The former California State Treasurer and Financial Crisis Inquiry Commission Chairman discusses the parallels between now and Wall Street’s 2008 financial meltdown.
Fmr. Financial Crisis Inquiry Committee Chairman Phil Angelides
Tavis Smiley: Good evening from Los Angeles. I’m Tavis Smiley.
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Tavis: So pleased to welcome Phil Angelides back to this program. The former Treasure of the State of California chaired the National Finance Crisis Inquiry Commission and recommended prosecutions for a number of executives who they felt were complicit in what Naomi Klein once called Wall Street’s shock doctrine.
Unfortunately, none of those high-profile executives were ever locked up by President Obama’s Justice Department, so here we go again with a Republican-controlled White House Congress and Supreme Court. Phil Angelides, as always, sir, good to have you back on the program.
Phil Angelides: It’s great to be with you.
Tavis: Let me start there. Why did not Eric Holder, why did not the Justice Department in the Obama era find any one of these persons liable enough to be locked up?
Angelides: I think it’s one of the real disappointments. For all the successes of the Obama administration, for all the strong financial rules put in place, for all the good regulators put in place after the crisis, I think this will stand as one of the seminal failures of the Department of Justice.
I really cannot tell you why, but the fact is, they never really committed the resources and the will to do the deep dive investigation that was warranted.
Our commission after hearing 700 witnesses, holding 19 public hearings, revealing millions of documents, we made a series of referrals to the Department of Justice identifying potential violations of law and calling them to investigate and, where warranted, prosecute. They did not prosecute a single senior executive. Now they levied tens of billions of dollars of fines against banks.
Tavis: Who pays for those, though?
Angelides: The shareholders.
Tavis: That’s what I thought…
Angelides: Mutual funds…
Angelides: 401k’s. And so you have the situation where North American banks paid over $200 billion dollars of fines. Read that shareholders. Somehow banks engaged in misconduct, but no bankers were involved. I call it the immaculate corruption. And the danger here is that coming out of this financial crisis, the Wall Street was helped back on its feet by a bailout that was in the trillions of dollars.
They paid no real legal or economic consequence for their wrongdoing and now emboldened by their escape and their lack of responsibility, they’re poised to go on the offensive again and undo a lot of the reforms that were put in place.
Tavis: What’s the worst? I mean, I suspect there’s a long answer to this, but what’s the worst case scenario for what you expect to come out of this iteration of Congress and the power that they have now?
Angelides: Well, let me just say something. So much can be done without Congress. I mean, the fact is that the Democrats in the Senate can filibuster some of the more dramatic changes, but one of the key findings of our commission was that we had some pretty strong financial rules and regulations going into the financial meltdown of 2008.
But there are were regulators there who believed in the wisdom of the free market who didn’t believe in a strong hand of regulation over this powerful behemoth financial industry. Alan Greenspan had many opportunities to stop predatory lending that finally infected and devastated our financial crisis or our financial system.
So the real danger is that the Trump administration — and they are redoing it — can appoint regulators who look the other way, who don’t enforce the rules, who aren’t vigilant guardians of the safety of our financial system.
And that’s already happening. They’ve appointed people to head the key regulatory agencies whose only common denominator is that they have lifelong service in and fealty to the financial industry.
Jay Clayton at the Securities and Exchange Commission, a lifelong career at Sullivan and Cromwell and representing big banks, you have Joseph Otting at the Office of the Comptroller of the Currency. His whole career has been in the banking industry.
And now you’ve got Mick Mulvaney at the Consumer Financial Protection Bureau who called this agency that’s gotten $12 billion dollars back from consumers who are misled and abused. He’s called it a sad, sick joke. So a lot can be done with no Congressional action.
Tavis: Let me go to this last agency that you referenced, the Consumer Financial Protection Bureau. This is the organization, the entity, that many of us thought and hoped Elizabeth Warren would head because it’s her idea essentially back in the day.
They didn’t give it to her because they didn’t think they could get her through the Senate because the bankers were going to make sure she didn’t get through. So she ends up running for the U.S. Senate. Thank goodness, she’s in the Senate now from Massachusetts.
But this entity was established to look out for consumers and, when the guy who runs it calls it a sick joke, it’s pretty clear what his agenda is. How much do you expect that agency to be gutted by the time and the Trump administration writ large are done with it?
Angelides: Eviscerated. I thought you ought to count on what’s going to happen there is the same things that’s happening at the EPA, and we can see it. Mick Mulvaney’s been installed for one week now, I think, as the interim director, and look what he’s done already. He’s frozen all investigations. He’s ordered the stop of payment to some victims of financial crime.
There was a case recently where a firm had misled 100,000 mortgage customers, been put out of business, they want to get back in business, and they were fined $8 million dollars and they were required to put up a bond before they can get up and running again. And he has now withdrawn the agency’s requirement for that. So just within a week, he’s set a very clear signal that they’re going to piece this thing apart.
Tavis: How emboldened do you think Wall Street — how emboldened does Wall Street feel in this moment?
Angelides: Emboldened? Look, I think it’s, again, important to remember what happened. Sometimes we forget. You know, it’s only been 10 years since the financial crisis rocked this country, and it’s worth pausing to remember what happened.
Millions of people lost their jobs and their homes. Trillions of dollars of household wealth for middle class families was stripped away. Communities across this country were devastated and many have never gotten back off the floor.
That was not the story for Wall Street. They got a multi-trillion dollar bailout. By 2010, within two years of the meltdown, executive compensation on Wall Street had hit record levels. The 10 biggest banks controlled over three-quarters of the banking assets in the country. Profits hit record levels. There was really no consequence.
Now normally, Tavis, we learn in life when we make bad mistakes, when there are consequences, and we talked about no prosecution of any senior executive. Keep in mind, when George H.W. Bush was president, 1,000 S&L executives either pled guilty or were convicted of felonies.
And by the way, the Department of Justice under Eric Holder, they went after wrongdoers, small fry, people who were mortgage brokers, borrowers who lied on 10 loans. The people who lied about a million loans, defrauded investors, didn’t pay any price.
So Wall Street never really paid any consequence, did the critical self-examination required, and the minute they were back on their feet, they’ve been waging a rear guard fierce battle against all the Wall Street reforms. They’ve spent over $1.5 billion on lobbying since the financial crisis. They’ve contributed over $1.6 billion dollars to federal campaigns, mostly to Republicans.
And now the triumvirate of Trump, the Congressional Republicans and their powerful forces I think are poised to strip away a lot of the safeguards that were put in place starting with the Consumer Financial Protection Bureau.
Tavis: But what about the promise that was given to the American people that we will never have banks again that are too big to fail?
Angelides: Well, it’s hooey. Look, the thing is, you don’t need to — of course, we know that the Trump administration has a disrespect for history and ignorance of history. You just got to look back. Leading up to the great crash of ’29, Wall Street was loose, unfettered, no real regulation. The banking reforms put in place in the Great Depression precluded a financial crisis for five decades.
Then we had deregulation of the S&L industry. It blew up on us. Of course, minor league compared to what happened in 2008. And then in the 90s and 2000s, frankly, a bipartisan buy into deregulation on the basis that somehow the industry had become so sophisticated it could understand risk, it could avoid risk.
The instincts for self-preservation were there, but they weren’t in fact. The system is set up that, when Wall Street bankers take big risks and they hit it, they get the homerun. When it goes awry, we pay the bill. And I’m very fearful that we’re moving very quickly back to the same elements that led to the crisis of 2008.
Tavis: If the Democrats can fight back, what’s your suggestion for how they should, number one. And, number two, what agency do we the people have at this point in the process?
Angelides: Let me be blunt. It’s gonna be tough because the Trump administration can do so much on their own. But here’s one thing I think we need to do. First of all, the Democrats in the House and the Democrats in the Senate, at every turn, every opportunity, need to stand fast.
There should be no timidity here. There should be no giving of ground because, remember, the reforms put in place after the great crash of 2008 were strong, but they weren’t as far-reaching as many of us thought they should be.
So there shouldn’t be any ground given. Should be very tough on any nominees to these agencies, you know, in terms of who’s appointed by Trump. But I think, most of all, transparency.
Here’s what the White House has done. A lot of what they’ve done already has been very damaging, but it’s been cloaked by the chaos, the vitriol — excuse me, the insanity — coming from an unhinged White House every day.
Look at what they’ve done since the beginning of the year. AIG, which required a $182 billion dollar taxpayer bailout, was one of the institutions subject to heightened scrutiny. They let if off this year. Said no longer needed. I’m thinking there were real constraints. It was having eyes on it.
They’ve gotten rid of something called the fiduciary rule, which was adopted in the last days of the Obama administration that said financial advisors have a duty to represent the interests of their client. They got rid of that.
They got rid of something called the arbitration rule that the Consumer Financial Protection Bureau put forward that said if you’re wronged by a financial institution, you can’t be forced to sign one of those multi-paged documents where you give away all your rights. You’ve got a right to go to court.
So they’ve done a lot and I think what we need to do is shine the light of day on this. You know, the irony of this, much of the Trump constituency were the people most damaged by this crisis and, as I said, who have never really gotten back on their feet by a recovery that served not everyone in this country.
Tavis: Is there any reason [laugh] — I want to close on a high note if I can. Is there any reason to be hopeful?
Angelides: Well, yes, in the sense that eyes on this, letting the country know. This affected everyone in the country and, up until now until the fight exploded in the Consumer Financial Protection Bureau, it was happening in hidden dark corners. We need to elevate this in the same way that the healthcare fight was elevated.
Tavis: And how scared are you about this tax bill?
Angelides: It’s all part of a piece, empowering people who have the most to take risks at the country’s expense.
Tavis: Phil Angelides, good to have you on. Thanks for your insights, my friend.
Angelides: It’s wonderful to be here.
Tavis: Up next, actress Allison Janney. Golden Globe nomination she received today. Stay with us.
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