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BILL MOYERS: This Week on Moyers and Company.

JOHN REED: If you had asked me under oath, what probability I would have given that you would have gotten the whole group of Wall Street precipitants to get it wrong, so to speak. I would have said zero.

BILL MOYERS: And…

BYRON DORGAN: If you were to rank big mistakes in the history of this country that was one of the bigger ones, because it has set back this country in a very significant way and caused so much heartbreak and heartache, and a near total collapse of the American economy.

BILL MOYERS: Welcome to our third episode about the powerful players in high places who rewrote the rules of American politics and the economy. You can read all about it in this book: Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class.

If you missed the first two programs, you can see them on our new website, BillMoyers.com. The first is with Winner-Take-All authors Jacob Hacker and Paul Pierson; the second with David Stockman and Gretchen Morgenson on “crony capitalism.”

In this edition, we’ll look at a seminal moment when Wall Street and Washington stacked the deck against the rest of us.

Remember, this is the political equivalent of a crime story, a mystery. How is it that our economy stopped working for the broad majority of Americans? How did our political and financial class shift the benefits of the economy to the very top, while saddling us with greater debt and tearing new holes in the safety net? In other words, how did politics create a winner-take-all economy?

Well it didn’t happen by accident. This was an inside job, politically engineered by Wall Street and Washington working hand-in-hand, sticky fingers with sticky fingers, to turn the legend of Robin Hood on its head: giving to the rich and taking from everybody else. It’s all on the record.

The richest of the rich was Citigroup, at one time the world’s largest financial institution. When the 2008 meltdown hit, the bank cut more than 50 thousand jobs, and taxpayers shelled out more than $45 billion to save it. So how are Citigroup executives doing these days?

Nicely, thank you. Last year, its CEO, Vikram Pandit, took home almost two million dollars in salary, almost four million dollars in deferred stock, stock options that may be worth as much as six and a half million dollars, and a $16 million retention bonus. And yet just a few days ago, Citigroup failed the latest stress test by the Federal Reserve. It may not the means, in order words, to survive another financial fiasco.

There’s no clearer example of the collusion between government and finance than the deal that created Citigroup in the first place.

At a standing room only press conference in April 1998, Sandy Weill, head of the investment bank and insurance company Travelers group, and John Reed, the longtime CEO of the commercial bank Citicorp, announced a gigantic, $140 billion merger.

Just one problem: the merger flew in the face of this law.

You’re looking at the Banking Act of 1933, also known as Glass-Steagall. Glass-Steagal was enacted during the Great Depression to prevent investment banks from ever again gambling with people’s life savings, as they had before the market crash of 1929. Glass-Steagall protected us against a repeat of that calamity for seventy years. It’s a little bitty thing -- just 37 pages -- for the big job it did for us.

Glass-Steagall was still in force when Travelers and Citicorp went ahead with their merger. So what made them think they could get away with it? They had friends in high places. That's how. Friends who helped them exploit a loophole giving them two years to get rid of the Glass-Steagall Act.

Among those friends, the laissez-faire, libertarian chairman of the Federal Reserve, Alan Greenspan; the right-wing Republican Senator from Texas, Phil Gramm, who once called Wall Street “a holy place,” and later would become a high priest at the global banking giant, UBS; and the democratic Secretary of the Treasury, Robert Rubin, former co-chair of Goldman Sachs and tireless advocate of taking down Glass-Steagall. In the weeks before its repeal Rubin left government to join, are you ready for this, Citigroup’s board, the very financial giant made possible by Glass-Steagall’s elimination.

And so it was – the fix was in, the path cleared all the way to the top.

JOHN REED: Sandy called his friend the President last night and invited me to join in on the conversation and we had a good talk. So the President was in fact told last evening about what was going to happen.

BILL MOYERS: You got that, I’m sure. Wall Street was telling the President of the United States what was going to happen.

Within two years, Glass-Steagall was deader than a doornail. With the stroke of a pen, President Bill Clinton signed legislation that eliminated its protections and gave Citigroup the green light.

John Reed retired from Citigroup a year later, after losing out in a power struggle with Sandy Weill. He went on to serve as interim CEO of the New York Stock Exchange and now chairs the board at MIT. As Wall Street collapsed in 2008, Reed watched in disbelief, and began to have second thoughts about it all including the wisdom of repealing Glass-Steagall.

You were a key player when Traveler’s and Citicorp merged. How big was this to you at that time?

JOHN REED: It was not that big. You know, it clearly was an important transaction from our point of view. And it was hopefully -- it turned incorrectly -- but it was hopefully going to transform sort of the opportunity space in which the bank operated from a business point of view.

Our customers were saying, "Hey, we don't want to come to you for loans. They're too expensive. We can sell our paper into the capital markets more cheaply. We can finance ourselves more cheaply."

BILL MOYERS: Your customers being?

JOHN REED: Being large companies. And these customers were saying, "We want you to intermediate the capital markets.” Now that is the traditional business of what we then called investment banks. And Glass-Steagall had separated out those who were principally engaged, which is a very important phrase, in the capital markets, which were then the investment banks and the brokers and so forth, from the commercial banks.

BILL MOYERS: Glass-Steagall was the act passed during the New Deal back in the 1930s that was designed to put a firewall between the investment firm and the traditional banking firm. So you couldn't take my deposits or grandma's deposit and take risk with it, right?

JOHN REED: Well, that and even more importantly, or equally importantly, since the FDIC came into existence at approximately a similar time where the government was guaranteeing deposits so that people didn't lose if a bank got into trouble-- people didn't lose their lifetime savings. My father lost his lifetime savings during the Depression. And it was quite a family event. And if he had ever known I worked in a bank he would have died yet again.

But not only did they want to keep the banks from the business for reasons of not risking the money. They didn't want them to use the guarantee that the government provided for those deposits to leverage their position. Because, you know, if you have a deposit base that's guaranteed by the government, it sure puts you at a great advantage in terms of going into the market and playing around.

BILL MOYERS: The government's going to pick up your losses, right?

JOHN REED: Yeah. And you don't have a funding problem.

BILL MOYERS: That was what the FDI--

JOHN REED: Because you have guaranteed deposits.

BILL MOYERS: That was Federal Deposit Insurance Corporation was designed to protect my --

JOHN REED: That's right.

BILL MOYERS: My deposit in your bank.

JOHN REED: That's right. And they wanted to make sure that it was used for that purpose and not as a basis for doing other things in the capital markets.

BILL MOYERS: So this is why the financial community wanted to repeal or eliminate the Glass-Steagall Act. They wanted to get rid of this firewall?

JOHN REED: Yes. And the reason was our customers increasingly said, "Look, we can't use you banks for finance because there are opportunities in the capital market that are much cheaper. And if you can't help us go there then we're going to go to the investment banks. And so all of a sudden we saw our customers migrating out towards the investment banking community to do the business that we would have preferred to have done. So from Citibank's point of view, our point of view, this merger gave us access to the capital markets. And so we were in a position to offer our customers the services that they wanted.

NEWS REPORT: They plan to attract new customers with one stop shopping: Stocks, bonds property and life insurance and banking. Federal Regulators must approve the deal. Most banks are now prohibited from selling stocks and insurance.

JOHN REED: When Sandy approached me on the merger I knew that it was right on the forefront of the legal thing. But there’s a technicality Citibank could not have bought Travelers because that was out and out illegal. Travelers on the other hand could buy Citi because they were buying a bank and they had two years in which to correct for the deviation from the law. And what we basically were told was, "If you all want to do this within the two years we'll get the law changed."

BILL MOYERS: Because if in that two-year period as I understand it, Glass-Steagall had not been changed, this merger -- which had already taken place -- would have been illegal.

JOHN REED: We would have to take it apart. And we took steps to make sure that was possible.

BILL MOYERS: But you got the blessing in this two-year period of President Clinton, of the Fed, of--

JOHN REED: We had that blessing prior to. In other words—

BILL MOYERS: What? They assured you that this—

JOHN REED: Yes.

BILL MOYERS: Glass-Steagall would be--

JOHN REED: Yes. In other words, I went with Sandy to call on Chairman Greenspan. We told him we were contemplating this merger. But that it would required that the Fed would be prepared to grant us permission. And we were assured that they would.

We went and saw the Chairman of the House Banking Committee, the Chairman of the Senate Banking Committee. And we said we're talking about this merger but it could not take place if we were not assured that it would be approved at the Congressional level. We talked to the Secretary of the Treasury, I don't recall--

BILL MOYERS: Robert Rubin? He was the Secretary of the Treasury at the time.

JOHN REED: Yeah, we would've spoken to him, I'm sure. And had Bob Rubin said, "No, the Treasury feels this is wrong," we would've been careful. Because obviously, the Treasury recommends to the President on an issue of this sort. And there was no argument. No one said, “We’ll have to think about it.” And so a consensus built up. I don’t think it started in the Fed. I would guess it started in the industry, it certainly got into the Congress.

SENATOR TIM JOHNSON: By eliminating the Glass-Steagall restrictions we free our financial services industry to maintain its place as the world leader…

SENATOR PHIL GRAMM: We dominate the world financial market, and we’ve done it with one hand tied behind us because we have the greatest economic system in the history of the world. But we can untie that hand that we have had tied behind us. And we do it in this bill by repealing Glass-Steagall.

JOHN REED: Lawmakers inevitably learn as lobbyists tell them things. It’s sort of like a doctor being sold new medicines, they can’t stay on the forefront of the pharmaceutical technology, they rely on being educated to some extent.

SENATOR CHARLES SCHUMER: This bill is vital for the future of our country. If we didn’t pass this bill, we could find London or Frankfurt or years down the road, Shanghai, becoming the financial capital of the world.

JOHN REED: There was no one in the press who said, “Oh no, that’s wrong.” There was a celebration. And the industry, including myself, didn't recognize the danger.

BILL MOYERS: The danger being?

JOHN REED: That we could make a mistake that would then be transmitted in a much more drastic way throughout the system.

BILL MOYERS: Which happened later.

JOHN REED: Which happened, yeah. I mean if you had asked me under oath, what probability I would have given that you would have gotten the whole group of Wall Street participants to get it wrong so to speak, I would have said zero.

SENATOR BYRON DORGAN: We are with this piece of legislation moving towards greater risk. We are almost certainly moving towards substantial new concentration and mergers in the financial services industry, that is almost certainly not in the interest of consumers, and we are deliberately…

BILL MOYERS: A handful of politicians who tried to sound the alarm. Among them was Senator Byron Dorgan of North Dakota.

SENATOR BYRON DORGAN: What does it mean if we have all this concentration and merger activity? Well, the bigger they are, the less likely this government can allow them to fail.

BILL MOYERS: Were you aware of the few senators who raised real concerns about removing Glass-Steagall, about what would happen?

JOHN REED: No one that I’m aware of it saw it clearly. You point out to some Senators and Congressmen who did, but somehow we described them as being peripheral. And I simply said, “They’re wrong.” Turned out they weren’t.

SENATOR BYRON DORGAN: I think we will in ten years’ time look back and say, “We should not have done that, because we forgot the lessons of the past.”

BILL MOYERS: Senator Dorgan predicted disaster. Disaster's what we got in 2008.

JOHN REED: Yeah, no, they -- and disaster-- it wasn't solely Glass-Steagall, because much of the disaster of 2008 would've occurred independently of it, I believe. But certainly the propagation of the problem throughout the economy was greatly aided by the absence of Glass-Steagall. You know, we would've hit the iceberg anyway, I believe.

But the ship would've had compartments which would've been flooded. And question is, would the whole ship have gone down? Because had it been compartmentalized, we still would’ve had a disaster. It still would've involved very important institutions. But it might not have spread throughout the whole ship. That's the real issue.

BILL MOYERS: What do you think they saw that Wall Street didn't see?

JOHN REED: They simply didn't participate in the exuberance. But I do think that, you know, this setting up the deck of cards so that we could produce what we currently are trying to withdraw from. Turns out to have been something that the word disaster is maybe not strong enough.

BILL MOYERS: Well, some people now say the deck was stacked, that the game was rigged against the broad interest of the public.

JOHN REED: No, I definitely agree. And, I mean, the proof is there. It doesn't take a genius to figure out that we'd been wrong.

BILL MOYERS: But it takes somebody principled to admit that, "I was wrong."

JOHN REED: No, no. It's not something you'd like to end your career with. That is for sure. No, look. We got carried away. It wasn't any small group, it was a consensus that reached the press, it reached the political world. It certainly had reached the intellectual world. I'm now, as you know, at MIT, and I say to some of my academic friends that the intellectual underpinnings of this was created at MIT and places like that, I mean—

BILL MOYERS: With the technology of the computers?

JOHN REED: Well, no. It's the mathematics. It's all of this mathematics of finance and the presumption in much of this mathematics that you can capture risk by looking at historical volatility and so forth and so on. As soon as you say something appears not to be risky, you get an over investment in it, because the capital requirements are less. And then if something does go wrong, the hurt is all the more because you don't have the capital to take the risks. And you know, if somebody says, "Walk across that sheet of ice, there's no danger whatsoever you're going to fall in," you know, you're fine. As long as you don't fall in.

BILL MOYERS: Are you saying, suggesting that -- the chairman of the board of MIT's suggesting --that human intelligence no longer runs our financial system?

JOHN REED: Well, it's a little wisdom balance that judgment wouldn't hurt.

BILL MOYERS: So how, when you look back on it, how did so many people, including yourself, get it wrong?

JOHN REED: We were carried away by the enthusiasm. And like everything else, you know, once you start you probably go a little further than you should have.

We started out lending mortgages to customers and putting them on our balance sheet. Then in the '90s, when the mortgage-backed securities came in to being, we found that you couldn't economically do that, so we would package our mortgages and we'd sell them to a Wall Street firm, who would then pass them on to their customers. Pretty soon, we were in the business ourselves, after the merger.

And so all of a sudden, these mortgage-backed securities could be distributed throughout our own company. And pretty soon people said, "Well, why only package the securities that your customers create? Why don't we go out to mortgage brokers and start buying some of their securities? And we'll package those and we'll sell them."

And then, I was retired at the time, but you read in the press and you may even have seen on television, no doc and low doc. Now, no doc/low doc means no documentation or low documentation. Low meaning less than the regulators would require of you.

BILL MOYERS: You didn't ask the person, the homeowner who was buying the house, "Show me proof of your wages. Show me proof of your savings."

JOHN REED: That's right. But can you imagine that you publicly acknowledge that you were creating products and selling them into the market that had no documentation or less than normal required documentation? And this was -- it's sort of like taking a product and putting a skull and crossbones on it and saying, "This might be poison," and putting it on the supermarket shelves.

BILL MOYERS: You know, I hear you talk. And I think, "Well, human beings certainly can go insane. So can systems, right?"

JOHN REED: Yeah, and so can groups of human beings. In the 90s, the investors took over. And they basically said to management, "We don't care what you do. We don't care how many private jets, houses, golf courses, swimming pools, whatever you have, as long as you keep the share price going up. If share price goes down, we're going to get rid of you even if you're good.”

And managers started being scared of their stockholders and this idea of shareholder value came into being. I never heard the word "shareholder value" until the '90s. It was customers, customers, customers. How are the customers? Are we doing well? Are we losing place with the customers? But all of a sudden -- and Sandy was a total proponent.

BILL MOYERS: Sandy Weill?

JOHN REED: Sandy Weill. I mean, his whole life was to accumulate money. And he said, "John, we could be so rich." Being rich never crossed my mind as an objective value. I almost was embarrassed that somebody would say out loud. It might be happening but you wouldn't want to say it.

But you know, the biggest bonus I had ever received when I was at Citi was three million dollars. The first year I worked with Sandy it was 15. I said to the board, "I'm the same guy doing the same job, same company. There are two of us. The company's bigger but there're two of us. What's going on?" "Oh, you don't understand." And it was just totally different culture. And see, Wall Street developed that culture.

BILL MOYERS: That's what happened, isn't it, in the --

JOHN REED: Yeah. No, and it happened. It happened in Wall Street and there's a subset of the world, that self-selects, for whom money is an overriding value. And being personally rich somehow is something they aspire to. And you know, it's a minority of the population. Bill Gates certainly did not start Microsoft to become rich. Nor do I think Steve Jobs went back to Apple because he wanted to be rich.

These were byproducts. They became rich, but as a byproduct. But there is a subset of the population that self-selects and they go to Wall Street because that's where it's somewhat legitimate. You could do the same thing illegally. And there are people who do that. I mean, there is a drug cartel and so forth and so on. But the thing that has amazed me is, A, it's fairly large and, two, it's sort of been accepted.

BILL MOYERS: Is this an accurate thumbnail sketch of what happened over this period of time? Banks took too many risks, right?

JOHN REED: Yes, they did. But there are worse things, but they certainly did.

BILL MOYERS: What were the worse things?

JOHN REED: Well, they originated and sold into the marketplace things that should never have been originated.

BILL MOYERS: Derivatives, unregulated derivatives?

JOHN REED: Well, it was the excess mortgages, the no-doc, low-doc mortgages. And then the derivatives were a byproduct. Once you had those, then you could chop 'em up and so forth. And of course they had changed their mindset. They were in the business to make money, period.

BILL MOYERS: The exuberance, you said, took over. Isn't it, isn't democracy supposed to be a brake, B-R-A-K-E, on greed and power in the private sector? To keep the balance-- to keep the exuberance from going too far, as it did in this case?

JOHN REED: It should. But you're a better historian than I am. I don't know, but I would guess the democratic systems tend to go back and forth.

BILL MOYERS: Like a seesaw.

JOHN REED: Like a seesaw.

BILL MOYERS: But when you take the watchdog off the beat, as happened in the 1990s, when you lift Glass-Steagall and throw it on-- into the dustbin of history, you're removing any check in behalf of the public on the exuberance of the private sector.

JOHN REED: You're-- I mean, a consensus developed. The fact that we took it out was a byproduct of this mistaken belief in this modern financial system that was, quote, "more efficient," was very lucrative for the United States and the U.S. economy in global terms.

And which was supposed to handle risk better. In fact, it handled risk worse. I mean, this is what the facts are because there was a much greater concentration of risk created. And so we got it wrong.

But the restraint of the government and it's agencies disappeared in the enthusiasm.

And so it was this combination of the participants getting carried away, the normal checks and balances that should exist against participants.

And the thing that is astounding, frankly, and there's a lesson here that we probably haven't yet learned, is that the system can get it so wrong. It wasn't--

BILL MOYERS: So wrong?

JOHN REED: Wrong. It wasn't that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did. And then the whole system came down. You know, it became illiquid, the government stepped in. Had the government not stepped in, it really would have come to an end.

BILL MOYERS: Should the government have spent billions of dollars of taxpayer money in bailing out the banks?

JOHN REED: I think they had no choice. I think they had to do it, yes.

BILL MOYERS: Why?

JOHN REED: The alternative was worse. Letting the banks all collapse, which would have spread across the world, because banks lend to banks. So the interconnections were such that they just couldn't allow a meltdown of that scale. And we see in the Lehman bankruptcy that we're -- I don't know how many years since but it must be three or four. And they're still unraveling the bits and pieces.

And had it been the whole system, it simply would have been a calamity that from a societal point of view would have been worse. So I think they had no choice. They did have to bail them out. And they did do it. And it did succeed.

BILL MOYERS: But they left in place the very people who had driven the ship into the iceberg.

JOHN REED: I'm quite surprised at that. It clearly has not been a clean sweep. In other words, those of us who made mistakes, and so forth and so on, are still floating around the system. And--

BILL MOYERS: Floating it? You're running it.

JOHN REED: Well, I am not, but --

BILL MOYERS: You're not running it, they're running it.

JOHN REED: But there are many who are. I wasn't involved, obviously. I had retired in the year 2000. We're now talking 2008. So I was a knowledgeable spectator, but certainly not a participant. I was quite surprised because, frankly, the worst thing that can happen to a businessman is to go bankrupt. That's the sign of ultimate failure. You ran a business and it was unable to succeed under the terms and conditions of private capital. Namely, you went bankrupt.

It's not a crime. But it certainly is a mistake. And these companies, even though they didn't have to file for bankruptcy, de facto went bankrupt. And so the managements and the boards and the regulators should have, in my mind stepped aside.

BILL MOYERS: How hard was it for you to go before Congress in 2010 and say, "I was wrong. I made a mistake." In fact, you said, "We created a monster."

JOHN REED: No, we -- look. You don't like saying this. The hard part probably preceded my testimony by two or three years, where I came to recognize and feel, and I still feel bad. And I feel bad for the people at CitiBank who lost jobs and so forth and so on. Not to mention our stockholders. But I am a realist. I try very hard to be honest with myself, and honest in what I, you know, say. And facts are facts. I've seen Sandy a couple times. Not --

BILL MOYERS: Sandy Weil.

JOHN REED: Yeah, Sandy Weil. And I sort of say, "Sandy, you know, we didn't do very well." And he's not comfortable with that conversation at all. I think he would still defend that it was a good merger, it just went off the tracks afterwards. I --

BILL MOYERS: When it went off the tracks, John, you know, millions of people lost their jobs. Millions of people lost their homes. Millions of people saw their savings --

JOHN REED: If you look at the lost product in the United States, in other words, the difference between our current economic trajectory and the potential economic trajectory, you're talking about trillions of dollars. And those dollars are jobs and output and so forth and on so. I mean we over leveraged. And that was because we were creating mortgages so as to sell them into the market. And we're creating them from customers who probably should not have been borrowing. They didn't know what they were originating, didn't know who was buying it, and they didn't care. They were getting paid commissions along the way.

And that's a fundamentally flawed system. If you say to a businessman, "What is your objective?" and he says, "My objective is to make money," there are no boundaries on that. I mean, it's only the law as to what you do in the middle. It would be better if you said, "I'm in business to serve my customers,” or “to create a product like an iPad or what have you." But something that has intrinsic value. And all of a sudden, we changed to, "Hey, I'm not totally sure what we're doing here. Maybe it's not right. But you know what, I'm getting paid my commission." And that mindset took over. And a lot of that money did flow into the political coffers. There's no question--

BILL MOYERS: What do you mean?

JOHN REED: Donations. You know, if you're rolling in money in a business, it's very easy for you to have a PAC and to contribute to campaigns and so forth and so on. And we went through a period of time when there was an immense amount of money. I don’t mean small. I mean, we took-- this is the biggest economy in the world. And we went from 15 to 25 percent of the economy.

BILL MOYERS: The financial community did?

JOHN REED: The financial--

BILL MOYERS: Industry.

JOHN REED: The financial sector, yeah. But the point is our government is designed fundamentally to be dumb but to listen. In other words, no one is elected to the government because of their personal expertise in the various issues that they're going to have to deal with. We have a system that is designed to listen.

BILL MOYERS: But if money gets you greater access--

JOHN REED: But unfortunately the talk of what you're listening to gets distorted by the money issue. They're not randomly listening to the population at large. They're listening to people who have a strong voice, because they're strong contributors and so forth and so on.

BILL MOYERS: I think you've taken us to a very fundamental issues that's roiling the country at the moment. And it is that this is an-- democracy is no longer a level playing field or even approximately a level playing field. The big institutions have so much money that they can flood into the system. There's one study I saw just the other day that reports the number of people lobbying today on behalf of the financial industry to try to weaken Dodd-Frank, the bill passed after the disaster, outnumbers consumer, union, and other groups by a ratio of 25 to one. The financial industry outspending everybody else 25 to one to try to weaken Dodd-Frank.

JOHN REED: I'm quite surprised that the political establishment would listen to groups that have been so discredited.

BILL MOYERS: You're saying despite what happened in 2008, Wall Street still has too much power?

JOHN REED: They have too much voice. They certainly are being listened to. I find it incredible. I would have guessed that society, at large, would have said, "Hey, we made a mistake. Let's get some rules." You know? I used to tell my kids, "Why do you think a car has brakes?" And they all would say, "To stop." And I'd say, "No, a car has brakes so that you can drive fast. If you got into a car that had no brakes and you knew it, how fast do you think you would drive? You wouldn't drive very fast at all." And that's the same reason we have rules. You want the private sector to be free to be creative and exuberant and whatever, within a framework.

BILL MOYERS: You testified in front of the Senate Banking Committee, you came out in support of what we call the Volcker Rule. For the layman, what is the Volcker Rule and why do you support it?

JOHN REED: The rule simply says, "If you have a customer who wants to issue a bond, you could help him. But you can't trade in the bond market for your own account."

And so what the rule does is it basically puts the banks back into the customer business and allows the Wall Street community to be in the pure trading and the business of speculation and hedge funds and so forth. And it separates those.

BILL MOYERS: Sounds to me like you're calling the Glass-Steagall Act back from the grave.

JOHN REED: I think I am.

BILL MOYERS: Because?

JOHN REED: I just think it’s better that we have that barrier than not. It makes sure that the FDIC guarantee doesn't provide a funding base for proprietary trading activities. Remember, the government guarantees your savings account and mine in the local bank. And, correctly, we don’t want the government's guarantee for those accounts to act as a funding base for somebody who's speculating in the market. And so it’s that kind of separation.

It's a prudent barrier. And I'm astounded that anybody would be against it. And mind you, I'm a private sector guy. I'm not suggesting over government intervention. But you need rules. I would never let you or a friend or my kids drive a car without brakes.

BILL MOYERS But when the financial community can buy the rules they want --

JOHN REED: Then you've got an unstable situation. That's an intolerable situation. I mean, obviously.

BILL MOYERS: So do you have any sympathy for Occupy Wall Street?

JOHN REED: Yeah, no, I definitely do. I mean, I think it's symptomatic of the disconnect that exists in our discourse now. Where you have a set of folks who seem not to understand fully what went on and the implications of it. And a political establishment that doesn't seem to respond very well. They know a lot about the concerns, but they seem not to be able to do anything about them.

And the folks in the financial system are not listening. They're not saying, you know what, there's some correctness in these views. And so I think these people are giving voice to a frustration. And I am quite understanding of it. I hope the political establishment has some ears. I understand the political divisions. But they've got to start understanding that at some point you have got to come together

BILL MOYERS: John, thank you very much.

JOHN REED: Thank you. I’ve enjoyed it.

BILL MOYERS: This is pledge time for Public Television. Some stations with be stepping away from us briefly to ask for your support. For the rest of you, we will resume in just a moment.

BILL MOYERS: John Reed and many others say they were taken by surprise when the country’s biggest financial institutions went bust in 2008. But it wasn’t as if they hadn’t been warned.

SENATOR BYRON DORGAN: I believe that when this legislation is enacted…

BILL MOYERS: Remember Byron Dorgan? He sounded the alarm about the dangers of striking down Glass-Steagall. But his concerns were dismissed by Wall Street, by the Clinton White House and most of his own colleagues in Congress. But on the day of the vote, the Senator from North Dakota gave one of the most prescient speeches in our political history.

SENATOR BYRON DORGAN: I worry very much that the fusing together of the idea of banking which requires not just safety and soundness to be successful but the perception of safety and soundness…to merge it with inherently risky speculative activity, is in my judgment unwise. I think we will in 10 years’ time look back and say we should not have done that.

BILL MOYERS: Ten years later, 2008, your prophecy came true. Our financial system came crashing down, and taxpayers, as you had predicted, had to bail out the banks, just as you said we would. What did you know that no one else knew?

BYRON DORGAN: I don't know that I knew something. I felt something very important about all of this. I you know, I had read what went on in the Great Depression, kind of understood what caused a collapse back then, and the unbelievable heartbreak and pain for this country.

Closing of the banks and people losing their jobs and losing hope and so on. Well, we put together a remedy as a result of what had caused the Great Depression, the speculation, the orgy of greed and so on, on Wall Street. The remedy was Glass-Steagall and other protections that said we're going to separate banking from the more risky enterprises -- real estate, securities, insurance. And so, we're not going to let this happen again. And that legislation was passed.

And it lasted for, what, 70 years or so, and worked well for this country. And then, all of a sudden, what happened with this shift politically where those that had capital in this country, Wall Street and others -- had a profound influence on the political class, and said, you know what, we want to change this in our interests. We want to get rid of Glass-Steagall. Let's throw aside these barriers because we want to do what we want to do. And they just caused an avalanche of effort here in Congress to decide we've got to get rid of Glass-Steagall. It's old-fashioned, it hurts America and so on.

BILL MOYERS: That's a great term for it. How did they create an avalanche here in Washington?

BYRON DORGAN: First of all, they have a lot of money. And they're interested in their own financial interests. And so, when they weigh in on something like repealing Glass-Steagall, they have money to advertise. They have money to persuade. They have money to get grass roots support. It became, kind of, a circus in the sense that this was not thoughtful. This wasn't a bunch of people in a room with the best minds in the country thinking what might be the consequences of doing this? If we really thought through what the consequences might be, having gone through a Great Depression once as a result of banks fused with risky ventures?

I don't think it ever became a moment in which really good people sat down and evaluated what are the consequences of this. And one of the reasons for it is the green lights that were signaling at these intersections from the President, Secretary of the Treasury. Key people in Congress were saying, “Let's do this, let's do this, let's do this, Because it will be good for the country.” And it became a chorus of voices from all sides raise in support of repealing Glass-Steagall because it was old fashioned, no longer needed.

It was necessary to be repealed so that we could be competitive with the European banks. Of course, that was all nonsense. All complete nonsense, but they swallowed it hook, line and sinker. And everybody marched right off a cliff and repealed Glass-Steagall. And here we went, you know, we headed right towards an economic disaster.

BILL MOYERS: It had this fancy name. The Financial Services Modernization Act, but its real purpose was to kill these banking protections, right?

BYRON DORGAN: Oh sure. This country's been modernized before by special interests that wanted to get a bigger slice of the pie for themselves. But no matter what they called it here, the Modernization Act, this was the biggest financial interests of the country trying to grab more money for themselves.

They didn't like -- they chafed under regulations. They didn't like regulations. And they were busy creating all kinds of exotic instruments and, you know, credit default swaps, CDOs, I mean, the whole -- the list is endless, and making very big fees, getting unbelievably wealthy doing it, and injuring this country and putting us in the position where we almost saw a complete collapse of the American economy, through the greatest amount of greed, I think, perhaps in the history of the country.

And there's bipartisan responsibility for it. Alan Greenspan bears a significant part of the responsibility, I should say because he sat and watched it all on his hands when he had supervisory responsibility over the investment banks. But the Congress, the president-- what this country did was unthinkable.

BILL MOYERS: As he signed the bill, President Clinton handed the first pen to free market Republican Phil Gramm of Texas, who had worked long and hard to eliminate Glass-Steagall. It was later reported that another pen went to Sandy Weill at Citigroup.

BYRON DORGAN: Somebody ought to track that pen down and destroy it. There's no honor in what that pen did. I think if you were to rank big mistakes in the history of this country, that was one of the bigger ones because it set back this country in a very significant way and caused so much heartbreak and heartache and a near total collapse of the American economy. And it's not surprising what happened when we decided to eliminate the rules and provide a green light to say, do whatever you want to do.

It doesn't -- it just shouldn't have been surprising then, and it's not surprising to me now that we had a whole lot of interests that, you know, made this look like a bunch of hogs at a slop pail, you know, grunting and shoving to see who could get richer quicker. And that was at the expense of the American people.

BILL MOYERS: You said in that speech on the floor that choruses of folks, choirs standing outside the Senate chamber spent their lifetime working to get this done. Who was singing in those choirs?

BYRON DORGAN: Well, it's interesting, you know, it always starts with soloists, but then, that music is joined by a lot of people. And, you know, it was who's who in the financial industry sector saying, “We want all the rules to be gone.” It's very much like what we're hearing today.

I heard it this morning on the radio, the biggest problem in this country they say is regulation. Really? What kind of regulation? They now, you know, all of the mantra with the Republican candidates running for president, we've got to get rid of regulation, got to get rid -- I'm very surprised in the shadow of what happened when we most recently got rid of regulation, I'm very surprised anybody has the willingness to say that publically, and yet they do.

It’s unfathomable to me, Bill, that all of this happened under our noses. So, regulators, members of Congress who were supposed to know what was happening, and who, if they knew, would believe it was okay -- does anybody really, really believe that it is okay for financial institutions in this country to trade tens and tens and tens of trillions of dollars of credit default swaps in which they have no insurable interest on either side, just making wagers, casino wagers?

But, at least in casinos they have bright lights so you can see what they're doing. You know, I mean, these financial institutions at Wall Street, you didn't see any spotlights inside of those institutions, so that all of us could see what was happening.

BILL MOYERS: You warned in that speech that if we took this direction, encouraging, allowing mergers and conglomerations, it would create institutions too big to fail.

BYRON DORGAN: Right. That's exactly what happened. And sadly, even though there were institutions too big to fail that had become bigger since the repeal of Glass-Steagall, now, they're even larger as a result of the bailouts, and we still have a too big to fail doctrine because those big financial institutions -- and by the way, they are still gambling today, it isn't shut down.

So, they are bigger than ever. I tried to pass some legislation in Dodd-Frank that says if you are too big to fail, you're too damn big, and you should be broken up. I tried to pass legislation to say it shall be illegal to have naked credit default swaps. You've got to have an insurable interest. Couldn't get either passed.

BILL MOYERS: You're talking about Dodd-Frank passed after the 2008 crash to try to prevent it from happening again, and you're saying it's too weak to prevent another collapse.

BYRON DORGAN: It is. Yeah, I mean Dodd-Frank passed with my vote because it does some good things and moves in the right direction, but it is timid. It doesn't -- if you were going to address the real causes here, you would decide that too big to fail cannot be tolerated. If you're too big to fail, we need to be slicing away at those enterprises and bring them back down to size. And I hope that Congress will begin doing that at some point.

BILL MOYERS: But you don't expect it will really. Even as we speak, Capitol Hill, over your shoulder there, is swarming with lobbyists from Wall Street trying to weaken further an already weakened bill, right?

BYRON DORGAN: Absolutely. And as you know, very quickly Wall Street was made whole. It's just the folks at the other end of the economic ladder that still bear the consequences of this near collapse.

BILL MOYERS: No matter how we slice the numbers, it's a fact that since 1979, 40 percent of the income growth in this country has gone to one percent of the population. And so, that you can hear it said, that we now have government of the one percent, by the one percent, for the one percent. What do you think about that?

BYRON DORGAN: Well, the interesting thing to me about it is that it's not accidental. I mean, this has happened as a matter of public policy, in some cases, very deliberate policy that creates a tax code that says the wealthier you are, the less you pay in income taxes. And the more income you have as a result of netting out your tax payments.

Whereas on the other side, the lower income you are the higher your burden. Well, that's a deliberate policy that says we're not going to have a fair system at all. We're going to weight it favor of the wealthy. Now, how does that happen? It happens because those who are at the top of the income ladder have enormous clout. They have the ability to hire people and have their will in this debate on public policy.

And all the rest of those folks, they don’t have anybody that they’ve hired to say, “Look after my interests.”

And I think history shows that in every country where you have an unbelievable mal-distribution of income, where you have just a few that are very, very, very wealthy, and then, a lot of others who don't have very much, that's not a recipe for having economic growth and opportunity and expansion for all people.

Just, you know, we know what that causes. So, when we see this growing inequality of income, it means our country's headed towards a future in which we won't have the same opportunity generally for the American people that we've experienced in the past.

BILL MOYERS: Senator, I appreciate very much your giving me your time this morning.

BYRON DORGAN: Well, thank you very much, Bill.

BILL MOYERS: It is practically impossible to describe the extent to which our country’s been changed by all this political and financial cronyism. Nonetheless, we’ll be returning to this issue, so critical to our future existence as a democracy, in the weeks and months ahead.

Next week on Moyers & Company, with so much clamor for another war in the Middle East – this time with Iran – I’ll talk with Andrew Bacevich, a professional soldier turned scholar, who cautions us to stop, look, and remember, because every war comes with a terrible cost.

I’m Bill Moyers. See you then.

Watch By Segment

  • John Reed on Big Banks’ Power and Influence

    Bill Moyers talks with former Citigroup Chairman John Reed about his role in bringing down the Glass-Steagall Act.

    Air Date: March 16, 2012
    REED_FeatureJohn Reed on Big Banks’ Power and Influence
  • Byron Dorgan on Making Banks Play by the Rules

    Bill Moyers talks with former Senator Byron Dorgan about making sure big banks play by rules that protect consumers from financial calamity.

    Air Date: March 16. 2012
    Byron_featureByron Dorgan on Making Banks Play by the Rules

Encore: How Big Banks Are Rewriting the Rules of Our Economy

March 16, 2012

A version of this program originally aired January 27, 2012.

Big banks are rewriting the rules of our economy to the exclusive benefit of their own bottom line. But how did our political and financial class shift the benefits of the economy to the very top, while saddling us with greater debt and tearing new holes in the safety net? This weekend, on an encore episode of Moyers & Company, Bill Moyers talks with former Citigroup Chairman John Reed and former Senator Byron Dorgan to explore a momentous instance: how the mid-90’s merger of Citicorp and Travelers Group — and a friendly Presidential pen — brought down the Glass-Steagall Act, a crucial firewall between banks and investment firms which had protected consumers from financial calamity since the aftermath of the Great Depression. In effect, says Moyers, they put the watchdog to sleep.

There’s no clearer example of the collusion between government and corporate finance than the Citicorp-Travelers merger, which — thanks to the removal of Glass Steagall — enabled the formation of the financial behemoth known as Citigroup. But even behemoths are vulnerable; when the meltdown hit, the bank cut more than 50,000 jobs, and the taxpayers shelled out more than $45 billion to save it.

Senator Dorgan tells Moyers, “If you were to rank big mistakes in the history of this country, that was one of the bigger ones because it has set back this country in a very significant way.”

Now, John Reed regrets his role in the affair, and says lifting the Glass-Steagall protections was a mistake. Given the 2008 meltdown, he’s surprised Wall Street still has so much power over Washington lawmakers.

“I’m quite surprised the political establishment would listen to groups that have been so discredited,” Reed tells Moyers. “It wasn’t that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did…. And then the whole system came down.”

How Wall Street and Washington got together and stacked the deck against the rest of us. Watch it here.

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  • Methylethylk

     Some people just never learn and unfortunately the rest of us are stuck with cleaning up after these IDIOTS!!!!!!
    That’s what really sticks in my craw!  Just remember who these folks are!  Anyone associated with Goldman-Sachs should be avoided as if they have the plague! 

  • Disgusted Citizen

    Thank you for taking on the BANKS, the politicians who are in their pockets, and the harm done by them. 

  • Johnettecoker

    You are the best person to ever come out of Marshall,Tx.Mr.Henry would be so proud of you.I remember a very nice young man who did a youth revival at Second Babtist Church.I feel honored that I once stood by you,strange how our church es have changed.My son ask me today what has happened to love of ones fellow man that my dad taught him.I do still attend church but it is not what I grew up with.WE were taught to help those less   fortunate and not to judge anyone,and seperation of church and state.Keep up the good work.Just finished  The Conversation Continues,really enjoyed Stevenson and Alexander.Thanks for all you have given to this country.

  • M.L.Perno

    Just watched the re-run …. even better the 2nd time . 
    Congratulations.again.
    Is it possible for me to purchase a DVD copy of this particular
    show?  Please e-mail me an answer and how to do so.
    Thank you.
    Marilyn Permo
    perno101@aol.com

  • MLW

    Great show! Now I finally understand

  • Rlkbach

    I concur with Marilyn Perno. I’d love to download this or buy it on iTunes and recommend it to everyone I know.

  • ron carpenter

    Retired savers are being deprived of a main source of our income–interest on savings.  It is gone!  Replaced by “service fees”.

    Worse, the dollar is being debased, so that any dollar savings not only receive near zero interest, but lose value daily.  The Roth  IRA has turned out to be part of this scam.  You pay taxes with better dollars than you will collect later on.  At least IRA users should realize they are better off taking the tax avoidance now, and pay the taxes years later when the dollars coming out of their IRAs will doubtless be worth much less than the ones they put in today.

    The “growth” in our economy is mostly fictitious–subsidized by the $trillion+ federal deficits.

  • Terra Williams

     Intelligence and civility having been nearly drowned out of public discourse by the shrill noise of the ignorant, it is reassuring to hear your well-informed, balanced voice, Mr. Moyers.  I appreciate your courage, that of your guests, and of your corporate sponsor and many foundation sponsors.  Please keep “talking truth to power”.

    Wishing you well,
    Terra Williams

  • guest

    Cna´t remember who said it, “The more power you have, you´ll have more abuse”#

  • Patleeholt

    Mr. Moyers, please do several programs on this.  Did you see the editorial in last Sunday’s NY Times about how the banks are spending politically to minimize any regulation of their behavior?  In this time of conservative republicanism, the message must be given again and again re the effect on the middle class.  So far, they don’t seem to be getting it.   Don’t stop being our voice.  Thank you for never giving up.  I’m grateful.

  • Dnadanyi

    I viewed the show last night-excellent. It has been saved on my dvr to show others.  The fact that Bartlett and Stockman and Reed are speaking out about the abuses of the last 30 years validates what the occupy movement is all about.  People are finally catching on to Goldman Sachs and what this bank has done to Greece, Ireland and God knows how many other countries and investors. The cartoon in the paper today was an Irishman finding his “pot of gold”. The caption is ”sorry Goldman Sachs got here first.” 

    I’m still waiting for Scooter and Curveball to write their books-but that is another subject.

  • Sigsep

    Getting rid of Glass-Stegall introduced the American version of “socialism for the rich.”  It allows big banks to speculate wildly and irresponsibly.  If they win, they get the profits.  But if they lose, the taxpayer is called on to bail them out.

  • Max

    Dear Mr. Moyers,

    I have watched almost everything you have produced I have come across and considering the variety, depth and quantity of programs you have produced over the years, you, sir, are a National Treasure.

    Each of the programs you have produced over the past couple of years makes me mad about our situation and you bring the problem to light with your (and your guests’) wonderful simlicity and clarity.

    The reason for my being mad is that you bring the problem to light but do not offer much in the way of solution an average citzen can persue, except perhaps elect good Congressional representatives. Anyway that’s what I have come away with and I feel helpless and mad !

    How about starting a petition like the GOP’s “No Tax” that makesd a potential Congressional representative sign a “Reverse Citizens United” pledge ?

  • Anonymous

    We have admired your work over the years and were delighted when we learned of your new program.  We watched four first-run episodes but are somewhat put-off by reruns at this early stage of Moyers and Company.  May we suggest you consider doing a program or segment about the Goldman Sachs whistleblower who resigned the day his Op-Ed appeared in the NYT. 

  • Anonymous

    I do not believe that any of this was a mistake.  Every crash leads to the consolidation of more power and money.  Works like a charm.

    Again, this is why we were in the streets in Seattle and why we are in the streets now.  This is economic policy.  We are no longer a designated  consumer market.  We are now like every other nation owned by the banks (ruling elite).  Our export is war, to defend elite ownership and expand it’s domain. 
    IMF, World Bank and others intend to run everything.  They are going to call it creating a sustainable economy.  Translate- Economic slavery for all.  

  • Anonymous

    I believe this man is being honest about his experience but…  I again, cannot consider the financial collapse to be a business error.  We see the same exact thing happening in nations across the globe and the are all ending up having to do exactly the same thing.  Austerity measures and political subservience to the over rich ruling elites.  

    Why is this man so surprised?

  • Anonymous

     Find a NGO that works to correct these problems.  Like election reform or New Green Deal economic reform or Business Alliance for Local Living Economies or what ever your passion is.  Find them and become an active member.  Learn and speak out.  In other words, the ultimate solution to our problems is for all of us to COMMIT to taking back our country.  Learn and spread the word.  No one person is going to fix this and we have so many good solutions that people are doing right now (see YES Magazine),  but we need individual Americans to spread the word, we don’t own the media, the ruling elite does. 

  • Sonja

    Please let’s be clear on one thing — they got to KEEP the money.  It’s really that simple.  And most of them didn’t even lose their jobs.  But what difference does it make?

    “Exuberance” and “leverage” are marvelous Orwellian euphemisms.

    Anyone who can make enough money in a matter of two or three years to ensure the wealth of their children and their children’s children for the foreseeable future will do so, no matter what may happen to anyone else in the process.  Anyone who can buy the laws that will allow them to make that money will buy the laws.  These are not universal truths about people, but they are systemic truths about our lives and our time.

  • Chris

    Nothing has changed  The problem  of the crises of 2008 are
    being repeated. The Banks legislate through the Bankruptcy Judge and the judge Rules on their proposal as is shown in the
    LBHI procedings. The judge issue an order approving the reorganization plan. The Bank can do same thing over,  issue new fiat unregistar securitie and get 100% protection by the
    Bankruptcy court. Legalized fraud by the corporations, Banks etc. 
    “Exemption
    from Securities Laws. To the maximum extent provided by section 1145
    of the Bankruptcy Code and applicable non-bankruptcy law, the
    issuance of any New Securities or Liquidating Trust Interests will be
    exempt from registration under the Securities Act of 1933, as
    amended, and all rules and regulations promulgated thereunder and any
    other applicable non-bankruptcy law or regulation.”

  • Anonymous

    When the Financial Crisis hit in September 2008, my friends had no idea what caused the mess except to say “those people should have known better than to buy more house than they could afford”.

    They thought the bank mergers was a good thing and Glass Steagall was hampering the growth of their 401K’s and IRA’s..

    They thought that “Get the government off our backs’ was a good thing.

    They thought that Regulation in any form was bad.

    They thought a Free Market was better for the country.

    They thought that people who have medical bills that put them into bankruptcy was because they were not being responsible for their actions.

    They thought that Nancy Pelosi was the most evil person in the world.

    Today, they are pretty “quiet”.

    Not sure if that means they are going through denial or it just might be, I hope, they have awakened and realized that the only entity that can get us out of this mess, is a strong government with the right people elected.

    I can only hope.

  • Anonymous

    I have decided to do something, like you, I am mad. But rather than just curse at the TV or think I cannot do anything about it. I decided to give up watching the latest DVD’s, “clicking on channels” and going to the Political Party I align with.

    I am going to work for someone to get elected. It will mean going door to door passing out flyers, writing to the local newspaper, going to Political events and supporting someone but not a Politician who take bribes from Lobbyists, submit bills from ALEC to go into law, and is part of the 13% approval rate of Congress.

    I also plan to support the Occupy groups.

    So far, I have learned a lot, more than I would have if I listened to the Radio or TV.

    That is how I am going forward to help get us back on track.

    One small step at a time. (But if all of us, as many as possible “put one step in front of the other” we can do it.

  • arcticslinky

    They bought into the lies, unfortunately they can be lied to again and only time will tell if they’ve learned anything. Large amounts of people better wake up soon or we’re cooked.  It’s hard to get them to look at the truth right in front of their noses. And information is getting more and more censored…for example, my local PBS airs Bill Moyers on Sunday morning at 11am. I believe that this is because they don’t want to “offend” the local Tes Parties and Republicans, that’s how you self-censor. Otherwise they would put on in a prime time slot…I believe most stations are airing it on Friday nights. This is why I still hope, but I’m increasingly worried.

  • arcticslinky

    Calling it a business error is Orwellian Doublespeak. It was a planned event, it is happening across the world. Slash and burn. Or as those Enron creeps said “burn baby burn”.

  • arcticslinky

    They seem to be working rapidly to consolidate their position. They are the reverse Robin Hood and their goal does appear to be slavery for all, caste system for all.

  • arcticslinky

    Many NGO’s are corrupt, many are helping the IMF and World Bank with dirty deeds, be careful who you get involved with.

  • arcticslinky

    But if the 99% wants anything just it’s called socialism, socialism, socialism.This is how the 1% cons everyone: economic and social justice are socialism(they continue the fear of “communism”, rhetoric and smokescreens). Liberal/left=bad, conservative/right=good, much like being left handed was considered bad and being right handed was considered good and children were forced to be right handed.

  • arcticslinky

    This shows all of the collusion: the interest rates were driven down to almost zero by the Fed to drive people, institutions and pension funds into the Stock Market were the money was no longer insured and could be stolen. Interest rates are still held low to continue to accomplish this or to do as ron carpenter said, devalue the money of those that don’t put their money into Wall Street. The Fed is not a true government entity but it is in control. Current growth is ficticious: it is designed to make people feel good so that they will consume more, invest in Wall Street again and be “suckered” again. Credit cards offers are back, home equity loans are coming back…all intended to get money out of those who still have jobs and houses. None of the laws were changed. Wall Street and the Big Banks can still do everything that they did before. Bring back Glas-Steagall and more.

  • arcticslinky

    I’ve understood for a long time. This should be repeated over and over everyday in many venues until everyone understands…I don’t think that they do.

  • arcticslinky

    If your church has changed so much that you don’t like it any more you should first cut off all financial support, then try to change it back. The if nothing changes, leave and find another church. These churches that you are describing are going to drive our country over a cliff shortly if this type of thought isn’t corrected. There is an urgent need to turn things around now.

  • arcticslinky

    Goldman-Sachs alumni are running our government now. There’s Goldman men everywhere.

  • Kpfiremedic

    I believe the banks knew exactly what they were doing, They knew that if they built everyone’s trust up handing out loans left and right stacked the debt against us then destroid our credit they could come back with higher interest rates later on. It’s pretty sickening to see what our country has come to. I will never do business with any large bank especially Citi or Bank of America. It’s good to see this information is being televised publicly I just hope it sinks into the thick heads of America and we actually do something about it.

  • Guest

    Glass-Stegall is certainly a major factor.  However, there are several others that cannot be overlooked, including the impact of the 1977 Community Reinvestment Act and subsequent legislative “tightening” through 2008.  Eliminating Glass-Stegall together with CRA, etc., set the stage for Fannie Mae and others to shift the compensation formula to a strict bottom line calculation and aggressively manipulate Congress, the media and the public.  “Reckless Endangerment” by Morgenson and Rosner does a good job of uncovering the mess.

  • Davideros

    My understanding is that they repeated those three episodes because public TV is in a pledge period and the Moyers show is preempted in many cities. New programs next week.

  • http://profile.yahoo.com/NKX3DIU3ENLMAAKZN2YBJBVWJM Cedric Ward

    Listening, once again, to this pathetic interview with Mr. Reed, makes me ill to hear him couch his words so carefully in his failed attempt to excuse himself from his participation in the collusion perpetrated upon us all by BOTH the banksters and our legislators. 

    He states his ‘amazement’ that our legislators (aka money/power whores) would allow these banksters to get away with this.

    If he is that stupid, why was he ever allowed to rise to such a position of power?

    I am truly sick of watching Mr. Moyers treat these criminals with kid gloves and not asking them the hard questions and holding them accountable for their actions. He treats them like ‘his buddies’ and members of the Bull Shitters Club who participate in these media discussions, usually for profit, and further to spew their propaganda.

    Regardless of when Mr. Reed was employed at Citi, he was a willing participant in the decisions that were made in the mergers he described in which he indicated they all ‘knew’ what they were doing as they discussed their plans with the legislators they needed to ‘change’ the laws to accomplish their goals.

    Mr. Reed is NOT an innocent bystander, but rather an ACCOMPLICE. 

  • Dnadanyi

    Guest
    I read Morgenson’s book and what I took from it was 1. Jim Johnson was a extremely greedy man. 2. Both sides of the aisle were manipulated by him. Age of Greed by Jeff Madrick explains how named greedy people have, over the years, chipped away the regulations needed to keep them from becoming the vultures that they no are. Read it and you will understand everything. It was NOT the CRA that was to blame. It was used as an excuse for the profit making subprime mortgages. Now it is used by FOX as a simplified talking point as the culprits. Fannie and Freddie are guilty of greed and manipulation.  They did not get into the subprime mess until 2005.
    DN

  • Tom Caracciolo

    For too long we in America have been living under a Government that is run by government of the people by the lobbyists for the rich and powerful corporations.  Too many of our Senate and House of Representatives are owned and controlled by Corporations and their big money.  When our US Supreme Court announced that Corporations are people, that was a strong indication that the Corporations and their big money also owned and controlled too many of our Supreme Court Justices.The only way to cleanse our political system from the currently ongoing enormous corrupting influence is to get money out of politics. We need to free ourselves of Crony Capitalism whereby a rich and powerful few are running our government and reinstate Democratic Capitalism; that is, TRUE free market capitalism which is absolutely compatible with a true democracy.  TRUE free market capitalism includes corporations and investors that assume all risks and are solely responsible for all losses as well as enjoying all profits after applicable taxes.  Then once again we will have government of the people by the people and for the people. This amendment to the Constitution is necessary because of the Freedom of Speech provisions contained in the Constitution.
     
    That’s why I created a petition to The United States House of Representatives and The United States Senate, which says: ”We hereby petition The United States House of Representatives and The United States Senate to Amend the United States Constitution to prohibit all corporations from making contributions of any kind to members of the U.S. House and U.S. Senate and limit individual contributions to $100.00.”  Please click here to sign: http://signon.org/sign/take-money-out-of-politics?source=c.em.cp&r_by=1376091 Let me know what you think.  If you agree with it, forward it to as many people as you can.  I do believe, however, that there will not be many Republicans that will agree with it.
     
    “We hereby petition The United States House of Representatives and The United States Senate to Amend the United States Constitution to prohibit all corporations from making contributions of any kind to members of the U.S. House and U.S. Senate and limit individual contributions to $100.00.”
     
    Please click here to sign: http://signon.org/sign/take-money-out-of-politics?source=c.em.cp&r_by=1376091
     
    Let me know what you think.  If you agree with it, forward it to as many people as you can.  I do believe, however, that there will not be many Republicans that will agree with it.

  • onequitamrelator

    In 1978 with the passing of the “Marquette Decesion” a Supreame Court ruling that allowed our banking system to move its financial headquarters to South Dakota and Delaware where their are very little usury laws started this whole avalanche of financial disaster and 10 years later dissolving the situation even further with the burial of Glass-Steagall Washington put the final death blows to the average American and to our financial future. PBS, “The Secret History Of The Credit Card.” What a shame and shame on those who allowed this crime against the American people.

  • Marilynehlrs

    I  have  noticed  that  Capitalism   is  no  longer  working in this  country .  This  program  has  confirmed it.

  • http://profile.yahoo.com/NKX3DIU3ENLMAAKZN2YBJBVWJM Cedric Ward

    I have to say, you ‘moderators’ are such puritanical do-gooders, it’s just pitiable. 

    You delete the word ‘wh*res’ from my above post where I call legislators (money/power wh*res) as if people who read these posts are little children.

    Do you really thing we’re children?

    Do you think we can’t handle a perfectly good word like ‘wh*res’ when that is an apt description?

    Do we need to call them prostitutes?

    Will that make it acceptable to you?

    Even the pickiest moderators or auto-censor programs will, at least, asterisk  over the ‘offending’ word so at least those people who want to ‘guess’ what the horrible word is have a chance to do so.

    But to just delete a word with no indication of what was deleted or giving a reason why you deleted it is simply a violation of free speech and an affront to constructive commentary.

    When the sh*t really hits the fan in this country, I hope you have the energy to ‘moderate’ (what an inaccurate title that is for what you do…what’s ‘moderate’ about it?) the use of language the population that can still read and write will be using on this website and all over the internet, not to mention verbally in public.

    You better stock up on black marker pens and White Out.

  • http://www.billmoyers.com/ AnneLBS

    Hi Cedric Ward,

    BillMoyers.com encourages conversation and debate around issues, events and ideas related to content on Moyers & Company and the BillMoyers.com website. The editorial staff of Moyers & Company reserves the right to take down comments it deems inappropriate.

    Profanity, personal attacks, hate speech, off-topic posts, advertisements and spam will not be tolerated.

  • CarolynB

    I agree with Mr. Reed that the legislators should have stopped the problem before it started.  They should not have been led astray by the lobbyists.   Even more amazing, however, is that Mr. Reed colluded with his friends to make it happen.  He obviously understand how the process worked.  Yet he didn’t listen to Mr. Dorgan.  For all of Mr. Reed’s knowledge (as a financial expert) and his power (at the head of such an operation), did he not see the problem just as Mr. Dorgan did?  He pretends now that he’s sorry.  I wonder.  In fact, I doubt that he is sorry.  The fact that he retired in 2000 does not relieve him of the responsibility for his role in the disaster.  How sad for Americans that we have no recourse for justice and that Mr. Reed and those of his ilk are off the hook and free to go about their business.

  • Ebay Shycat

    the most important thing the average citizen can do is VOTE…and the vast majority do not..

  • ChasM

     I enjoyed this program, but am at a loss to reconcile this:  while I know government needs to regulate various industries, those same regulations can cripple. John Reed sort of laughed at the thought of industry being “over regulated), but it can and does happen. E.g., Dodd-Frank Section 1502 (conflict minerals) has reporting requirements for use of tin, tantalum, gold, and tungsten–2 of these, tin and tantalum, are used in virtually EVERY electronic product (and tin is used on nearly all electronic components), and it’s very difficult and expensive to trace them back to where they are mined and have an audit trail. That’s very hard to swallow for a small business, and there are lots of small electronics manufacturers in this country. The intent of the requirement is good, the implementation is impractical. How do we get a government that can balance these sorts of issues?

    I decided against big government when I had to investigate export regulations: the regulations that control military items run about 80 pages, and these are manageable. The regulations for everything else is about 1400 pages, and takes a lot of study to understand. What company of 50 employees can afford an export control specialist?

  • Jgargyiconsulting

    Reed should hang up his professorship and get back in to fix the mess with his cronies in tow…for a salary of $1 a year.  And, Dorgan should run for president on an independent ticket. 

  • Dfmcarth

    The Reed interview was quite interesting. Clearly he regrets selling to Travelers. The repeal of Glass-Steagall makes it more likely that prop trading may be supported by a government guaranteed deposit base. Surely, this is not a good idea. But, it is not at all clear that the repeal markedly contributed to the financial crisis. The crisis was caused by banks making loans to borrowers who couldn’t repay them, compounded by the issue of regulators having allowed banks to become too large. This happened in the same environment that allowed the repeal of Glass-Steagall but is somewhat independent of it. The more serious current problem is that Dodd-Frank does nothing to rectify this problem. As noted in the program, the big banks are larger than before the crisis.

  • http://www.facebook.com/people/John-Chase/100002016501953 John Chase

    Listening to Sen. Dorgan’s 1999 speech against  Glass Steagall raised the hair on the back of my neck. We need men/women in Congress like Sen Dorgan, who look past the hype-of-the-day to consider the probability of unintended consequences of their actions. But I don’t think it is possible to find enough like Dorgan to do it.

    So, rather than anger at the men who caused the 2008 collapse, I propose that we find a wedge issue OK to both Dems and Repubs that will reduce the probability of a recurrence. I propose a revenue-neutral change in fed tax law to replace ALL corporate taxes with highly progressive tax rates on ALL personal income, capital gains, stock options, dividends, interest. New rules would be needed for such things as corporate retained earnings and how to value stock options for tax purposes. But deductions and tax credits would be largely unaffected. The rules for non-profit corporations – e.g., churches — would be unaffected.

  • Dnadanyi

    ChasM
    When citizens behave in a manner that is not responsible-namely greedy- then rules need to be implemented.  It is very unfortunate that some suffer due to the recklessness of others. There were banks and business’ that operated in a very responsible fashion. They are now subject to unfair rules due to the reckless greed of others.
    DN

  • Gillian

    If John Reed has, in hindsight, such a different view of the financial meltdown, I wonder whether he returned his $3 million bonus or possibly donated it to charity.

  • Dnadanyi

    What about the 15 million? What are the CEOs doing with all the millions they have given themselves?

  • Pjasperson1

    The interview with John Reed was very educational and enlightening!  It should be clear to all the Congress can and is bought and sold every day!  Corruption in govt is the issue of today!!!!! Party politics and partisan politics should be exposed at every corner to the people of the United States!  Too many of us are flooded with information that simply isn’t the truth!  The recent political campaigning is a perfect example!  If we can take what Reed says as fact, then the philosophical tenets of the republican party, which is to keep the rich, RICH and keep the poor, POOR, should be on the minds of every working class American!!!!
     

  • Amyliseth

    Loved the show! But I feel like I’m banging my head against the wall. Most (if not all) of the people I know have no interest or clue about what’s going on. They fall into 3 groups:

    1) Don’t care to know – It just causes them a headache
    2) Only recite the bible 
    3) Only recite Fox news & how we need a more capitalist country 

    I’m finding myself wishing I was back in group 1!
    I really wish this would become more mainstream news!!! God willing!!! :)

  • Khorshedaqua

    it was greatfull…

  • TodayTomorrow

     It was Karl Marx : “All power corrupts. Absolute power corrupts absolutely.”

  • Paul_mastromatteo

    John Reed is acting all contrite. What a phony baloney

  • Jean Blackwood

    I wonder how the real estate brokers and sales people have escaped all blame in our financial debacle?  They were the ones steering unqualified buyers to outfits like Countrywide, and they were getting rich on the inflation of real estate prices.

  • Dnadanyi

    The secret of the corporate world domination is organization.

  • Bluegrassbloke

    Bill, I so appreciate your UN-rhetorical sane voice. I just want to say a heartfelt ‘Thank you’!  

  • SoCalJohnnie

    Thank you Bill Moyers for still being there for the People…

  • Fj Rubino

    My father (born 1898) used to say ” steal a loaf of bread, they send you to jail. Steal $1 million dollars, they sit you down and discuss it”.   Now a days we are talking about $ trillions of dollars. The concept, I believe , is the same.   Frank R

  • Ribeekah11

    I’m just grateful that there are scribes like Bill Moyers among us – one in a million.

  • Pjasperson1

    Jean, Real estate agents and Brokers really don’t have much to do with lending etc….! When we see how banks acquired loans and sold them to the secondary market for profit, then we understand who was getting and making money!  Like the saying goes, “  the love of money is the root of all evil”, I guess it may realll be so!!!!!

  • Anonymous

    The financial crisis as sort of faded in the back drop. Thank you Bill Moyers for keeping this in the discourse.

  • Anonymous

    It would seem that “Cedric Ward” is venting a sort of helpless rage by targeting messengers seeking to cast some light on that which is the very source of his anger and frustration, a sense of outrage that many of us have in common.
    I do not believe that appropriate moderation has crossed the line into censorship in this instance, it seems more an example of well-reasoned editing in keeping with long-standing rules of usage of PBS sponsored internet discussion groups.

  • Dnadanyi

    Elizabeth Warren for Senator and then President.

  • Cathy

    Leaders with integrity serve all countrymen. Integrity is the goal!

  • Taichi-wuchi

    As far as the republicans are concerned, working people are just sub-human drones.
    People like the frog in the cooking pot, are susceptible to allowing the heat to be turned up until they can no longer do anything about the situation.  The republicans have a long history of supporting the supply side of economics and undermining the demand side of economics to the joy and enrichment of the supply side of economics until the economy goes bust and the demand side of the economy can no longer be support the supply side of economics.
    The democrats were always a buffer against this failure but like little black sheep they lost their way and now support the supply side of economics because of the corruption of the government system by lobbyists and now the supper pack people backed by the justice system. The people need to take back their government before we are all boiled in our own oil.
     

  • Imos1

    Spellbinding, especially when paired with Tavis Smiley’s two interviews with Jack Abramoff (and presumably, Abramoff’s book, “Capitol Punishment”).

    Where shall we go from here?

  • Rosehigh

    2 comments….
    1) It is surprising and discouraging that so much integrity is given to lobbyists who are very upfront that they have an agenda; an agenda which by virtue of the amount of profit / money involved does not have integrity or the greater good at its center.
    2)  When was it defined that journalists (in whatever field) are the “gatekeepers” or “interpreters” of strategies and law? I do not rely on journalists to provide me with an opinion or even unbiased facts.  It has been proven over and over again that journalists are only as good as their sources and who are their sources?
     

  • Jimknight

    I know your program cannot cover all of the many factors
    that accumulatively lead to the financial fiasco we have inherited today, but I
    greatly appreciate the two people you decided to interview – one from the
    inside of the players who created it and one of the few in Congress that warned
    it was a dangerous idea.

    We as a country seem to never learn from history, nor seem
    to understand a basic instinct which drives greed in people.  Libertarians argue that it is exactly that
    greed in which great societies are created and any government hindrance to this
    great motivator of progress should be eliminated.  They are correct.  Laws should not inhibit private sector
    creativity and motivations for achieving great things.

    But this line of thinking stops short. It does not discuss
    the tremendous instability unfettered capitalism can create and having to live
    with wide economic cycles, when charted with time, shows it takes many more
    years to recover from a downward swing than it takes to create prosperity.  Borrowing huge amounts of other people’s
    money just makes the cycles swing that much wider.

    And if you ask the entrepreneurs or the bankers, they will
    tell you they want stability and predictability for long term planning.  Even Wall Street takes a dive at the hint of
    instability.   

    This is precisely the reason Glass-Steagal was put into
    place.  The roaring Twenties clearly showed
    unrestricted, 10% or less margin investing, can lead to a house of cards. The
    Depression was in the wake of a similar financial crisis of the 1890s.

    Fast forward to the early 2000s where the bank’s limitless thirst
    for real estate mortgages in which they are now allowed to wrap up in huge
    securitized debt packages to be sold on Wall Street while using the FDIC as a guarantee
    for that speculation , lead to street vendors such as Countrywide putting together
    any subprime mortgage they could think up including no documentation loans, teaser
    interest rates that would ratchet up beyond the homeowners ability to sustain,  scam over-inflated appraisals creating a
    frenzy of overbidding properties and even resorting to hiring people to falsify
    signatures on loan documents. Together it was, in Mr. Reed’s words, an “orgy of
    greed”.

     

    Missing links in how this could happen to the world’s most
    sophisticated economy:

     

    1) Mr. Reed’s description that everyone was on board with “modernizing”
    and rejecting that old fashion Glass-Steagal  regulation is what some call “group think”:  The force of the many (or chorus as Senator Dodd
    says) drowning the warnings of the few.  Group think creates its own reality obscuring any
    critical thinking. 

     

    2) Democracy has been weakened.  Weakened by the tremendous influence of our
    Representatives by lobbyists paid for by the special interest groups with their
    own profits in mind and influencing those Representative’s allegiance with contributions
    to their political campaigns

    Weakened by the lack of investigative journalists who could
    have analyzed and reported what was really going on. 

    Weakened by ill-informed voters. Voters ultimately have the
    power to influence their Representative’s allegiance to their interests but,
    until journalists can given those voters the information they need to make an intelligent
    decision, voters will be making their decisions on the candidate’s personal
    life or regurgitated political rhetoric such as how we need to reduce government
    regulation to create the ideal free market system.

     

     
     

  • Cegentry924

    our society has moved from benign neglect to malicious indifference.

  • Pat

    No issue to date discusses or debates preexisting obligations, technically grandfathered, when Glass Stegall was ended. That banks were so willing to disregard those, places them in material breach of ant contracts that could be considered to fall under those protections; but who’s counting?