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.