In this week's episode of "Scheer Intelligence," host and Truthdig Editor in Chief Robert Scheer talks with Nomi Prins about her latest and, in Scheer's words, "most ambitious" book, "Collusion: How Central Bankers Rigged the World."
The two discuss the 2008 financial crisis and the disconnect between governments and the governed, as well as Prins' unique perspective on the financial world, thanks to her time as a banker. Scheer and Prins come to the conclusion that the world's biggest banks "rigged the world," as the author's title suggests, and, what is perhaps more alarming, that the Federal Reserve has allowed financial institutions to continue growing and "screwing over the consumers."
"I think there's an element of what's happened in this past decade since the financial crisis," says Prins, "where yes, the Federal Reserve sort of led the way for the major central banks in the world " to manufacture money in order to save the global financial system, basically global banks."
Listen to the interview in the player above and read the transcript below. Find past episodes of "Scheer Intelligence" here.
Robert Scheer: Hi, this is Robert Scheer with another edition of Scheer Intelligence, where the intelligence comes from my guests. Sometimes I say hopefully; today there's no question. We are fortunate in having Nomi Prins in the studio here at KCRW. And I must say, I've written a bit about the financial collapse and economics; I was in graduate school in economics and so forth. But I finished Nomi's -- I know all of her other books, she's been a guest in my class at USC, I assign parts of her books about the banking meltdown and how basically the banks were bailed out, but Main Street was screwed, and the whole thing.
But this book is her most ambitious. It's called Collusion: How Central Bankers Rigged the World. And just by way of preface, you know, there's a whole sort of conspiracy theory industry about the Federal Reserve and so forth, and then the sophisticated response is supposed to be, oh, yes, but all they're doing is regulating interest rates, and keeping inflation down, so there's no there there. And I must say [Laughs], I went along with that, you know, and I've covered the Federal Reserve, and as I say, studied it in graduate school.
But reading your book, reading Collusion -- no, you're right. They've rigged the world. And the point that you make, particularly about the U.S. Federal Reserve, you deal with all the central banks -- which, by the way, is not only not described in the Constitution, it's something that only came about quite late in American history, 1913, I believe -- is it was always described as having a very specific, modest function; as I say, controlling, you know, the rate of inflation. But what you point out in your book is because of the banking crisis -- first of all, our Federal Reserve enabled the banking crisis; and secondly, instead of learning the lesson that they can do damage, they responded to the banking crisis by making it much worse, by allowing the banks to get even bigger and screwing over the consumers. Is that not the thesis of the book?
Nomi Prins: That's the thesis -- that's just America. [Laughs] That's the thesis of what the Fed has done, first of all, yes. Forgetting to watch their banks, which they are supposed to regulate, going into the financial crisis. In fact, seeing problems emerging and literally publicly deflecting, for example, that mortgage problems were going to become a bigger issue in the public eye and in the press. To, going on after the financial crisis, to subsidizing these banks; they have unleashed, the Federal Reserve, with no limitation, with no regulation, with no legislation, with no accountability, the largest bank subsidy program in the history of the world. And I say this because they've brought in -- and this is where the term collusion comes into play -- a number of other G7 central banks to expand that subsidy for banks in the financial system throughout the world.
RS: Yeah. I mean, this is what is so exciting about this book. And I must say, to use the word exciting in a discussion of banking is often a stretch. But you actually pull it off. And I, just to give something about your background, Nomi Prins comes from the enemy camp. She was one of these wonks, these experts on the mathematics of the economy, the econometrics and so forth, that gave rise to a lot of these bad packages. Your graduate work was done in this field. And you were working at Bear Stearns and Lehman Brothers, both of which went belly-up; you were working at Goldman Sachs as a manager; you've worked at Chase and other places. And you bring an insider's expertise.
And in this book, you point out that in fact, there are some real contradictions. Because of the crisis of the housing meltdown, the greatest crisis we've had since the Great Depression, this spooked the banks all over the world and the economies all over the world. And the irony in this is that the resistance from other banks was met by our Federal Reserve in saying no, our way or the highway. And let me just make clear the critical point here: do these banks serve the people in their own country, or do they serve the bankers or the super rich? That is really the issue. And when the other bankers have tried to push back and say, you know, whether it was in France or elsewhere in Italy -- no, we have to be concerned about how this plays out for our economy and ordinary people and wages and unemployment and so forth -- it was the U.S. Federal Reserve that snapped the whip and said, no, we are saving the big banks here.
NP: That's right, and the deceit in this -- the sort of, you know, why I call it collusion -- you know, it's a group of people and it's performing a deception, ultimately, against the whole world, against the people of the world -- is that the Fed positioned itself, with the treasury department and with Congress, actually, in the very beginning, of saying you know, we need to formulate some form of emergency strategy in order to save the banks. And because of that, if we save the banks, it will help people; banks will then be free to lend again, we will keep them from having a greater catastrophe, we will keep a Great Depression from happening. And that was sort of the initial deceit that happened in the fall of 2008, in the beginning of the financial crisis. But that became a much bigger deceit, which is that the Federal Reserve -- though its day job is supposed to be to regulate these institutions that have failed to regulate; to be a lender of last resort, that was how the Federal Reserve Act of 1913 set up the Fed; to regulate the balance between full employment and inflation -- did something dramatically different from that. And that is that they conjured electronically $4.5 trillion worth of money out of nowhere in return for purchasing -- that's where that term quantitative easing comes, and none of those two words actually say "purchasing" or "buying" [Laughs] assets that don't have the value that the Fed is paying for them --
RS: Well, it sounds like a back massage or something. Quantitative easing. And let me just explain what Nomi Prins has just -- this is not another person sounding off about the economy. She in this book went to Mexico; you know, went to China, went to France and Italy and so forth. Went all over the world to the kind of scene of the crime that happened, and the impact on people, and the resistance. And you describe the central banks in each of these countries, and they actually at times, they seem to have accepted you as an insider; you were invited to speak at the Federal Reserve in New York, I believe --