tv In Depth Nomi Prins CSPAN April 13, 2019 9:00am-11:02am EDT
what do you mean? >> well, what i mean changes over the decades because "all the president's bankers" cover from 1890 until the obama administration. but what it means is that in times of war, there's a certain relationship where the government turned to bankers to help finance it. in times of peace, the bankers require of the presidents that they help them bank more widely and with fewer rules. so depending on whether there was a financial crisis or a global war-like situation, the relationship changed but the dependency, one group on the other, continued. it was either about money or it was about influence but it was pretty much prevalent in different ways through the different presidencies we've had throughout our history, but the history i cover specifically since teddy roosevelt's administration through until today. >> is there a reason you picked that starting point? >> yes. first of all, there was only so much time i had in life basically to do a couple
centuries versus one but really, what happened was as we know, there was a crisis, a crash, black tuesday, in 1929. it's not when i start the book but what i realized when i researched that crash was that a couple of the bankers that were most connected to the crash, most concerned about it, including bankers from the morgan bank which we now know as jpmorgan chase, if you trace them back, jp morgan was one of the lead bankers in the country from 1890 so there was this through line of individual families and banks that cast back to that time. also, that was a time under teddy roosevelt's administration where there was a lot of kind of recessions going on. there were times when the country was doing well for a couple years, then it would sort of recede for a couple years economically, to the point where in the mid 1890s, the government, talk about dependency, had to call upon jp morgan to help them finance the budget. so that was what happened. that was kind of the gift that
jp morgan gave and in return, he required influence over his years after that. that's how it started. then in 1907, that midpoint, was when there was a huge panic in new york and it required a lot of banks to close as ultimately happened in 2008, almost 100 years later, and at that point in time, teddy roosevelt's administration turned to jp morgan again, as they had in the 1890s, and he said what can i do to help you help me, basically. what happened was the treasury department fashioned $25 million, it was kind of the first bailout of banks that the government paid for, and said to jp morgan here's $25 million, figure it out. what jp morgan did is he gathered in his library major bankers of the time, and what he decided to do is parcel that money to some of them. they were his friends, they had shares with him, he had shares with them, they hung out together, their families got together, et cetera, and a lot of the other banks failed at the time. that was a situation where he
then became known because he let his bank survive and he was sort of the king of banking. the "new york times" called him that as well. the history goes back through this period, 1890s and 1920s because around the morgan bank, they were very influential for money and also for what happened politically and how the treasury department and the presidency ultimately survived their panic at the time. >> but nomi prins, tr was known for being the trust-buster, for not liking big business or railing against it at least publicly. >> yes, and he was. he is known as that and he was a trust-buster. what he busted was non-banks. so at the time, standard oil which was the major oil company under the rockefeller family and other types of companies of that nature, he actually did bust up some of their more powerful sort of elements to sort of try to make some more competitive environment.
he did do that. he was known as that, and other industries as well. but he stayed away from banks. if you look at the history of why he did that, i think it goes back to that 1907 panic. he needed jp morgan to help him basically not have a larger panic throughout the united states, throughout the entire country, and to keep money flowing throughout the entire country by not having runs on all the banks. i think that element of saving was something that he required and that he therefore, as a kind of gentlemen's agreement, stayed off of busting up the larger institutions which, as a result, is why we have jpmorgan chase today. the fact he did not bust up some of the banks back then is one of the reasons why our larger banks in this country today have been able to accumulate that size and that footprint in the way that they have. >> so too big to fail is not a new concept. >> no. it isn't. it's definitely not. the difference is that more recent past, too big to fail
were banks that became big over this major period of the past century, 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 period, there's a character in your book that we probably haven't heard of today, james stillman. but he seemed to have this very influential role. >> yes. james stillman was actually 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 his family was a very sort of upscale, blue blood family in new york city, in culture and so forth. but he was also one of the bankers that after this period of time, he was 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 couldn't step in and help those banks. so when there was an instable period like the panic, rather than just jp morgan, for example, counting on the treasury department, which he had furnished money to in decades before that, there would be some other central entity that would do that. stillman was one of the people that sort of behind the scenes started to work with congress to basically create what became the federal reserve bank. but his name isn't really noted for that in history. >> so jekyll island, 1913, was that a noble effort? >> so jekyll island started in 1910 and it was basically -- jekyll island anyway was like the country club for all the sort of rich people in the united states at the time. they effectively, i spent a lot
of time doing research down there. now it's a resort hotel off the coast of georgia but at the time, all of these major families, morgans, hydes, rockefellers, would have sort of condos there but they weren't like city condos, they were really nice and had lots of servants 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. they would go down around thanksgiving until christmas and hang out. a particular thanksgiving around 1910, a very small number of them went before the families came in for the holidays to ink what became the documents that ultimately turned into the federal reserve act of 1913 which created the federal reserve. but at the time it was all very clandestine and almost didn't happen. i talk about it because it's one of my favorite stories. nelson aldrich, the senator, head of the finance committee, actually, at the time -- >> republican, rhode island. >> he was republican. that's right, rhode island.
that's right. he had a bit of sort of prestige himself and he was on the finance committee, the banking committee, it was called at the time, and he had a son winthrop who was living in new york as a banker. he was going to visit him and kind of talk to jp morgan and others about a central bank and decide where they could actually have this meeting. he was going to meet in new york. then what happened was he got hit by a trolley car, so he got laid up. he had to recover and rather than have people know what was going on, it was decided by morgan that they go to jekyll island, use his membership because it was, after all, a club, and convene there and decide what to do which is ultimately what happened. all the stories about it being secret, they really have been because nelson was in the wrong place at the wrong time relative to a trolley car. they meet at jekyll island, they
pen this, based on their travels, based on what was required, based on what they thought 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 wider committee and ultimately was not passed in 1910 under what was then a republican presidency. it passed under woodrow wilson, the democrat who came in after that presidency to take over and it was basically sold as this idea there be a federal reserve, a central bank, a bank to the banks to help them when they needed it but also provide credit for the country. the idea was if there was ever to be a panic again like the farmers in the middle of the country wouldn't find that their banks couldn't get money from new york and wouldn't be able to provide them through that season or through that hardship. that was kind of how it was sold, but in reality, it was created together with nelson
aldrich and some senators and bankers to provide them an out if there were to be an emergency. >> based on the european model? >> to an extent based on the 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 at the time which is now part of the european central bank, the idea was we would have 12 different sort of entities which were part of the federal reserve system. and that goes back to the farmers and back to the idea that if we have 12 separate entities of which in washington right here we have the main one, the federal reserve, we have a new york fed, a fed in san francisco and so forth, they would be able to sort of cover the local banks in that area in terms of making sure they had credit when they needed it, regulating them when they had to, and making sure that other 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. so our system has more banks in it to spread out through the
country. politically and also just because geographically we are bigger and have different cities that have more banks in them for more purposes locally and now they are more national but at the time, that was the idea. >> were there protests against it in 1913? today there is still an undercurrent of protest against the fed. >> there weren't protests in 1911 and 1912. there were more protests under taft before wilson than under him. yes, there were op-eds and concerns that a bank could be too controlled by wall street banks, but what he did is decide to use wording and he was even worried about having a federal reserve and even was after the fact, but he decided to use wording and to work with politicians throughout 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, the big powerful families that basically ran those banks at the time, but the idea was it would be a way to sort of have that money for the country. in that respect, he kind of got around any sort of protests which were limited by the time he was in office and also got around any sort of criticism because he got buy-in from a number of senators and representatives throughout the country that ultimately, the system, by being a system of 12 banks, would work efor everybod. >> nomi prins will return to the central banks when we get into collusion, your most recent book, but i want to read two things. first of all, from "all the presidents bankers" quote, the political and financial alliances between bankers and presidents and their cabinets continued to define the policies and laws that drive the economy, and then from one of your previous books, "other people's money" you write that the amount of clout the financial sectors
wield in washington can't be underestimated. >> that's true. those are both true statements. "other people's money" i wrote in the wake of the enron scandal and worldcom scandal which were affecting the energy and telecommunications sectors after deregulation in those sectors but they happened really because those institutions, enron, worldcom, were working with the major banks of the country on all sorts of derivative structures, hiding money off of their books and so forth. so the scandal situation happened, the recession happened, everybody knew about it but the banks kind of got off relatively free from that. none of their ceos went to jail then. this was 2001-2002, during when i wrote -- after which i wrote "other people's money" but their influence was very high in washington because what they were basically saying was look, you know, this is on enron. this is on worldcom. they did things wrong. yeah, we might have, you know, did some paperwork, helped them with their banking here and
there but the reality is those kinds of institutions, enron couldn't have become the major derivatives trader that it became instead of the energy company it said it was, and wor worldcom couldn't have become such a massive organization with so much stuff hidden offshore and from their books, from the public, if banks hadn't helped create the facilities, create the credit line, merge companies together, basically do all of that. so with respect to the influence in washington, all of that comes to bear. so all the bankers at the time and throughout our history have been able either through money or through just having the ear of presidents, being on committees, being major advisers, they have been able to say look, it wasn't us, you need us, it was them, and sort of summarizing, but work it into that. so in terms of "all the presidents bankers" it's the same thing. i wrote, ten years after i wrote "other people's money" but in that book i go through
specifically the kinds of relationships and influence that bankers had in washington. today we think mostly of the donations and the lobbying which is immense compared to other sectors, although right now the tech sector is kind of giving banks a run for their money but historically, the influence of sitting down with president obama or president trump or whomever from a major banker like jpmorgan chase's sceo jami dimon has a lot of clout. also, there is clout on the other side, so they can influence washington by influencing business media and the narrative of what banks do and why they are needed. even if they do criminal things and why they need to be maintained in their current form. >> now, nomi prins, you come from that side of the equation as well, don't you? >> yeah. so when enron was happening, at that time i was managing director of goldman sachs. i was working, i had a team that created what were called credit
derivatives which were effectively bets on whether companies or any sorts of loans, whether they were attached to mortgages or anything else, would default. basically that's what a credit derivative is. it's like i bet you that you will be able to either pay off your loan or not be able to pay off your loan. if you are a company, you either are able to pay off the debt you borrowed in the public markets or from banks or you're not. then i kind of bet on that. i offset that bet with someone else willing to take the other side or with insurance companies that insure this or that insurance, i'm taking out on the other side to make this bet. but they were much more convoluted than that ultimately, as we found out in the subprime mortgage crisis and the aftermath in the financial crisis. but i created at goldman and bear stearns as well where i ran the analytics department for seven years during the '90s, the creations that could enable these types of credit
derivatives to bey f used for v investors in large quantities. i was very much involved throughout my career on wall street. when i left and actually wrote this, i think towards the end of that book i wrote that credit derivatives and cdos, which to get real technical on a sunday, collateralized debt obligations. collateralized means i put a bunch of stuff together and i bet against that also in l layman's terms. they were something i said we should watch because they will be at the crux of the next financial crisis. that's partly because i saw where they were going, i saw the sort of junk that was being put inside of them and that still is, and that then they were very small, very small part of the market, and very much in fashion because they could make so much money for banks like goldman
sachs or like bear stearns. ultimately they became the crux of the financial implosion years later. >> were you good at your job? >> yes. i was good at my job in that i was a quantitative analyst throughout my career on wall street. i started as a programmer at the chase manhattan bank in the '80s, from having gotten a degree in math, basically trying to get a job and work in new york city, the banks were hiring. so 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. but what i also did, one of the reasons i left wall street was it was very important when i was creating analytics or directing my team, as i was building them
in the different places i worked, to analyze the downside, to make sure that if a salesperson was selling a product for which we were doing analytics, they were also explaining what the risks were in that product. and what began happening was as things got more competitive and there was more money in more esoteric products, this idea of talking to clients about risk or funding risk analytics within the company, it's just like the budget in washington, this money goes for this, this money goes for that, that happens in banks as well. it wasn't kind of considered a priority. it was sort of down considered. i had more and more of a problem just morally on that, because it's one thing to create something and there's risk attached to it and if someone understands the risks to be involved but if the risk is
either, a, ultimately on the public but b, can't be explained properly, then that's a bigger problem and that's where i started to divide out from wall street and ultimately become a journalist and author. >> you write about 9/11 and the impact that had on you. >> yeah. so that was really the breaking point i think for a lot of us in new york. i was working at goldman sachs at the time, very close to where the towers had been, and in fact, that morning, i had a corner office actually on a high floor at goldman sachs and the actual planes went by my office. now, when the first plane went, nobody really noticed that, nobody on the news noticed that. it just sort of happened. but we were sort of in the flight path. but then when i saw the sort of tickers and debris and smoke started accumulating very quickly upwards, and it started
to be covered on the news, and the second plane came by, that plane we noticed, that plane came very close. now, at the time, that moment of impact, obviously none of us knew it was a terrorist attack but what we did, what did happen was everything got very chaotic very quickly internally. we were actually supposed to go to an off-site to talk about credit derivatives and all our teams are flown in from around the world the night before and we were supposed to go off somewhere and do a jekyll island, basically the kind of thing that happens all the time in banking and just be somewhere else. obviously we couldn't and my clarity moment was when one of the people from -- a major person in the department said maybe if we leave now we can beat the traffic out of manhattan. it was like dude, there's like no, something really big happening here. it's not about, you know, that right now. but then ultimately, over the next few days, i spent a lot of time just thinking about where i was at, where my head was at, where life was.
i wanted to volunteer to help with the armory instead of going into work at goldman a few days afterwards to try to match items with people as they were coming in and just sort of help volunteer to do that, whereas we were supposed to be at work. so there was all these moments of just priorities in terms of what was happening in the street and life, life in general. yes, that was a big pivot point for me. i wound up resigning a few months after that. >> from "it takes a pillage" nomi prins writes unless you have been embraced into the bosom of goldman sachs even for a brief spate of time, it's hard to fully grasp its culture of excellence. it's like harvard, the "new york times," the senate and the new york yankees all rolled into one. once you drink the kool-aid and manage not to spit it out, you really begin to think you are better than everyone else.
>> i wrote that. yeah. first of all, when i was interviewed for goldman, as people were, it's a very long process. i was working in bear stearns in london at the time, i was sought out by goldman to come to new york and do credit-related products with them, and through this nine-month interviewing process, there was partners, i met when they were in london and i was in new york. it's a rigorous getting through of a sort of totem pole up through the very senior levels of the company. so all along the way, there's this idea, not that we didn't know goldman sachs had this aura in the industry of being sort of the manna of wall street or of banking because of how it just presented itself, you know. so the idea of the interview process kind of manifested that, like if you get through this, hurdle, and you get through this
hurdle and this hurdle, it's almost like this makes -- if we like you more, this makes you better. it's kind of like a weird cultural indoctrination just from the beginning. and once you get through that, i remember i was standing on one of the trading floors for one of the later interviews and i was being interviewed by lloyd blankfein who became the ceo and he walked me out after we were chatting to the trading floor and he kind of does one of these, and he says this is not bear stearns. in other words, like we are just so much better than bear stearns which is where i was at, this is goldman sachs. it was that kind of aura and that moment of presentation of who we are. the idea of that culture of excellence and that's -- there's a book about -- as well that was written not too long after i was there about goldman's culture of excellence, is something that's discussed internally. they consider it, that's the word they use, it's considered a
culture of excellence and if you are like them, sort of moving up the sort of ladder, then you are called a culture carrier. it's just a thing. at least when i was there. so this idea of being one of us and then doing your job, but then your job is about being one of us, is very sort of self-enforcing. and that's what i mean by that. there's a very strong sense of we are really great, if you're here, you're really great but only if you behave like us and if you don't, maybe you don't belong here. >> what do they do? >> well, they, like any of the sort of more marquee investment banks, do a few major things. they put banks together. they put companies together. they are investment banking advisers.
they find acquirers of companies and basically find companies that want to be acquired and work out the details. for working out the details, a couple of things fall out. one thing that falls out is a lot of fees. another thing that falls out of that deal are the ability to potentially issue bonds on behalf of that new company or on behalf of one of the companies involved so that they can raise money to either go on with the next part of their business or to buy each other. they can issue shares. they can issue new shares of stock to do that. then ultimately, once companies are already merged together or they already exist without having been merged, they are just corporate clients, they can work on issuing stocks, they can trade those stocks, they can work on issuing bonds, they can trade those bonds, and they can effectively create a sort of financial power for their clients that they take cuts of all along the way, either
through the initial creation of bonds or stocks, or through trading in something called a secondary market along the way. so they can kind of be on both sides of the initial entry of something new to trading something that's already in existence. >> in your newest book "collusion" you write that much of the 20th century belonged to wall street. the 21st century now belongs to the central bank. >> right. so along the way, of the 20th century as we talked about, the influence through war, through crises, through economic policy, through trade agreements, through all sorts of other things, was very much a symbiotic conversation or relationship that occurred between administrations, presidencies and the major banks of the country. so jpmorgan chase, citigroup, bank of america, goldman sachs,
morgan stanley and so forth. as we went into this century, not so much the beginning of it but the last decade and moving forward, central banks stepped in to act as the financers for everything the banks were doing. so when the crisis happened in 2008, the fed did this major pivot, the federal reserve, the main central bank of the u.s. did a major pivot and said well, banks don't trust each other right now. they just created a crisis, number one. but number two, they don't trust each other even, let alone feel compelled to give money to like the small businesses or to individuals at the rates we are ultimately going to give them which is zero, but into the crisis, we will come in and help them and we will create or fabricate money electronically in order to provide them with credit, because we can, but what happened was they didn't just do it a little bit. they took a situation, the federal reserve in conjunction with the treasury department and
major bankers of the time, and they took something that was considered to be an emergency, what was going on in the fall of 2008 when there was basically a complete crisis of confidence in the banking system, inside it and externally related to it, and they said we're just going to dump tons and tons of money into the system to make it right. we're going to do it as an emergency basis first. we are going to give banks loans, we are going to give them low rates so they can basically get money from us at nothing, and we are going to buy ultimately bonds from them that no one else wants in order to give them more cash, something called quantitative easing, in order for them to continue to operate. so this entire shift from the banks having a lot of this major influence financially relative to washington to the fed having it was because the fed had the money. all of a sudden, it wasn't just the banks that had the money and had the ability to raise money
in private markets historically or in public markets, plus so much of people's deposits on which they could do more financial activities with. all of a sudden, there's this extra body. it had been there all the time. it had been created ultimately over a hundred years or so before that to provide banks help when they needed it but it went into overdrive and it wasn't just the federal reserve. as i talk about in "collusion" it was the federal reserve, it was the european central bank, the bank of japan, sort of on to that ultimately peoples bank of china. all the major banks in different ways throughout the world decided to find ways to electronically fabricate money to put into their systems and then they are still going. so this thing that was an emergency and considered to be an emergency back in 2008 has become policy. it's become monetary policy and even though people don't really think of it this way, it's our economic policy. there's this body that can
create funds when necessary and that has no legal cap to how much they can create. there's a cap in terms of how much conversation they might have about how much they have created or what public opinion might be or what political opinion might be, but there's no legal cap to what any central bank can create electronically in the guise of helping the financial system or in the guise of helping the general economy. that's why they have so much more power now than they had before, because they now know this. and in different ways, over the last years, decade plus since the financial crisis, that is really how they operate. whoever is heading the federal reserve, whoever is heading the european central bank, the institutions themselves are now sort of superseding even their ability and what they may want to do by the virtual power of being able to create so much money when they want to. >> here's the warning from
"collusion." the fed and its allies have created a shaky monetary system that will collapse without their manipulation. central bankers, for all their meetings in posh locales the world over, have no plan b to reverse or alter course without causing massive damage and financial pain to billions of people. >> yes. so what's happened, we can even see this since i wrote the book, but recently, our federal reserve had an about-face in its policy. just going back really quickly to what central banks do, one of the things they do is they create a level for interest rates and by virtue of that level of interest rates, that's what banks basically receive, that's the interest banks have to pay in order to receive that money. so when the fed put rates down at 0% in the end of 2008 and
kept them there through december 2015, they were basically saying sort of one of our tools is to be able to make sure the cost of money over a three-month period is negligible to banks. from 2015 to the end of 2018, incrementally they raised the cost of that money. they raised interest rates by 25 basis points, a quarter of 1%, in 2015, then they waited a whole year because the markets didn't like that. 2016 was all about turbulence in the beginning, after the fed just raised their rates, after seven years of being at zero, by a quarter of 1%, by like nothing, the smallest amount of margin it could possibly raise rates by, so then they stopped for a year and they didn't raise rates again until the end of 2016, december 2016 by another five basis points, then more in 2017 and 2018. but always with an eye to seeing whether the financial system, the markets themselves, would be okay with that.
and what is them being okay with that? that means like not having massive downturns in the market. this year, on january 3rd after there was a fourth rate hike last year, which was in december 2018, the markets opened really upset and banks were really upset and as it turns out, there were meetings with senior bankers and the fed at the end of december as well, sort of going into what became an about-face. the about-face was the u.s. fed saying you know what, we're just going to hold back. first there was just some language, different central bank leaders from the different parts of the 12 banks central reserve system sort of started popping up saying maybe the economy's too slow, maybe we shouldn't, you know, tighten too much, things started being said and then a couple weeks ago, the main policy came out that like you know, we're not raising rates at all this year, at all, and maybe not even until 2020. and the reason for that is considered to be because the
economy is slowing and if you raise rates or increase the cost of money too much, you choke off the ability of that economy to get its funds. the reality is many times during this ten-year period the economy is doing a lot worse than's been doing recently and they still kept rates low. the difference is the markets have gotten upset again. january 3rd was a negative day. since then, we have seen a massive rally in the stock market because of the fed's about-face because it wasn't just the fed's about-face. it was all the central banks around the world that were worried if the fed did an about-face, they would have to tighten money, they would have to make money more expensive, they would have to stop buying assets in their markets to keep the level of finance up and the cost of money down. and then they were like okay, we're going to breathe a sigh of relief because the fed's not going to do it, we definitely don't have to worry about it. that's why some of their markets have rallied as well. so there is this dislocation between economies and markets.
if the fed were truly and other central banks were truly getting back to what i said, were truly to say all right, we are going to normalize rates, we are going to reduce the size of our books, the amount of money we put into the market, and we are going to basically sell the assets we bought for that money and take the money back, there would be absolute financial crisis throughout the entire banking system of all these major countries and the stock market. that's not like some crazy statement that doesn't come from the actual data. that's just looking upon what happens when money gets too tight too quickly, and the immediate reaction of the stock market, which is a place where money moves very quickly in and out so the reactions there are very indicative of the reactions that are happening throughout corporations and banks throughout the world as well. >> if you don't understand exactly what nomi prins is talking about and need a
refresher, the nice things about your books, you put in glossaries and casts of characters, as you call them, which is very important. good afternoon. this is booktv's monthly "in depth" program. our guest is author and financial journalist, nomi prins. her first book came out in 2004 after she left goldman sachs and it's called "other people's money." the corporate mugging of america. her next book came out in '06 "jacked, how conservatives, in quotes, are picking your pocket whether you voted for them or not." "the trial" came out in 2008 but it was written by somebody named natalia prentice. who is that? >> that was my alter ego. that was a financial thriller because what i decided to do when i left goldman initially was to kind of do a john grisham with respect but basically write about my industry from the
standpoint of something that was palatable. that book, i wrote as i was leaving goldman. it came out later so i took another name because i had kind of done that to begin with just in case it was too close to home. one of the things about that book now that you have mentioned it, in just recalling, i talk about a character who is the head of a company that was kind of equivalent to goldman. i think i called it silverman. very, very, very loosely, loosely veiled and how that character ultimately became vice president of the united states. in fact, it was kind of based on hank paulson who became treasury secretary of the united states later. it wasn't far off from that. i basically was using that name for that purpose. >> "it takes a pillage" 2009. an epic tale of power, deceit and untold trillions, "black tuesday" came out in 2011. her two most recent books, "all the presidents bankers, the hidden alliances that drive
american power" 2014, and her most recent is "collusion, how central bankers rig the world." this is your chance to talk with nomi prins. here are the numbers. 202-748-8200 if you live in the eastern central time zone. 748-8201 for those of you in the mountain and western time zones. if you cannot get through on the phone lines and still want to make a comment, we will cycle through our social media sites as well. twitter, facebook and e-mail, all available to you. we monitor those as well. so nomi prins, now that we have this hundred-plus year history that you have written about, has there been a cost to the taxpayer? >> there has been a cost to the taxpayer. also, the voter.
because when you talk about, you know, a major banker who can influence policy and ultimately, for example, in the case of jpmorgan chase, jamie dimon was someone who was on the new york fed board. he was a class a director at the new york fed board. he was head of jpmorgan chase, jamie dimon. he happened to be in the height of the financial crisis when it first occurred, also director at the new york fed which is the wall street located fed of the 12 member reserve system but he was one of the people along with hank paulson who at that time was treasury secretary, but who had been, when i came into goldman, ceo and chairman of goldman sachs. you have tim geithner ultimately came in. he was new york fed president at the time and then became treasury secretary under obama at the turn of the year after that crisis. so you have all these individuals who effectively have the ability to direct policy and
money coming out of washington to their own institutions, which are public institutions. these are banks that trade on stock exchanges, they are monitored supposedly by the federal reserve because one of their day jobs is to be the regulatory sort of answer, oversight body, to these banks. they are monitored and yet their individuals have such a tight relationship with the central political powers of the country that they are able to get money effectively to themselves when they need it in far greater figures than individuals are able to galvanize to do that. as a result, money goes from taxpayers to benefit them and not just when there's a crisis, but even from the standpoint of, for example, a legal act called the glass-steagall act which had been in place since 1933 specifically to protect the depositors and tax-paying public and voters from any kind of
weird esoteric products or speculations banks could do. banks could choose to bet on all sorts of stuff but if they lost those bets it was on them, on their shareholders, on their private partners, however they were structured, to repay it. it wasn't on the government or people. that was repealed in 1999. all of a sudden you have this merging of people's deposits, people's cash, people's mortgages, into institutions that also could do all sorts of stuff with that, do badly with it, do wrong, then come to the government for help. the fact they had all these deposits that they could say well, we have them, our atm machines aren't going to work, people aren't going to get their money back in this crisis unless you give us all these other things meant a different way of taking money from depositors or taxpayers because they influenced the policy that allowed them to have all those deposits. so on multiple levels, they are extracting by their influence and when things go wrong and
through rules surrounding their businesses from taxpayers into their own pocket. >> so jim walsh tweets in, could you explain how someone so brilliant and economically astute, you, supports an economic system that always fails at tremendous human and economic cost or dissolves into a dictatorship? she supports progressivism socialism. is that true? are you a socialist? >> i support certain socialist policies. because if we think about how economics divides into the needs of society, in other words, how money that comes from society helps society and how governments are used to appropriate those funds, i think about things like how expensive
health care is for people in this country. i think about how expensive it is for a student to go to university and to come out with $50,000, $60,000, $70,000 worth of debt which means they can't ultimately be the kind of participant in our economy that they could have been without so much debt. when i went to school, i started out in public schools and i went to community college and then i ult pa ultimately went to state college, then to nyu for all my education but i paid for all of it along the way. i could pay for all of it along the way because what i was earning by working was enough to allow me to afford courses and books and rents on tiny places at the time. now that is an impossibility. so when i look at the economy as a whole and think okay, do we think it's better for an economy to be more level for people, for more people, in order for them to contribute foundationally
throughout most parts of the economy in an easier way, and i think about how we also have firefighters and post offices and police officers and a whole host of elements of our society that are meant to help more of society than just their shareholders or just their banking institutions. so i look at it from the standpoint of a healthy society that's healthy economically and educationally and physically and they're protected, defense is another sort of level of our society which has a lot of money that goes into it and to protect everyone, protect the country, all of those things to me are social good. and what i support from the economic standpoint and financially is for within that, not to risk the country's health and to be bailed out to the extent that they were by the country, by taxpayers, or helped
to the extent that they have been by the federal reserve. so i look at an economy as being holistic in that respect. >> so in today's current political environment, is capitalism at a tipping point? >> i think in general, we are a capitalist nation. i mean, we do strive as a nation to do business activities that create profit and those profits go in different ways, either to the people involved in creating them or to society or to people's futures. i don't think that's going away. but i do think that using wall street as an example and using the financial crisis as an example, using the fact that our federal reserve still has $4 trillion of assets on our books after what isn't an emergency situation, we should think anymore, since it happened in
2008 and it's still subsidizing wall street and larger banks, those are tremendous sums of money, so i think that healthy capitalism has to recognize that putting too much money in one place, where that one place has actually been a cost to the general financial system or to the general economy, is not necessarily a good decision. so i think it needs to be more regulated. i think we have rules in place that do that that were ignored into the collapse that we're still sort of reeling from in terms of these policies. i think that those need to be reinvigorated and we need to protect everyone. >> before we go to calls, finally, the fed. is in your view a fed type bank necessary is question number one. i will follow up with question number two. >> i think what the fed does in
terms of providing so much subsidy to so many banks, is not necessary. i think the fact that the fed can sort of raise or lower interest rates in terms of monetary policy is something that could equally be done within the treasury department. i think that the fact that the fed is structured in a way that allows the private members of that bank which is how it's structured, the fed ultimately does provide credit and does take meetings with the head of wall street firms and stuff because they are the primary shareholders in the fed and they are the historic shareholders in the fed. they created the fed. so wherever the fed is today, there's a major flaw in how it was created and how it exists which is that it exists ultimately to benefit its members. it says it exists to help greater -- the greater economy and sort of the greater public but the reality is if you look
at the actions, they are very visceral when there's a situation where a wall street large institution is in trouble or there's a necessity to help a goldman or jpmorgan chase or someone who has an institution that is part of the history and the fabric of how the fed was created, has benefited from how the fed is created and continues to benefit from this sort of implicit subsidy that not just the fed but all of the central banks provide to the largest banks in their respective countries. i think that's a flaw. >> are the u.s. and china central banks, in your view, colluding? >> okay. so this is a very interesting question because the major collusion i talk about in the book had to do with predominantly the g-7 countries. what was interesting after the financial crisis was that the method they were using, the timing of quantitative easing,
of reducing their rates, of putting money, to swap between them to help make sure currencies were moving back and forth between the central banks and ultimately to the banks, major banks in their respective countries because they work with each other across borders, all of that happened with phone calls, with documents, with things i have in the book between sort of major countries. where china comes in, where the peoples bank of china comes in, is that they actually were quite critical of this process from the beginning. it's kind of fascinating because one of the major ways i believe china became such a tremendous economic superpower in the decade since the financial crisis is that initially, they were very public about being critical of the fed's policy that if you create too much money too quickly, if you subsidize a system, ultimately that system can't sustain itself. however, in recent years, the peoples bank of china has also been creating their own sort of quantitative easing. the difference between what happens in china and what happens with the fed, so they're not so much colluding but acting in sort of opposition to, in a world where if money is cheap in
one place and we have sort of an international capital globalized system it's going to be cheap somewhere else, peoples bank of china comes in with their own methods. what they do is inject them sort of directly into more growth strategies throughout their country. they will actually direct some of the money that they create into say infrastructure building, into companies that create higher speed railroads or companies that finance them and so forth, which we don't. so they have a different just twist. so it's not so much collusion, it's more sort of the antithesis but the result is still creating money, it's just directed in different ways in the u.s. than in china right now. >> nomi prins is our guest. cc is in portland, oregon. go ahead. >> hi. i have a comment and a question. you know, the comment is within the context of the person who makes $50,000 a year and has a
401(k). this whole, what you have been describing to me sounds like that there's no free hand, you know, as adam smith, the theory of the free hand, laissez-faire. this is really gambling, the stock market and wall street is the bookmaker like in vegas and they are playing around with our money gambling. i see it as gambling. i know there's no, you know, way for us to make money or to advance as just a $50,000 a year 401(k) person, you know, without having it in there but essentially, the rules are regular working public, $50,000 a year, put all your money in the stock market, then the people who are managing the stock market, the wealthy people, they don't leave their money in the stock market. they move it in and out constantly with all these reports and they tell the person
with the 401(k) making $50,000 a year, just leave it in there because that's the money in my mind that they're playing around with. >> we are going to get a response to that. are you invested in these markets via a retirement account or any other method? >> i am. so what i want to know is tell me why this isn't gambling, you kn know, and how it is that the person making $50,000 a year is supposed to trust this system and finally, is there such thing as the free hand of the market anymore? is that a myth? >> thank you, ma'am. >> those are excellent questions, cc, because -- for a number of reasons. one, i think your question really gets to the core of so many millions of people in this country because the reality is only about 10% of the country
owns 90% of the stocks in the u.s. stock market. so even someone like you who has an investment through your 401(k) plan in the stock market, the reality is that it is the people that are wealthier that have accumulated more stock that ultimately get the benefits of the stock market going off in significantly more ways when they're in it than you would see. the reason it is gambling is because -- it's rigged gambling in a way because these institutions, whether they are hedge funds or brokers, you should check this on your 401(k) plan, everyone should, who make money for moving what's in your 401(k) around, some 401(k) plans are actively managed, it means brokers are moving them around, they get fees for trading and not necessarily for performance. that comes out of your retirement, that comes out of the lump sum that's left at the end of the day. that's something to take a look at. but those institutions that do
that, those institutions that manage money, the fact there is this relationship between wall street institutions that get this access to cheaper rates and get access to federal reserve policy and influence the policy means they are also kind of influencing the stock market. from their perspective, if they're bet onniting on the sto market and i am using the term betting as you used the term gambling, they also have a sense for whether it's going to go up or down more so than you might for a number of reasons. one is they have the volume so they can see how much volume is going in or out. they also have the ability when things go down too much to go to the federal reserve and say look, there are some problems going on here or look at our books or you know, we could have credit issues going forward and sort of ease money a little bit, then that money goes back into the stock market. the reason the stock market rises so quickly in that manner is because it's easy to accumulate money into it, easy for money to come out with it which also makes it a very good haven for betting.
that's not to say there aren't companies that have real value and aren't producing things for the country and hiring people in the country and providing input into the economy, and buying shares in those stocks isn't necessarily a gamble, that's actually investing in the growth of that company. where the gambling comes in is how they are all ultimately, their stocks are related to money that's coming in from an outside source. so getting to the adam smith idea, you know, sort of free hand, the reality is right now, particularly in the last years since the financial crisis, there's this sort of external artificial injection of money into the financial system that then gets borrowed against and leveraged into moving stocks up, moving real estate up for those that have that money at the top, that receive the bulk of that wealth back, then reposition it into the market and move it up even further. that connotes sort of a lack of transparency and lack of a full free market element and what it does is shows there's this
artificial stimulus to the market which has continued to drive it. if you look at the relationship between bouts of quantitative easing of the fed or other central banks buying assets in their countries, you will see that those are days in which their stock markets tend to go up. there's just more money coming in artificially into the system and it lifts it up. >> scott in new york city, you are on with nomi prins. >> hi, nomi. i wanted to talk to you about an id idea, set of ideas i have been developing recently, and that is if you were to construct a global wealth tax where the 0 .1% of the wealthy, the large corporations and large foundations had to pay 7% a year if they do not pay with bank loans, but they only have to pay 3% a year if they do pay with bank loans, then obviously the
400 basis points on their wealth, all these guys would pay with bank loans and the banks would get two sets of fees. first they would be able to charge fees to the wealthy for providing the loans and then the second set of fees is the banks would package the loans into wealth tax collateralized loan obligation bonds and the bond buyers would pay a fee for the packaging. so the banks, the wealth tax, if you constructed it that way, the banks could make $200 billion to $600 billion a year per the $10 trillion a year plus in wealth tax money, and since you were talking earlier about how powerful bank lobby is, and since this would be the most profitable event in the history of the banking industry, the bank lobby would be the most ferocious proponent for the global wealth tax.
>> scott, do you work in the financial industry? >> yeah, i was -- i'm a retired jpmorgan banker and was a hedge fund banker and i'm an alumnus from columbia university. >> what made you come up with this formula? what was the impetus? >> i have been thinking about this a long time. so i lived with this woman for 11 years who graduated second in her class from columbia, and she works at a big law firm. she, one of her clients went years and years and years without paying his taxes and he's a billionaire guy, and she raised a $100 million loan for him to pay his taxes. of course, i look at twitter all the time and i see these right wing guys saying hey, you can't have a wealth tax because all these rich guys will have to liquidate all their assets. i would always respond look, if you think these guys, you think
a guy with $2 billion can't get a bank loan at low interest to pay his wealth tax, you just don't know, you have no concept of reality. >> we are going to have to leave it there. nomi prins, what did you hear? >> so scott, that's interesting because the last thing you said, i will start with that, it is true that someone who has such an extreme amount of wealth should be able to not just figure out how to sort of borrow cheaply in order to pay a tax, but also just in general, if there were a tax that was sort of more related to their actual wealth as opposed to, you know, sort of leveraging that wealth, then they could easily figure out how to make extra money in order to sort of cover their tax anyway, whether they are borrowing to do it or whether that's just, you know, siphoning a portion of what they have and just making more. i agree with you that someone in that position, this actually almost relates to cc's comment before, the more wealth you have, the less you will feel a tax, that's true, and if a
wealth tax were created in such a way that it was connected to banks being able to manufacture or to securitize as you mentioned, aggregate loans that go to institutions or individuals from which they can pay their wealth tax, yes, that would be something that would be an attractive way for them to buy into a wealth tax and also make money out of it. i agree with that. on the other hand, i think if we are going to have a wealth tax, we should look at it as more of a sort of speculation tax in that it should be related to sort of accumulated wealth, and it's hard to find a way to truly get there from a forensic accounting perspective but the idea would be if we are actually taxing say transactions or speculative transactions or buying a piece of a clo or selling a piece of a clo at a certain higher level than say a capital gains tax, that would be a way to sort of take some of
that money back into the system. then use it for other things that might be more beneficial. >> jay is in asheville, north carolina. good afternoon. >> good afternoon. thank you for taking my call. i have a question for your gu t guest, relatively simple question. about these rating agencies like moody. prior to when the bottom fell out of the tub in 2008, all these wall street mouth breathers were taking these so-called mortgage-backed securities to places like moody's who stamped every single one of them triple a, absolutely can't lose. any damn fool knows that there's only so much commercial paper that's going to qualify as that.
did any of these people at these rating agencies that stamped all this toilet paper triple a, were any of them ever jailed or prosecuted? >> before we get an answer, were you affected by the 2008 crisis? >> no. not at all. i was lucky. >> thank you, sir. nomi prins. >> thanks for that question, jay. and good that you weren't. yeah, first of all, the way the rating agencies work as you mentioned is that they get paid based on what they're rating and the information that they get that goes into securities that they're rating tends to come from the institutions that want these securities rated. now, they should also have independent sources and in some cases, they do, but the reality is the payment relationship has been that a bank who wants a security rated goes to moody's
or s&p, they stamp it, they get paid by that bank for that relationship and for that stamping and it goes into the market. that was definitely one of the main problems at the crux of the financial crisis because not only did banks have bad loans coming in already, and because you were talking about this, i just want to say, just from someone who programmed the smallest details of things throughout my career at wall street, banks have information coming in all the time. they know immediately if a loan isn't going to pay or if it's in delinquency or in default. they know exactly what to pick. what happened was, what still happens today in creating these collateralized securities where the collateral are the loans, at the time the collateral were mortgage loans, is that banks are just picking enough bad loans to add to the good loans to get the good rating on the entire package, but to give them enough money because the bad
loans generally are paying a higher interest before they go bad than the good loans were paying. that's why they are subprime. their rates are higher to the borrower. so they are getting juice out of that entire beginning process of creating a loan or security, they are showing it to the rating agency and the rating agency is rating that high. then what happens is institutions who only are supposed to buy triple a rated securities are like cool, we're going to buy a triple a rated security and it's going to give us more return than another kind of, like treasury bond that's also triple a rated, that's great, we will buy as much as we can. what else happened during the financial crisis which made it worse is they would borrow money from the same banks creating these securities in order to buy them. so now these institutions that could only buy triple a are buying something that's labeled triple a that really isn't, and they are also borrowing money because they have a triple a against the triple a thing they just bought which they also have to pay back. multiply that a number of times,
it's like going to vegas and every time you lose $100 on blackjack, someone lends you $100, you think i have another hundred bucks to pay but eventually you go bufst having o pay everyone back. it's still the case today except the ratings agencies now tend to be rating securities that have corporate loans in them as opposed to more of those mortgage loans or individual so what's now happened in the years since the financial crisis, because the cost of money was so low and companies were able to borrow or to leverage themselves so much, so cheaply, if any of those go bust, it will create a default. if their loans are packaged somewhere else and rated high, then they default, then that package is going to decrease in value very quickly again. we are kind of in that situation again with rating agencies. but to your other point, no, nobody in rating agencies went to jail. nobody, a ceo running any of
these institutions despite the billions of dollars they paid in fines to the department of justice and the s.e.c. have gone to jail for fraud and you have to go back to my first book, people like ken lay who ran enron were sent to jail but not any of the people running the banking institutions involved in this process. >> steve is in anchorage, alaska. hi, steve. >> hello. thank you for taking my call. i very much appreciate having the opportunity to hear miss prins today. my call is two part. i would like to first of all go back to the point that you made about the relationship between the social good that provide the benefits to the society and the relationship of the economic system. it should be fundamentally a position to provide those services. in that context, i'm wondering about the social order in which it is by law and judicial
decision, the obligation, fiduciary obligation of corporations to solely make profit for their shareholders and the need to fundamentally rechange -- remake that particular proposition. let me link that to a second related proposition, which is if you are familiar with the governance of ghana, you may recognize a man named jerry rollins. he was the leader of the force who carried off a coup after watching years and years of elite and corporate corruption deflecting monies away from the basic social goods for the society. after assuming power, he passed a law entitled economic sabotage and with those laws, he indicted and found guilty those previous owners. why should we not have economic sabotage laws associated with the manner in which our economic institutions function? thank you.
>> we are going to leave it there. nomi prins? >> so going back to what i was saying before, i don't know all the ins and outs of what happened in ghana but from what you're saying and from your question, again, the institutions that were involved in the financial crisis, just to look at our most recent example of just mass fraud, to which some of them admitted or settled, to the tune of multi billions of dollars and for which this fraud still continues. you look at a bank like wells fargo where after the financial crisis, after paying tens of billions of dollars worth of settlements for various mortgage-related and other types of misstatements and fraud, they went about creating fake accounts for their real customers and then charged those real customers fees on those fake accounts which were ultimately discovered to be fake but in the meantime, those people, you know, might just be on the edge of their paycheck for that month or 80% of the
country is living paycheck to paycheck and it means something to have fees or to have a credit score go against you or whatever it might be because a bank is basically committing fraud and stealing from you. these are all things that none of us should be proud of economically. we shouldn't subsidize institutions that are doing this and we should have real individuals made to be responsible and liable and if there's jail time for those crimes and they are tried, it's discovered they are guilty, that should be done because that result, particularly in the financial system of having such a link to so many subsidies or being able to pay fines so easily because of the laws that enable them to function as they are currently functioning, without having real accountability, is ultimately a detriment on multiple levels of society because the things that they do to society affect incrementally so many people in our society and in our economy. so i agree, we need to have a
better way of making them legally responsible and enforcing laws and creating laws that don't allow these things to happen or at least have regulators more attuned to what's going on as it's going on, and not after the damage has been done to individuals. >> it was in 2009 that "it takes a pillage" came out. nomi prins appeared on our "after words" program and was interviewed by this gentleman. >> i'm a member of the budget committee now and we had hank paulson in a couple of years ago. i said paulson, back in my state and around this country, the middle class are in a whole lot of trouble. people are struggling, losing their jobs, their income is going down, there's a growing gap between the very rich and everybody else. what's your sense of the economy. you said our economy is doing really good. year after year, this is really astounding, a bit aggravating, year after year we heard from the bush administration that from their perspective, the
economy was doing great. now, explain to me how they could believe the economy was doing great when the middle class was collapsing and we were getting closer and closer and closer to the edge of a major global financial crisis. >> because for them, it was great. that's the problem. >> nomi prins, what's your relationship with senator sanders? >> well, since i was on the show, which was the first time that i met senator sanders, was actually here at c-span, for that interview, i subsequently served on his federal reserve advisory council which was a bipartisan council to take a look at or at least talk to the fed at the time about more transparency in terms of what they were doing, because at that time they were now subsidizing the banks in a tremendous way, and trying to sort of influence them, actually, to think about these matters and where they
could lead going forward in a better way. i have also contributed recently, he had a bill out at the end of last year where, to kind of relate to the too big to fail question, particularly with respect to derivatives which had been my expertise particularly when i was back on wall street, to ensure that banks that have too much of a concentration of too many derivatives on their books, in other words, they are most likely to be at the helm of steering us into the next financial crisis, would have to reduce their size, reduce their footprint by a certain amount. so that's a very large banks that were basically subsidized since the financial crisis and controlled most of the derivatives activity that happens, have to actually reduce their size. so it's a different way of getting at that too big to fail size from the standpoint of actual legislation that was introduced. it was not passed which is not surprising, because i think
members on both sides of the aisle tend to think that when banks say we're okay now, we've got this, that it's true. and that's sort of the situation in which we find ourselves today. >> folks on the hill tweet to you please comment on the trump administration trying to influence fed policy, how much influence does trump have on the fed, is that a good or bad thing, by the way, monetary policy set by the treasury department would be overtly political. >> so it's interesting because, just going back to the history of the creation of the fed, it was effectively created as a marriage between politics and finance. i mean, it really was wall street working with the senate finance committee to create an institution that could help them in times of trouble. it wasn't like jekyll island happened because jp morgan decided to send a bunch of
lieutenants to his sort of club area to talk about how to help farmers in iowa. that just wasn't why it happened. so if you consider that was the initial sort of m.o. of the fed and it has, you know, issued, it's done monetary policy and set rates for different reasons to combat inflation or sort of price activities going forward, since then. that's one element. if we look at what's happening today, there's still a relationship, even though it was created as an independent body, where its members are institutions and it lives in washington. so it's very hard to really think of it as an independent body. it wasn't created independently. it's supposed to be independent but just from the sheer pragmatics of it, it isn't really. that said, i think when president trump talked about that there shouldn't be rate hikes at the end of last year, what he was looking at i think was less the economy and more the markets. as i was talking about before,
he doesn't want the markets to go down on his watch any more than president obama wanted the markets to go down on his watch. it's just that he has a much sort of more public way of tweeting his opinion than happened under the obama administration, where rates didn't rise at all. what we have now is him very publicly having talked about there shouldn't be any rate hikes, then it turned out that chairman jerome powell and the fomc committee at the fed decided not to raise rates for the rest of this year so there is that relationship. is it because of trump? i don't know. but i think what it's because of is ultimately they are looking at the same things which is they are looking at data, looking at the markets, and looking at not on their watch having another financial crisis. so in that respect, they are sort of allied as they were from the beginning into right now. when trump said just recently that they should be cutting rates right now and immediately, as did economic adviser larry
kudlow and sort of a week later, president trump did, that's going further and sort of in the same process, like you did this before, you should do this again. i think again, even though the economy is slowing, it's not necessarily because of the economy, it's because of the easier way to look at how money is impacting headline figures which is how it's impacting the stock market, which i think they both look at. >> so nomi prins, with your background and your philosophy, what do you think when you see president trump criticize the fed chair? >> well, for the fact he put the fed chair in his position, it's just -- it's odd, but i mean, he's criticized other people that he's appointed after he's appointed them, if they haven't done what he's wanted them to do. but having looked at chairman powell's past votes on interest rates in general, he basically
voted with the rest of the fomc committee. he voted with janet yellen. he was fairly dovish and in fact, he only had a couple more rate hikes under his time than janet yellen started under her time. he would have seen that before criticizing his actual policy. i think it's interesting just on a personal level that you appoint someone that you then criticize because they're not doing what you want them to do, and i think he wants them to do what he wants them to do more quickly, as possibly with other entities in washington, but i also think that -- but i also think it's just an alignment he has looking at markets, that the fed has looking at markets, and ultimately, they are coming out to the same conclusion which is that there might possibly be a fed cut in rates by the end of this year. if it happens, then chairman powell will say it's because of data and president trump will say it's because he told him so.
the net result is going to be the same. >> harsh is in lexington, mississippi. you are on on nomi prins. >> thank you for taking my call. i'm a primary care physician who happened to come here in lexington, mississippi, and my issues are very complicated. i came here to get my own green card which took me almost three years to get a green card, because my son is a u.s.-born u.s. citizen. so what i see here which i challenge anybody in the united states of america to come and visit and see the poverty and suffering of the american people in mississippi. as a physician, that's my observation of 25 years. a. b, who is going to safeguard the american people who pick up the garbage, who work in the hospital as a janitor? who take care of them and if
they become sick, there is no way they can be cared upon, a. b, if they become sick and need disability, it takes months to gather. c, if something happens to these people, they barely get something, they have to make a choice between paying for the medicine or their own food. and d, all the government agencies, they put money, why doesn't somebody come and visit here? i'm available to give them a tour. i'm an outsider looking at insider. this is a great country because of a, the scholastic fairness. i came to america because of the scholastic fairness. if we lose the scholastic fairness and understand it's not a free party. i studied and was given an education in america. >> we are going to leave it there. i apologize. >> you know what you're talking
about is again, something that unfortunately, is not just the underbelly of america which is great as a country on the whole but it's also prevalent throughout the country. i remember when i was writing my second book, it was after katrina, the hurricane katrina had happened. i spent time in louisiana and mississippi, of course that was after a natural devastation but it was apparent sort of then that having, just living on the edge to begin with and obviously compounding that with a natural disaster creates devastation that goes past any of the individuals involved to their families, to people that work with them, to companies that rely on those people for their own benefit and so forth, it's a knock-on effect. i think what you're talking about from a primary health care perspective that you do is that as well, it's that i think people don't understand that if
we don't have a way, you know, from an economic perspective given the massive amount of wealth we have as a country to support the people that support not just themselves and their families but others in need of medical care, then on multiple levels, we are hurting ourselves. if someone goes into a hospital and they could be the richest person in the world themselves, they could have access to the best private health insurance that there is out there, but if they are being cared for by people who can't afford their own health care or have to choose between food and that if there's a situation in their family, then that's a massive hole in the system. i believe that there is primarily because in many ways, we do subsidize so many financial activities, speculative activities in this country, that we have the ability to create a way to help
through an extended medicare for all program or extended disability program, money that's going into -- people have already put in and appropriated in a way that actually looks more at areas such as yours and throughout the country. >> from her book "jacked" nomi prins writes let's make no mistake about this, insurance companies are middlemen, their sole job is to connect the dots that stand between you and your medical treatment. more often than not, it seems like their job is actually to create red tape between you and your wallet. why do we put up with them. >> right. that was written, that book came out in 2006, i think. so this was before our conversations about whether medicare for all, obamacare, whatever you call it, the reality is, insurance companies are private brokers.
their ceos get paid a lot of money and their shareholders make a lot of money in the process of separating people from their premiums, of raising premiums without a lot of limit or some states, with any limit, really, just what the market can bear, and ultimately what that means is people don't get the health care that they need in order to sustain not just themselves but all of the levels in the country of individuals who rely on them. >> tavis, eagle river, alaska. >> thank you for taking my call. it's been fascinating listening to nomi and listening to other callers. it's interesting when you look at the history of economics, and i think a lot of what nomi is touching on from the free market standpoint, a lot of this has been presented previously by hyack, freeman, and others, talking about the effects of fiat money on the economy, the effects of too much easy money
in the banking system. if you look at the financial crisis, in 2008, i think that's probably a pretty good case study when you have too much fiat currency flying around. i guess -- then just kind of trying to figure out where nomi sits on a lot of these issues. it seems like some aspects, she's in favor of the free market, not in favor of too much fiat currency, then she kind of has socialistic tendencies. i guess my question, one of my questions would be for nomi, do you think we should tend towards a commodity money and perhaps get back to a gold standard, or do you think we should continue on with this fiat currency that we have? i will just leave a quote from keynes, in the long run we're all dead. i will just leave it there. >> that kind of stole my thunder. i was going to close with that. >> i like that. >> when we were done.
i didn't associate you with hyack. >> what's interesting about your statements, i think money is very complex. i think markets are very complex. what we do with it tends to, you know, get labeled under different sorts of isms and political sort of fights. from the standpoint of the free market, just to really quickly, i don't think we have free markets. i think it's a kind of theoretical construct by which, you know, sort of the definition for which would be full transparency and full participation ability by all actors in the market, and this sort of relates to my theories about the fed or about fiat currency or about subsidizing the main financial actors in that environment, you by definition rig the market. if you are subsidizing one level of the market and that's the market that has the most access and volume and influence and control over the market, we sort of get away from free markets in
general just from a practicality standpoint by virtue of how our monetary system has been constructed. that said, just because you mentioned in terms of my thoughts about how society should have more of the economic benefits that are produced by that society, to sort of help it whether that's from a health care standpoint or from securities standpoint, police, fireman, education, so forth, i think that ultimately allows people to be responsive into that economy, be responsible to that economy and that helps grow upward from a foundation standpoint, from local, small business and so forth, in a way that's more secure for everyone involved. in terms of the gold standard, because it is a question that comes up from a lot of people that have read my books, particularly "it takes a pillage," "all the presidents bankers" and "collusion" one of the things that happened when the united states was taken off
of the gold standard in 1971 under the nixon administration, was that all of a sudden, banks didn't have to kind of reserve to gold, the fed didn't have to reserve as much gold. there was no anchor to the financial system. there was no currency anchor to the dollar and by subsequent just definition, to other currencies outside of the dollar that were pegged to the dollar. so all of a sudden, you had the ability to create more money because there was nothing anchoring that money. that was a situation that was pushed primarily by the banks. it was pushed primarily by the banks because they knew that. they knew that it was much easier to create money if you didn't have to also connect it to some hard asset or some sort of other standard on the outside of that creation. you could just do more. it was a way actually of deregulating the monetary system. i don't think, just from a sheer standpoint of pragmatism, to
throw an ism at you, we are going back to a gold standard. in fact, ben bernanke and i have a lot of some of the things that he said specifically to congress in "collusion" about the gold standard, if he went actually on defense, a defensive movement against the gold standard being brought back when no one was even asking him that question, when the financial crisis was at its height, to banks and to congress which is interesting because it was basically saying we need to create money right now. this is really not the time to be talking about pegging it. that said, there are central banks who do stockpile more gold and do think not that we're going to go back to a gold standard but that it could potentially be part of sort of more global currency or benchmark that will include pieces of a gold standard which will at least also give some sort of a peg to simply being able to create dollars which will create money just at will. ...
in terms of actual money it's the corporation the members are the big bangs are like shareholders in the corporation. this is how they get the money to utilize that said it's also an electronic process now. there was reserves or gold put against the notes. they would use those as collateral. it can be used electronically. there were reports that came out
to talk about how the member banks and how many shares they owned and how much they were putting in for them. >> rob you are on book tv. >> i hope your book will have an audio subscription to it. i would like to be on the devil's advocate. the way i look at california they have the sixth largest economy in the world. that's silicon valley. yet, we have the highest rate of welfare and poverty than any other state even the southern
states. silicon valley takes money out of country and they won't invest it in our banks. that really worries me and i wonder as you, i think you are more liberal i would say. i have no problem with that as long as the money gets distributed right. it seems like silicon valley, the way they runout of our country with the money, i mean, how do i, you seem to argue the point against wall street but you don't say anything about silicon valley. what would you do about that? >> all right, robber, thank you very much. first of all, have you recorded an audio version. >> there are audioversions to all three books that i know of. the one for collusion which is the most recent book i think it's phenomenal. >> did you do the audio? >> i didn't.
i know that it was done and there are a lot of names in collusion. there are a lot of chinese and chap niece names. -- japanese names. it's making sure things are accurate. what could be considered dry for the last ten years it was very entertaining topic. she did a good job on that. hopefully you will listen to those. you want to talk about the wall street banks and influences they have. it's over a long period of history and evolution as a country. the evolution of our political system. this is as the major reserve. a lot of tech companies are new to that aspect.
although that said last year they over took wall street in terms of lobbying money and what they were pouring in to get what they wanted from a legislature or policy prospective for their companies. most of them don't pay any taxes. president trump spoke about getting taxes back onshore. president trump obama spoke about getting taxes back onshore. president bush talked about getting the taxes back onshore. this is before google and facebook were companies. this is when the work was done in the east. you are not building the bridge in front of where it was about to be built and bringing the construction aspects. you can do these jobs in multiple places. it's easy to create different kinds of, you know, in different countries. that is a problem.
an individual is basically paying, this is data from our last census. if you look at the number of individuals what we are paying in income taxes, employment taxes, what corporations pay as a percentage of revenue. the money that goes to the treasury department and the gets appropriated through the budget process is only pick a year, within the last tennessee years 7 to 11 percent of all of the money that comes into washington. on that bases individuals are paying a lot more and small business owners a lot more than the larger corporations are paying i believe companies that have the benefit of the american population as workers.
even the global environment should be paying more taxes to the country in which they are actually domicile and not the country on paper they existed. >> there are a lot of e-mail, tweets, and facebook comments along this line. as a retirey how can i best protect myself. that's from george. again,self comments like that. >> those are great questions. on the retiree side. if you are younger and would like to live as long into your retirement and need to finance that. there is a few things. one is the older you get the more secure what you have should
be. so i think, it's hard and if you have retirement money in the saving account you are getting a quarter of a percent interest on that. if you put it into american express bank online or aspiration bank online then the money is getting over 2.1 to 2.2%. right there on a secure bases just on money you don't want to do anything with. i do this with my money. i don't have savings account in any of the large banks. they just don't pay enough relative to other places i could put the savings. that's one example for secure money or retiree. in terms of 401 k plans coming in. there are a few things. one is you should be aware of
what you have and how it's changing. people look at their statements when something bad or good happens. what you might see if you monitor them and ask these questions sometimes your money is managed by companies that make money off of trading your money. your 401k plan or pension plan has to pay for the charge of executing each transaction that they execute against your account. it might not be you individually or where your account lives. it's important to have control of your 401k. if you have an outside manager have someone that's responsible to your money and not necessarily to a major company they might work for or bank that might have an asset management element that your 401k is housed with. it trades with what the bank
would like it to trade with. that's what happens. it's -- loses less in that process. i look at my money kind of religiously in that respect. one thing i'll tell you is you make more on wall street then as a journalist. that's a thing out there. if you think there is a major difference. it's important for me to preserve what i have i'm careful not giving it away. i make sure i'm not paying fees and extra things along the way. those adjustments, or looking at your credit cards or getting them down to zero or nothing. those actually making money especially when you compound
that getting rid of your cost is huge. >> from the book jacked banks spend hours determining how to use your relationship with them to suck money from you. there is no reason banks have to charge people to access their own money. what happens if you can't maintain a minimum balance, you pay a fee. don't do direct deposit because you need the crash immediately, pay a fee. next call is david from hot springs, arkansas. >> hello. i'm interesting in the history of goldmann sacks and i read william goldmann's book. i wondered if you read it? the thing that struck me was gus levy or principal partner there was able to get on the board of at least a dozen of the fortune
500 or 100 companies. they came back and trade on the information he would be getting at these board meetings. i wonder if you read that book and what you think of that? my other question is simple, do you think thomas has nailed it? thank you. >> thank you, sir. i think i reviewed the book for the daily beast when it came out. yes, i did. it's a very well researched book. his last name is william -- >> we'll get the producer on it. >> whatever. one thing that happened it's a fascinating set of relationships. sidney who was around the time of the crash in 1929 was running goldmann sacks as it
throughout time that still happens. >> phil from portland, oregon go ahead for your questions for nomi prins. >> i'll put this up as a political country. can a president get the 10% to pay a fair share tax? the purdue's, walton, they laugh in america's face and keep as much money as they can and not pay anything. can a president elected get 10% from the wealthy without creating a civil war between the haves and have notes? >> that's an interesting question. under this administration we went down the opposite way in terms of taxes. there is no particular reason.
the math would work better on that kind of taxes. it's a proportion tax. they pay a certain amount. a higher percentage and a different percentage. that's a way to bring the money into the treasury department. it's taken into the budget process and that can get a proppated into things like infrastructure. we have a deficit in the country. everyone who was in the process trying to get elected last election including president trump talked about paying money into infrastructure. it's a problem we have, you know, bridges are falling apart. railways that are slow and hospitals that are in need of better equipment or roads to get to them. again, that's a significant
problem for the country. retrieving money from companies or this would benefit them as well. back wit when president eisenhor was the president he came up with a plan to build our nations highways. he came up with that plan and raised taxes and built the highways and resided over a number of economics. they spoke about inequality being a problem. throughout the rest of the country. an antidote i found going through. a lot of time in kansas looking at his notes and all of this. the documents from thatpired in
history. there was a person or banker at the morgan bank at the time. he said to president trump eisenhower in a letter if you create a tax system whereby those of us -- he was rich. they have less money and can keep more of their money. they have more money have to pay a bit more money into the system ultimately you have a stronger economy. he was working at one of the major banks. he advocated this kind of a more proportional tax system because he believed the more money was actually in more peoples pockets throughout the country. the better ultimately the entire economy would be. it would left those people and all of the business owners and wealthy people at the top of that. that's one thing inside the philosophy for the highway program.
it wasn't the only thing. he listened to people that communicated a lot through letters and he took peoples opinions very seriously. this was something that worked to the benefit of the country and pusslated bulldozed members. >> all of the national archives and administration librairies from fdr through carter have excessble and well organized information with consistent classification. they were a pleasure to go through. records became less available. at the clinton library in little rock some records may never be uncovered without the benefit of a freedom of information act request. not nearly for national security reasons but the vast amount of
material is not what it was before the 1980s. most of the information that might be revealed by the request i filed at the reagan and george h.w. bush and clinton library is not available. >> since that time, i actually did file a request with the clinton library and george w. bush library, sir. i ultimately got some requests back to me from the clinton library. it took a number of years. they did respond to some of them. they didn't respond to others. what i studied and tried to get at is what happened into the repeal of the act of 1999. there is a lot of activity that was going on back and forth in
particular the city bank had sandy wild and the clinton administration and congress and so forth. what i was trying to do. it was happening during the clinton administration is get as much of that as i found. the classification system in the presidential library became more active. it was classified and difficult. they got me some material. after the book came out. i used some in the paper back version. some of it is coming in. but, not all of it is exactly what i asked. so, i asked even though i did get some material back from clinton's library. i haven't gotten it back from the bush library. my guess is going forward. i spoke about this in the end of all of the president's bankers.
when we get to the obama administration or trump administration it's harder and harder to get access to that information. there is electronics and national security ha labels butn it. every peace o piece of every e-s to go through security times have changed. nomi, i know this isn't your study area but did he have a relationship with bankers. >> i know adams had a relationship with bankers. also what he thought of banking. i'm not sure about george washington.
someone had to finance some of those wars. in a lot of cases the initial war that created our country a lot of times it was financiers. >> during world war ii were banks important to fdr. >> they were very important. if we look at war bonds issued through the banks to individuals. there was the population in new york city. open up the account. there were all sorts of deals that were being run by banks as well as providing some of their own money into the war effort as well as directing some of that
war effort. different banks provided different elements to the war. also different alleys going to the u.k. definitely, they had a role in the financing and raising of finances for that war. during that period we spoke about world war ii there is a lot of communication going back and forth they were running the morgan bank at the time. >> before we leave collusion what is the role of the ims and world bank and world money situation. >> talking about coming out of world war ii the idea was and the meeting with how in 1944 the
leaders of the international communeky came about. the argument for the ins in the world bank came out of two things. one two have a currency element that could work throughout the world so we could look at financing that were at the time a lot of devastation. by extension other countries that needed funding that's changed over the years since. they have a funding based on developing countries and helping with anything down to building a waterway to more complex and larger funded programs.
they are run by different individuals. is is an international base. the world bank was run by a man named john mccoy who was the chairman of chase after he was the second head of the world bank. that had to do with chase or banks and they go to the public and they will go back to the world bank so they could use it for projects they deemed appropriate or necessary. >> one final character before we runout of time david rockefeller. >> david rockefeller was interesting. he was at part of a major shift
that happened between banking and washington. between watt street and the presidency. he came from a time were there was a depression. he married into the family the family was fascinating. they go through multiple decades. there was global policy and nelson became the vice president while david was running chase. that was the major bank. it still is. it's a major power player at chase. david during his time as he rose to become the chairman was also working more and more hours with other foreign policy
initiatives. they made loans to latin america and other developing countries. rather than being fully aligned and influence came. now, they have the stability to access money coming in from an external place and lended to another external place and took themselves into position so they didn't have to be controlled. he was an advocate for the gold standard. it was the 1970s period. you have larger access to capital. or just a larger footprint. he did this for a lot of
reasons. he goes back to having, you know, laws with the kennedys in london. john worked with david throughout his early ericier ca. he was the head of the world bank. so, a lot of individuals between politics and global systems and banks and society were all tied in somehow to david. >> she told that story in her book. >> what is the solution to this 100 plus years of banking regulation law and the government. >> there are a few pieces. we do have to reinstate and
separate not just our banking system but globally banking systems. banks copy banks from the money that's put in through peoples deposits and through their loan and credit they require from the other activities. without doing that, it's important to make that split we will have a situation where the federal reserve have no chose but continue to subsidize the risks that these institutions place upon society while they say things okay. they will always say things are okay when they are not holding the bag. this can help them in that time of trouble. that's one major thing that needs to be benefited from that. >> author and journalist nomi
prins, thank you for joining us. >> thank you for all of the years. >> you are watching book tv. television for serious readers. >> this entire weekend we are live from los angeles for the l.a. times festival of books held on the campus of the university of southern california. all weekend you can watch author discussions and call in opportunities as well. with the university of california president and former dhs secretary janet. actor justina. check your cable guides or book tv for a complete schedule. follow us on social media at book tv for behind the scenes photosnd