Warlike situation, relationship changed but the dependency of one group on the other continued. It was either about money or influence by them is pretty much prevalent in different ways through different presidencies weve had throughout our history but the history i cover specifically since Teddy Roosevelt administration until today. Host is there a reason you picked that starting point . Guest yes. First of all it was only so much time i had an life basically to do a couple of centuries versus one but really what happened was as we know there was a crisis, a crash, black tuesday 1929. Not want to start the book but when i realized when i researched that crash was a couple of the bankers that were most connected to the crash and most concerned about it including bankers from the morgan bank bank which we now s j. P. Morgan chase, if you trace them back, traced back to j. P. Morgan and j. P. Morgan was one of the league bankers in the country from 1890. There was this through line of individual families and banks that went back to that time. But also that was the time under Teddy Roosevelt administration where there was a lot of recessions going on. Times with the country doing well for a couple of years and then it would receive for a couple of years economically. To the point where in the mid1890s the government, talk about dependency, had to call upon chase j. P. Morgan cut them finance the budget. So that was what happened. That was a gift that j. P. Morgan gave any return the record influence over issues out of it. Thats a start. In 1907 was when it was a huge panic in new york and it required a lot of banks to close as ultimately happen in in 200, almost 100 later, and at the point im Teddy Roosevelt administration turned to j. P. Morgan again as he had in the 1890s and he said what can i do to help you help me, basically. What happened was the Treasury Department fashion 25 million, kind of the first bailout of banks that the government paid for and set a jg morgan here 255 million, figure it out. What j. P. Morgan tegucigalpa in his library, major bankers at the time and what he decide to do is parcel of money to some of them, all the strength, shares with him, they hung out together. I i love the other banks failedt the time but that was a situation where he then became known because he let his banks survive and he saved his panic a sort of the king of banking. New times called him that as well. The history goes back between 1890s and 1920 because 20s because really around the morgan bank they were very influential for money and also for what happened politically and have Treasury Department and the presidency ultimately survived their panic. Host but tr was known for being the trust buster, for not liking big business, or writing against it at least publicly. Guest and he was. He is noted as any was the was the trust buster. What he busted was nonbanks. But the time standard oil which is Major Oil Company under the Rockefeller Family and of the types of companies of that nature, he actually did bust up some of their more powerful sort of elements to sort tried to make some more competitive environment. He was known as that and other industries as well. But he stayed away from banks. If you look at the history of why did that i think it goes back to 1907 panic. He needed come j. P. Morgan to help him basically not have a larger panic throughout the United States, threat the entire country. And to keep money flowing threat the entire country by not having runs on all the banks. That element of saving was something that he required and that he therefore as a kind of gentle mens agreement stayed off of busting up the larger institutions. Which as result is longer j. P. Morgan chase today. The fact he did not bust ups on the banks back then is one of recent what are larger banks in this country today have enabled to accumulate that size and a footprint in the way they have. Host soaked too big to fail is not a new concept . Guest no, it isnt. The difference is that more in the recent past too big to fail were banks that he can bake over this major time of the past century and then required help from the government and the government provided that help as did the Federal Reserve. At the time back then they were either helping themselves getting some money from the government to help themselves but it was a bit more limited. Before we leave this time, as a character in your book that we probably havent heard of today, James Stillman but he seemed to have this very influential law. James stillman was one of the leaders of what was called National City bank which now we know as citigroup. Going back in time he was one of the major directors of the bank and family was a very sort of upscale blueblood family in new york city in culture and so forth. But he was also one of the bankers that after this time, and his friends with the morgans and so forth, he was one of the main people that decided it would be necessary for there to be some sort of central bank in the United States like what we have now, the Federal Reserve, that would be able to save banks in a situation where the government did not step in and help those banks. When it was sudden instable. Unlike the panic rather than j. P. Morgan for excel account of the Treasury Department, which she had furnished money in decades before that, they would be other central entity that would do that. Stillman was one of the people sort of behind the scenes started to work with congress to basically create what became the Federal Reserve bank. But his name isnt really noted for that in history. Host subject island 1913, was that that a noble effort . Guest so Jekyll Island started in 1910 and was basically, Jekyll Island was like the country club for all the rich people in the United States at the time. They effectively, i spent time doing research down there. Now its a resort hotel off the coast of georgia. But at the time all these major families, the morgans, the rockefellers would have thought of condos there but they were not like city contester they which was nice and had lots of service come down with them and they could only access Jekyll Island through the waterways and the rest of the people had to stay away from it during the times they were there. It would go around thanksgiving to christmas at and hang out. A particular thanksgiving around 1910 a very small number of them went before the families came in for the holidays in what became the documents that ultimately turned into the Federal Reserve act of 1913 which permitted the Federal Reserve reserve. But at the time it was over clandestine and almost didnt happen. I talk about and all the president s bankers because its one of my favorite stories. Nelson aldrich was a senator, head of the finance committee at the time host republican from rhode island. Guest thats right. He had a bit of wealth and prestige and stuff himself and he was on the fines committee, the Banking Committee it was called at the time. Finance committee. He had a son new york as a banker, and he was going to visit him and come talk to j. P. Morgan and others about a central bank and decide where they could have this meeting. He was going to meet in new york. What happened was he got hit by a trolley car and so we got laid up. He had the convalesce. During that time rather than at people note was going on, it was decided by j. P. Morgan basically aldrich and a bunch of other people voted Jekyll Island, used its membership because it was a club and convene their and decide what to do. All the stories about being all secret, it will happen because nelson was at the wrong place at the wrong time relative to a trolley car. They met at Jekyll Island. They pin these ideas for the central bank based on the travels convey some what was required, based on what they thought would go through with the American Public if it were voted and ultimately it was a bunch of bankers including James Stillman who took those documents back to congress and basically brought them into the senate and ultimately was not passed in 1910 underflow spent a republican president. It passed under woodrow wilson, a democrat who came in after that presidency to take over, and it was basically sold as this i do that would be of Federal Reserve, central bank, a bank to the banks to help them when he did it but also provide credit for the country. The idea was if there was to be panic again like the farmers in the middle of the country would not find the banks could get money from new york and wouldnt be able to provide them through that season or through that hardship. That was how it was sold as a peoples bank. But in reality it was created together with Nelson Aldrich and senators and bankers to provide them an out if it were to be an emergency. Host based on the european model . Guest to an extent based on european model, with a sort of more, because our country is bigger than say the bank of england model or the bank of france model of the time which is now part of the European Central bank. The idea was we would have 12 different entities which were part of the Federal Reserve system. That goes back to the farmers and backed the idea if we have 12 separate entities in which washington writer we have the mainland Federal Reserve, we have new york fed, San Francisco so forth, they would be able to cover the local banks in terms of making sure that credit when they needed it, regulations and when they have to and me are making sure of the banks that use the big banks to help workers and farmers and other businesses throughout the country would have access to credit and access to money. Our system has more banks in it, just spread after the country. Politically and also geographically we are bigger and have different cities that have more banks in them for more purposes locally, and now there are more national but at the time that was the idea. Host where their protest against it in 1913 . Today theres an undercurrent of protest against the fed. Guest the remote protest in 1911 and 1912. Basically more protest under taft, the president before wilson, the number during him. Within it was much more yester oped updates and concerns that the bank could be too controlled by wall street banks, but what he did is decide to use wording he was worried about having a Federal Reserve and even was after the fact, but he decided to use wording and to work with politicians to the country, particularly in the middle of the country in those regions to provide the narrative to the rest of the country that this money would be good for everyone. The idea was not to just focus on the big wall street banks for the big powerful families the basically ran those the banks e time but the idea was would be a way to spend that money for the country. In that respect he kind of got around any sort of protest which were limited by the time he was in office and also got around any criticisms because he got buyin from a number of senators and representatives threat the country that ultimately the system by being a system of 12 banks will work for everybody. Host we will return to the social banks only get into collusion, your most recent book by to want to read two things. First of all from all the president s bankers, quote, the political and financial alliances between bankers and president s and their cabinets continue to define the policies and laws that drive the economy. And then from one of your previous books, other peoples money, you write that the amount of clout of financial sectors wheeled in washington cant be underestimated. Guest thats true. Those are both two statements. Other peoples money i wrote in the wake of the enron scandal and the worldcom scandal which were would effectively end energy and Telecommunications Sectors after deregulation in the sectors but they happened really because those institutions, enron, worldcom were working with the major banks of the country and all sorts of tremendous structures, hiding money off their books and so forth. The scandal situation happen, the recession happened. Everybody knew about it but the banks kind of got off relatively free from that. Not other ceos went to jail then, which i wrote other peoples money, but their influence was very high in washington because what they would basically saying was look, this is on enron. This is on worldcom. They did things wrong. We might have did some paperwork and help them with a banking are there but the reality is those kinds of institutions, enron could not have become the major derivatives trader that it became instead of the Energy Company its that it was. Worldcom could not have become such a Massive Organization with so much stuff hidden offshore and from their books come from the public, if banks had not helped create the facilities, the credit lines, birch compass together and do all of that. With respect to the influence in washington, all of that comes to bear. All of the bankers at the time at throughout our history have been able either through money with a just having the ear of president being on committees, the major advisors, that even it would to look it wasnt as, you need us, it was then. And sort of come on summarizing, but working into that. So in terms all the president s bankers h1a the same thing. I wrote ten years after i wrote other peoples money, but in that book i go to specifically the kinds of relationships and influence that bankers had in washington. Today we think mostly of the donations, the lobbying riches and then skippered other sectors the right now the tech sector is kind and giving banks a a run r the money but historically the influence of sitting down with a president obama President Trump or who ever from a major banker like j. P. Morgan chase as chairman Ceo Jamie Dimon really does have a lot of clout. Also the media has caught on oe other sets of the influence washington through influencing Business Media and the narrative of what banks to and why they are needed, even if they do criminal things and why they need to be maintained in their current form. Host now, nomi prins can you come from outside of the equation as well, dont you . Guest yes. Went into ron went in when was happening at the thomas managing director Goldman Sachs and is working, i had a team that created what were called Credit Derivatives which were effectively bets on whether companies or any sort of loans whether they were attached to mortgages or anything else would default. Basically thats what a credit derivative is. Its like i bet you you will be able to either catholic or not be able to fairfield on. Or if your company are either able to pay off the debt you borrowed in the Public Markets or from banks or youre not. That i can bet on that. I offset that with someone elses is willing to take the other side or with Insurance Companies that ensure this or that, im taking on the other side to make this bet. But there they were much more convoluted than that ultimately as he found out in the subprime mortgage crisis and aftermath in the financial crisis. But i created at bear stearns where i i ran a department for seven years, more than 70 string the 90s for bear stearns the creation that could enable these types of Credit Derivatives to be used for investors, for companies, and large quantities, mixed and matched together. All of the analytics for that i was a much involved in threat might run wall street. When i left and about this and other peoples money towards into that book i said that, i wrote Credit Derivatives and cbos come which to get a technical on a sunday, then i will go on, credit, collateralized debt obligations, collateralized just means of what a bunch of stuff together and the predicates that also come just in lehman terms. They were something i i said we should watch because they will be at the crux of the next financial crisis. Thats partly because i saw where the recording. I saw the junk that was being put inside of them and that still is. And then there were small, very small part of the market and they were very much in fashion because they could make so much money for banks like Goldman Sachs or banks like bear stearns and then ultimately became the cracks of a financial implosion years later. Host were you good at your job . Guest yes, i was good at my job, and that i was a quantitative analyst throughout my career and wall street. I stored as a programmer at the Chase Manhattan Bank in the 80s from having gotten a degree in math. Thats basically try to get a job and work in new york city. From the beginning of derivatives, of looking at aggregating different types of financial securities, looking at the math, looking at the programming i did that stuff from the sort of very initial level in the 80s to when i ultimately left in 2002. What it also did and one of the reasons i left wall street was it was very important when i was creating analytics or directing my team as is building them into the place i worked to analyze the downside, to make sure if a salesperson was selling a product or which were doing analytics, the