Interview with Nomi Prins on financial meltdown
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 Womenâs 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 âplay money.â
Nomi Prins: âThat is exactly what the situation is: itâs ârealâ versus âplay.â And ârealâ happens to be our money, it happens to be public money. Itâs our deposits. Itâs our interest payments on loans. Thatâs real cash coming in. And what the trading and all the other types of activities that banks doâbecause our deposits and loans are intermingled in the current types of banks that we haveâis playing around. It is taking risks. It is betting with our money. And right now itâs betting with our actual money, our deposits and our loan interest, and also federal money thatâs our future money. So theyâre 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 wasnât used as kind of chips on the betting table. And I think that makes perfect sense as a way to stabilize things going forward. Itâs not really the major theme in Washington right now.
âThey talk about, âWell, 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 thatâs too big. Theyâre 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 thatâsâthatâs just wrong. Thereâs no way weâre going to not have another crisis in that scenario, because we havenât fixed anything.â
Mary Glenney: âWell, thatâs why I think your book is so important. Because, you know, Iâm hearing the stuff coming out of Congress now and Iâm waiting for Baucusâor maybe heâs already said itâthat we canât afford to do anything about this. I mean, Iâm 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 othersânot exactly raving liberalsâare saying that youâve got to reinstate something like Glass-Steagall. And I thought it was interesting, because he was talking about regulatoryâI canât remember the word he usedâbut, in other words, you canât 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: âAnd they will ignore regulations. Thatâs why these conversations about many regulations are so annoying, because they act as if thereâs something being done to contain the risk that was taken. And, in fact, itâs really cosmetic. And, youâre 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, thatâs actual regulation. That actually gets you somewhere and that is something that Volker hasâPaul Volker, former chairman of the Federal Reserveâhas indicated. And every time he says something, the White House kind of distances itself and says, âNo, no, no.â Itâs like, âWe donât really want to go there.â And, yet, he makes perfect sense. Heâs always made perfect sense. He was against the repeal of Glass-Steagall when it happened 10 years ago. Heâs 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? Itâs like if the rest of Congress, and the president, and the treasury secretary donât get it now, or refuse to understand it now, I donât know what it would take.â
Glenney: âI donât either, but I know itâs going to take something. And itâs 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 happensâand not only that, theyâre losing their jobs, theyâre losing their houses. You know, they donât have adequate health care. Thereâs really, thereâs no bottom in sight, yet, for the little people here. And I think thatâs frightening. And, you know, when Congress is talking about what to do about this, our voices have got to be heard.â
Prins: âYes. 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 knowâand, 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, itâs 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, itâs sort of like, if someoneâs popular, then other people kind of migrate. If someoneâs 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.comments powered by Disqus