Reprinted from Truthdig
In this week's "Scheer Intelligence" -- the Truthdig editor-in-chief's podcast on KCRW -- author, journalist and former investment banker Nomi Prins explains the culture of Wall Street and its influence on government.
Prins worked as a managing director at Bear Stearns and Goldman Sachs for several years before leaving the financial sector around the time of the Enron crisis to become one of its sharpest critics. She has written several books about the relationship between Washington and Wall Street, including "All the Presidents' Bankers: The Hidden Alliances that Drive American Power" and "Other Peoples' Money: The Corporate Mugging of America."
Scheer and Prins discuss that relationship and the players who have kept it going in spite of devastating effects on many Americans. In addition, Prins talks about the lack of an "accountability gene" within many in the finance industry.
Lastly, we hear about how Wall Street has influenced and may continue to influence the presidential candidates and outcome of this year's election.
Read the transcript below.
--Adapted from KCRW by Alexander Reed Kelly.
RS: Hello. I'm Robert Scheer, and welcome to Scheer Intelligence, my podcast in collaboration with KCRW in which I talk to people I consider to be American originals. My guest today is Nomi Prins, definitely an American original. She started out working on Wall Street, worked for Goldman Sachs at one point, and then has emerged as one of the major critics of the big banks and what they did to bring about the Great Recession. She is currently a Distinguished Senior Fellow at the Public Policy Think Tank DEMOS; she is also the author of several books, including "It Takes a Pillage" and, most recently, "All the President's Bankers." And, full disclosure, she served on Senator Bernie Sanders' Federal Reserve Advisory Council. I'm going to ask you what that's all about. But I want to get an objective appraisal of this democratic election, because we're being frightened with some image of the greater evil of the Republican Party, and there's a lot of evil there to talk about. But once again, we're being urged to think uncritically about the Democrats. And I want -- you know, your, "It Takes a Pillage" is, after all, a play on Hillary Clinton's "It Takes a Village"; it's a terrific book, I use it in teaching in my job at USC, and I've had you in my class, and I have great respect for your analysis. So why don't we begin there? You were working at Goldman Sachs, and what has brought you to this place, and what is your evaluation of the choices we face?
NP: First of all, thanks a lot for having me, Bob. I did work in Goldman Sachs, and did leave to become a journalist and an author. And mostly that was because of what was my own moral obligation percolating within me to leave a very corrupt environment and seek the reasons for it, and also to share the analysis of what I could bring from my experience to the rest of the world. And at the time I left, it was in the wake of the Enron crisis, which at this point's an old crisis; but a lot of the reasons for that crisis had to do with banks, had to do with how financing works in this country, and it has only gotten much worse and, as we know, more -- because of the banking system and the political system that allows it to have become what it is--than ever before, with the financial crisis of 2008 and now what we see as what will be a prolonged global crisis.
RS: Let me jump in there, since you brought up Enron, which a lot of people forget about. But the collapse of Enron destroyed the life savings of all sorts of people, quite a few who worked for Enron and one of its subsidiaries, but also, and their investors who thought, my goodness, this big company -- which was extremely well-connected in Washington, and not only to the Bush administration, but before that to the Clinton administration. And in fact, it should have come up recently in the news, because in the debate between Hillary Clinton and Bernie Sanders and -- it came up when Hillary accused Bernie Sanders of having voted for this terrible piece of financial deregulation, which is known as the Commodity Futures Modernization Act. And it's true Sanders voted for it, as did everybody else except four members of the House, libertarian Ron Paul; but they did so because it was tucked into an omnibus bill, and it was written by Bill Clinton's administration, it was signed by Bill Clinton; it was Bill Clinton's legislation. The reason I'm bringing it up now is there is something called the "Enron loophole" in the Commodity Futures Modernization Act that Clinton signed as a lame duck president. And that loophole allowed Enron to go absolutely berserk in marketing energy derivatives and so forth. And so maybe you could begin there, because it's all part of a whole; it's manipulating the financial system to benefit Wall Street and screw Main Street, is of course, not only the slogan, but it's an accurate description, and it's been done by Republicans and Democrats. And so why don't we begin with the Democrats and the financial deregulation that happened under Bill Clinton?
NP: Sure, I will unpack that. And also, the "Enron loophole" and how it was created was not just by Enron; it was by bankers at the time. In fact, during the period of the Clinton administration in the late nineties, when energy deregulation had just occurred in 1996 -- which effectively allowed energy companies to become bigger than they were and take on little energy companies and control more of the energy environment than they had before, of which Enron was a major recipient -- the financial element of that, where they got to also trade in energy futures and derivatives and all sorts of complex financial securities that had nothing to do with extracting and distributing oil or creating an energy flow for a population; it had everything to do with trading and simply making money off of speculative transactions. Goldman Sachs, which is the company I worked for, had been a part of fighting for that "Enron loophole" during the Clinton administration years, as well as had Enron. So here you had a company that was run by Republicans, who had a big bank that was, at the time, run by a Republican, Hank Paulson; but you also had people on both sides of the aisle, Democrats and Republicans, pushing for this idea of ensuring that derivatives that were associated with energy would not have to be transparent to anyone else who was examining the markets. So effectively they were deregulated; they were taken out of the purview and control of regulators. And what this meant was, not just Enron but its banking partners like Goldman Sachs, like Merrill Lynch at the time, which became later part of Bank of America during the last financial crisis, were able to basically be copartners in creating a very opaque trading environment around energy.
RS: Well, so opaque, as anyone who has seen the movie "Smartest Guys in the Room," Alex Gibney's movie on the Enron collapse -- I mean, they were actually phony companies, and people went to jail over it, and so forth. But it's interesting, you mention that Hank Paulson at that moment was the head of Goldman Sachs, and then he of course became Treasury Secretary under George W. Bush. But let's not forget Bill Clinton picked as his Treasury Secretary Robert Rubin, who had been one of the top guys at Goldman Sachs, and certainly had been there during a lot of the mischief of that company. Now, you know, some people have written very persuasively about Goldman Sachs, and you know, yet I don't think we really quite understand, what is it, the cynicism of these folks. That's the only way I can explain it. And to take it full circle, here's Hillary Clinton who now says she wants for everyone what she has for her grandchild. Well, that would mean every grandchild in this country would have to have a father who was funded in a hedge fund by Lloyd Blankfein, the head of Goldman Sachs. It would have to mean, you know, all of us would have to have one of these top-choice jobs like he has, where he can lose lots of money and still make lots of money. That's what they do. So maybe we should begin by giving us the ethos of Goldman Sachs and how bipartisan it is. It's something people -- you know, it's all easy to blast the Koch brothers and the evil right-wing forces, but if you think about who really runs this country, it's not the Koch brothers. Goldman Sachs is much closer to the center of power. And one thing people seem to have forgotten is that with the great meltdown -- you know, and the ending of Glass-Steagall, ending of Franklin Delano Roosevelt's great restrictions on greed done in response to the Great Depression -- Goldman Sachs was allowed, when it got in trouble over these derivatives, to go from being an investment bank to a commercial bank and get public funding as a result. You know, so that, not only did that legislation benefit Citigroup and Bill Clinton gave the pen he, one of the pens he used to sign to Sandy Weill, the head of Citigroup, and Robert Rubin left the Clinton administration and worked for Citigroup for 10 years at 15 million bucks a year. So these people are -- what are they? Are they totally without ethics? You have smelled them [laughter]; you have rubbed shoulders with them. You have been in their world, Nomi Prins. You've done an excellent job in your books, but now share that with people listening to this. Are these people, do they have any kind of a moral sensibility?
NP: To these people, morality is basically, to them, money. It's a greed for profit, it's a greed for hierarchy, it's a greed for power. And that's all associated together; it's not like just the idea of being a billionaire, which Lloyd Blankfein now almost is, or is, depending on where his stock is at the moment. It's about being able to control what's going on in the company, in Goldman Sachs; what's going on in the government, and basically to buy and sell power. That's really what it is. And it's like that, it was like that -- and that was one of the reasons I left in tremendous indignation, and I kind of turned my back on all the money of it. Because the money of it, the power of it, the struggling -- now this is my trade, now that's my trade, now let me get Hank Paulson to like me, now let me get a promotion -- all of that sort of manifestation of what happens on a day-to-day basis, in terms of the internal struggles of people within an environment like Goldman Sachs, has absolutely nothing to do with the real world. It has nothing to do with how people, ultimately most people in the world are betrayed by what happens in these financial hierarchies, and particularly because of how they control and collude with -- I shouldn't even say it's just the Goldman Sachs bankers that control the government. It's a welcomed control; these people are friends. So when Bill Clinton becomes the president because Robert Rubin was one of his chief fundraisers in Washington in the early nineties, and then he turns around and thanks Robert Rubin by offering the most powerful banking position, really, in the country, which is the Treasury Secretary spot in his administration -- that's the kind of collusion and collaboration that's at the core of our financial-political structure, and that is, as you said, that's not just on the democratic side or just on the republican side; that is on the side of the power of those two components working together. So when Robert Rubin leaves Goldman Sachs to ultimately become a vice chairman at Citigroup -- and for a little bit he was even chairman during the financial crisis, when Chuck Prince was kicked out, and there was a dislocation going on there in chaos -- that's an indication that this power circle has multiple decades and generations and associations that continue through the administrations of any one president. So by the time we got to Obama -- well, by the time we stopped for George W. Bush and had Hank Paulson, who was the head of Goldman Sachs and then became the Treasury Secretary for George W. Bush during the financial crisis, whereby he helped architect help to the largest financial institutions, which are predominantly larger today than they were before the financial crisis, as well as helping his old firm Goldman Sachs -- and then relinquish that position to Tim Geithner, who had been an Assistant Treasury Secretary under Bill Clinton and who was now, then reemerged in Obama's administration -- you see this, like, multiple increase of individuals who continue to maintain their political and financial power through administration and through party. So when we look at Hillary Clinton running now, and trying to disassociate herself in some just abstract manner from Wall Street, it's ridiculous if you consider the depth and the intricacies of the relationships between not just the Clintons but the parties, the families in power, with the individuals who are in power and the financial institutions, how they continue to stay linked throughout the years and throughout the different administrations. It's illogical -- and Bernie Sanders pointed this out, as do many people in America see this -- to assume she is not connected to this infrastructure. Not simply because she is funded by it, not simply because her husband was funded by it, but because these are associations that exist for the purpose of maintaining that financial and political power structure.
RS: This is Robert Scheer and I'm talking to Nomi Prins, who is an American original in many ways. But one that's quite interesting, because she defies what Lawrence Summers said in his misogynist manner as head of Harvard, that women can't learn the intricacies of math and economics and so forth, and it's been a male territory. And you have really called these people out, I think as effectively as anyone. Instead of drinking the Kool-Aid and going for all the money -- because we've had women executives before; we've had women rise to the top of these big corporations and banks -- you turned your back on them and you called them out. And you've done so very effectively, and they've attacked you for it. What got you to play, really, one of the leading roles in challenging these -- what are they, these banksters?
NP: These are megalomaniac banksters. At my core, money wasn't a motivating force relative to the sense of injustice that the entire system had. So I think -- and I didn't start out thinking about justice; what I started out, as I left the banking sector, was to -- was to call, yes, to call out these people. Because no one else was. You know, and it wasn't like I set out to be a whistleblower or anything else; I know there's been different titles that have been put on me, and other people have done similar things. I mean, it was really a sense of, look, there is something going on here, and it isn't clear to most people; and it was clear to me. And it was sort of like, well, if I don't talk about this, you know, who is? And I mean, it's weird, because it wasn't like I felt that I was responsible to educate the world or anything; I don't have that kind of sense. But I did feel that someone had to, and I was in the position where I could. And I did try to call out practices within the firm, but that was not the place to do it; I was talking to people who were basically set in their ways in their power structure, and all I could do was see what was going on. And I felt much better about myself and sort of my life, and the purpose or whatever, having not been in that environment, which was also quite toxic and coveted the wrong things, I think, the wrong values; I don't think money is a value. Money is money. I think justice is a value, I think equality is a value, I think morality is a value, I think how we treat each other and how we teach each other is a value. And I would not have thought that, you know, 15 years or whatever it is that I, after I left the industry, I would necessarily still have to be talking about the same things, and they've gotten so much worse.
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