tv Book TV After Words CSPAN November 22, 2009 9:00pm-10:00pm EST
dallas. he believes he knows dallas as a hot right wing spot. is he supposed to the idea of an open lowercase. he wants kennedy to go to a couple of locations and raise money and get out of texas. so from the very beginning johnson was not in favor of kennedy going to texas. he opposed the trip kennedy went to raise money and he wanted to get a measure of what was going to take place in texas, a key state. this is kennedy already come out for a civil rights bill and the whole issue of civil rights was turning the south into a space south. kennedy is trying to get a sense of how he's going to handle that. that's the last question we can take. i want to thank everybody for coming out tonight. i appreciate it. [applause] ..
moving to the senate. >> let me begin by thanking c-span for the opportunity of the interviewing the nomi prins who is the author of "it takes a pillage". while i was in the house i served on the financial services committee in arianism the list to say i have been actively involved in it the last few years in the senate. but we thank you very much for being with us. >> thank you very much, and thank you for taking the time to be here as well today, senator. >> less began with of the bit of background about you. where you born and what happened in your life to have you end up on wall street?
>> i was of born in upstate new york in poughkeepsie. it was very much an ibm town at the time. we were very much a mathematical family. work with numbers from of very, very young age. i. altman the wound up going to going to a state school. of the little closer to new york city, getting closer to wall street to some extent where i studied mathematics. my father said that is really the way to get of a decent living and find a job. as it turned out that was true because ultimately that is what was being hired on wall street at the time. so what i've really wanted to do was move to new york, as you do when you graduate college. i wound up getting my first job at chase manhattan bank before it was part of j.p. morgan chase
when i graduated. actually before i graduated. >> you were 19? >> yes, i was. i started there during a lot of analysis. computer board and numerical work. >> when others are partying habit. >> i was way too serious. i was the oldest child in the family. that might have had something to do with the. this sense of responsibility and financial independence. i figured i was only going to be there for a year or two. work in musical theater or something else. as it turned out have wound up staying there a very long time through number of different firms. i did it just became bar easy to some extent. with all of the hardness that comes with wall street for you make enough money to pay rent. nothing like the kind of sums that are being made today, but certainly enough to live on your
own. >> you write your broken in a sense as being in the belly of the beast. what impact on your use and life use about wall street occurred as a result of working for goldman sachs? >> i worked at goldman sachs for two years. was the end of my career. i ejected myself from wall street after having been with nomi prins. >> and bear stearns as well. i was there for seven years. that was really a lot of the workout was doing. and then i came. >> and does so what impact did you experience? you were on the inside. >> yeah. on the inside. there is such a tremendously competitive environments which we saw in a lot of other places. in wall street it is almost like
you come in every single day. the higher you move up and affirmed the more this is the key. every single day trying to figure out how much credit you can take for a particular trade. if you can beat someone. you actually raise to the office as a senior manager in order to be able to tell them what you did to take part in a certain deal or transaction. it very much becomes this immediate type of an environment where if you don't do that you don't succeed. if you are someone who wants to try and succeed you sort of get involved in this game. i ultimately saw that very distasteful and really quite empty. the environment is really bike that. very intense some gamesmanship and a power sword play as well as it is really like s strategy every day going and the truly from whose name he put on an e-mail first of whose office to go into first to hear you tell about a certain tree before someone else knows. >> of like the united states
congress. let me ask you a question to reedbuck on the minds of millions of americans. right now we are in the most serious economic decline since the great depression. if you add that the number of people who are unemployed and underemployed 17% of american adults were forced is in that position . the first question, nobody could have predicted this. how do you responsd? >> it was absolutely predictable for a lot of reasons. that mentality in the street. the reason the crisis happened was there was a desire to find products and to create access within wall street that made money. they don't really care.
it doesn't matter to wall street firms what those are. it turned out that they created assets out of a small amount of sub prime loans. when i say a small amount, i look at it like it's an upside-down pyramid. 1.4 trillion were issued in. what wall street does is takes them and creates new securities not even trading them back and forth. just the creation of the securities. and then what they do is take the securities. the bar against row against ando create new ones and to merge and to acquire and to speculate. so it all goes up. that is why this whole thing fell down. it wasn't the sub prime loans. it was that all of the securities and trading on top of them topple over.
>> we went to school and i learned about economics. maybe they manufacture. here is my tough question. what do they do on wall street? >> they predict assets that only have value because they say they do. >> wall street exists in particularly investment banks, it is not engineering a building. it is engineering something that only has value because they say it does. it gets its value from that. i have a quote in the book which
is great from a senior partner. he left the firm to actually go to morgan stanley. it is one of the only, finance is one of the only things that is bad create predicated on the creation of absolutely nothing. it is only by pushing that nothing throughout the system that this continues to churn. you create these upside-down pyramid of risk and assets that don't truly have intrinsic value . >> at a time when our infrastructure is in major disrepair .w e e desperately nes to help us deal with illnesses. we are seeing some of the best minds in the country going into a sphere of activity which produces virtually nothing him.
>> it is purely the amount of profit. you look at a company like goldman sachs, they pay 50% of their profits out in bonuses. in any type of production company or even retail the amount of money that is paid in terms of compensation is maybe 20% or 22%. all of that extra fluff, all of that extra profit that is really just about moving transactions and moving money back and forth goes directly into these extravagant bonuses and compensation structures. it does not go out anywhere. it does not even pretend to go out anywhere. >> it looks to me like we are in separate worlds. 40% of the profits are now being made on wall street. >> right. >> it's an extraordinary number. >> extraordinary. in new york city it is an even greater portion. it is an obscene number because it is really not predicated on the creation of anything.
we are still talking about assets that pretends to have value. there are all these other agencies that work with wall street. the rating agencies. they come in and basically stamp values by deciding that these assets are worth a certain amount of that they have quality attached to them. they call the aaa. if you call something aaa it sounds really good. individuals hear about it from their local banks. and so basically this into trades the entire system. s ystem. >> i remember, i'm a member of the budget committee. in my state, people are really struggling. what is your sense of the economy? it's going really good.
year after year we heard from the bush administration that from their perspective the economy was doing great. h'm explain to me how they could believe the economy is doing great and the middle class is collapsing and we are 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. 2006 was the record year of bonuses on wall street. 2006. between 2006 and 2007 foreclosures in this country between march 2006 and march 2007 foreclosures increased by 47%. it isn't like there was an information coming in that would indicate there is a tremendous problem brewing. it is that like someone like treasury secretary at the time, paulson, could not have seen that. but the fact that goldman and other firms were paying out record bonuses that year because they were manufacturing. as things are getting weaker, and they knew this, they were
manufacturing and even greater amount of these assets. wall street new. there was less trading going on. idem wall street knew that the game might be up. so they pay themselves well. they created these assets. paulson should have known this. the fed should have done this. on the other side of all of this was increasing foreclosures, increasing defaults. this was real data. >> i have to tell you something sitting in the congress, it is like they were living in another world. they had bernanke himself who for a while was a major economic
adviser to the president. i didn't hear anything coming from these guys that said wait a second. where were they? >> i don't think there were looking at the data. if there were they were choosing to ignore it. you don't want to the be the party in power when the crisis happens. it you can push it along and will lead to not happen you can push it on to believe the next guy or the next administration. >> he almost got out. >> he almost got out. if it had happened just in the beginning of 2009 it would have changed. >> talk for a moment about this whole business of deregulation. my understanding is that wall street spent $5 billion pressuring congress through
lobbying efforts, campaign contributions to de regulate. what impact did all of that deregulation have on the ensuing financial collapse? >> the repeal was really the catalyst for what altman became a decade later the collapse. and altman the what came the scandals that we like to forget about. they were all predicated on the idea of merging and aspiring and making institutions becoming not just bigger, which they were doing, a record merger spree leading into the repeal which happened almost a year ago today. >> i've voted against it. diverted against it. >> not only did he vote against it. you said all the things that would happen to consumers, all of that. it did happen. all of the warning signs unfortunately came to fruition.
the reason for that is that when banks merge, when a concentration changes so that the more powerful ones have more deposits and control more loans and control more actual capitol they can turn it. they can trade it. they can speculate. it is there. said that is what ultimately caused the crisis. you have extra capital and access to consumers that you could use real money and real bonds and real assets and turn them into something that ultimately became a crisis. >> of want to ask you a question. during those years, every year al greenspan would come out. the best thing you can do is get away from all regulation.
they do all the right things. it will create great wealth. unfortunately people believed him. here is my political question. i think it says a lot about our political system. the president to whom originally appointed greenspan was the first president bush. he was reappointed. the first president bush was considered to be a politician. he was reappointed. an extreme right wing guy by a democrat named bill clinton. then you have some years later mr. bernanke is appointed by a right-wing republican. and a liberal democrat wants to reappoint him. what is going on? i generally believe that there is a difference of opinion between a first bush and clinton and a second bush and ann obama.
how does this happen? >> first of all there hasn't been a change in the regulations that come on to the financial world between any of those to the administration changes. we hope there would be. texted me back that one up. not a democrat or republican. but what you are essentially saying collodi's kind of key financial issues and how we do with wall street, it's not safe to be a heck of a lot different. >> this seems like one of the least partisan things in washington. if you look at just the two regulations that were passed, the continuation of the fed chairman under the changes from republican to democrat bill * there isn't a tremendous amount of difference. in fact there is more financial deregulation done under clinton than there was under the first. >> and the secretary of the treasury. >> the secretary of the treasury
to happened also to be affiliated with goldman sachs. this revolving door from wall street and goldman sachs into the presidency. whether or not there is a democrat or republican president. >> when i was there. yes. he was head of goldman sachs. became treasury secretary. he was the republican. of course the democrats and the clinton. there were both for this andy regulation. you could have almost interchanged than at any point in time. >> where was tim? >> well, you talk about where he was, he was part of the new york said which had a very tight relationship with h wall street. had a very tight relationship and a revolving door between the
board of the new york fed and the leaders from wall street. he runs a large bank, and j.p. morgan chase. associated with any wild. so there is this constant revolving door. if you are running or president of the new york fed you have, perhaps, a closer relationship than almost the chairman of the fed. >> while we are on the fed let me mention something. last year ben bernanke came before the budget committee. this was during the whole belau process. as you know -- i'm going to get into this at some level. at the very least we know that the fed went out over $2 trillion in zero interest loans to financial institutions. so i said, you know, can you tell the american people who got the money? most of us would like to know
who got the money. he said, not going to tell you. $2 trillion of money and he's not going to tell the american people. by the time that day was over we introduce legislation to make him tell us. talk a little bit about that. how can the head of the fed say with a straight face and not going to tell the american people where $2 trillion of their money at risk has gone. >> i know. it was astonishing. i think at the same moment for a few minutes later he said it would actually be counterproductive to tell people. i remember the word counterproductive. how do you possibly get to that term. i guess the reasoning besides the fact that a whole lot of banks don't want that information disclosed because that would indicate how weak they actually truly are, and i think he was basically using
that and trying to somehow justify it by saying people knew. if people actually knew how weak the banks might be brief would have this catastrophic run on the banks. it would be redline 1933 all over again, and the world would totally collapsed. i think whether he believes that are not, i personally think that had we disclose this information from the get go, from when before the bailout became as extensive daman no one trusted anyone. that is why credit tightened up. we actually have full disclosure of books back then. by the time they got to that moment he was still interested in the idea that if anyone knows what actually went on it would create -- and it would. it would create a lot of anger. he acted as if it would create a run. >> that is exactly what he did. but i think -- and by the way,
we took that the four transparency to the floor of the senate during the budget discussion, and we want. i think it is very hard between the average american to say excuse me. you're putting $2 trillion of my money at risk and you're not telling me who guided to back ? everybody in america gets 0 interest loans. >> we would have a very different america. i tell you, the new york fed actually is extending more money and had more open plans to the banking system. we are talking about the 2 trillion. altman the there was about 6 trillion worth of facilities created, much of went to the new york fed. they don't necessarily aggregate. their is a lot of other stuff that isn't even your being looked at. >> to knows about this? >> it is causing a public. not what collateral has been
posted and what banks have received blood money. you are trying to get to the bottom of that information. but when those facilities were open, when they were created. it wasn't a big media press release. there is information you can see from digging through the web sites. >> you can do it. >> no. you can't do it. there is no way you can go on a fed website or treasury web site. what did you spend? when did disbanded? there is no report that exists like that. >> all right. i'm going to put you on the spot. based on his record as head of the new york fed -- well, let me get to them. do you think president obama, do you think that was a good decision? >> i think he made a lot of mistakes during this whole crisis, leading up to it in
terms of not looking at the information. there were economist telling him. more than that the fed has the ability to reject mergers. the fed has the ability to deny applications of banks that are investment banks to reedbuck it makes them more publicly accessible in terms of receiving funds and receiving any sort of subsidy. it is the fed's job to be prudent about that. when he was in that seat he did not say for a moment we should not have a merger between merrill lynch and bank of america. he didn't say why every backing bear stearns assets in order to have the merge into j.p. morgan? he did say wait a minute. you can't become a bank because you have too much risk and we don't want the government's money to back your risk.
i believe by not doing that he actually showed a really big second coming of the crisis, may be delayed it a little bit, but created a much less stable landscape than we even had before last year's crisis. >> so you are not one of those folks who say, thank god for that decisive action, the bailout. we are over the hump. good times are coming. >> right now there are some good times coming because of the bill they can use. the stock is up and the profits are up, but in actuality there is more risk and more consolidation and more power of mind of your groups of banks. so was there a crisis averted? i think it was delayed. that is the way i'd look at it. i think there are other decisions that could have been made that would not have involved putting trillions of dollars of public capitol behind that banking system without changing dramatically the
landscape. >> as we speak president obama has indicated that those financial institutions that were bailed out, he is going to cut back very substantially. but the other financial institutions like goldman sachs, they are running as quickly as they can back to before the crisis. tell me, have to record the people who caused this terrible crisis and after getting bailed out go back to a huge compensation packages and bonuses, go back to exactly where they came from? >> they feel incredibly ridiculously entitled. they go back to their offices. great. crisis averted. let's go make money, which they are. goldman sachs is on track to make $23 billion in bonuses. that is a couple more billion dollars than they made in the year before the crisis. they are actually doing better than they did before.
it is really this mentality of what we do here is intense and important. it is a trade and transaction. what happens on the outside is their fault for not being -- >> again, an elected official. sometimes people criticize appropriately people in side the mentality. their is a theory. there is rage against these people. apparently they are not interested. >> they don't care because nothing has happened to them. the raids and the righteous rage of the public doesn't affect what they get paid. it has not affected how they operate. they said at their last quarterly earnings they were going to continue to do what they do. they're very open about the fact that they are not even try to hide this information. >> we are going to take a break. nomi prins his excellent book, "it takes a pillage," explains
a world deeply divided and a nation deeply divided. you have wall street up there. use the phrase as sense of entitlement. these guys make hundreds of millions a year. they're doing their thing. meanwhile the but the rest of the country which has seen in many instances deep declines with people's standard of living and people losing their health insurance. what is the connection between the two? why does wall street get bailed out and get richer while people on main street lose their jobs? what is that about and how do we turn that around? >> for one thing wall street has a tighter connection to certain people in washington and much more money to lobby and everything else. there is more of a sense of keeping what they have. there is no sense bang as an ethical wall street or we will stop ourselves from making as
much money as we possibly can. >> let me interrupt you. to me this is kind of astounding. you would might have thought that the people on wall street caused the severe economic crisis. one of these fellows might have gone on tv. you know, i'm really sorry. our greed got away from us. i hope all of the suffering that because, i'm sorry. haven't heard that. >> there is no awareness or connectivity to the rest of the country because honestly the people that really, there is almost no contact. they mature they just don't have a lot of contact. but the result of the crisis that we all saw last year and the bailout, this is the decision to open a lot of federal funding and subsidies and guarantees as if that would somehow trickle down to the rest of main street. almost at the opposite effect.
>> let me interrupt you. i voted against the bill pyridium the line was this is not a bailout for wall street. this is a bailout for main street. we are working day and night said save main street. >> not only do not agree with the back then as you didn't, but i also don't agree with any of the numbers that have legitimately indicated. credit did not listen. in fact, when t.a.r.p. was passed there was an those teeny piece of that act that also allowed the fed to pay out more interest on reserve money that the banks were keeping. so while the banks were getting money they are actually incentivize to not do anything with it of the treasury secretary and others would say that this would somehow loosen credit. it didn't. credit is tighter now. as a result of unemployment is higher. their is a direct correlation.
i'm not talking about crazy credit. basically the idea for credit of small-businesses. once those companies can't make payroll they close. they have nowhere else to go. also the smaller banks are continuing to fail in sizable numbers. ninety-nine closures. the bigger banks are getting all of this capitol. even in the banking system there is a wider gap. the smaller gaps fetal of the smaller loans and the individuals. so this affects of the bottom part of the country. that is why forecloses are now at a record quarter again bomb. but this year there is more defaults. this year there are more delinquencies. this year people are starting more. >> after the bell of. >> a year after the unemployment. now it is almost 10%.
in most cities and urban areas under in 39 different urban areas have double-digit unemployment, 15 before. not only has this crisis not help, it has actually hurt main street. the bailout has hurt main street. >> what do we do to create financial institutions that are part that don't live behind a wall of greed and selfishness and irresponsibility and illegal behavior? but to be due to have financial aestheticians play a role in providing credits so that the entrepreneurs and business people can create meaningful jobs. what we do? >> well, first of all, we have to look at the money that was given to the system. the government didn't put any strings attached to it. we would start to have to attach some strings. he said he needed this. he said you're going to loosen
credit. he didn't. here is what you need to do. the need to take a portion of the capitol. there is all this discussion now, and there should be. at the same time i think some of that should be divided out. more capitol should be given to small businesses and more capitol should be made available. renegotiation should be much easier. not only is credit not listened, but if someone wants to renegotiate a home, renegotiate their mortgage, you can't kid anyone on the phone. the process is so exhausting and cumbersome. documents get lost because there is no accountability. these little was became these many assets. so appeared you can't even find read the actual deed was to a property. the need to basically take a look at that and make institutions more accountable. their is a good reason to do that because they are sitting on capital funding. more of a reason to come in and say you have yours. here is what you need to do.
>> used the word accountability. on wall street that is a four-letter word. >> it will never come openly. he is not going to come to washington and be like, you know what, we are paying out 23 billion in bonuses this year. i am going to cut that down to a measly 15 billion give the rest of that money to some find that is going to help small businesses or some fund that is going to give credit or advisers or pay for them to help people renegotiate their mortgages. i'm going to do that because i'd feel bad. that will never happen. somehow it needs to. and particularly because they have had public assistance. it should be easier now. >> i tell you, one of those things i care a lot about, people can understand that we
are bailing out these financial institutions and then they have to pay 25 and 30% interest rates on their credit cards which in the old days used to be considered usary. now is just the cost of doing business. >> fees on credit cards, even all sorts of things. it is really a by product. >> explain for a moment what that is about. >> okay. in 1929 the stock market crashed in the united states which is followed by the great depression. in 1933 when fdr was the president and became in basically 1932. he closed the banks because it was noted that it was the bank's fault. it was unlike people spontaneously stopped paying.
credit tightened. speculation was rampant. products are being created. the same sorts of things are happening because banks could take the deposits of consumers and borrow against them in order to speculate and trade, and they did. so what class stiegel was about was saying, you cannot have a so what glass stiegel was about e a financial institution that has the right so what glass stiegel was abouta n d the access to population deposit and make loans to the population and have them use that to bet and gamble and speculate. it doesn't make any sense. it is all kind of a black box. the fdic was created in order to back the deposits of consumers. you can do whatever you want. maybe not totally whenever.
you can speculate. you can trade. you can do whatever. we don't have your back. we are not buying to back at risk. >> right. >> and that was just so logical. and the fdic won't be there to back you or insure your debt, which is kind of what they're doing now. it just won't happen. it makes no sense. >> the 80's and the 90's. telling the congress why that was just a terrible -- >> from 1995. robert rubin was talking about this notion that we could be competitive as a nation is our banks aren't allowed to do whatever it is that they do. it didn't work in today's modern world of finance. you just can't considered these because we are going to be at a loss. the united states will actually declined from financial supremacy of we don't allow our banks to do what the other banks
are doing. >> of the congress repealed. what was the immediate result? >> a wave of mergers. mergers that actually preceded. there was an idea where insurance companies could be a part. and everything started marching together. there was a first wave of mergers that happened. and the lobbying that year actually went down. so that as a small, temporary. and then what happened, more consolidation for the banking industry said that he went from a situation where the top bank said 20 percent of the assets and deposits to now the top they said 50 percent. you continue to concentrate risk. now you have these banks using deposits again as they did to speculative trade just like they did back in the '20s.
>> too big to fail. if a huge financial insitution goes under is going to take have the economy with it. justification. it seems to me, and i said this on the floor of the senate. if an institution is too big to fail it seems to me it is too big to exist. but since the bailout we have not seen a breakup of these. quite the contrary. what do you think? >> said think we should be goig back to the current. we should be separate in these banks back out. we should not have gone from a crisis into a situation where there are fewer banks controlling more assets which goes back to what the fed was doing in terms of those mergers. we have a situation where we need to separate them out. we need to separate the consumer deposits and loans and assets.
because what we have right now, not only of those big banks bigger a lot of mergers to begin with. but then having achieved the acquisition of bear stearns, a really risky investment bank. washington mutual, a consumer deposits. now it is this bigger animal. again, no secret about this. the only reason they made money is not because consumers are doing better. consumers continued to post losses. where they made money was in trading. so i think you have to totally take that risk out of the government's responsibility which means you have to break up these banks. >> if people want to speculate they can get speculate. >> exactly. >> the banks want to make loans to people, real people we will back them up. >> and that makes so much sense.
not only will you back him up. you will understand the risk. you know exactly what you're dealing with. i don't think there are a lot of people but in washington that can sit there and look at an actual credit derivative prospectus for a transaction. you don't. it's complicated. i think to some extent it is actually not as complicated as it is made out to be. it is certainly arcane to anyone who is not in the trenches. that's why wall street gets away with creating a lot of the securities it creates. it uses that lack of understanding to its benefit. >> let me switch gears for a moment. i think the average american after the bailout wanted to understand how the crisis occurred. who was responsible and how to hold those people accountable. who is going to jail. we really haven't seen a whole lot of that. in fact, one of the issues,
explain to folks what that investigation was? >> well, the assistant d.a. in new york basically was asked to undergo an investigation of predominantly the banks by the senate banking committee. to basically look at the practices of the bank contributed back to the crash and contrary to it to the depression. and what he found a husband this idea of speculating on the back ck of nothing. and he basically really hammered them to explain exactly what the practices were and exactly how the inflated value and exactly what they used, deposits or money they used in order to do that. and it was so clear from that, so clear that this was something that was a direct contributor of
the crisis. it wasn't -- forecloses were had been to. but that wasn't the crisis. that was just the manifestation of what wall street was doing. the little individual in vermont or in stockton or wherever, the foreclosures are very, very tough bill for the individuals. they are not what brought the system down. what brought the system down is all the speculation that wall street, mostly invested banks created. >> but the american people really have not gotten that kind of explanation. they have not had the guys to cause this problem in front of the tv cameras answering our questions. >> that is really a good thing. some of these guys have been in front of various committees mostly talking about the bonuses. their is a good thing and a bad thing about that. certainly the bonuses are egregious, particularly now. but if we just focus on the
bonuses we lose sight of the practices that actually contributed to the bonuses. it will be really nice if you even get these people in front to said their bursar. >> in addition to that the american people are owed an explanation of what happened. and then the understanding that the congress is trying to make sure that this doesn't happen again. what a think you are implying is these guys are moving very aggressively to bring this back to exactly where we were before the financial crisis. >> absolutely. one of the things that contributed to them being allowed or able to the. these assets is that money was very cheap. as a result you have more esoteric loans being given out because banks are getting this money cheap and need to figure out how they get more out of it. they extracted by creating an asset or they find some way to create money from nothing, money from cheap money. now we have the exact same
situation. rates are very low and the banking system is getting loans from the fed. we are in a recreation of that scenario. >> let me ask you another question changing gears again. there is growing, i'd think, interest in the fed itself, which, as you have indicated today is enormously important as an institution, but it pretty secretive institution. you can argue that certainly there are particular moments is more powerful the present obama. >> it controls more money. he controls the ability to create money. that is a very powerful ability. >> talk about the fed. how does someone like the chairman of the fed did all of his power? what is enough ? i have to admit i am the author of the senate bill which calls
for a gao audit of the fed. but i think within a conservative or nservative or ae people are just kind of shaking their heads. institution with so much power can operate in so much secrecy. >> and also subsidize so much of a public sector. i think to a large extent the fed in this particular situation totally overstepped its mandate and what it was designed to do. the fed is supposed to control or basically set interest rates. monetary policy. raise rates, lower rates. is also supposed to oversee commercial banks and make decisions about whether they are allowed to become bigger.
the fact is it doesn't. it as such a tight relationship with wall street and the banking system. it is almost like telling on your brother. >> how many people there are. >> well, 12 federal reserve banks. basically people are appointed to those banks. you have a boredom. >> one extend last year, chairman of the board of the fed commandeered fed is at the same time on the board of directors at goldman sachs. so basically got your foot on the place that you can get money from and you get the foot in the door of the place that gets benefits.
>> the fed was a conflict of interest. i should not be members of that board who are on the board that are in any way related to the banks that receive any kind of money from the fed. otherwise call the bank. still lead it have access to the ability to create public money pumped. >> el in your judgment to these guys with so much power playing literally with trillions did away without the kind of public scrutiny. when you're on the floor of the senate and fighting for $28 million, you don't need that money. meanwhile very quietly they provide trillions of dollars. no discussion. nobody knows who gets it. >> well, to some extent -- at the time there was an idea.
the economy is going out of control. spiraling downward. something needs to be done. for some reason they will know what to do. there will so much debate over the bailout. there wasn't any questioning at the time over what has been going on. i think to some extent there needs to be calm and certainly the auditing is the way to do that. opening what they are doing to the public is the way to do that. their needs to be a required accountability to congress because it's public money. >> how do you live in a democratic society? suppose to have accountability without any kind of. >> knowledge. it is wrong. what we have seen have of this scenario in particular is the fed should not be isolated, private, secretive. if it is going to be involved in the huge raising of public funds
in order to subsidize the private industry it needs to publicly disclose what is doing. it is bizarre that so much conversation is given over 289 and dollar additions to help anything. >> almost like a shell game. >> look over your. >> with charlie on the floor of the senate. $100,000 earmarks. hour after hour. and then you get trillions of dollars went out here with no discussion whatsoever. >> at one point the amount of money the fed had on offer was $8 trillion. now it's six. $6 trillion worth of open possibility. we don't know. there is an open possibility of $6 trillion worth of lending. >> it is staggering. >> it is. >> and then you also debate over stimulus package or extending unemployment. the numbers aren't even in the same zip code. >> all right. we're rapidly running out of
time. i'm glad you're father made you major in mathematics. it sounds like he used why don't we conclude our discussion. where do you think the president and the congress should go? what would you like to see? >> well, i think they should have a real debate over this idea too big to fail. by simply increasing its is not the way to go. you are watching something you don't understand. we need to break them up a reedbuck you know, that will have the added benefit of reducing risk. then you can control compensation which is created out of the risk-taking because you are subduing the risk. yes, bankers won't make as much money, but that is okay. >> we are running out of time.
the main point cut the most important point. we can't look at wall street as something separate from the middle-class and working families of this country. we cannot continue process where these guys live in their own world, do not invest in anything of productive value well the middle class continues to shrink and unemployment goes up. we have to have a different thing. >> exactly. we can't make it up to them. that is the key thing. president, is talking about raising small business loan cabs. that is good. but there has to be an attachment. there has to be an actual legislative attachment to making this behavior. >> on that note let me thank nomi prins for being with us. an excellent book. i can't think of a subject matter which is more important for us to be engaging. >> thank you h.
book fairs and festivals in your area. we'd be glad to add them to our list. >> in their book not invited to the party. they argue the two-party system is an artificial creation designed to exclude any party other than democratic or republican from winning. the cato institute in washington, d.c. hosts the 90-minute event. >> welcome to the cato institute. i would like to offer a special welcome to our viewers on c-span who will be joining us. my name is john stampos. our forum today concerns a new book, not invited to the party. how the republicans have rigged the system. let me begin by giving you some framework and ideas about today's event. we will certainly hear from our
speakers first for about an hour or so. then that will be followed by question and answer. around 1:30 we shall break for lunch. you will have an additional chance to talk with the authors and the speakers about the issues raised in today's forum. i am also admonished by our staff here that i should respectfully request that you turn off yourself phones. that means turn them off so that we don't get that "weird buzzing sound on the television." thank you very much for that. the cato institute, as many of you may know, stands for individual liberty and limited government. competition offers a means to these ends. competitions in market expresses liberty . electoral competition offers alternatives to voters and