To save money now, it might have seemed like 23491930s in the 1930s we were saving a lot of money on defense. It ended up costing the world a lot more. This is actually a moment where congress by itself cannot do the job. You really need president ial leadership to explain and justify to the country whats at stake. And i have to say theres not really i think franklin roosevelt, that is his finest moment is that he really did work on persuading the American People that they had to bear a burden to make sure the world came out a certain way. And i think thats the responsibility of the current president. I worry that theres a lot of war fatigue, but we are actually going to regret giving into it. Just final, final footnote, actually not so much in this current, i mean, the old today, but there was a similar one that came out in pew a couple months ago. I have a colleague here whos spending some time actually going through the pew data, and there is that headline which is, you know, wed rather leave the world alone. But ifl a4 g you ask is seconr third a question do you still want america to be the, you know, primo country, overwhelmingly its, yes. Do you want American Leadership . Theab answer is, yes. So implicit to get back to johns point which is theres still something to be worked with, that of a little bit of leadership not only of the president , and i must say as somebody who works rather closely with a lot of members of congress, its only this the recent, last couple months that youve got members of congress who are interested in reviving some of the discussions about what needs to be done when it comes to americas defenses. So, you know, so the trend line potentially is there if somebody picks up the mantle and runs with it. Listen, i want to thank everybody for coming out today on a miserable day in washington. Not that there are many great days in washington [laughter] but nevertheless, this particularly rainy one. I want to thank our panelists, harvey, michael and, of course, john. And i do highly recommend that you pick up johns book. Do not wait for the movie version, because theyll screw it up. Again, i do want to thank you all and thank our panelists. [applause] [inaudible conversations] wed like to hear from you. Tweet us your feedback, twitter. Com booktv. From the 2014 Los Angeles Times festival of books, a panel on finance. Its a little over an hour. [inaudible conversations] okay. I guess, i guess we can start. Its post time. Thank you all for coming. This is a great crowd, and were all very happy to have you here to talk about the financial crisis and financial history under the title gaming the system, which is really what its all about. Before i introduce myself and the panelists, i just want to make a couple of quick announcements. First of all, we ask you to silence your cell phones, and we point out that personal recording of these sessions is verboten. There will be a book signing for all the members of the panel and myself right after this session. And im asked to tell you that if you are buying a book, you buy it upstairs in this building in the lobby, and then the signing will be across the street. Therell be booths there where well sign them after you buy them. So anyway, once again, welcome to all of you. Were privileged to have with us today three authors who have taken three very different approaches to reporting and analyzing the financial crisis that began in 2008 and in many respects is still with us. Before i introduce them, ill introduce myself. Im michael hiltzik, business columnist at the l. A. Times, and i blog for the l. A. Times at a page called the economy hug which you can find at latimes. Com. Im also the author of this book, the new deal a modern history, which the paperback edition of which came out last year and which you can get upstairs. As i mentioned, the three authors with us today have all taken these very different approaches to the financial crisis, but their books all have a Common Thread in that they address issues of financial industry regulation and history and the ways that incumbents in this big, sprawling financial industry have managed through the years through a combination of political influence, very wellfunded lobbying and misdirection and deception to avoid the sort of regulation and oversight that would have been done much to avert the financial crisis of a few years ago and would do much to keep the same thing from happening again in the future. So on my left, though its hard to be to my left too much [laughter] as some of you who have read my columns might know is nomi prins whose book published, i think, just this week, right . Tuesday. Tuesday, is all the president s bankers the hidden alliances that drive american power. Nomi is a former wall street executive whos written for a wide range of publications including the New York Times, fortune, mother jones and the nation, and thats a pretty Broad Spectrum of publications in the United States. Her book exhaust ily examines exhaustively examines the relationships between banks and bankers on the one hand and our national goth on the other going d our National Government on the other and bringing the story forward pretty much to the present day. On my right is anat admati who is the author, coauthor, i guess, of the bankers new clothes which is also just out in paperback. The subtitle is whats wrong with banking and what to do about it. Anat is George Parker professor of finance and economics at stanfords graduate school of business, and i know from personal experience is one of our most uncompromised and penetrating analysts of the Banking Sector that we have today. Her book shines a spotlight on how the banks have avoided what could be the most straightforward and most effective reforms of their industry since the crisis largely by lobbying, and i hope im not being too blunt, by lying. [laughter] and on my far right just top logically speaking is helaine olen, one of my former colleagues here at the l. A. Times whose book is pound foolish. Here it is, exposing the dark side of the personal finance industry. Helaines work has appeared in the washington post, salon, slate and forbes, and her book really lays bare the charlatanism that underlines the nostrums that were inundated with every day on television, online and in print. So im going to ask our authors to start by each giving us some preliminary thoughts about their books, their themes, their motivations in writing their books if they wish, in fact, anything they want to say about their books and their subject that they can fit into, say, 57 minutes each. And then well move on to a broader discussion and, ultimately, to your questions. So, nomi, why dont you start us off. Okay. Thank you. And its just an honor to be here and with this amazing panel. We were all sort of golf carted over here, so we had a good ten minutes to talk about each ohs things others things, and weve known them historically as well. I came here by uber, and the man who was driving the car asked me what i was talking about, and i explained, you know, its this book about president s and bankers. He said, yeah, its really tighter than ever now, and i said, yes, it is. And he said, well, but i hear its gone back like a hundred years, this is nothing new. And i said, yeah, thats exactly what i talk about in my book. And he said its not just about wall street and washington, its the families, its the blood and the marriages, and im like, youre quoting me to me, thats weird. [laughter] and it turned out he had, you know, heard something throughout the week. And just as an author, you know, youre asked about talking about writing and books, its so, it was so amazing to have someone who wasnt related to me actually finish. [laughter] you know, talk about a theme that was out there that is now part of his discourse. It was a really, really warm feeling to come here. And the reason i wrote this book was because we know happened more recently in time, you know . I had worked on wall street before, the years before the financial crisis that just happened in 2008, and theres certainly an intense alliance and relationship and interdependence between washington and wall street that i think were all aware of. Its pretty obvious when the heads of large banks dont go to jail and the heads of and small people who rob Little Stores do, you know theres a definite problem in society in injustice and Everything Else. And what we have today is a more concentrated power of wealth than weve ever had before. The big six in these banks today control probably most of your accounts as well as 85 of the assets of all banks as well as 96 of derivatives. Thats a phenomenal concentration of capital and leveraged capital in one set of hands. And this is after the financial crisis. But it didnt just get there accidentally. And so what i did was i looked at this idea of the big six, and i had been covering what was going on in washington and said, you know what . Theres a lot more to this than just whats going on with the big six. And six is like this interesting number in history, because i had done a normal before this called a novel before this called black tuesday in which i did Less Research than i did for this book but found a meeting that happened on wall street on october 24, 1929, at noon where the market was starting to fall, where all this unregulated speculation that had happened adulter 20s was during the 20s, and the acting chairman of the morgan bank at the time because jack morgan who was the chairman at the time was off partying in europe, and he got phi other bankers five other bankers together that collectively ran the big six banks of the time. And they were called the big six banks of the time. That name had been coined by b. C. Forbes in 1917 and forward because it was about six bankers. At the time those bankers were all related in some capacity. If they werent related by blood, they were related by marriage. If they werent related by marriage, their children were or would be with. So there was a really strong connection in that room and this idea that, you know, put in some money, well save the markets, we can do this, etc. But the story went back even behind and before those big six decided to save the markets from all the screwups that they had imposed upon them in what would become the Great Depression which would be imposed upon the Greater Society and all of the population of the United States and globally. The tide back from the morgan bank went to the panic of 1907. Actually even before that. At one point in time jpmorgan had more money than the Treasury Department. And in the late 1890s there actually were too many crises at the time. Real people, like normal sort of people in the street, main street didnt really have as much invested in the market, they were just impacted by them. Today we both have money pensions, deposits invested in them, and we are impacted by them. But at the time there were some panics in the 1890s. The government called upon jpmorgan to help. But the panic of 1907 was a situation in which Teddy Roosevelt who became president of the United States before that was friends with the morgans. And when he was going about talking about trust busting other industries, he didnt bust the banks. The reason he didnt the banks was because he trusted and supported and was socially involved with jpmorgan and other sort of big bankers of the time. And in addition to that when the panic happened in 1907, there was a Trust Company called the knickerbocker Trust Company in new york, and it imploded. And the reason it imploded is because of a lot of bad bets in copper. Now there are bad bets in subprime, then it was bad bets in copper. And Teddy Roosevelt called upon jpmorgan to do something to save the situation again. And jpmorgan said, all right, i got this. Teddy roosevelt, you know, you wait for my word. The treasury secretary was to wait for the morgans word, and there was a meeting that was called at midnight, 12 00 midnight, at the Hotel Manhattan in new york where morgan invited some of his friends James Stillman who was head of National Citi bank which is now citibank, tom lamont who was still hanging around in 1929 but was then much younger and a bunch of other people to go around and talk about how they would save the markets. They also got 25 million from the Treasury Department. So that was the first time where this trust buster said, you know, i these your help, heres some money, do whatever you need to do. Morgan got his guys together to put in money to save the situation. They do except they dont do it with morgans money, they do it with standard oils money and shares they then dissect to get spank into saving the knickerbocker Trust Company, not the company that people from harlem to fifth avenue and in between were trying to get their deposits out of because it would affect their lives, but the american Trust Company of america because in that he had invested. And running that were his friends. And that was a situation where, you know, the government basically said, Teddy Roosevelt said do this. Morgan said, okay, saved his friends. And that was sort of the beginning of a situation that led to the Federal Reserve act of 1913 where morgan and theres a big part of my book, and i probably only have 30 seconds or left to finish that but basically out of that came this idea that the bankers wanted a bank that could support them even more in these panics. So not even having to gather these late night meetings or later in meetings, but to have some other backing. And it was the bankers that pushed for the Central Reserve act. I went to every president ial library in this countb laoc t to examine the original documents because i dont trust a lot of media. [laughter] no, some media is fantastic, but i present company except. The purpose of media is to tell the truth. Historically, the exaltation to jpmorgan at the time by certain newspapers was massive. He was a king. He had saved the country, he had saved the world, you know . It was all sort of massive, we now see jamie dimon in certain publications. Theres a legacy there. Why dont we i will wrap up. [laughter] anyway, the point is these things have a long tail, and theres a lot of blood and connections and protege mentorship relationships and Everything Else that manifest in policies that come not from wall street to washington, not from washington to wall street, but that are together. Its one box. It isnt a revolving door or two doors. It is one box of power which is shared by different groups of people that have incredible philosophical, political and financial ties. Okay. Anat, why dont you take it from there. [applause] i come at it as an academic. I teach finance at Stanford Business school, and i awoke, like everybody else, in fall 2008 and actually before that wondering whats going on and why is it that this industry managed to harm so much. And the more i look, the more of a falling in the rabbit hole experience it was. So two great pieces of literature are alice in wonderland and the emperors new clothes [laughter] which is sort of the cover of the book. It ended up being only men, so their ties cover enough. [laughter] i couldnt believe what i heard, and i couldnt believe what i didnt hear. What was all this nonsense . And the more i looked and the more i read and this is media, and this is policy papers, and this is even academics the more disturbing it was. Because some of it was was just complete and Utter Nonsense that you could immediately if you only know what the words mean, you can debunk. As literally, i mean, the headlines that you got in the paper are just false, you know . Its not true that the banks are asked to hold cash in some vault. Thats false. To all kinds of subtle what we call bankers new clothes meaning nonsense in one way or another. And theres a whole wardrobe of those. As i talked to people, it became obvious that or it became unclear actually what people know and what they wanted to know, and there became this feeling that i am in the rabbit hole, and i people, i try to see where theyre coming from as i talk to them, and im tutoring whoever i come across. It takes a long time. And some of them dont care to know. So it became sort of, okay, assume absolutely nothing. Of its not that hard its not that hard. But if we dont clear the nonsense, we have no hope. So this book is a book with a mission to at least remove the nonsense from this debate so we can maybe challenge all these banking emperors that actually have no clothes. The bottom line is this system has not changed in the last five years. Its very disturbing and very scary. All this stuff you heard is spinning narratives. They want you to believe that it was just a Natural Disaster that happened, and they sent these really, really bright, nice ambulances for all of us to help us. But instead what they or they tell you it was just some problem with plumbing, some liquidity problem. [laughter] thats the narratives that are favored. These are flawed narratives that are meant to hide the responsibility of the regulators themselves and the politicians who have very bad regulations that absolutely failed to protect us. And which were pairly tweaked barely tweaked since. So the narrative about big reforms i cant, obviously, unpack all of them, but they are just false. The analogy you could think about is imagine trucks driving at 90 miles an hour with fuel in residential neighborhoods, and they tell you were really good drivers and 90 miles an hour is absolutely an essential speed for us to drive or terrible things will happen if we drive slower. And here are the policemen just watching by that dont even have the speedometers showing the speed. And then theyre burning the engines, by way. Theyre incredibly inefficient, and theres tons of them around. And then when they implode and take each other down in implosion and all this Collateral Damage happen, then theyve got to be saved as well as their Insurance Companies got to be saved and Everything Else so that we can have this fuel flowing again into the market. And then they get up ask say, oh, well, you know, fix me up so i can keep running, get back in the car and drive again at 87 miles an hour. Big reforms, we did. [laughter] and were still leafing all this leaving all this risk that we cant see and all of that. And so the battle is no where pretty, and lobbying is intense on every bit of it. So the forces against are very small and powerless in the end. Its very difficult partly because of this politics that i did not appreciate, but i do now. Trying to just bring in a voice that doesnt care exactly what the outcome is but cares for the public, and i feel its my responsibility to try to unpack all these things that are completely wrong that i fail students for saying and empower more people to challenge those emperors. Otherwise were just driving, again, at this speed. And the next time it happens were going to wonder how come these [inaudible] and they will have a story. You can bet, they will have a story about it. And theyll get a lot of people to spin narratives for them including academics, unfortunately. So thats where i come at it from. [applause] okay. Helaine, your turn. Okay. Hi, everybody. I came into this, i write about the area where most of us are most likely to interact with the Financial Services sector, and thats in our personal finances. And the way i came into this is i for several years in the late 990s wrote and edited the money makeover feature for the Los Angeles Times. And i think as Everybody Knows because it still runs occasionally, you know, you take you have a subject, and you fix them up with a financial planner, and they give some financial advice, and the implication is their life is going to just go fine after this. They just needed a little financial advice, and all would be well. So i came back to this several years ago, long after id stopped doing it, and wanted to ask the question of how we had gotten to this point. How had we become convinced that with Financial Planning and doing good financial behaviors we would all be okay, you know . We never addressed the point in this world that, you know, we were putting more and more responsibility on people, pensions were being taken away, as pensions were being taken away, as our salaries were stagnating and falling, and at the same time we were saying, well, you know, you need to save for retirement, you need to, you know, save for your kids college education, and by the way, were going to take away the right to declare bankruptcy on the Student Loans if it doesnt work out. You need to pay more and more of your medical expenses, hospitalizations alone went up 20 between last year and this year according to some people. And, you know, and its your fault that this doesnt work out. So what i became very interested in is how we had been sold on this idea exactly. Because, you know, it all seemed very natural to us. But, in fact, you know, our own planning our own retirements was, you know, really less than 30, 35 years old at this point. So i went back and, of course, what i discovered pretty quickly is there are actually one group of people thats doing really well off of this system, and its not anybody in this room. Its the Financial Services sector. It doesnt matter how badly youre doing, theyre making a mint on all of this. And to give one quick example because i dont have a lot of time to speak here, retirement savings. We collectively have roughly 23 trillion. That, in case which sounds like an enormous sum of money, that actually comes out to less than 20,000 per person. Thats going to really go far especially since the estimates for medical costs per household and retirement are over 200,000. But, of course, why are we tolerating this . Well, we dont really know how much the Financial Services sector is making off of this pile of money except to know that its an awful lot of money. That the estimates have ranged from 90 billion annually at the low end to 500 billion annually at the high end. Its probably somewhere in there. Your guess is as good as anybody elses. They claim that they dont know, they cant track this money. [laughter] somehow they manage to take it, but they cant tell you where its going. Its quite fascinating, actually. But weve become convinced that this is all our own fault. And the sort of premise of my book was to tell the story of how we had been sold on this idea that we could control our financial fates in this world where our salaries were stagnating and our costs of living were developing up. And why we werent fighting back. And, of course, as i do the book, i find out more and more about the, you know, the lobbying in washington, the vast amounts of money being thrown around to make sure youre not protected. As i like to say about your dealings with the Financial Services sector, if a food was regulated as well as our financial products, wed all have Food Poisoning at least once a week. [laughter] and you can ask why that is, okay . And how this would come to be, how weve become sold on the fact that women were it wasnt that women were underpaid and lived longer and had more responsibilities on their money, it was that women were simply too emotional to deal with their money, ask thats why we have less of it. And thats ooh why we have less of it. And you could go through the whole gamut of these things, you know . Its your financial problems are because of your childhood memories, not because of your class. And so on. And i basically wrote a book telling this story and really came to the conclusion that we need to begin talking about this as a society and not be take such fault on ourselves and begin to talk about this in ways that, you know, we no longer think its, you know, if only id not gone to the starbucks eight times last month, clearly i could have paid that 10,000 medical bill. [laughter] so on that note, i will conclude and let the panel begin. [applause] okay. Well, thanks, thanks to all of you for those quick anecdotes. One thing that interests me as writers i think many of us have the experience that when were either researching a book or maybe writing it, theres a particular moment, an anecdote or a fact that we learn that really defines for us either the theme of our book or maybe justifies for us why we are committing ourselves to spending two years, maybe three or however long it is really deep ending into a subject. And i wonder if maybe each of you could dredge up if you have it a case like that, an anecdote, a fact, a moment that sort of defined for you why you were taking on this project. And then i dont know if this is the one for you, but you told i think in your book you tell a story of hearing the chairman, i think, of Deutsche Bank justifying or rationalizing something. And if not that, some other story. So why dont you start. Well, i was, my moment where i was going to speak up actually had to do with, first, wondering am i missing something . Let me read another thing and let me read another thing. And then thinking its just a big confusion somehow. But the big moment really was opening up a textbook on banking and being absolutely horrified at what i saw. That really was shocking. This particular book still has completely false teachings that contradict the absolute basic courses that we teach in other classes in finance. As if banking can just deny all the forces in the world and somehow theres no gravity. Youre supposed to leave at the door everything that you know. They can make it up as they go along. So, basically, they tell you that banking is very special as an industry, and in reality the specialness of banking is really what they get away with. Thats the specialness. The privilege that they have to defy everything that and to live in an entitlement for cheap funding to take risks with it and hide those risks and have somebody else bear the downside. And when i realized that this really was the essence of what was going on, it was a matter of unpacking little bit by little bit for anybody that doesnt know what a Balance Sheet is and most people . 1r o1 that, what the words mean and how simple it really is to see through all this nonsense. So thats, that was the moment. But there have been many amazing stories. Someday when i write the book outside job, i might tell it. But i might drop dead. [laughter] helaine . I joke that to have done my book right i would have had to have junked half of it and started all over again, and my children would have had to have published it after im gone because there were that many scams in this world. I think the one that crystallized it for me that when youre writing a book about personal finance, a lot of people come to you and say ive got the solve. And these are wellmeaning people. And i began to look at a thing called Financial Literacy. In fact, its all will be well and theyll learn all these behaviors they should have learned. It sounds reasonable, right . How could you be against teaching kids about money . I start to look at this, im thinking, oh, maybe thisll actually work. I discover one of the greatest boondoggles i have ever stumbled into. Financial literacy starts with Ford Motor Credit in the mid 1990s. Theyre trying to cover up the fact that theyre having a problem with what we now call subprime auto loans. And so they get this bright idea that theyre going to fund childrens education and money. And they start throwing money at this, and it starts to pick up. And it really starts to pick up after 2008 if you go into the lexus databases, youll see the amount of mentions of the term Financial Literacy doubles and doubles again and doubles a third time within, like, a year. And what it comes down to is you start having the banks who are putting this product into school with their names emblazoned on it as Brand Awareness are basically using us as a way of dumping responsibility for all of the disasters of the past several decades on you. So its not that they issued a subprime mortgage with, to somebody who shouldnt have had it that was a hundred pages, singlespaced with more gotcha terms than there are gotchas out there, you should have read it. And if you had taken that class in the eighth grade, you might have been able to get this. [laughter] and its all your fault, and you should have known when the Mortgage Broker who was getting paid and you should have known he was getting paid to sell you a mortgage that you should have known that, oh, no, i cant afford that house and, actually, no, prices dont always go up. You should have known not to listen to him. And it went on like this. And i just found example after example of how Financial Literacy had basically been sold to us. And i really became, showed me, you know, how the ethos of responsibility, you know, that we were responsible for what the banks had done had been sold to all of us. [applause] is. When i first even began to have any word with people this washington, d. C. , i was absolutely shocked to see they had absolutely no idea about anything at all. And part of the way they learned, part of the way they learned was that the Financial Services industry was running what they called Financial Services university and taking staffers, wining and dining them for a weekend to teach them how it works. Yeah. I have to just interject to say i dont think i put this in the book, but i actually attended a major Financial Literacy event on the hill where they were wining and dining all the aides with really great food and such. It was the same thing. Well, thats the key to Financial Literacy on the hill. [laughter] how to read a menu is [laughter] especially when youre not paying the bill. Especially, yes. Well, and that is, actually, one of the key points. Its other peoples money, and thats also thats the last chapter of my book. Its the last chapter, and its also not just the political system, but it really just goes back to you protect your own, and if your own are other bankers, other banker politicians or your families are integrated or you understand them better, then all your policies are going to drive that way. We kind of foot that bill. The things anat talks about in her book in terms of how all of this impacts people is because we foot the bill to all of this. The political Financial System that is about political and financial power that has nothing to do with us. There are so many moments in the book where i was like, wow. I was in the middle of nowhere at times. I was in abilene, kansas, at president eisenhowers library with a guy who was looking up cattle ranching because eisenhower also had cattle and just there every day and poring through this information. I went to every single place, and i wanted the big six bankers of that time. These people were head of their banks for decades, and if they werent, they were in the Treasury Department or the Defense Department or the state department or the National Security department. There wasnt a place where there wasnt overlapping interaction, and it wasnt just because wall street was influencing washington, it was because washington and wall street were the same thing and two sides of the same coin of power. All of the stories that i found really just show that there was so much personal integration. There was personal integration in the families of power through, you know, you talk about well, you write about the new deal and fdr in your book. One of the most fascinating things when i went to the fdr library in hyde park, new york, was i was looking at documents that no one else had looked at because no one else had thought that maybe all the people running the banks were friends with fdr. Maybe i shouldnt say that, but all of them. And when i say friends, i mean connected, yachting, James Roosevelt who was fdrs father which i didnt know worked with jpmorgan to create the Metropolitan Club in new york where all the powerful elite political families would discuss matters of the day. So the political financial families and individuals were all very integrated, and every place i went there were just these stories. Ill, i can keep going, i wont. But kennedys, roosevelts, rockefellers, these arent conspiracies. And i think that was the one thing i actually wanted to cover through actual documentation is that the one thing i noticed all of the moments throughout the research is that these are not things we are assuming are conspiracies, was thats what the message is. Oh, there werent a bunch of people on jack l island, oh, there werent a bunch of people rigging the Financial System in every possible measure that you can find. Its real x. Its much more at the core of what america is. And, therefore, what our democracy isnt if you really look at the information, and that was something that all along the way i going in thought there would be connections, but i just had no idea how many there would really be and how close and tight they really were. Well, thats a great point [applause] since you mentioned having been at the hyde park president ial library, one of the impressions that i got when i was there was how bad all of the equipment was. I mean, you know . [laughter] none of the microfilm readers worked, and they were all broken down. And there was [inaudible] this, of course, is part of the National Archive system, and they were putting out appeals for money from the average person. [laughter] [inaudible] well, yeah. To preserve the collection. One thing about fdr that i wanted, i want to move into sort of the next phase of our discussion. Fdr, of course, had a lot of depends friends. He had grown up in great wealth. He had a lot of friends from the 1 really. Theres a great moment that i came across when he was, he had written a speech or prepared a fireside chat that was going to be about how he was going to raise the taxes on the wealthiest people, and he was going to raise them up to marginal rate of 90 or so, and he was reading, he was giving a dramatic reading with hairlsic keyes haroldic keyes, i think, who was his interior secretary and a republican, by the way, but a very progressive one. And Vincent Astor was in the room, and he was a very, very close personal friend of fdrs and one of the original 400, i think, of ward mcallisters great term. And fdr was reading this out, and he got to the point where he said this is what im going to do to taxes on the wealthy, and astor sort of said, well, you know, franklin, im one of those people. And roosevelt sort of looked at him and said, well, youre going to have to pay too, vincent. [laughter] so, but this leads me into a question i wanted to ask you, nomi, which is that in all of the period that you covered going back, as i said, to the dawn of the 20th century it seems to me, and you can check me if im wrong on this, that there was really only one period in which there really was a Successful Campaign for wall street and banking regulation, and that was the 30s. When we got the securities act of 1933 and of 1934, we got the sec, we got disclosures of corporate finances, we got, we brought the New York Stock Exchange to heel, all these things. The is that true, and if so, why do you think that is . Why have we been so unable to do it in other periods, and what was it about the 30s that made a difference . There was a man named winthropal dredge who was actually the son of the father of the Federal Reserve and, by the way, related to Nelson Aldridge rockefeller who yes. He was the great uncle of nelson rockefeller, fourtime new york governor, Vice President and David Rockefeller who ran chase also for two decades. So anyway, Winthrop Aldridge a couple generations before that was friends with fdr, and he was actually concerned about the speculation that had driven the market apart. He was concerned about the economy and confidence in general in banking as was fdr. In his first inaugural address he talked about stabilizing the system because he believed, fdr believed because he had grown up in wealth that a system that was more stable for everybody would lift america in general. And, actually, Winthrop Aldridge believed the same thing which is ironic because jamie dimon would never get up and say, hey, gee, im going to split up my bank, that would be a really good idea because everybody would be more stable. But then it actually did. And aldridge put out a frontpage piece in the New York Times to push glasssteagall that separated speculative activities there all these deposits and a fdic insured by the government. And he promoted it. And he actually was going back and forth to washington the get the senate and to get senator carter glass whose name is on that bill to make the bill Even Stronger than it was going to be to include the morgan bank which was also one of his competitors, so that didnt hurt. But, but, yeah. Theres so much selfinterest going on here, but the point is at that time with the population where it was, with fdr very, very, very skilled politician understanding the language and with getting certain friends of the bankers like aldridge and also James Perkins who ran National Citibank at the time to work with him, they separated their bank withs before the legislation. Their banks before the legislation. So that was something that happened that helped the country, it helped the bankers, it helped fdr. That lasted, that stability in banking and that separation lasted for about 40 or so years before in the 70s things started disintegrating, and theres a lot of reasons in between. But thats when bankers found other ways to make money. They found oil to recycle into the middle east. They started going off this idea of more stability at home means a better profit for us and thought, hell, we could make a much, much greater profit if we dont really care about that and sort of go off in our own direction. And politically they were allowed to do that by all of the president s that came after that. Right. Now, anat, you and i were talking before the panel began. In the preface, the new preface that youve written for the paperback edition of your book, you talk about the blindness of bankers and, in fact, the willful blindness is the term you use. Fragile is that they take it with somebody elses borrowed money. That is the problem, so they are like the owner bought a mansion with no down payment but they just rush to pay them out to protect them from their creditors. So they continue to live on the edge like it is absolutely not necessary and the that they are allowed to, so in terms it is a term i came after the book i met a writer. We do not see the perils that its about to see no evil and hear no evil that represented when theres a lot of blind spots in banking. In other words they dont here about it because it isnt convenient so i cut many incidences about i dont want to hear what you have to say. There is a lot into your inr book that is designated with the concept. My wife and i were subscribers to the magazine and we discovered two things while we were subscribers and one is that the one we had to subscribe for one year. Every month it would come in the mailbox and its never missed one where it offered the advice thats what you should do to save herself from a financial where the is to consolidate your credit card and about one bookmark failed. That brings me to the question which is since the theme of your book is that it i isnt stacked against the ordinary investor or household because of all of this that we get inundated with, what can the average american whether we are thinking in terms of investors, what can we do to save ourselves from is there anything in particular that people should read or keep in mind . Theres the big picture and the individual picture that we need to start speaking out about because we are not going to speak up and the only way is we have to insist on protection out of washington and that isnt happening until we start. They dont realize how stacked the deck is against them in that retirement but in terms of the fact that Financial Service industry has been very little duty to help you. If we seek help it is like going to a doctor and its in your best interest and there is a hippocratic financial oath that they are violating if they don dont. Most adhere to the suitability standard that can be described as if it fits it is okay. Because most people have no clue about any of this, what i say is that you have to ask questions constantly and dont assume someone is acting on your behalf. As if it means to be have the legal duty to act in your interest itheirinterest and if k away. As they are charging and getting money from the Financial Services sector. Somebody else is paying the bill and somebody else doesnt have to best interest at heart. Those are the things i try to tell people is dont take anything for granted. One of the things that is not in the news is that he finished his book with exploration of the brain and how we get printed by credit and things like that. Whats my book explains that the magic of leverage and what it does in the dark side of it. The point is everybody but bankers. So right now there are distortions in banking that have to do with sort of too much and too little credit at the same time so the credit that is good in the collection and Credit Card Debt and other things that are quite questionable at the same time and some lending that is not happening. I talk about them in some of the books bu that its so easy o take someone elses money to back however you want and wherever you want to have a political infrastructure that allows you to do it in the political infrastructure that exceeds you when it doesnt work out at the expense of everything that went into it that there is no reason and there is nothing to break that danger and the other thing is dont ever consolidate your credit. But there are so many ways to extract. So many ways to struct to go up and then have it a lot out as it is being right now even today there was a bailout that is still going on today plus the infrastructure creates an implicit bailout and so there is a definite danger to that. Basically by a money magazine and then do everything. [laughter] the comment that struck me is the claim by your subjects that they are put on this earth to do good and that they do good. The banks say it makes the economy grow and the personal finance is saving people money for retirement and it will destroy a good thing and Lewis Douglas who was one of the original cabinet members but at the moment when fdr called the cabinet and said i am taking america off the Gold Standard that reaction was this is the end of western civilization. So there is always this idea in the Financial Sector that we cant do without them and i would like to hear from each of you how much truth there is and how much of it is just merited a. Sometimes i use this quote that came out after hours called pay off and he says unfortunately obama and biden are financially illiterate but later when he worked for ted coffman he actually was protected so he took joe bidens seat and served for two years remaining and therefore he didnt care about the campaign contribution. He said anything that you propose to do at all they always say blending and the growth will suffer and then he paused and said and im quoting it all bullshit. [laughter] not all regulation is good. I go sometimes to some events where i see the sausage being made. I see the interactions between the lawyers, there are a lot of lawyers involved by the way there is a lot of legal stuff and its this power play and they have an interesting relationship and they want to generate more jobs for the consultants so they write a very complicated and when it came off the shelf it was impossible to implement. By the time its done you might as well forget or let me give you an example with words you know. So under the monstrous dodd frank act that is supposed to save us some have more and more responsibility and they cut their budget, too. There is a requirement is that they write when you worry about your loved ones and how they would go through the same code of the Lehman Brothers went through that took down the rest of the system when it was triggered and how at least four times bigger than the Lehman Brothers depending on the Accounting System a lot more of the derivatives and a lot more trillions of dollars with no other company in the world to manage how this would be through the bankruptcy course. So they spent a lot of time and money writing these things and then the regulars are supposed to check these things and tell us somehow that j. P. Morgan chase at the time when maybe other companies would go down as well would go down through bankruptcy without harming us and what they submitted to the answer is there is no way in the world that is what happened so they would say yo see read my lo more bailout. In other words if you let them drive 90 miles per hour, so the point is not all of these regulations are effectively useful. There are things to do and they are not that complicated. The dodd frank act is the bullshit. Its true. You can drive through anything despite every complaint thats coming from the Banking System and the millions of the lobbyists and lawyers and people that are expounding upon it. I read that and it is literally like six pages of exceptions. Its ridiculous. And of the living well. After world war ii and after the period before that when he went off the Gold Standard something the bankers wanted at the time because of the reform that divided the regulation from the deposits whenever it is easier to have money to speculate with either you dont have to connect a golto gold or have accountabiy to what you do with it the easier it is to speculate and that he will make money quickly and then if it falls apart and you come back and, so what. That actually went through the next ten period because he went up and talked about how it was his idea that in fact it was rockefellers idea of running the National City bank because they pushed for this idea that america needed to expand in order for america to be powerful now in ukraine for america to be powerful to join philosophy between the people that were on wall street and that are selected and appointed is that the american competitiveness is something that is important to both militarily to eisenhower into the doctrine support of capitalism versus communism that coincided with the Financial Support because while the u. S. They were opening branches in those countries. It was not an accident in terms of where the geography politically and financially ca came. They be needed very strongly and i think i saw this in the book someone quoted they are mutually reinforcing power involved on the Financial Spectrum of the most elite levels. It doesnt matter if that falls on the basis of. That is the same of republican democrat there are speeches in my book for different people wee under different president s say the exact same word. It sounds like they are reading each others lines. Why dont you take us out on this comment. I think we know the ability to believe our own is unparalleled in the a lot of the explanation that goes on here we all believe we are virtual actors of this world. Maybe theres an exception that most of us dont and that includes that the kurds and Financial Service people. They think its important stuff and that if we dont do it the way they say that things are going to happen. I think a lot of times its in their best interest of a convinced themselves of that and this is often very powerful interest and i think as people since we are in the la i will accuswould use my favoritey example which is i think you eventually know someone who becomes a celebrity at some point did you get to watch the process if they start getting surrounded people tell them what they want to hear and they are embarrassed to go near them so they lose their ability to hear the word now and this is what happened to bankers and the powerful people as well they hear what they think and what they think is they are acting right and we are all wrong and thats basically how it happens. They are not always evil people. I have a lot more questions but i want to turn it over to the floor [inaudible] to