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BILL MOYERS: Welcome to the question of the week: are the banks – banks too big to fail and too big to jail – are these monsters courting another disaster?

That's what it looks like. As you no doubt heard, last week, the Senate Permanent Subcommittee on Investigations issued a report and hauled in key executives from JP Morgan Chase -- the world's biggest derivatives trader -- demanding to know how the bank blew 6.2 billion dollars in funny money -- I mean, derivatives – and hid the losses with some fancy accounting tricks aimed at fooling both regulators and the public.

Senator Carl Levin, the Chairman, bluntly summed up what they found out: “It exposes a derivatives trading culture at JP Morgan that piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.”

The trail led directly to JP Morgan’s celebrated silver-haired Chairman and CEO, Jamie Dimon, said to be Barack Obama’s favorite banker. An e-mail requesting an increase in the bank's "risk-taking" received a two-word reply from Dimon: "I approve."

But the well-connected Dimon - whose bank was being bailed out by almost $25 billion from taxpayers even as he was making $35 million a year -- was spared from testifying personally and having to disclose exactly what he knew about the shenanigans of his lieutenants -- and when he knew it.

Among the many of us who will be anxiously awaiting those revelations, should they come, is my guest, Sheila Bair. A long-time Republican, she was appointed by President George W. Bush in 2006 to head the FDIC, the Federal Deposit Insurance Corporation. During the financial collapse, she oversaw the takeover of more than 300 banks that went belly up and was an outspoken opponent of the taxpayer bailouts. As one influential observer wrote during that time, Sheila Bair never forgot that her most important constituency isn’t the thousands of banks she regulates, but the millions of Americans who use them.

She now heads the Systemic Risk Council. That’s an independent committee formed by the Pew Charitable Trusts to monitor what’s being done to prevent another financial collapse. She was at this table a few months ago to talk about her book, Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself.

And I’m pleased to welcome you back.

SHEILA BAIR: Thank you. Thanks for having me.

BILL MOYERS: I felt perhaps we were getting the bull by the horns until I saw those hearings last week.

SHEILA BAIR: Yeah, it really was amazing. I mean, a lot of that we knew already. But it was really laid out in gruesome detail in that report. It was quite shocking. You know, I don't think-- I think the system's got incrementally safer, a little bit safer but nothing like the dramatic reforms that we really need to see to tame these large banks and to give us a stable financial system that supports the real economy, not just trading profits of large financial institutions.

BILL MOYERS: Were you surprised by anything that you heard at those hearings?

SHEILA BAIR: Well, I was, you know? I viewed, like a lot of people viewed JPMorgan Chase as a pretty well-managed bank. And so yes, I was surprised at the ability of this trader in London to build these huge positions. And even when he started calling foul the senior, the next level of management above him really didn't get on top of it. I was not surprised but appalled by the way they were manipulating their models that are supposed to be able to determine how much risk is involved in various trading positions.

BILL MOYERS: And what advantage did they gain from manipulating those--

SHEILA BAIR: Well, there were--

BILL MOYERS: --models?

SHEILA BAIR: There were a couple things going on. One was it's clear that they were trying to boost their regulatory capital ratios in anticipation of some new capital rules coming into effect. This is a key defect with the way regulators, bank regulators view capital adequacy at these large banks. They let those capital ratios to be determined in part by the risk models of the banks. So if the banks produce models that say, "These assets are safer," it means they can report a higher capital ratio. So it really gives them upside down incentives to manipulate their models.

BILL MOYERS: So for the layman, what is the capital ratio? And why is it so important?

SHEILA BAIR: A capital ratio is simply the percentage of your assets, what's on your balance sheet, the percentage of that that is funded with common equity.

So when banks have a low capital level, that means that they're borrowing a lot to support themselves. Whether it's a household or a big bank, you borrow too much and you don't have enough common equity to absorb losses you-- that's what it means to fail. You start having losses. You don't expect them. You have a very thin capital base. You can't make good on your debt obligations. You fail.

BILL MOYERS: And this is what--

SHEILA BAIR: We fail.

BILL MOYERS: --happened in the buildup to the big crash?

SHEILA BAIR: Yeah, exactly.

BILL MOYERS: What surprised me and others that they could hide these hundreds of millions of dollars in losses, as you say, and survive even internal scrutiny.

SHEILA BAIR: Yes, and even after it was in the Wall Street Journal, you know it--

BILL MOYERS: Hiding in plain site.

SHEILA BAIR: Yeah I think it, what was going on was they were in this big power game with a bunch of hedge funds who were trying to, who realized that this London Whale trader was building up huge positions in a fairly narrowly traded product called tranche CDS. And so they outed them. You know, they were trying to squeeze them. They let the public know, "Hey, you know, JPMorgan Chase is exposed here." And then the losses really started to mount. And it's amazing that the papers picked up on it before the senior managers or the regulators, for that matter.

BILL MOYERS: Yeah, where were the regulators?

SHEILA BAIR: I don't know. You know, I think we need a culture change with the regulators. I think and I talk about this a lot in my book. You've got a lot of good, well-intentioned people. But they confuse bank profitability with bank safety and soundness. They are not the same things.

There's the right way and there's the wrong way to make money. They're almost aligned themselves to some extent with bank managers and wanting to have the appearance of profitability, because they think that makes a sound banking system. And it's really upside down. You can't ignore the problems here. And some of that is overlooked. It’s overlooked a lot.

BILL MOYERS: We thought we were going to get a culture change after the big crash.

SHEILA BAIR: Yeah, well, I think it's coming slowly. But not fast enough. It's, you know, it's amazing that, you know, so many years after the crisis hardly, you know, less than half of the Dodd-Frank rules have been completed. The ones that have been completed, a lot of them are watered down.

BILL MOYERS: By? By?

SHEILA BAIR: It really needs to, well, the regulators succumbed to industry pressure to do this. And even some of the statutory provisions in Dodd-Frank had too many exceptions. But then we get even more exceptions since these proposed rules come out, things like the Volker Rule. You know, it should be just a simple ban on proprietary trading, but we get these very complicated rules that are very hard to enforce and easy to game.

BILL MOYERS: When Dodd-Frank and the Volker Rule managed to get through a recalcitrant Congress, many of us were hopeful. Would you tell us briefly what Dodd-Frank was supposed to do and what's happened to it and what the Volker Rule was supposed to do and what's happened to it?

SHEILA BAIR: Right. So Dodd-Frank was, is a very large, a very, it is a complicated law. Probably more complicated than I would have preferred. But it is what it is. But at the heart of it is ending "too big to fail." Giving the government new tools to resolve large financial institutions when they fail in a way that will not hurt taxpayers, not subject taxpayers to risk.

Well, it forced the losses on the shareholders and creditors of those large financial institutions, which is where they belong. It also requires the Federal Reserve Board to have much tougher what we call prudential standards. So higher capital more stable liquidity, more stable funding sources, less reliance on short-term debt.

Those are the types of things that were problems during the crisis. And the Fed has been mandated. And they haven't finished those rules yet to have better regulation to prevent these banks from getting in trouble to begin with.

And the Volker Rule, too, a key part was designed to prohibit prop trading by those institutions that are in the government safety net. So if you're a bank holding company that has an insured bank that has FDIC backed deposits or access to the Federal Reserve's discount window, you know, you have a lot of government support, as is provided to traditional banks.

So Volcker’s really about customer service. And your banking model should be you serving customers, making loans or, you know, if you're facilitating trading, you make your money off of a commission, not by by trying to make a profit off the spread.

And that's really what Volker was about. And it turned into a lot more complicated thing than it should have been.

So I do think, you know, I talk a little bit about structural changes, too, that I think could make, give us a more robust regulatory system, because now I think we have cognitive capture, which means basically--

BILL MOYERS: Wait a minute, what does that mean?

SHEILA BAIR: It means the regulators tend to look at the world through the eyes of the banks. So they don't look at themselves as independent of the banks. They view themselves as aligned with the banks, that their charter is not to protect the public, but to protect the banks. And this is the premise of the bailouts, that somehow if you take care of the banks, you're going to take care of the broader economy. And it just didn't turn out that way. They're two very different things.

BILL MOYERS: As coincidence would have it, I took your book with me on a trip last week. And I was actually reading the last chapter again, in anticipation of your coming, before I actually looked at some of the hearings. You say, "When you read about problems like the Libor or Whale scandal or the JPMorgan Chase trading losses, don't accept gobbledygook about regulators needing more information or needing more power." Then the next day I look at the hearings and--

BILL MOYERS: --more gobbledygook, right.

SHEILA BAIR: Well, you know, they had the information.

I mean, there were plenty of warning flags. Those examiners should have been all over this. Senior managers at JPMorgan Chase should have been all over this. It really was remarkable how kind of lackadaisical things were until the losses were right there in front of them. And then it was, you know, all hands on deck. But that was too late, at that point.

BILL MOYERS: This is what is actually scary to me. The Senate found that not only did the regulators fail to act aggressively in uncovering the risk, but that Dimon on his own for a period of time decided not to comply with federal regulations and flatly denied the regulators crucial data. Does that scare you?

SHEILA BAIR: Right. Right. Right. Well, that was amazing. And what’s troubling in that, you know, to the extent it reflects how he views examines and their role.

He was apparently worried about leaks. But I, you know, I think that most examiners are quite, you know, confidentiality is sacred with examiners. So I wouldn't, giving examiners information, I wouldn't worry about leaks. I don't think that was a legitimate concern. And one that couldn't justify denial in any event.

BILL MOYERS: Could reckless behavior like this bring the system down again?

SHEILA BAIR: It was a very big loss. But, you know, I think it underscores how even in banks that are viewed as very well-managed, how there can be major management breakdowns.

And how these derivatives, these actively-traded derivatives can generate very, very large losses in a very short period of time, how volatile they are. So, you know, I think this is all problematic and should inform some future regulatory choices. One is on the Volker Rule. Another is on bank capital. Because we don't know the next time that six billion could be $16 billion, so the capital rules are all upside-down, they need to be fixed, and the Volcker Rule needs to be fixed.

BILL MOYERS: Do they need to be fixed? Or do they just need to be used? I thought both Dodd-Frank and Volker had pretty well put into place the tools that regulators need.

SHEILA BAIR: Well, I think they do, too. You know, the statute could have been more prescriptive. Instead, it delegated authority to the regulators to fix it. And the regulators wanted it that way. The Fed and the Treasury wanted-- they didn't want a lot of prescriptive rules in the statute itself. They wanted the authority to do it themselves.

And so they got what they wanted. But the record has not been as good as it should be. You know, the Volker Rule is still not finalized.

And what's been proposed is very weak. It needs to be strengthened. The bank capital rules still haven't been changed. It's, and again, what's been put out there is pretty weak. It needs to be strengthened dramatically.

BILL MOYERS: So for the stranger who came up to me in the Dallas Airport, where I was reading this book, looked at it, and said, "You know, I don't understand it. I don't even know why I should care."

SHEILA BAIR: Yeah, he should care. Or she.

BILL MOYERS: Why should he care? Why should he care?

SHEILA BAIR: Well, because look, when this crisis hit, first of all, there were a lot of bad loans were made by large institutions that should have known better. And were there borrowers that took advantage of it? Yeah. But there were a lot of innocent victims, as well. But it wasn't just the mortgages. When all those losses came home to roost with financial institutions that did not have enough capital to absorb those losses, what did they have to do?

They had to pull back on their credit lines. They had to pull back on their lending. And people, small businesses couldn't get their credit lines renewed or they couldn't get their -- a lot of homeowners couldn't get their mortgages refinanced. You know, people who were in the middle of development projects had had their money pulled.

There was this huge pullback in credit, because these large financial institutions had too much leverage. And they had to pull in their horns and nurse their balance sheet.

So you have these large financial institutions with these huge trading operations that can be subject to very sudden, volatile losses, not enough capital to absorb them. You get into another recession.

BILL MOYERS: Is the banking system safer today?

SHEILA BAIR: Yes, it is. There is more capital in the system now. That's been done through the stress testing process that the Federal Reserve Board has led. And that has helped. That has helped a lot. We do have more capital, more of these banks balance sheets being funded with common equity and less with debt. But the ratios are still far too low.

I think people can understand that basic notion. And if you get capital levels up, you reduce the leverage. And that makes the system much, much more resilient. You know, it also-- they're better than prescriptive rules, too. Because we never know what the next stupid thing is going to be that's going to get a bank into trouble, but if you make--

BILL MOYERS: We human beings are brilliant at figuring out the next stupid thing.

SHEILA BAIR: Yeah, so exactly. But if they have a nice thick cushion of capital, whatever that next stupid thing is, they're going to have a much better chance of surviving it and continuing to lend to the economy than if they have very thin capital levels, which means they have a lot of leverage, a lot of borrowed money there.

BILL MOYERS: Are these big banks still too big?

SHEILA BAIR: Well, I think they are. I think it's more complexity than size. You know, most of the, all the London Whale, Libor even most of the losses during the crisis, those were occurring in the trading operations, not the lending parts of these banks. The loans, they made some bad loans, but we probably could have handled the losses on the loans.

A bank, even a very big bank, if it takes deposits and makes loans, I think we can deal with that. The FDIC's been dealing with that kind of business model for a long time. When loans get into trouble, generally, it's a slower process. You have time to work with the borrower, try to mitigate losses. But with a trading loss, it's immediate and you're really in the soup if it's unexpected.

BILL MOYERS: Give me a quick definition of the Libor scandal?

SHEILA BAIR: The Libor, the London Inter-Bank Offered Rate, was a process that was easy to game. It was basically a survey to a bunch of large banks that said, "If you had to borrow today, what do you think the interest rate would be that you'd have to pay?"

And so they were allowed to guess, right? They didn't have to base it on actual transactions. And so the Libor, the traders at these large institutions figured out that if they could manipulate the rate, if they colluded and gave information together that would raise or lower the rate, that they could make money. So it was just good old-fashioned manipulation of an interest rate that's very important to a lot of municipalities and corporations that use interest rate swaps to manage interest rate risk, as well as people who have mortgages and credit cards.

BILL MOYERS: So it could impact all of us?

SHEILA BAIR: It absolutely could. I think, you know, there's nothing more sacred than an interest rate to the financial system. I mean, the interest rate is the primary cost of credit products. And so if you're manipulating that rate you've got a problem with your financial system. And the thing that frustrates me about Libor is that this is criminal manipulation. There's no doubt about it.

You read their e-mails that show these guys colluding with one another. And I think only two traders at UBS have been charged with criminal charges. Nobody's gone to jail yet on it. The settlements that have occurred there again are forcing the corporations, the corporate entities at the banks to pay these huge fines. But individuals aren't being prosecuted or brought to justice. --I don't understand that.

BILL MOYERS: Our attorney general, as well as other Washington officials say, "Well, we can't really prosecute them, because they're too big they would hurt related companies."

SHEILA BAIR: I mean, honestly, I just look, if prosecuting the individual is going to -- I mean, even if you accept the premise of too big to fail, which I don't accept, you can still sue the individuals. That's not going to bring the system down.

BILL MOYERS: So what's going on?

SHEILA BAIR: The financial regulatory enforcement system. It's basically become a cost of doing business, right? So you bring these cases. You settle them. It's paid out of the corporate pocketbook. Individuals aren't held accountable. Very few people have gone to jail. And you don't change behavior.

You know, the whole point of this is to change behavior. We're just not doing it.

BILL MOYERS: I read the other day that between 2009 and 2012, JPMorgan Chase, Jamie Dimon's bank, paid $16 billion for legal defense fees and eight billion dollars in settlement for cases involving regulatory avoidance. I mean, that's almost a third, this estimate was, of their profits. If I was a shareholder, I'd say, "Why are you spending all that money on that?"

SHEILA BAIR: It's amazing that the easiest way to avoid all this is to stop doing these, you know, change these behaviors.

Yeah. Well, they do. And, you know, I'm hoping Mary Jo White is going to be the new SEC chairman. She's got a long history in law enforcement. She was obviously in the private sector for many years and that's created some controversy. But--

BILL MOYERS: Defending big banks.

SHEILA BAIR: Yeah, but I'm going to hope with her because I think, yeah, and I think she's at the end of her career. Her legacy's going to be how well she does at the SEC. She's not actually someone like her could be the very best regulator. Because they've been they know where all the bodies are buried.

She's not trying to cultivate a client list to go back into practice. She, this is the last thing she's going to be doing. But I hope she looks at the SEC enforcement strategy and starts suing individuals and looks at it as a way to change behavior, just not to rack up a bunch of press releases. And, I, you know, I think that fresh look is going to be helpful, so let’s all wish her luck.

BILL MOYERS: There are some proposals floating around Congress to break up these last remaining big banks. Are you sympathetic toward them?

SHEILA BAIR: Well, I am, though I think, you know, government's not doing much of anything these days. You know, and I never know, these large financial institutions still have a lot of clout on the hill. So reopening Dodd-Frank and trying to get Congress to do something on this, I think it's a very healthy discussion. But it, you know, at the end of the day, I'm not sure where it'll take us. And so my focus has been and the focus of the Systemic Risk Council, which I chair, has really been on the regulatory tools that are already available under Dodd-Frank to deal with this problem.

The Fed and the FDIC have the authority to order a restructuring of these large banks or divestiture if they cannot show that they can be resolved in a way that doesn't hurt the rest of the system. If they fail, they can go into a government controlled bankruptcy or a traditional bankruptcy and not impose losses on anybody else. So that's an important showing that they have to make. And if they can't make it, the Fed and the FDIC now have joint authority to go in there and say, "Well, you need to get smaller. You need to restructure, so we can resolve you in a way that won't hurt the rest of the system."

BILL MOYERS: But they also--

SHEILA BAIR: Those both need to be used.

BILL MOYERS: They also have armies of lobbyists, these big banks, that--

SHEILA BAIR: Well, they do.

BILL MOYERS: --came after you, when you were at FDIC.

SHEILA BAIR: They, well, they still do.

BILL MOYERS: Now that you're running the Systemic Risk Council. Describe how that lobbying and the pressure works--

SHEILA BAIR: Yeah, well, it's--

BILL MOYERS: That culture of Washington.

SHEILA BAIR: It is not good. It's, you know, I think the lobbyists view their success rate by how much good stuff they can get for their clients, right? And their clients want to make money. So their focus is regulatory changes that will make money for their clients, not that will promote system stability.

And I'm not saying, you know, "Listen to everybody." Sure, but, you know, understand that when those lobbyists come in, whether you're a regulator or a member of Congress, they're arguing their own bottom line. They're advancing positions that are going to make them more profitable. And making them more profitable is not members of Congress' job and it is not a regulator's job.

So there needs to be more separation. And people need to rise up and say, "I'm sick of this, you know? And I'm going to start voting-- about my vote about you is going to, you know, determine whether I think you're on top of financial reform and whether you're standing up to these big banks, not whether you're coddling them or your staff's getting jobs with them or what have you."

BILL MOYERS: You know, as I say, I was reading this the day before the hearings. And I went back to your final chapter, where you said, "We need to reclaim our government and demand that public officials, be they in Congress, the administration, or the regulatory community, act in the public interest, even if reforms mean lost profits for financial players who write big campaign checks." I mean, that's a marvelous aspiration, but in practice?

SHEILA BAIR: Well, you know, I think members of Congress need to rise above, look, I know they're under tremendous pressure to raise money to get reelected. But why are they there to begin with if they don't want to do the public service? And, you know, my sense is do what's right. And let the chips fall where they may. But, you know, you and I have talked nostalgically about the 1980s when we had the World War II generation in leadership ranks in Congress, and especially in the Senate. And they did rise above a lot of the special interests with tax reform and fixing the Social Security system.

You know what? They managed to survive reelection. I think really if you take principled positions, stand up for them, explain them to your constituents, you know, it may be that they'll raise more money by refusing the Wall Street guys and going to the Main Street constituents who vote for them. And I think, at the end of the day, they'll sleep better at night, too.

BILL MOYERS: And that's all the more reason to read Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself. Sheila Bair, thank you very much for what you're doing and for being with me today.

SHEILA BAIR: Thanks for having me.

Sheila Bair Takes on the Banks

March 22, 2013

Sheila Bair, the longtime Republican who served as chair of the Federal Deposit Insurance Corporation (FDIC) during the fiscal meltdown five years ago, joins Bill to talk about American banks’ continuing risky and manipulative practices, their seeming immunity from prosecution, and growing anger from Congress and the public.

“I think the system’s a little bit safer, but nothing like the dramatic reforms that we really need to see to tame these large banks, and to give us a stable financial system that supports the real economy, not just trading profits of large financial institutions,” Bair tells Bill.

Bair is the author of Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself.

Interview Producer: Candace White. Editor: Rob Kuhns.
Intro Producer: Julia Conley. Intro Editor: Rob Kuhns.

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  • Anonymous

    I just love these ballsy women who know damn well that it’s the testosterone choked air breathed by these criminal bankers that drives them to take outsized risks. Brooksley Born blew the whistle on the dark market of OCDs, and although she got nowhere with Greenspan, she at least got to say I told you so. Elizabeth Warren may have got shafted by the bankers and their boy Obama on the Consumer Protection Agency chairmanship, but she’s now in an even better position to sock it to ‘em — and wow is she doing it. And Sheila Bair cleaned up hundreds of little banks and got them back on their feet while Obama and Geithner coddled the Wall Street banks with trillions of taxpayer dollars, only to see their CEOs turn around give them the finger.

    Bair is spot on when she says that the public should rise up as one and demand that this dangerous nonsense of gutting Dodd-Frank and the Volker rule be stopped. Because it’s not just “banking culture” that has to change, it’s political culture too. This business of the banks renting out Congress on consecutive 4-year leases is exactly why the US is in decline. London would dearly love to take over as the centre of world finance, and the Bank of England has just hired Mark Carney to see if he can swing that. Another couple of screwups like Dimon just effected will make Carney’s job that much easier.

    I just watched, for the third time, that FRONTLINE special “Money, Power, and Wall Street.” Any American who missed it — or let it go right over their heads when it was first aired — should surf over to the FRONTLINE page and watch it again. The first hour and the last hour are especially important. Then read Bair’s book. It is a page-turner — and I don’t say that about any other of the 6 books on the crisis that I’ve read.

  • kirby

    Another great show. I have some hope for Mary Jo White as head of the SEC, but if she doesn’t work out,
    Sheila Bair is my pick. She needs to be in some regula-tory position. However, I do wish she would support a re-instatement of Glass-Steagall, in place of the Dodd-Frank law and the Volcker rules.Glass-Steagall worked.
    The last time Richard Wolff was on,I commented to ex-
    press my concern with his dismissive attitude towards
    regulation.I am still concerned.Because he sees regula-tion as ineffective,he wants to “throw the baby out with the bathwater”.Make regulation more effective. I don’t
    see another option.Corporate America isn’t going to do
    what we want just because we want them to.
    As for fixing our capitalist system, making sure that labor has a proper say in a capitalist economy is a worthy goal, but that isn’t a solution to every ill. Who-ever makes decisions in a capitalist system is going to maximize profits,be it labor,capital,or a combination of both. The only way to make sure profits are made in a socially acceptable way is outside,independent,effec-
    tive regulation. This calls for a government that is re-sponsive to the needs of the people,and we don’t have that currently.Our government is owned by corporate
    America and other wealthy interests. There will be no

    real government regulation of our capitalist system un-til this deplorable situation ends.

  • Jim Young

    I wrote in Sheila Bair for President as the best indication of the type person I think knows what’s wrong and what we should be doing to correct in perhaps the most critically flawed area of our overall system of government and finance. (California was easily assured of delivering all the electoral votes for Obama.) I wonder who all her choices would be for honest agents she’d like to see running for office, or monitoring the ever changing ways the “best and brightest” adapt to, and game, any relatively static attempt at cast in stone regulations..

  • http://www.facebook.com/jude.mcdonald2 Jude Mcdonald

    I think Moyers & Co out shines all media NEWS. Thank you for your service, I appreciate you.

  • Craig Thomas

    Shelia Bair, Elizabeth Warren and Brooksley Born should be running all aspects of the American financial system for the next decade. They are current America’s greatest heros and have the values and ethics to replace the greed and testosterone driven criminal “boys club” who are gaming the financial system while doing great harm to Democracy and the American people. Stregthen the Volker rule and jail Jamie Diamond. Regulators need to regulate through the eyes of what is best for the American people and financial stability–period.

  • http://www.facebook.com/leveragedpromise James Hanson

    Something that needed to be said within our Wall Street owned media. “There is a right way and a wrong way to make money.” We may have more capital today, but we have much more in derivative activity since Sept 18th, 2008, to the tune of $1.2 quadrillion. Why is this? Why is it that it was derivatives that caused the financial crisis, not subprime, yet we have trillions more in derivatives than in 2008.. See Jim Rickards/Chris Whalen on Bloomberg 3-21-13. Thanks Bill!

  • GuyFawkesLives

    Sheila, you failed to mention your biggest failure which was the WaMu failure and your role in hiding the full Purchase and Assumption contract. We still don’t know what JPMorgan Chase bought.
    So, all this talk about how it’s all the fault of the banks….is a load of crap. It’s also a failure of our government….including the FDIC under your management. Funny, how that got left off.

  • GuyFawkesLives

    So apparently, you failed to understand her role in hiding the full Purchase and Assumption contract that happened when JPMorgan Chase “bought” WaMu. No one really knows what assets that JPMorgan Chase bought. And that has harmed many many homeowners.

  • http://www.facebook.com/alan.derossett Alan DeRossett

    wow, she complains about others while she was chair of the Federal Deposit Insurance Corporation (FDIC) during the fiscal meltdown five years ago. It happened under her watch why was she not held accountable or thrown in Jail.

  • http://www.facebook.com/barry.fulford.3 Barry Fulford

    Ok, 6 billion was lost by the bank. Who gained 6 billion ?

  • http://www.facebook.com/bennett.schneider Bennett Schneider

    HOW is Jamie Dimon 1) still employed, 2) a free man!!!

  • http://www.facebook.com/bennett.schneider Bennett Schneider

    I agree with you. We had it; it worked, it was time tested. We must push our senators to reinstate Glass-Steagle. “Accept no substitutes.”

  • Jim Young

    Never heard of it so it would be hard to understand. I will ask people I trust though when I get the chance, at high levels and the lower tiers (like Tim Russert used to). I trust people like John Bogle on who’s speculating with other people’s money, creating a massive notional value compared to “real” productive investment. I trust the lower tier people who say WaMu trained their spouses on how to sell stuff they thought had to be unsustainable. I trust Jeremey Grantham, who described a convention of 1,200 financial analysts in 2000 that thought a bubble was possible (and said it was bound to collapse). Out of 1,200 only 7 (probably mangers or above) didn’t admit they thought it would end badly. We have too many investors/gamblers and not enough producers really earning the outsized rewards. Sheila Bair at least recognizes the gamblers should really lose their own money, and not drag down insurable capital with it. In other words no bailouts to the those who delivered some of the worst products ever seen in America.

    P.S. Even Sandy Weill wants to restore what he helped destroy.

  • Jim Young

    You need to look at what she said throughout, as well as Brooksley Born, and so many others who saw this even clearer than the many friends we had in real estate, many of who quit the business from 2004 through 2006 because of the recklessness of the private mortgage lenders (and worse performance of Fannie under Daniel Mudd).

  • Jim Young

    I suppose it was “notional” value on junk rated as triple A. There never was the value claimed and falsely rated. Our National ((notional?) Net Worth dropped at least 15 trillion from 2007 to early 2009, from $65 trillion to under $50 trillion (Greenspan said it dropped $17 trillion).

  • Jim Young

    Ask former Chairman of the House Financial Service Committee, Spencer Baucus, why he decided Jamie Dimon was an exceptional witness that didn’t need to be sworn in to testify as most others were. Then consider Dimon’s failure to provide required information during the $6 billion fiasco, allegedly covering rules violations. I think many others would have suffered far more wrath from the government and courts in days gone by.

  • Larry Alexander

    I think Richard Wolff made an excellent point when he discussed the idea and realities of co-operatives: Companies owned by and managed by the employees. He said the “structure” of hierarchy has to be changed in such a company so that decisions about how to run the company are not based on a capitalist model; that is: where the management and decision making processes are not done by a CEO and Board Of Directors, with the traditional motives of making profit, increasing market share and unlimited growth. The Employees, themselves would manage the company via a democratic, co-operative effort. Also the Spanish co-operative that he used as an example had a pay structure where the highest paid employee of the company could not be paid any more than six times the salary of the lowest paid employee of the organization, therefore, a much fairer distribution of wealth. Every employee makes a living wage, has more incentive to produce a good product and is more concerned with the social and environmental impact of the company, since they are each an owner and because they will be the ones affected by whatever impact the company will have on the environment. While profit is, by necessity, a driving factor and major concern to the owners, it is not the only concern. I like that Idea. and Wolff is right about regulations; while, in theory they are good, as soon as they are made, corporations view them merely as obstacles to overcome and start hiring lawyers, economists and lobbyists to help them sidestep the regulations. I liked Glass-Steagle too but look at what happened to it; and Dodd-Frank was watered down before it ever became law. Don’t forget about ALEC and the revolving door between the Hill and K Street and Wall Street. I think Prof. Wolff makes sense: We need to change the structure and nature of our system into something that does not invite corruption.

  • kirby

    I like the idea of cooperatives,I just have trouble seeing how to make them a reality. I
    also don’t see how to change the”structure”
    of hierarchy so that a company in a capital-ist system is not run on a capitalist model,
    “with the traditional motives of making profit, increasing market share and unlimited growth.” In a capitalist system,those making management decisions-be it workers,CEOs,
    board of directors, share-holders, or some combination, will make those decisions with those traditional motives in mind, and the primary goal will ALWAYS be profits.I just don’t believe that simply putting workers in charge is going to change how a capitalist company operates in a capitalist system. It
    seems that the only way to use capitalism
    as a tool for creating wealth is to have com-prehensive, effective regulation to ensure that this wealth-creating tool is used in socially and environmentally acceptable ways. I support the idea of employee owned
    and managed companies, but this will not remove the need for regulation. Of course,
    corporation will ALWAYS try to circumvent
    regulation,that is the nature of the game.This is not a reason to give up on regulation,it is a reason to make regulation more effective.
    Just putting workers in charge won’t change this fact. The Spanish example is good, but even they need regulation.Also,salary should be based on merit and ability,and there will be disparity in pay-scales,but six to one? Why not 2:1,or at least something less than 6:1?
    BOTTOM LINE:Using capitalism to produce
    wealth requires regulation,no matter who is in charge,and I don’t see a way to change the structure of capitalist companies that will remove the need for regulation.

  • http://twitter.com/yeswecanjane Jane

    My feelings are turning on and off from OMG I can’t believe this much fraud is allowed to Oh What the heck Why should I even read or watch about these banksters.anymore since most government and media is turning a blind eye to this. But I guess we who want change have to keep on getting out the info and hope and pray.

  • http://www.facebook.com/people/Duncan-Macleod/100002990126891 Duncan Macleod

    Elizabeth Warren couldn’t run a 7/11.

  • Marsha Kitchel

    Thank you, Sheila Bair and Bill Moyers. Keep big bankers’ feet to the fire. You are our voice!

  • Paul Turner

    She’s held positions in the law schools at UPenn, Michigan, University of Texas, and Harvard.

  • Paul Turner

    It might be helpful to consider some of the specific behaviors firms display which need to be regulated. As Wolff points out, it’s much less likely that a company which is owned, operated, and supervised by workers embedded in that particular community are going to dump harmful byproducts into the air or water they have to breathe and drink, or that they’re going to create unsafe workplaces, and so on. While you assuredly do need robust regulation, the cooperative model would strike at the heart of the tendency to engage in risky or problematic behavior in the first place. Those firms might occasionally engage in risky behavior in order to generate profit–and indeed, what we need is to strike at the profit/excess accumulation motive, which is not ‘simply natural’ as we’re taught to believe (cf. Robert Heilbroner’s very good “The Worldly Philosophers” introductory chapter, “The Economic Revolution,” which makes the case that widespread profit-seeking behavior is a relatively recent innovation–but it seems strange to suggest that the cooperative model wouldn’t make that behavior more rare than it is now, where it’s really the rule.

  • kirby

    The argument that the cooperative model would not NECESSARILY make anti-social corporate behavior more rare is based on the fact that the man-agers of companies are just as embed-
    ded in their communities as are the
    workers, yet such managers often en-
    gage in harmful corporate practices in
    the quest for profits.I don’t see how re-
    moving local managers and replacing them with local workers is necessarily
    going to change corporate mentality.
    A capitalist corporation operating in a
    capitalist system will always have as
    its PRIMARY motivation,making a pro-
    fit.This is what corporations do,this is
    their sole purpose,no matter who is in
    charge,no matter what structuring
    model is used.Economic systems and the corporations that operate within them are amoral,they just seek profit,
    that’s just what they do. Only indepen-
    dent, effective,comprehensive,strict, regulation will ensure that they make profit in a socially acceptable way.
    Whoever is in charge,you are not going to remove the profit motive,and no one
    should be surprised that,when push comes to shove, managers of corpora-tions are going to do what they have to
    do to ensure profits. That Is why they MUST be regulated.

  • Anonymous

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  • Francoise Arouete

    Why is this woman wearing a chain?

  • John

    Asked and answered. Res ipsa loquiter. NO one holds any capitalist foot to the fire. They all wear asbestos boots and laugh in our face. She is here to sell a book few will ever read. As the comments here suggest: there are too may questions Moyers did not ask.

  • John

    And leave no cliche unturned! It’s not the horns we need to grab the bull by but the ….

  • John

    That’s why she still wears a chain!

  • Pappy

    I agree with everything Wolff said except his dismissal of the effectiveness of regulation. Regulations worked for a long time because we didn’t have thousands of lobbyists representing corporate billionaires on capital hill telling the politicians what is acceptable, or else. Even when lobbyists fail at getting new protective laws shot down, (the laws pass) , the lobbyist lawyers sit down with the regulators and tell them what loopholes to put into the new regulations under those laws, making them totally worthless. And we also shouldn’t have elections determined mostly by the 1% who determine who gets most of the money for a campaign. We don’t have anything near to a democracy any more. We now have government of the people, by the corporation and for the corporation. And they are enslaving our middle class who are the bulk of all consumption, and increasing poverty, preventing economic recovery and growth. Get the big money bribers out of our government. Bring back democracy, and then we can pass effective laws. It seems to me that our current generation in general is more of a dog eat dog generation. As each person struggles more and more.. they understandably, become more preoccupied and concerned only with their own livelihood and of their families, and more indifferent to the whole. The top 1% live well off of this totally divisive mind set. Divide and conquer works, and by taking advantage of it they are really raking it in at our expense . But as soon as things get bad enough…. and they will, most will learn that we are a part of that whole and that maybe we can’t do it all on our own any more. Then maybe people will stand together in solidarity again. Then maybe we will take some time, and write to our elected officials who take special interest money and tell them they have to stop accepting all bribery money from ANY outside interest AND introduce campaign finance reforms WITHOUT lobbyist influence, whereby we eliminate ALL outside bribery in election campaigns. And instead, finance equally, through tax revenues, the candidates of at least, the top 4 or 5 major political parties. And we give all of those candidates free and equal air time of a designated amount only, (and no more would be allowed), on the major broadcast networks. The networks should have to offer this limited free airtime to the American public as a condition of their FREE bandwidth licenses. Like back in the days when they got free bandwidth only on condition that they served the public interest. Before Reagan repealed it. If the politicians don’t pass this legislation, we simply determine who voted against it and vote them out of office. No matter how good or bad they have been to us and their constituencies in their represented states. And if legislation is not even drawn up for a vote, we boot all incumbents out. They will get the message quickly. When we kick all outside money out of politics, there may still be lobbyists offering their opinions, but not any honest ones as they would no longer be able to hold government officials hostage by denying them campaign funding and threatening to support the opposition if they didn’t do whatever they want them to do. This IMO is our countries largest and maybe only problem. BRING BACK DEMOCRACY. Then we can bring back effective laws without any loopholes, that protect our people and our economy from the crooks.

  • Pappy

    I agree mostly with what you say…, that everyone needs regulations, but I think the real advantage of the coop, and what Wolff was saying, is that all workers in a Coop would get a more fair share of the pie, since they all own a piece of it, and grow if the pie grows. And will therefore work harder for its success and growth. No one would be stuck in a dead end job where they fall further and further behind with inflation, while the CEO and shareholders rake it in. At some point when you can barely make ends meet even working 2 jobs , and the retirement fund goes unfunded as the years go by, you have to do as those workers in Spain did or face a very dismal and probably shortened existence. Sometimes you have to demand a living wage with the threat of a strike. Like we use to do in this country before the government started helping business destroy unions. And the clueless went along with the demonizing propaganda of the wealthy business interests who were against unions. But despite their faults, unions (along with sensible minimum wage laws) were the only way the middle class could survive in this country and the demise of the middle class along with the union wage and a sensible minimum wage is why we are where we are today. If the management of a profitable, growing company threatens to shut down the company and move it to a slave labor country, unless their employees live on poverty wages, the government should say good riddance, charge them massive import duties for goods brought into this country, and provide their former employees with low interest business loans to help them organize a Coop, and maybe later, they may even be able to compete with their former cutthroats. There would be shared ownership , more equitable growth among the employees, more dedicated workers, which will help grow the coop. This will help grow the middle class… not just the top 1% , and increase consumption, along with education and upward mobility of the middle class. And all of this creates a more vibrant and stable local economy with time.
    As for regulations, they will become effective when we kick all special interest money out of government and the news media. When politicians can no longer be bought with special interest money because it would be illegal to accept it , and could only finance their campaigns through rationed government funds from tax revenue, their would be a lot fewer crooks in government. And if voters became better informed , from non-biased media outlets, who are required by law to report truthful facts and support the public interest or lose their broadcast licenses, like it was before Ronald Reagan came along, people would be able to make better decisions on who to vote for. And when you get enough good politicians who truly represent the voters, and can’t be bought , tougher regulations to protect the common good and the economy without the loopholes will appear like they did before. IMO.

  • kirby

    I could not agree more with your post if
    I had written it myself. You covered all the bases. In my post, I was just trying to say that, even though worker owned and managed enterprises are a good thing and something to strive for,there would still be need for various types of regulation,perhaps different types,but

    regulation nevertheless.

  • Underwater

    She’s had her detractors but she is really strong in looking out for the public interest and very knowledgeable in this interview. I keep thinking of her common sense approach to view the foreclosure crisis as a natural disaster and get immediate aid to homeowners. One of my loans was flagged as a “natural disaster” on a credit report by my possibly fake lender almost like a slap in the face to Ms. Blair. It was never even late so I wonder if they collected bailout money. Hopefully I can get in touch w/ Moyers or Bair through the contact page.

  • http://www.facebook.com/suttershome Sheryl L. Sutter

    What you didn’t hear, Mr. Moyers, is that the banks have also been found guilty of forging homeowners signatures to the actual mortgages…here is a letter to the editor that I wrote a couple of weeks ago and has yet to make the paper and probably won’t. Heaven forbid people find out that Robo-signing was nothing compared to this. I pray that you, Mr. Moyers, actually read comments by your readers…because trust me…this is a doozy.

    LETTER TO THE EDITOR:

    This is an apology to our neighbors, our neighborhood and our
    city. We apologize for how our home has
    deteriorated and how, it may seem that we have been neglectful of our
    home. We have lived in our home and in
    this beautiful city, for almost nineteen years; and for many years we were very
    involved in trying to better our community and in some ways are still involved
    today, although, as you will see, we have been busy in other avenues of
    bettering, hopefully, our country when this is all said and done.

    In 2004, after a very destructive year in our lives (the
    death of our son-in-law and grandson, the loss of a job and a son serving his
    country in Iraq); we were forced to refinance our home and unfortunately for
    us, had dealt with a loan company that, within six months after our “closing”,
    would receive a Cease and Desist letter from the State of Michigan for illegal
    practices. We would learn this fact
    after the bank tried to illegally foreclose on our home in 2006. We discovered that the involved lender had blatantly
    forged my husband and my signatures to the mortgage document, notarized that
    document and recorded it as legal tender at the Lapeer County Register of
    Deeds.

    We spent the next six years, fighting the bank, over a crime
    that, had we committed, would have sent us straight to jail, paying restitution
    and suffering the consequences that go along with that type of decision. We not only had to fight the bank; we had to
    fight the very court (bankruptcy) that we reported this crime to. The trustee hired an attorney that jumped on
    the bandwagon to win an avoidance of the forged mortgage, only for that same
    attorney to turn around, after we won (in July 2007), and attempt to sell the
    avoided mortgage back to the defendants for $30,000, without notifying us or
    our attorney; an action which would have allowed the guilty defendants to retain
    their interest in our property and continue with their illegal
    foreclosure. We were forced to pay the
    trustee’s attorney over $12,000 for his “services”.

    This erroneous decision by the bankruptcy court, before
    determining whether the bank had a legal right to an equitable mortgage, caused
    us to appeal the resale of our voided mortgage to the US District Court. This courts determination was that the
    bankruptcy court had not determined whether the bank had a legal right to have
    an equitable mortgage, based on the forgery, and sent it back to the lower court
    for a determination. The bankruptcy
    court, upon the receipt of this remand, immediately determined that the defendants
    were eligible for the equitable mortgage and, again, we were forced to appeal to
    the US District Court. The final
    determination deemed that the bank did not have the legal right to have an
    equitable mortgage. This action caused
    the bank to file an appeal to the US 6th Circuit Court, where,
    finally, in January of 2012 the higher court denied the equitable
    mortgage.

    Most would consider this a big win, however, if this was a
    big win, I wouldn’t be sitting here, almost seven years later, feeling
    compelled to write this letter of regret.
    The entire time that we were embroiled in this fight, we were continually
    told that we were not to make any repairs to the home (after all it might go
    back to the bank). The bank (six years
    after the avoidance of the mortgage and a year-and-a-half after the circuit court’s
    decision) still have their names on our deed and have placed forced insurance
    upon our home that has been billed to us on our ever growing “escrow” that we
    weren’t entitled to when we actually had a mortgage…and the coup de grâce, the
    bank is reporting that we are over 80-months delinquent on our non-existent “mortgage”.

    We have had to hire another law firm to straighten out this
    mess and after speaking with our lawyer, this will be another long, drawn out
    affair. We have attempted to file a
    claim against the insurance, however, it is likely the bank will rescind the
    insurance based on a “mutual mistake of fact” (the original servicer, midway
    through the appeals process sold the non-existent mortgage to another servicer)…so,
    in other words, oops, sorry we didn’t tell you that the mortgage we sold you
    had no validity, no hard feelings.

    We have contacted every agency that we can think of to try
    and get help with our situation, only to be told that because our credit is
    shot we, most likely, would not be able to get any help if there was any help
    available in the first place.

    There is no quick fix for us. We decided to stand up against a crime that
    was committed against us and this is the consequences of an average American
    going toe to toe with the banks. They
    will chew you up and spit you out without any regard for the laws that govern
    us, the “average” Americans. So, therefore,
    I feel compelled to apologize to my neighbors and community and let you know
    that this is not what we want and every day we make strides to overcome what
    the last ten years has done to our lives.
    I will not apologize for fighting a crime or standing on principle, but
    I know that my decisions now have consequences for my neighbors and
    neighborhood. I hope that this will at
    least give our neighbors answers to the why “it is what it is”.

    Sheryl L. Sutter
    Lapeer MI 48446

    http://mortgageforgery.wordpress.com

    Share Your Story of Mortgage Fraud at https://www.facebook.com/ShareYourStoryOfMortgageFraud