Joe Nocera puts into a book what is already generally known. Wall Street controls all of our lives.
Jim Kawakami, Nov 27, 2010, http://jimboguy.blogspot.com
Joe Nocera on "All the Devils Are Here: The Hidden History of the Financial Crisis"
… AMY GOODMAN: What about Obama’s record now? Where are we today?
JOE NOCERA: Ehhhhh…. ugh.
AMY GOODMAN: Any different than Bush?
JOE NOCERA: No, no, no. First of all, the creation the Consumer Protection Bureau is a big deal.
On the margins, these regulations will help, that came out of the Dodd-Frank Bill. The problem is, that if you compare it to what happened in the 1930s, in the 1930s, they forced the banks to split in two and they created the SEC. We had, pretty much fifty years of no crises before financial innovation started to poke holes in the regulations and eventually rendered them moot.
So, here we have a situation or no one is willing to take on Wall Street head-on and say, “We can’t allow certain practices to go on.” So, in fact, they’ve tried to do with these practices on the margin, but in general – $$$ …
http://www.democracynow.org/2010/11/23/joe_nocera_on_all_the_devils As federal agents raid the offices of three major hedge funds amidst news of a sweeping probe of insider trading at Wall Street firms, we speak with New York Times business columnist, Joe Nocera, about his new book, All the Devils Are Here: The Hidden History of the Financial Crisis. The book describes how most of the underlying structures and key players behind the financial crisis have emerged relatively unscathed. [includes rush transcript]
Joe Nocera, award-winning journalist and author. He’s a business columnist for the New York Times and a staff writer with the New York Times Magazine. He’s the co-author with Bethany McLean of All the Devils Are Here: The Hidden History of the Financial Crisis.
AMY GOODMAN: Federal agents have raided the offices of three major hedge funds amidst news of a sweeping probe of insider trading at Wall Street firms. On Monday, the FBI seized documents at the offices of Level Global investors, Diamondback Capital Management and Loch Capital Management in New York, Connecticut and Massachusetts. Collectively, the three firms manage nearly $10 billion in assets.
The raids come days after news broke out the federal authorities are conducting what could be the largest insider-trading investigation in U.S. history. According to The Wall Street Journal, federal prosecutors in New York, the FBI and Securities and Exchange Commission are probing a network of alleged insider trading rings involving some three dozen companies.
The probes could lead to charges against the Wall Street executives and traders but are unlikely to affect record payouts and soaring profits. According to the Journal, executive pay is set to break a record high for the second consecutive year. The top thirty-five financial firms are on pace to hand out $144 billion in compensation and benefits this year, a 4% increase from 2009.
Well, a new book has just been published that tries to explain the history of the financial crisis and how most of the underlying structures and key players behind it have emerged relatively unscathed. It’s called All the Devils Are Here: The Hidden History of the Financial Crisis.
I am joined now by one of the book’s two co-authors, Joe Nocera, a business columnist for The New York Times, a contributor to NPR’s "Weekend Edition," and former executive editor of Fortune magazine. He co-wrote the book with Vanity Fair contributing editor Bethany McLean. Joe Nocera joins us in the studio. The hidden history of the financial crises – in the moments we have, explain it, what caused it and how they’ve come out on this side, what most people don’t understand.
JOE NOCERA: Well, our key point is that it took a lot of disparate things to make this happen. If you had only Wall Street’s venality and greed, you would have had a problem, but not a crisis. If you only had the predatory lending practices of the subprime companies, you would have a problem but not a crisis. If you only had Washington’s – well, this kind of enabled everything – Washington’s deregulatory emphasis under both Democrats and Republicans, let’s be clear here, you would have had a problem. But when you combine the three of them and you watch them interact with each other.
You watch the way Wall Street gets the subprime people to make their loans worse and worse and worse and watch the way they take advantage of Wall Street to sell their loans upstream, and then you watch the way Wall Street takes advantage of investors to sell these crappy loans which are supposedly AAA and watch the government look the other way.
When you put it all together, you have a really toxic stew. So, I think most people have looked at this as the sins of Wall Street and it is absolutely the sins of Wall Street, but required awful lot more and almost a societal-wide delusion about home prices and value and what home ownership actually meant.
AMY GOODMAN: Who are the main culprits? Name them.
JOE NOCERA: Ok, in terms of institutions, we think the single worst culprits are the rating agencies because they really had to really consciously sell their soul and debase themselves, debase their integrity. They knew there were doing it, as they were doing it, in order to give all these securities AAA. The thing about it is, if you do not have a AAA rating, all of these large institutions are not allowed to buy your securities. You had to have a AAA for this to be a widespread product. So institutionally, we think it was the rating agencies. Personally, we think it’s Alan Greenspan.
AMY GOODMAN: Ok, go further into that.
JOE NOCERA: Sure. The Fed has two jobs, monetary policy and oversight over bank holding companies and other regulatory responsibilities. Alan Greenspan, as a devotee of Ayn Rand and as a libertarian goes into office saying, “I don’t believe in regulation,” and saying, “I’m going to turn my back on that part of my job and let others do it.” But he’s powerful and he is so influential that his deregulatory emphasis becomes everybody’s deregulatory emphasis.
When we get to the point in the mid-1990s when a very brave woman, named Brooks Lee Bourne, wants to of least look at the possibility of regulating derivatives, he leads the charge to beat her back and does so quite easily. (Larry Summers was deeply involved in taking down Lee Bourne. Jim)
AMY GOODMAN: Talk about Greenspan’s famous admission before Congress.
JOE NOCERA: Well, he really didn’t say, “I was wrong,” so as much as he said, “People won Nobel Prizes for this research (“conservative” Univ Chicago Economists) that led me to this belief system in the apparatus that was built up.” He – pressed by Henry Waxman, he apologized for what he had done – what had gone on in his watch. But actually, it was a halfhearted apology.
Quite recently, he’s taken to the convenient Republican line, which is to blame everything on Fannie and Freddie. As we point out in the book, Fannie and Freddie, guaranteed mortgages, which plays a hugely important role in home ownership in America and mortgages in America was, yes, they did a lot of dumb things, but the truth is, they did not lead the charge in the subprime, they followed into subprime. It’s basically a convenient excuse to blame it all on Fannie and Freddie. They did it because the Republicans are completely unwilling to say that the marketplace made mistakes too.
AMY GOODMAN: What about Obama’s record now? Where are we today?
JOE NOCERA: Ehhhhh…. ugh.
AMY GOODMAN: Any different than Bush?
JOE NOCERA: No, no, no. First of all, the creation the Consumer Protection Bureau is a big deal.
On the margins, these regulations will help, that came out of the Dodd-Frank Bill. The problem is, that if you compare it to what happened in the 1930s, in the 1930s, they forced the banks to split in two and they created the SEC. We had, pretty much fifty years of no crises before financial innovation started to poke holes in the regulations and eventually rendered them moot.
So, here we have a situation or no one is willing to take on Wall Street head-on and say, “We can’t allow certain practices to go on.” So, in fact, they’ve tried to do with these practices on the margin, but in general – $$$
AMY GOODMAN: And won’t it get worse with elections coming up? Won’t Democrats and the Republicans want the money from there big money interests?
JOE NOCERA: What’s really going to happen over the next two years with the Republicans now in charge of the House is that many of the regulations have not been written that will enforce this new law. In fact, the law itself is kind of a punt to the regulators. That’s where the battle line is and the Republicans are going to do their best to make sure these regulations are as minimal as possible and the Democrats are going to try and make them tougher.
AMY GOODMAN: What surprised you most in your research for this book?
JOE NOCERA: Here’s what surprised me most, the extent to which Wall Street was dictating to the subprime companies about their lending practices and the extent to which Wall Street knew exactly how bad these loans were and yet encouraged them to make worse and worse loans.
I’ll give you one example, we actually have an e-mail or a memo in the book where a Wall Street guy goes to visit one of the big subprime companies and he says, “You stopped lending – you won’t lend below a 620 FICO Score, you know that’s a credit score for a person who wants to buy a house – your competitor down the street, their lending at 580 FICO scores. We want you to drop your standards forty more points to be as bad as them.”
AMY GOODMAN: These federal agents who have raided the offices of three major hedge funds amidst the news of a sweeping probe of insider trading, how significant is this?
JOE NOCERA: It really looks like the biggie, the big enchilada. The problem with the FCC insider-trading cases over the past ten—
AMY GOODMAN: Goldman also looks like it is involved?
JOE NOCERA: Potentially. Although – they really, what the truth is, what they’re trying to get at is some of the really big hedge funds. They think that this is really widespread in the hedge fund community. If they go after Goldman, it would be probably, my guess would be, Goldman’s hedge funds. I don’t know that for a fact. There’s a lot of things we don’t know. But the FEC insider-trading stuff has been so on the margins for so long, going after small fry, who are meaningless small fry, at least they’re going after big targets now.
AMY GOODMAN: Finally, the title, "All the Devils Are Here". Are there any good guys?
JOE NOCERA: Yes. Not a lot, but there – one of the things we did was found a lot of people who were skeptical at the time. We found a lot of community activists, who in places like Cleveland, who were screaming to the federal government saying, “Stop this, stop this, stop this!”
We found a lot of state legislators that actually passed laws to try to get rid of some of the worst practices and the federal government basically came in and preempted those laws and that’s one of the real tragedies of this whole thing. People on the ground saw it happening and nobody in Washington would listen.
AMY GOODMAN: Joe Nocera, thanks so much for coming in. All the Devils Are Here: The Hidden History of the Financial Crisis is his book, wrote along with Bethany McLean.
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