Interview with Nomi Prins on financial meltdown listen10/30/09 Mary Glenney
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The new book by Nomi Prins is called It Takes a Pillage: Behind the Bailouts, Bonuses and Backroom Deals form Washington to Wall Street. She ought to know: she used to be an investment banker at Goldman Sachs.
Today, WMNF Womenâ€™s Show co-host Mary Glenney asked Prins how the real economy is brought down by the virtual economy of Wall Street executives who caused the financial crisis by using their â€œplay money.â€
Nomi Prins: â€œThat is exactly what the situation is: itâ€™s â€˜realâ€™ versus â€˜play.â€™ And â€˜realâ€™ happens to be our money, it happens to be public money. Itâ€™s our deposits. Itâ€™s our interest payments on loans. Thatâ€™s real cash coming in. And what the trading and all the other types of activities that banks doâ€”because our deposits and loans are intermingled in the current types of banks that we haveâ€”is playing around. It is taking risks. It is betting with our money. And right now itâ€™s betting with our actual money, our deposits and our loan interest, and also federal money thatâ€™s our future money. So theyâ€™re doing a lot of stuff with our money and I do think, as you mention and I mention a lot in the book and a lot of things I write, that we do need do something called reinstating Glass-Steagall. Glass-Steagall was an act in 1933 that separated commercial banks from these investment and speculative banks so that our money was protected and wasnâ€™t used as kind of chips on the betting table. And I think that makes perfect sense as a way to stabilize things going forward. Itâ€™s not really the major theme in Washington right now.
â€œThey talk about, â€˜Well, what do we do with these too-big-to-fail institutions?â€™ as opposed to making them smaller, which is the obvious thing you do with something thatâ€™s too big. Theyâ€™re talking about all these other kind of potential restrictions on them, and yet allowing them to stay the size they are and as intermingled with our deposits and their risk as they are. I just think thatâ€™sâ€”thatâ€™s just wrong. Thereâ€™s no way weâ€™re going to not have another crisis in that scenario, because we havenâ€™t fixed anything.â€
Mary Glenney: â€œWell, thatâ€™s why I think your book is so important. Because, you know, Iâ€™m hearing the stuff coming out of Congress now and Iâ€™m waiting for Baucusâ€”or maybe heâ€™s already said itâ€”that we canâ€™t afford to do anything about this. I mean, Iâ€™m just waiting for him to say that and the Senate Finance Committee. And, you know, because already the lines are being formed: do nothing or, you know, that Volker and othersâ€”not exactly raving liberalsâ€”are saying that youâ€™ve got to reinstate something like Glass-Steagall. And I thought it was interesting, because he was talking about regulatoryâ€”I canâ€™t remember the word he usedâ€”but, in other words, you canâ€™t really put regulations on these kind of people, because they frankly will kind of absorb the regulations and turn them to their benefit.â€
Prins: â€œAnd they will ignore regulations. Thatâ€™s why these conversations about many regulations are so annoying, because they act as if thereâ€™s something being done to contain the risk that was taken. And, in fact, itâ€™s really cosmetic. And, youâ€™re right, banks will found their way around it. However, if you really segregate the banking industry, and you disallow companies to trade that are also dealing with commercial deposits, or at least you severely limit their ability to trade, thatâ€™s actual regulation. That actually gets you somewhere and that is something that Volker hasâ€”Paul Volker, former chairman of the Federal Reserveâ€”has indicated. And every time he says something, the White House kind of distances itself and says, â€œNo, no, no.â€ Itâ€™s like, â€œWe donâ€™t really want to go there.â€ And, yet, he makes perfect sense. Heâ€™s always made perfect sense. He was against the repeal of Glass-Steagall when it happened 10 years ago. Heâ€™s always indicated, and even when he was chairman of the Fed, that there were problems with mixing these different types of financial services in the same institution. And there are. I mean, what more proof do you need than a 14 trillion subsidization of the industry? Itâ€™s like if the rest of Congress, and the president, and the treasury secretary donâ€™t get it now, or refuse to understand it now, I donâ€™t know what it would take.â€
Glenney: â€œI donâ€™t either, but I know itâ€™s going to take something. And itâ€™s certainly going to take the kind of information that you have in your book, It Takes a Pillage. Because I think when people actually understand what happensâ€”and not only that, theyâ€™re losing their jobs, theyâ€™re losing their houses. You know, they donâ€™t have adequate health care. Thereâ€™s really, thereâ€™s no bottom in sight, yet, for the little people here. And I think thatâ€™s frightening. And, you know, when Congress is talking about what to do about this, our voices have got to be heard.â€
Prins: â€œYes. We have to keep on being heard and we have to keep on being loud. And we have to keep on letting the Congress people that we knowâ€”and, actually, you know, one for example is Democratic Representative Alan Grayson from Florida Congressman Alan who are saying some very logical things and trying to push for change. And, itâ€™s important for other people in Congress see that they have support from their constituents, because that makes them think about what they should say and the kind of support they could then get in return from their constituents. Congress is like high school. I mean, itâ€™s sort of like, if someoneâ€™s popular, then other people kind of migrate. If someoneâ€™s not popular, they sort of go away from them. You know, and so you just need to help.â€
You can hear this interview in its entirety tomorrow morning on 88.5 FM beginning at 10 am.