper.
It tends not to be how.
Media presents itself, it tends to keep itself simple.
So, again, I think all of us, whether it's in the media or associations with any business, a bank or whatever, should be a little bit more aware of using our own brains to dissect the information and not just accept it, you know, to look for other sources or to think, to be aware, to be a little bit skeptical or cynical.
I mean, I just think that's useful.
Yeah, yeah.
That's amazing.
You know, in your work, when I look at your stuff, I think there must have been a moment.
And I want to say that you're so much more than just a financial whistleblower, you know.
But there is that aspect.
And I wonder at what point was it where you said, I have to get out of working, you know, and be around these people and actually start exposing what they're doing?
What happened?
Beyond Financial Whistleblowing00:04:37
Yeah.
I mean, I had for a few years really considered leaving, you know, the business before the Enron crisis, before 9 11 happened.
You know, I was down on Wall Street at the time at Goldman.
It was a very intense moment for a lot of people.
And of course, Goldman Sachs was trading.
Like, you know, if a plane went down, let's.
Trade oil, you know, and it was sort of that.
All of that was kind of the head of a lot of years of realizing that, you know, these people are really toxic and this environment is really toxic on so many levels that it just didn't appeal to me on so many levels.
And that just was the moment where it got to a head.
And I resigned, you know, shortly after that time.
And they, so they were kind of disconnected from their sort of human values in the sense that you're starting to feel like you couldn't align yourself with that.
Right.
They, right, exactly.
And then to make the jump to light speed, to actually put out a book about it and really expose a lot of what was going on, that also seemed like it took a different kind of leap of faith for you.
Oh, totally.
I mean, I've never written a book.
So there was that.
That's a great book.
The first book is a fantastic book.
Oh, thank you.
I think not many people read it, so I appreciate it.
Oh, yeah, it's great.
But at the time, there was almost no coverage of what was really happening inside.
Not when I say no, I mean just now there's a lot more bloggers, there's a lot of other people that have come in, and then it was you know a very small group of people.
Um, and so I just wrote what I saw, um, in terms of connecting Enron and WorldCom and what the financial systems role is, and what the Glass Steagall repeal role was, and where credit derivatives were going.
I just kind of saw it, um, for what it was, I suppose, and and just yeah, just sat down and I spent a lot of time, well, I spent a lot of hours writing this book.
You got inspired, yeah.
Do you think when you look at conditions now in 2015, you think about people's awareness around these types of topics, like the Federal Reserve, like the financial shenanigans from firms like Goldman Sachs and the political relationships?
How do you think the public awareness is doing?
Well, I think certainly from when I first came out and wrote that book, the public awareness has increased.
It's just the level of detail that hasn't really infiltrated the public.
Affect me?
How do they really work?
What should I really be concerned about?
How should I really keep a critical eye on my own financial dealings and who I'm associating with on a big bank basis or whatever?
I think that still has a ways to go.
But yeah, I think more people know at least that there is a Federal Reserve now than 10 years ago.
So that's positive.
Yes, absolutely.
I agree with you.
It's really fantastic to have you on the show.
It's been amazing.
What an education.
Well, thank you.
I really, really appreciate it.
Absolutely.
And I want to say to anyone who's looking to understand the financial world, you know, I encourage them to start with your work because you've been there and have that great experience and just incredible insight.
The new book is All the President's Bankers.
And, Nomi, where can we get more information about what you're up to?
Well, I have a website.
It's www.nomiprins.com, N O L I P R I N S.com.
And whether I'm on something or wrote something or think about something, it's somewhere on that website.
Okay, great.
And the new book is another bestseller for you.
So that must be quite a thrill.
What a rush.
You know, you compare the kind of books that I write versus the sort of major, you know, Gone girl type stuff.
There's a huge difference in the buyer.
So I'm just happy that people come and want to learn more than what is sort of the general sound bites that may or may not be out there and want to take the time to dig in.
So that's what makes me happy.
Oh, yeah.
Well, it's fascinating stuff and really a great education.
I've learned so much from your work.
So I really appreciate it.
Thank you.
Thank you so much, Nomi, for being on the show and have a great day over there.
Thank you, you too.
And I'll talk to you soon.
Absolutely, that would be great.
Thank you for joining me for this powerful episode with financial expert Nomi Prins on the Bankster House of Cards.
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