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AUDIO: Robert Scheer Speaks With Nomi Prins About the Connection Between Washington and Wall Street

Posted on Jun 1, 2016

By Robert Scheer

dflorian1980 / CC BY-SA 2.0

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.

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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?


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