UYGUR: Now, here‘s a question. Why isn‘t Wall Street in jail? It‘s a question I love. It‘s also the title of a great new expose in “Rolling Stone.” Reporter Matt Taibbi, we‘ll talk to him in just a moment, wanted to find an answer to that question. So, he started looking into it. And a Senate investigator gave him this spoiler alert. Quote, “Everything is f‘d up and nobody goes to jail. That‘s the whole story right there.” Now, that turns out to be slightly inaccurate. Actually, one guy did go to jail. His name is Bernie Madoff. He‘s the Ponzi schemer who‘s serving a 150-year prison sentence.
But he said in a jailhouse interview released today in “The New York Times,” quote, the banks had to know, but the attitude was sort of, if you‘re doing something wrong, we don‘t want to know. And that gets it exactly right. They didn‘t want to know. They‘re making money hand over fist. Who wants to find out? By the way, you know why Madoff went to jail when no one else did? He stole from the rich. That was stupid. If you steal from the average guy, you get away with it. Now, you want to see examples, how about Dick Fuld, he was running Lehman brothers and of course, it imploded. You know what he walked away with? Five hundred and twenty nine million dollars. He‘s suspected of hiding compensation to make it appear that he got less and he‘s also suspected of lying about his compensation to Congress. What kind of charges did he get? None. How about punishment? Squat.
Now, let‘s go to Joe Cassano. He worked for AIG financial products which crashed spectacularly. And by the way, that was largely thanks to Joe Cassano, nice work Joe, and he walked away with $280 million during his tenure. He’s suspected of misrepresenting the risk of mortgage derivatives which he famously said, wouldn‘t, quote, “lose a single dollar in the market.” What kind of charges did he face? Oh, my God, look at that, he also faced no charges. How about punishment? Zilcho. Who could have seen that coming? How about John Mack? He was on again, off again Head, and actually is the current chairman, of the Board of Morgan Stanley. He was investigated in 2005 for allegedly giving out insider information. Which may have resulted in a quid pro quo deal worth $10 million to him personally.
He also faced no charges and no punishment. And the way that that went down is actually a perfect illustration of everything that‘s wrong with our financial system and why they get away with all this. Gary Aguirre was an SEC investigator who smelled something fishy in Mack’s dealing, so he wanted to look into it. And he—basically, this is the good guy, he was trying to do the right thing. So, what happened to Gary? Well, he went to his bosses. And his boss at the time was Paul Berger, he was the SEC associate director of enforcement. Oh, he got fired. But we’re going to get back to that in a second.
All right. So, he goes to his boss with the guy we just told you about. And now where does his boss at the time work for today? Are you sitting down? Are you sitting there? Morgan Stanley. Weird. The guy who wouldn‘t prosecute, now works for the guy he wouldn‘t prosecute. Then Linda Thompson, she was SEC‘s director of enforcement and another boss of Gary. Guess where she is now. She‘s a lawyer representing Wall Street firms. Weird. Huh? I didn‘t see that coming. Now, here‘s the external forces who pushed back on the SEC to make sure that there was no investigation. Mary Jo White, she was an attorney representing Morgan Stanley.
Guess where she was before that? She was the U.S. attorney in New York. The top cop on Wall Street. And of course, there was Gary Lynch. Now, that’s Mack’s attorney, but before that, he was the SEC‘s director of enforcement. Do you see what‘s happening here, guys? It‘s called a revolving door. They‘re waiting for the payout. Are you going to investigate the guy who might give you millions of dollars in your next job? If you‘re a really good guy like Gary, you might. And remember what happened to Gary, now let’s do it: boom, fired. Gone. Everybody else gets paid, Gary gets fired for being a good guy. Now you see how they get away with it? All right. Let‘s do more though.
Joining me now is Matt Taibbi, he wrote that article. He‘s a contributing editor for “Rolling Stone,” and by the way, that article appears in the new issue of “Rolling Stone.” It‘s fascinating. All right. Matt, look, I‘ve got a lot of guys who I went to school with who are part of the circuit. And if you go tell them what you tell them or I tell them that, oh come on, you‘re being totally unfair, right? Are we being unfair to them? They‘re just good guys trying to do their job?
MATT TAIBBI, REPORTER, ROLLING STONE: No, we‘re not being unfair. Look, in this country, the reality is if you go out and you sell a dime bag on the street and a cop sees you, there‘s a very good chance that you will actually go to jail, and you will do real jail time. But Insider Trading, fraud on a massive scale, stealing billions of dollars, putting a million of people into foreclosure, defrauding thousands of janitors and cops and fire them out of their pensions, nobody is going to jail for this stuff. It‘s really, it‘s a class issue. These guys do not go to jail. Madoff was the only person in the entire financial crisis who is doing time. Even somebody like Angelo Mozilo, they couldn‘t find a way to put him in jail and all they did was fire him, less than half of his network. So, it‘s an incredible situation. It‘s really, really dangerous for the country.
UYGUR: So, Matt. Look, a lot of them was saying, look, I use bad judgment. My bad, dog. So, I lost, you know, a couple of billion dollar, but there‘s nothing criminal here.
TAIBBI: Right. No. Look, all of these banks on a larger level were complicit in a sort of general fraud scheme, and that fraud scheme was to sell toxic mortgage-backed securities, toxic mortgage-backed securities as triple A-rated investments. During this mortgage boom, they were essentially selling worthless crap as triple A-rated investments. And they were selling it to people like pension funds. That‘s why your pension has decreased in value. Because some banks sold you phony securities that they knew were going to blow out. That‘s securities fraud. That‘s a broad fraud scheme. All these banks were complicit in. But at another level, they were also involved in basically every kind of crime you could have in the financial services market. Insider trading, they were hiding billions of dollars in losses. A lot of these banks were involved in Enron-Esque schemes to hide losses. Again, fraud. You know, insider trading, all of that stuff was going on. And nobody got prosecuted for it.
UYGUR: At the banks, were there e-mails specifically saying hey, we know this stuff is toxic or we know it‘s not going to work or we know it‘s junk?
TAIBBI: Yes, absolutely. I mean, a great example is the Bear Stearns Hedge Fund that blew up. This was the one case that they actually took to trial. Where these two guys, these guys who are running this Hedge Fund that were involved, sub-prime mortgages, and that was the blowing up of this fund is what caused Bear Stearns to go out of business. But they had e-mails from these guys telling their boss, look, we are never going to make money on this stuff. And then a few days later, they were out saying publicly, this isn‘t a disaster, it‘s all going to be fine. And that‘s just straight up fraud when they do that. That‘s what a Wall Street crime looks like and they weren‘t convicted for it.
UYGUR: Right. And then you‘ve got Goldman Sachs e-mails saying, hey, that we‘re selling craft and stuff, you know, we got Mozilo and his e-mails said, I can‘t believe we‘re selling this crap. But if people at home got to be wondering, so why are they doing it, right? It seems like that‘s going to sink your company. It sunk AIG, sunk Lehman Brothers. So, why they do it anyway?
TAIBBI: Well, people have to understand is that the system of incentives on Wall Street has been completely perverted. I mean, all of these guys, it doesn‘t matter—they don‘t care if they blow up their companies. They don‘t care if we have to end up having to bail them out. They get their bonuses anyway. All these guys, even the ones who are in disgrace now, guys like Joe Cassano who, you know, helped blow up AIG, he lost—he made $280 million and he‘s keeping all that money. It doesn‘t matter how irresponsible or how wrong you are, the incentives are there for these guys to do all this stuff because they never have to pay in the end.
UYGUR: The taxpayers had to pay every dime of that $280 million eventually when AIG went under. And the guy—it‘s crazy. But he‘s not crazy because as you explained it, finish that up for us. Why don‘t they prosecute?
TAIBBI: Well, I think the key issue here is the revolving door. I mean, I think that every source that I talked to in researching this story pointed out the same thing. All these guys—the two main cops of the SEC, and the U.S. attorney here in New York, if you‘re one of the top investigators in the SEC or the U.S. attorney‘s office, when you leave those offices, there‘s a partnership waiting for you at one of these big corporate defense firms. And those partnerships are worth millions of dollars a year. These guys have all the equivalent of all college basketball players waiting for their first NBA deal. It‘s an enormous amount of money. And—what‘s happening. It‘s a collegial, sort of merry-go-round of lawyers who all know each other. They‘re all on a first-name basis with each other. You have a situation like Aguirre, you know, he‘s trying to prosecute, investigate Morgan Stanley, and Morgan Stanley‘s lawyers are going five levels over his head to talk to the director of enforcement, they‘re talking to his boss‘ boss while he‘s trying to prosecute this case.
UYGUR: Right. And at the very least, it‘s implicit saying hey, if you‘re good, you‘re a team player, we got a job at Morgan Stanley waiting for you with millions of dollars.
UYGUR: Or the law firm that is working for Morgan Stanley. And that‘s how it works. That‘s what is no prosecutions. Great piece, Matt. I really appreciate your time tonight.
TAIBBI: Thanks, good to see you, Cenk.
Transcribed by the Barefoot Accountant of Accountants CPA Hartford, Connecticut, LLC
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