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GRCC Diversity Lecture: Matt Taibbi

GRCC Diversity Lecture: Matt Taibbi


(applause)>>Thank you, Chris. It’s my pleasure to represent
the Social Science Department tonight and introduce
our speaker. But, first, I’d like to thank
the Diversity Learning Center, on behalf of the
Social Science Department, for their help in
bringing Matt Taibbi here to Grand Rapids
Community College. Without their logistics
and financial support, the social sciences would not
have this terrific opportunity to supplement our
curriculum tonight and offer this speaker
to our students. Matt Taibbi is the
author of “Griftopia,” one of the most entertaining,
quotable, scathing, and illuminating histories
of the economic crisis. In 2008, he won the
National Magazine Award for his columns in
“Rolling Stone,” where he serves as a reporter
and a contributing editor. He’s also known as the author
of “The Great Derangement– “A Terrifying True Story of
War, Politics, and Religion.” And backstage, it was
interesting to have him tell me that he also served and
played in one season in the Mongolian Basketball
Association in Mongolia, where he was known as
the “Mongolian Rodman.” (audience laughing) So–
(chuckling) woulda liked to
have seen that. But he’s here tonight because
of his most recent book, the “New York Times”
bestseller “The Divide–
American Injustice “in the Age of
the Wealth Gap.” Matt Taibbi takes readers
on a galvanizing journey through both sides of our
new system of justice– the untouchably wealthy,
and the criminalized poor. As he narrates these
incredible stories, he draws out and analyzes
their common source and unveils what we
need to do to stand up against the troubling
trend of the divide. It’s my honor to
introduce Matt Taibbi. (applause)>>Thank you,
so much. Wow. First of all, I wanna thank
Chris and Professor St. Clair and Mr. Light and all the folks
at the Diversity Learning Center who made it possible for me to
come to GRCC and appear here. It’s an incredible honor and, frankly, a little
bit intimidating to stand on this spot,
where people like Malcolm X and Clarence Darrow, who
were my childhood heroes– they stood in
this very spot, and that’s a
little bit scary, but it’s a
tremendous honor. So, I’m very, very glad
and very grateful to have been
brought here today. So, thank you
for that. And may I also add that this
is by far the coolest podium that I’ve ever spoken on…
(audience laughing) in my entire life. I feel kind of imbued
with power up here. So, thank you,
for that. It’s a beautiful
facility. So, I’m here to talk
about “The Divide,” which is a book
about the disparity in the criminal
justice system. And I really came across
this topic by accident, and I think some of the best
ways to talk about the issues in this book– the easiest way is just to
describe my own journey into the
subject matter, because it was very
much by accident, and I learned so many
interesting things along the way. Prior to 2007 and 2008, I
worked for “Rolling Stone,” primarily as what you would
call a “political humorist.” I did a lot of campaign
trail dispatches, and– mostly what I did is I would
follow around politicians and write these goofy and
sometimes biting profiles, and often just sort of
made fun of them, and– really, the idea was just
to sort of follow people on the road and talk
about how interesting and strange the campaign process
was, which was a little bit fun, but as an investigative
reporter, you know, I had spent over
a decade in Russia writing about corruption
in the Kremlin and all these things. It was a little bit
frustrating to me, as well, because I always sensed
that there was some deeper and more interesting,
more complicated story under the surface of
what we normally encounter in the campaign trail, which
is usually very superficial and very repetitive,
and that was the source of a great
frustration to me. And then, in 2008, there were
a couple of really key moments in my life. One took place
in July of 2008. Does everyone remember the whole
“Drill, baby, drill” thing? Anybody out here? So, this was– I was following
John McCain’s campaign, and I was with
the traveling press, and McCain unveiled a new
version of this speech, where he was addressing a
problem that was in the news at the moment
in America, which was that
gas prices were soaring. And McCain’s answer to this
was that we had to deregulate the industry and
allow oil companies to drill in the
Gulf of Mexico, and somehow, magically, that
was going to make gas prices go down immediately. And he gives a speech,
to uproarious applause, in a place called
Kenner, Louisiana. And it’s a huge hit on
the internet, on cable. But all the reporters, as we’re
filing back into the plane and the tarmac,
later that night– as an aside, I should
just sorta point out the campaign
reporters– all they do is pick on the
candidates behind their back. They– but, to their face,
it’s completely different. But behind their back,
that’s all they do, is make fun of
the candidates. And– so, we’re
filing into the plane, and one of the reporters is
really busting on McCain– he’s saying, “God,
you know, what an idiot. “As if drilling in the Gulf
of Mexico has anything to do “with gas prices
going up.” And I kinda
raised my hand, and I said, “Does
any of us actually know “why gas prices
are going up?” And it was like the cartoons
with the crickets, you know? (audience laughing)
Like… literally, nobody in the
plane had the faintest clue. And I turned to one
of my colleagues, who I’ll describe as a prominent
television personality, who was sitting next
to me on the plane, and I said, “Doesn’t
that make us all frauds?” And he looked at
me, and he said, “You’re only figuring
that out now?” (audience laughing)
And so, I was worried by this. Obviously, reporters– you know,
we often pretend to know about things that we
know nothing about, but this seemed to me a little
bit of a bridge too far. And then, fast-forward
a few months later– we’re at the
Republican Convention, and the same
thing happened. We’re covering Sarah Palin’s
speech, I remember, and– of course, we all
remember this moment. It was this electrifying moment
in American political history. We all rushed to the
filing room after the speech, and we all knew that
this was this thing we were gonna remember
for the rest of our lives, and we– all the reporters
are turning on their computers to write their stories
about the speech, and we see on the internet
that the– that the economy– world economy is
about to collapse. And there are all
these news stories emanating from Wall Street
about these venerable companies that are on the
verge of bankruptcy. And I’m reading
all these stories, and I’m searching sort of
in vain for an explanation. Like, there’s a lot of
“what” in these stories, but not a lot of
“how” and “why.” And so, they were saying
that companies like AIG and Bear Stearns
and Merrill Lynch were in terrible trouble,
but they weren’t really– these stories weren’t
explaining anything about what the
problem was. So, I– again, I sort
of went around the room, in the filing room, and
I polled, individually, all the reporters– said,
“Does any of us have a clue “about what is causing
any of this stuff?” And one by one, all the
reporters looked up at me and went like this. And, you know, this is
supposedly the cream of the political
crop, you know? It’s not just any
room of journalists. We’re supposed to be the
very best political reporters in the country. And not one of us had a–
had even the remotest clue about what was going on,
what was behind what would turn out to be
the singular economic event, certainly,
of that decade and perhaps, you know,
next to 9/11, this most important political
event of that decade, as well. And we were
completely clueless. And this was very
troubling to me. And this– it was exacerbated,
’cause as soon as I got home from that story,
filing that piece, my editors at
“Rolling Stone” sort of cheerfully
assigned me a story about the causes of
the financial crisis. So, here I am,
completely clueless. I had already, you know,
started trying to investigate the situation myself, because I didn’t wanna
be talking at a school about a subject that I was
completely ignorant about, but I was really
at square one. It was so bad that– and
the academics in this room can appreciate how
desperate this is– but I was actually reading
“The Wealth of Nations,” and, you know, people
like Hayek and Friedman. Like, I thought I really needed
to start at basic economics before I could learn
about this story. And, you know, four or five
weeks into this assignment, I was getting
nowhere. And… I was randomly calling
people on Wall Street and basically
saying, “Can you tell me something
about something?” And through this process,
I stumbled upon this guy, who was a trader at
one of the big banks, who had a hobby that
was really interesting. In his spare time, he made these
really nasty, satirical cartoons about Wall Street. One of them was called
“Goldman Superheroes.” And he invited me to lunch, so
we went to lunch in Chinatown in Manhattan, and
he said to me– after five minutes into the
conversation, he said, “Look. “Your problem is that you’re
trying to cover this “as an economic story. “This is not an
economic story. “It’s a crime story. “And once you get that,
the whole thing “will become
simple to you.” And, he pointed
out the window– how many people have
ever been to New York? Anybody? Okay, it’s a
sizeable number. So, one of the things you
will see, very often, in New York City, is people
selling phony stuff. So, fake
Prada handbags. Do not buy the Prada handbags
when you go to New York. Fake Rolex watches, fake Gucci
wallets– all that kinda stuff. And it’s especially
common in Chinatown, and we happened to see some
people selling phony handbags out of the back
of a trunk. And he said,
“That, right there, “is the key to the
subprime mortgage crisis.” That, instead of
phony Prada handbags, what they were doing is selling
phony AAA-rated securities. And this is a complicated
subject to the mechanics of actually how the subprime
mortgage scam worked. They actually are a
little bit complicated, but the underlying thing is
actually not all that hard. It really is just an
exalted, exaggerated version of a common
street scam. What these folks
were really doing, these banks that were
lending hundreds of millions, if not billions,
of dollars to lenders like Countrywide,
who, in turn, fanned out into primarily middle- and
low-income neighborhoods, and they gave loans out
to anybody and everybody. One company– Countrywide–
there was a whistle-blower who later explained
that their policy was that they would
give a loan to anybody who could, quote,
“fog a mirror.” And another company
I talked to was sort of a
Countrywide-type lender. One of their brokers
told me that his method of getting homeowners
or finding homeowners was to hang out at the beer
cooler at 7-Eleven at night. And he would look for
people, you know, and say, “Would you like to get
a new living situation?” And they really didn’t care who
was signing on the dotted line. They encouraged people to
misrepresent their incomes. If they didn’t have jobs,
if they didn’t have– if they weren’t citizens,
it didn’t matter. The important thing was to
get these people into loans. These loans would then be
resold back to the banks. The banks, in turn, would
put them into big pools that would chop them up into
a kind of financial hamburger and then sell them off to
institutional investors, like pension funds
and insurance funds. And they would wave
this hocus-pocus math on the whole pool of loans and
appeal a piece of it off, and that piece would be
a AAA-rated security. So, it was like a magic trick–
you took a whole bunch of people who are individually
junk-rated loans– each one of these loans
was junk-rated, but you– when you threw ’em
in the pool, they could suddenly sort
of shake up this pool and take a piece of it and
turn it into a AAA-rated loan. So, it was taking something
that was cheap and plentiful and not worth very much
and turning it into gold. It was like the
Rumpelstiltskin fairy tale. And, at its core, again,
it was just fraud. It was– these banks,
in particular– they knew that a
lot of these loans were very likely
to default. One of the best examples was
a story that I did eventually about one bank where the
quality control people was looking at a $900 million
pool of loans, and they knew that 40% of
the people in that pool had overstated
their incomes. And yet, they sold all those
loans anyway to investors like you and me and to
state pension funds and insurance
companies. And this is absolutely no
different, in any way, from a car dealer who
has a lot full of cars with faulty brakes and
sells ’em to customers anyway, even though he knows
they’re gonna crash as soon as they
leave the lot. It’s exactly the same
kind of activity. Except that it sounds
more complicated, and it’s done in
a different way, and so we don’t think of it
as the same kind of scam. But it is. And in fact, in the case
of the mortgage situation, it was actually even
worse than that, because many of these
companies got wise to the fact that they were
pumping the economy full of these hundreds of
millions and even billions of dollars’ worth of
these faulty loans, and they realized
that they could, if they wanted to, make
money, coming and going. So, they started to bet
against their own products. They would sell hundreds
of millions of dollars of these
mortgage bonds, and then they would
essentially take out bets against those
same bonds. So, it was kinda like selling
cars with faulty brakes and then taking out
life insurance policies on the drivers
at the same time. It was an ingenious scam, and
this was sort of the back story to the AIG bailout, because AIG was essentially
Wall Street’s bookie. This was where a lot of these
companies were taking out an insurance-like product
on their own bonds, or bonds like the ones
that they had sold. These things were called
“credit default swaps.” And when AIG crumbled under
the weight of all these bets, that’s when Wall Street ran
to the federal government and demanded that the
federal government, i.e. all of us here–
taxpayers– step in and pay off all
those bets that they made, and that’s why– it’s one of the
reasons that AIG was rescued. Of course, there was the
stability of the economy issue, there, as well. But it was also to make
sure that they got paid. So, it was an ingenious scam,
but, again, at its heart, it really wasn’t all
that complicated. It was just fraud in the same
way that any other kind of fraud was fraud. But it wasn’t presented
that way in the media. It was presented as
an economic story. When you read the financial news
explanations of what happened, they often said that it
was just an accident, that Wall Street brokers simply
misread the mortgage market. They used terms like a
“thousand-year flood” to talk about how
unusual it was, that everybody got it
wrong at the same time. It wasn’t any–
it wasn’t that. It was an intentional scheme to
defraud investors, and that’s– it was nothing any more
complicated than that. So, I started covering
stories like this, and then I moved on
to other scandals. And one of the
interesting things was, because this kind of
mass fraudulent activity went virtually
unpunished– which was different from
the previous precedent in American history. We had had a similar sort of
nation-wide fraud scandal in the late ’80s–
the S&L crisis– and we dealt with it
very differently. We prosecuted over
1,800 people back then. Over 800 people actually
went to jail in that crisis. And that was a scandal
that was similar in scope but much smaller
in scale. In this case, there
were two prosecutions and zero convictions. So, there was a completely
different response to the crisis. And so, really, the entire
industry’s really emboldened. I mean, if they’re not
gonna punish anybody for committing crimes,
why not commit more? And so, there was sort of
this epidemic of other stuff that happened, contemporaneously, with 2008, and
then afterwards. And again, at their heart,
they sounded complicated on the surface, but they were
really just exaggerated versions of common criminal schemes,
common organized crime schemes, except that they emanated
from Wall Street and not from
the street. One of them is the
Libor Scandal, which– in which a cartel
of banks– every day,
they get together, and they submit data
to this thing called the “London
Interbank Offered Rate.” They submit data about how much
money it– how much it costs for banks to borrow
from each other. That data is then aggregated
and turned into a number called “libor,” and libor is what virtually
all kinds of interest rates are based upon. If anybody has a floating-rate
interest card– er, credit card, or a mortgage, if anybody
ever trades in currencies or even has any kind
of money at all– all this is affected
by libor rates. And the banks were
submitting phony numbers. They were rigging
the rates. This was affecting hundreds
of trillions of dollars of financial products. And virtually,
anybody in the world who had any kind of connection
to the modern economy was impacted by this
criminal activity. And yet, it got very little
press here in America. There have been a few
indictments overseas, but here in the States, the
response has been almost– relatively small. Most– the only
real consequences for any of these companies is
that they’ve had to pay fines. And some of those fines,
incidentally, were tax-deductible. And so, libor was just the–
an exaggerated version of a common
mafia scam. It was a cartel price-fixing
kind of a story, except that it was
done on a scale that had never been seen
before in human civilization, so we didn’t recognize
it as being the low-rank criminal
scheme that it was. Then there was the Jefferson
County, Alabama, Scandal, where a series of
banks got together and essentially,
through a middle man, bribed some
local politicians in the Birmingham,
Alabama, area, to get them into
a toxic swap deal that ended up costing the
county about $3 billion. The county has since had
to declare bankruptcy and will probably
be in bankruptcy for the next
generation. And they achieved this mainly by
inviting the county commissioner on a shopping trip
to New York. They bribed him, they
gave him a credit card and let him buy new
suits and watches, and then, when he
went back to Alabama, they told him to sign
on the dotted line. And he did and bankrupted
a county for a generation. So, that’s just a
common bribery scandal. It’s a crime like
any other crime, but nobody from the
banks was indicted. The local politicians actually
were indicted in that case, but the actual
financial criminals somehow got
off scot-free. Then, there was the
worst case of all, which was the
HSBC case. I’m sure some of you here
heard about this one, but this was in
2011, when HSBC, which is Europe’s
largest bank and England’s
largest bank, got caught up in a money
laundering scandal, where the bank,
among other things, including laundering money for
people on terrorist watch lists, laundering money
for rogue nations. Among other things, they
also admitted to laundering over $800 million for a pair of Central and
South American drug cartels, including the notorious
Sinaloa drug cartel in Mexico. And the punishment for this
activity– and incidentally, this was not the first time
that HSBC had been caught with lax money laundering
prevention procedures. It was at least the third time
they’d been ordered explicitly by the federal government
to clean things up. So, they were really in
violation of parole. In one year, before 2011, they
had been warned over 30 times in print that more serious
consequences were coming, if they didn’t fix
what they were doing. So, they had violated their
parole about 30 times. And when they
finally got caught, when they
finally admitted to the biggest drug
money laundering case in the history
of the world, the penalty was a
$1.9 billion fine, which– a portion of which,
again, was tax-deductible, which means we all paid
a portion of that. And the only
individual penalty was that some of the
executives at HSBC had to partially defer their
bonuses for five years. So, why is
this important? Well, there are lots of
people in this country who are sitting in jail
for a long, long time for drug money
laundering. I mean, I talked to– while
I was covering this case, I talked to a former federal
prosecutor, who worked– who had worked in Miami,
who told me that– you know, he had worked in Miami
in the Miami Vice cocaine years in the ’80s. And he told me,
“Whenever I wanted to
put a drug dealer away, “whenever I wanted to add
years to his sentence, “I would just drop a money
laundering charge on ’em,” and he pulled out stacks and
stacks of examples of people getting an extra 10 or
15 years for this activity. And here we go, here’s HSBC,
which has just admitted to a money laundering case
that was so egregious that their branches in Mexico
were actually built with special
teller windows so that drug dealers could
slide their boxes of cash into the bank more
quickly and efficiently so they wouldn’t have
to wait in line. So, it was like a courtesy
line for drug dealers in their branches
in Mexico. Not one person did
one day in jail or paid one cent out of
his or her own pocket. The entire fine was paid by
shareholders and the tax payers, and so there was no individual
penalty for any person in that scandal. And yet, there are lots of
people in this country who are doing real time
for drug dealing, and why? Because they’re
street drug dealers. That’s the difference. It’s exactly
the same crime, but one set of people
does not go to jail, and one set of people
does go to jail. And there’s a big difference
between 10 years and 15 years and no time at all. You know, it’s not
like a small disparity. So, around this time,
after the HSBC scandal, which happened kinda
contemporaneously with libor, not just me, but a lot of other
reporters who cover this stuff– the corruption
on Wall Street– we started to ask
the question, “How come nobody’s
going to jail? “How is it possible that one
scandal after another happens, “and there’s no
indictments, “there’s no criminal
investigations? “Nobody’s getting, you know, in
trouble for any of this stuff.” The “New York Times” did
a big thing about it, the “Financial Times”
covered it. There were a lot of
other reporters– and I started to ask
this question, myself, and I was getting
incredible answers. I remember talking to one
former federal prosecutor, and I was talking
about libor, and I said, “How–” you know,
“How come nobody– “this is the biggest
crime in the history “of the financial
service industry. (chuckling)
“How can nobody be
indicted for it?” And he says, “Well, these
aren’t crime crimes.” And, that was– I thought that
was a really interesting answer. And then– you know, when
I was talking about HSBC with another law
enforcement official, he gave me this
incredible answer. I said, (chuckling)
“How can nobody go to jail “for the HSBC thing? “This is a
narco-terrorism case. “You know, and
they admitted it. “It’s not like it’s
even alleged.” And he said, “Well, you know,
have you been to a jail? “You know, those
places are dangerous.” (audience laughing) And, you know, it
sounds like a joke, but this is–
it’s an important thing, because this is a–
a crucial part of this story is that it’s an
unquantifiable thing that’s in the minds of law
enforcement and in regulators, is this idea that
this kind of offender is not the kind of person
who’s appropriate for jail. They actually used
that term with me. And to really bring this out,
I wanna read a quote from a guy named Michael Stephens, who was
the former Inspector General of the FHFA, which is the Federal
Housing Finance Authority. And he was talking about how
the FHFA had, in the past, indicted people, but that they were moving
away from that practice, because it had
bad consequences. And here’s
what he said. He said, “My organization
has indicted 82 people. “Three of those people
committed suicide recently. “Why do I bring
that up? “Most of the people that we deal
with are not hardened criminals. “They’re
white collar. “They’re highly
educated. “They belong
to churches. “They have no prior
arrest records. “They’re pillars
of society. “They’re all making
tremendous amounts of money. “And when they do get caught,
it’s a little bit more difficult “for them to take than it
is for a street criminal.” So, the rationale, here, is that, because it’s harder
for this kind of person to go to jail, let’s
not send ’em there. And as crazy
as that sounds, that, I think, is a significant
part of this whole phenomenon, is that, when law enforcement
looked at a lot of these crimes and said, “Yeah, well,
sure, they’re crimes “and, sure, there was fraud
in hundreds of millions “and, sure, this affected
a lot of people, “and people lost
their jobs, and–” you know, when you think
specifically about, for instance, the subprime
mortgage crisis– you know, think about
what those crimes actually meant, okay? So, if you owned–
you have a– you’re a teacher, and you have a
state pension, and your pension fund was sold
phony mortgage-backed securities that collapsed
in 2008, you might’ve lost 30% or 40%
of your retirement income. These people stole
that money from you. And yet, when the regulators
looked at these people, they said, “Well,
we can’t really send “these kinds of
people to jail, “because that’s not
the kind of person “that we send
to jail. “That person won’t
do well in jail. “Let’s instead get
financial settlements “for these kinds
of people.” And they would also
offer up excuses. They would say,
“What good would it do “to put that
person in jail? “That doesn’t
accomplish anything. “You know what
accomplishes something, “is let’s get $8 billion
from JP Morgan Chase, “or $7 billion
from Citigroup, “and we can do some
good with that money.” And so, that’s– that
was part of the thinking behind this
whole thing. And I– when I decided,
at that moment, right after
the HSBC case, that I was gonna write
a book about this, I realized that, in order
to understand exactly how crazy this was–
if it was crazy– I needed to understand
a little bit more about who DOES go to jail
in this country and why. And that was something I really
didn’t know a whole lot about. And this process,
for me, really started on the day of the
HSBC announcement. I was watching the announcement
actually on the internet, and I– when I saw that
they weren’t gonna get any time, there was gonna
be no indictments, I called up a public
defender in Brooklyn, very close to where they
were making the announcement, and I said, “What’s
the dumbest drug case “that you
had today?” And she said, “Well, come
on down to the courthouse. “We’ll find
somebody for you.” So, I ran to
the courthouse, and this lawyer found a person
for me who had been sentenced that morning to
40 days in Rikers for possession
of marijuana. He had a joint in his pocket,
which, incidentally, in New York City,
isn’t against the law. It’s been decriminalized
since 1977. As long as you have a joint in
your pocket, and you don’t– you’re not openly toking up on
the street and getting high, they’re not supposed
to arrest you. But under stop-and-frisk,
what do they do? They stop people who
they think look sketchy, and, of course, they’re
often a racial bias, there. You know, 88% or 89% of all
people who are stopped and frisked in New York
were black or brown. They were non– they
were people of color. And, what they do is they
force you to open your– empty your pockets. And if you have a joint in
your pocket, you pull it out– now, all of a sudden,
it’s open in plain view, and it’s a crime. And so, they create a
crime out of whole cloth, and that’s how,
in that same year, there were over 50,000 arrests
for marijuana possession in New York City, despite the
fact that marijuana possession is essentially
decriminalized in that city. So, this person, who
was really a vagrant, whose prior offenses had
been for things like sleeping on a park bench– this person, who’s
at the very bottom of the illegal
narcotics pyramid– one might even
call him a victim of the illegal
drugs trade– got a harsher
sentence– 40 days in one of the most
vicious jails in America– than anybody at
HSBC for doing, you know, things that
were at the very top of the illegal
drugs pyramid. I mean, these were people who
were essentially handmaidens to Pablo Escobar. They get off
without a day, and this, essentially,
homeless person gets 40 days in
Rikers Island. And so, I started to look
into this whole phenomenon of community
policing. You know,
what is that? It has this very
benevolent-sounding name– “community policing.” That has this ring that
the police are out there meeting people in the streets,
getting to know the people in their community. In fact, it’s– you know,
it turns out to be this horrible, awful thing,
that, you know– where police in New York
and other cities who had other versions
of this kind of policy, were stopping people who
sort of fit the description or fit the profile, and it got up to about 880,000
stops a year in New York, at one point. And they
searched people, and they collected
data on these people. They were collecting
intelligence on who their friends were and
who they were hanging out with. They– and the ostensible reason
was that they were looking for guns and warrants
and serious criminals, but the– you know, the
collateral damage of all this is that a lot of innocent
people got swept up in this sort of dragnet
approach to fighting crime. And I found these incredible
examples of overreaches in the criminal
justice system. And the most amazing,
to me, was this guy I met in a lawyer’s office in
Brooklyn named Andrew Brown. Andrew was, at the time, a
35-year-old African-American bus driver who
had been arrested for obstructing
pedestrian traffic. And he’s telling me
this in the law office, and I said, “What’s obstructing
pedestrian traffic?” And he pulled out his summons,
his little, pink piece of paper, and it’s written there, and it’s apparently part of
the disorderly conduct statute. Andrew was on his way home from
his shift, driving a casino bus, gets off the bus
after midnight. He’s walking to his house
in Bedford-Stuyvesant. It’s an apartment
building. Sees a friend
in the street. He wants to share
with the friend a song that he’d been mixing, so they’re both listening
to music on an MP3 player. Each one has a piece of a–
you know, a headphone. And, some police
saw them. They automatically assumed
that it was a drug deal, because it was two
African-American males on the street in the
middle of the night. When they demanded that Andrew
produce identification, he refused, so they arrested him with
obstructing pedestrian traffic on an empty street. So, this is a guy
standing in front of his own place of residence
in the middle of the night. Nobody around. They arrest
him for this. He had to go
to the station. He was strip-searched. Strip-searching,
by the way, is an unbelievably
common plot element of a lot of
these stories. I don’t know
why that is, but somebody should investigate
that at some point. Anyway, Andrew– I followed his
whole progress with this case, and incidentally, he hadn’t been
arrested, he’d been caught– he’d been arrested for
this many times before. It’s a very common violation
in the stop-and-frisk era. If it’s not obstructing
pedestrian traffic, it’s often something
they call “OGA,” or “obstructing government
administration,” which essentially
can be anything. If a police officer tells
you to move off a corner, and you don’t do it quickly
enough, they can call that OGA. If you’re standing in
front of an elevator in a project building,
they can call that OGA. So, for almost any reason,
they can ring you up on these charges,
and then, if you– if they don’t like
your attitude when they bring you to
the station for it, they can charge you
with resisting arrest, which, incidentally, they’re
trying to make a felony, now, in New York City, because you can’t have resisting
without an underlying crime, so you have this
underlying phony crime. You know, it’s obstructing
pedestrian traffic on an empty street, and then you can probably
add on this other charge like resisting arrest. Anyway, it ultimately– it
took Andrew almost a year to get this
case dismissed, and his own lawyer
didn’t understand– his own court-appointed lawyer
wanted him to plead out. And when he explained that he
wouldn’t plead out the crime of standing on his own–
in front of his own house, the lawyer didn’t understand
why, he got very angry, they had to give
him a new lawyer. And finally, they got a lawyer
who entered a not-guilty plea. And it was only after a
judge insisted, finally, on asking a police officer if
there was anybody on the street, and after some wrangling, he
admitted that there was not, that this case
was dismissed. And it took over
a year to do that. And this was– he was
one of the lucky ones. Now, there are lots of people
who get caught up for things like riding a bicycle the
wrong way on a sidewalk. In New York City that year,
there were 30,000 people who got arrested
for that. Having an open
container of alcohol. This is a really interesting
one, because there was a judge in New York who, somewhat
disingenuously, you know– a white judge named Noach Dear,
who was sentencing somebody for having an open
container of alcohol, and he was kinda
thinking out loud, and he said,
“You know what? “I’ve never sentenced a white
person for this offense before.” (chuckling) So he says this
in open court, and, because there was a
bit of an uproar about it, he got his staff to
look into the matter, and they found that,
in New York City, where there are roughly 70,000
open container violations every year, only 4% of
those involve white people in a city that’s
over half white. So, even– so,
there’s that. There was this incredible sort
of epidemic of “false arrests”– this is what somebody in
Baltimore called it– this constant dragging
people into the system on these small offenses, and people get into
the system that way. And the next time around,
the fines get bigger, and the penalties
get harsher, and sometimes
you’re denied bail, and sometimes you end up
actually doing time in jail. Because you’re going
to court appearances, you get in
trouble at work, and the whole thing becomes
incredibly complicated and incredibly destructive
to communities. And it’s exactly the
opposite of what happens in this white-collar
arena, where you– where nobody ever has any
individual consequence. The whole thing is dealt with
by lawyers in a room somewhere. Everything goes away, no
matter how big the crime is. The actual perpetrator never
has to physically go anywhere, never has to do time, never has to pull any money
out of his or her own pocket. Even in cases where the
actual crime is the same, the treatment is
incredibly different. So, to give
you an example, I had to learn about how
they deal with welfare fraud. In the State of California,
for instance, when you are on
public assistance– in San Diego,
incidentally, by the way, they have a program
called P100, where they preemptively
search your home to see if you’re
committing fraud on your welfare
application. So, when you fill
out a welfare form, you actually have to
wait at your house, and somebody will come
and search your home. And I talked to women who told
stories about the inspectors going through their underwear
drawer and picking out panties and saying, you know, “If
you don’t have a boyfriend “living at the house, then
what do you need these for?” You know, these incredibly
violative and horrible stories. But, beyond that, the mechanism
for catching people for fraud is that, quarterly, you have
to fill out these forms where it says, “I, the
undersigned, swear to,” and then you have to fill out
several pages of documents, where you swear that
you don’t own a car, that you– your assets
are less than $3000, you’re not cohabiting
with anybody. There’s a whole bunch
of different things that you have
to attest to. And there are computers
constantly monitoring all these fields, so, if
you fill out this form, and then, suddenly,
you try to buy a car, or you register
for a car, a fraud case is sort of
automatically generated. And the possibility
of over– of winning one of these
fraud charges is so small that most legal aid offices
don’t even have people who will– who are there in
place to defend against them. Once you’re charged with welfare
fraud, you effectively lose, in 99% of
the cases. And the consequences
are incredible. I mean, people can lose
custody of their kids, their family members can lose
access to other benefits like Section 8 housing. And additionally, you can
do time in jail, if the– you know, if the courts
rule that way. And this is for
simple fraud, which, remember, is the
same thing that, you know, that banker for
JP Morgan Chase, who knowingly sold
a pool of loans that he knew was 40% overstated
and likely to default– for that $900 million fraud,
there is no penalty whatsoever, but for the person–
you know, the single mom who had to go through the
humiliating experience of applying for welfare
in the first place– for receiving $215 too much, the
consequences can be enormous. So, there’s this
enormous difference in the individual consequences
of the same crime. And so, having
looked at this and having seen both
sides of the coin, I started to ask the
question of why this is. And I know we’re
getting towards the end, but I wanna go through
some of the answers that I found
in my research. And one of them is that
it’s simply a difference in allocation
of resources. There are simply fewer
law enforcement personnel watching this one white-collar
group of offenders, while there’s an
enormous number of police and law enforcement people
watching this other group. And I think the most vivid
example I can give is AIG. AIG, of course,
was at the center of the 2008
financial crisis. There were all
sorts of allegations that they were involved in
some improper activities, that they misrepresented
the health of their company to investors in the period
right before AIG exploded. But AIG, as a result of
some very clever lobbying by the financing
industry, like a lot of
other companies, had won the right to
choose its own regulator, and AIG had chosen the
Office of Thrift Supervision, because AIG, even though it’s
primarily an insurance company and a financial company, it
did own one thrift company, which the thrift is
an SNL, basically. So, they were regulated by a
savings and loan regulator, and on the staff of the
Office of Thrift Supervision, there was exactly
one insurance expert. So, here’s AIG,
you know, one of the world’s largest
insurance companies– 180,000 employees– and it’s effectively being
regulated by one person. And to make a kind
of facile comparison, just look at the
Eric Garner case. You know, here’s a guy who’s
selling 75-cent cigarettes on Staten Island, and he’s surrounded
by 10 police officers. And I know that sounds like a–
you know, a made up, you know, fanciful comparison, but
it’s absolutely a real one. The reality is that there
are very, very few people watching out for certain
kinds of wrongdoing. The few highly trained
financial professionals who are watching out
for white collar crime are usually watching
out for stuff that they know how to prosecute,
like insider trading. The rest of this stuff–
the subprime mortgage fraud, the libor manipulation,
the bid-rigging of the– in the municipal bond industry,
the myriad other schemes that have gone on and
gone unpunished recently– there’s basically nobody looking
out for any of that stuff. Another thing is that
the lobbyist influence. The financial industry can do
something that drug dealers can’t do, which is they
can go to Washington and ask to have their
activities legalized. A great example is the Commodity
Futures Modernization Act of 2000, which was a
radical deregulatory law that was passed
in the waning days of the Clinton
administration which essentially
deregulated all derivatives, which were, among other things,
the kinds of instruments that were used to package
those bad mortgages. The Commodity Futures
Modernization Act has an amazing
clause in it. It says that state gaming laws
may not be used to apply to derivative
instruments. So, even though many types
of derivative trading are exactly
like gambling– in fact, there’s a thing called
the “naked credit default swap,” which is really just
two financial actors betting on whether or not
a third financial actor pays his or
her bills. It’s kinda like taking
an insurance policy out on somebody else. That’s exactly like–
it is gambling, and because it’s
exactly like gambling, the industry had to
go to Washington and affirmatively ask that
that activity not be regulated by local police
and states, even though it might actually
violate state gambling laws. But, of course, a drug dealer
can’t go to Washington and ask that, you know,
that you can sell drugs, you know, as long as it’s
1,500 yards away from a school, or something
like that. They just don’t have
that opportunity. Another reason
is that prosecutors are afraid
of juries. They often use the
excuse that juries don’t understand
this stuff. It’s too complicated for them,
so they don’t wanna risk it. They do a kinda
cost-benefit analysis, and I had one law
enforcement official just put it to
me plainly– “Look, we know we can
make 50 drug cases. “For that same
amount of resources, “we might be tied up
for 10 years in court, “fighting the best
lawyers in the world, “in a case that A,
a jury might not get, “and B, we might
lose with– “because, you know, we’re
up against the best talent “in the world, and they have
more resources than we do.” So, they decided to go and,
you know– to do the smart thing, from a cost-benefit analysis,
and just get more convictions. And it’s easier to get
convictions against people who are poorly
defended. It just is. So, they make
that analysis. And another thing–
the final reason that I thought was
probably the scariest is this thing that
they talk about called “collateral
consequences.” And this was the
brain child of Eric Holder, back when he was a
little-known official in the Clinton
justice department. He wrote a memo, which came
to be known effective– affectionately as
the “Holder Memo,” where he gave guidelines
to prosecutors who were– who are prosecuting
financial crime. And he said if you’re going
after one of these big companies that employs a
lot of people, and you’re concerned about
the impact that it may have on innocent people,
like executives not involved in
the wrongdoing, or, you know, the people
who live in the community where the company
is headquartered, or just the
line employees, who maybe didn’t have
anything to do with it, then you may consider
the quote-unquote
“collateral consequences” of that
prosecution, and you may consider
alternative remedies– noncriminal remedies, or
deferred prosecution agreements, or non-prosecution
agreements, or fines. And so, back in 1999,
you know, this is something that might’ve applied in
a few cases, but by 2008, when we’d seen this explosion
of too-big-to-fail companies, it essentially became
the unofficial policy of the justice
department to worry about
the collateral consequences when they thought about
prosecuting companies like HSBC or UBS,
the Swiss Bank. And when people
like Eric Holder and the former Criminal Division
Chief Lanny Breuer openly said, “You know,
we’re worried about the impact “that prosecuting these firms
might have on the world economy, “and so, you know, we’re gonna
pursue some other kinda remedy.” Lanny Breuer actually
told “Frontline,” in an interview, that worrying
about the consequences of prosecuting people
from a company like HSBC kept him up
at night. And, you know,
while the consequences of those prosecutions may
actually be mind-boggling, and it might be frightening for
a prosecutor to think about, think about the– you know, the
callousness of that statement, because there are enormous
collateral consequences for anybody who gets caught up
in the criminal justice system. You know, wives
lose their husbands– you know, people
lose their children, they lose custody
of their kids, their relatives
lose their benefits, you lose your jobs,
you lose your career. When you get out of jail, when–
you know, it’s impossible to get back into the economy
in any meaningful way. All that pain fans
out into communities, and yet, when
they’re worrying about the
collateral consequences, the justice department says,
“Well, you can consider that “when you’re dealing with
these big companies,” but they’re never explicitly
asked to consider the collateral consequences of
prosecuting ordinary people. And so, in summation,
I wanna tell a story about an experience I had
when I was a student in the Soviet Union. I am actually old enough
to have gone to school in Soviet Russia.
(chuckling) But one of the things
that I noticed, when I was a student in
Leningrad, back in 1990, was that there were these people
who came to our dorms every day, who were trading
rabbit hats and trying to trade
dollars with us and, you know, buy foreign goods
or sell foreign goods. And, you know, I got
to know these people. They were called
(speaking Russian). They were black
market dealers. And every now and then, these
guys would get picked up by the cops, and
they would disappear for, you know, a few
weeks or a few months, and then they would come
back, and that was fine. But the funny thing was,
what they were arrested for was trading dollars and
having foreign goods, and they would
get arrested. And meanwhile, the
college president would walk right by
the same cops, wearing a
Savile Row suit, or some other
foreign item that he had bought from
one of these people, and the cops wouldn’t
even look at that person. And when I would talk
to Russians about this, they would laugh, because,
after so many years in the Soviet system– you know, the Soviet people,
the Russians, they learned that there were really
two different sets of laws. There was the
written set of laws, which was basically
meaningless, and then there was the
unwritten set of laws, which was the
meaningful set of laws. And all citizens
had learned to do these kinds of
silent calculations about who’s allowed to do
what, what line can you cross. You know that a street kid
can’t sell or buy, you know, a pair of French socks
on the street, but the college president
can wear those socks and walk right by the
same police officer, without worrying about arrest,
because this kinda person doesn’t go to jail, and this
kinda person does go to jail. And it’s just something
you inherently understand, and it didn’t even offend
the Soviet people, until the country
collapsed, and it was like everybody
woke up from a dream at the same time, and they realized
how absurd it was. And I think
we’re kind of– you know, not to be
dramatic about it, but I think we’re kinda
headed in the same direction, because when we read
about these stories, we know, sort of
inherently, that there’s a difference
in the way people are gonna
be treated. To give you an example, there
was a story in the early 2000s about a guy named– 19-year-old
kid named Jason Williams, from a little town
called Tulia, Texas, who got 45 years
in jail for selling an eighth
of an ounce of cocaine within 1,000 yards
of a school zone. It was his
first offense. He’d never been
arrested before. But there was a series of
enhancements in Texas for selling near
a school zone, despite the fact that half the
residences in the city of Tulia were within 1,000 yards
of a school. This kid got
45 years in jail. He’s still in
jail, today. Meanwhile, not that
long after that, a company called
Forest Pharmaceuticals got caught up in a scheme where
they had suppressed the results of a study that showed that
the antidepressant Celexa caused suicidal behavior
in adolescents. They had suppressed that study,
and they had illegally, in defiance
of the FDA, marketed this drug to school
kids and to adolescents. And so, here you have two crimes
that are in pretty much– you know, in certain ways,
they’re very, very similar. They’re– it’s marketing of
an illegal pharmaceutical– a dangerous pharmaceutical,
as it turns out– to people in a school… to
underage people in a school. One person– African-American,
you know, on the street– gets 45 years, and Forest Pharmaceutical gets
away with a $143 million fine, no indictments,
no individual penalties, no executives ever
have to be involved in the entire
transaction. And, again, it’s– when
you read these stories, yes, the number “45 years”
might raise a few eyebrows here and there, but the fact
that that person went to jail and these people
didn’t go to jail– it doesn’t really
surprise any of us, because we just sort of
understand instinctively that that’s
the way it is. And that’s really the dangerous
part of the situation. You know, the Soviet Union
was a dysfunctional society, because it had
two sets of rules, one written and
one unwritten. And we’re headed in the
same direction, I think. Our system of law works
better when laws are written and when everybody has to
follow the same sets of laws, and they should apply
to everyone equally. Anyway, thank you,
so much, for your time, and I’m happy to take
questions and answers. (applause)>>For those of you who would
like to ask a question, if you could step up
to one of the mics, and Matt will take
a few questions.>>Yup.
>>Good evening.>>Hi.>>Do you have any sense
of which comes first– the inequality of
income and resources or the inequality
of treatment by the criminal
justice system?>>That’s a great question. I think– it’s funny, because
when I wrote this book, there were a lot of people who
were looking at the inequality– income inequality
question. I think the two
things are linked. They’re interrelated. One of the things that I
talked about a lot is that– judges, I saw,
in courtrooms– they tended to look
down upon people who had committed crimes
of financial need. If somebody had
committed a robbery because they didn’t
have any money, that was offensive to
them on some level, whereas, you know, the
executive who commits the crime of intellectual choice, just ’cause he wants
to get more money– somehow, that’s okay
in our society. And I think there’s a– this
idea that needing money is the really wrong thing that
is at the root of all this. That’s what we’re
really criminalizing. So, I think it’s– the
two things are just– I– I guess the– my answer is the
two things are interrelated. We create poor people
by this activity but, also, it’s a symptom of
how we treat poor people. Thank you.>>Matt, thanks so
much for being here.>>Thank you.>>You know, I think,
last year, JP Morgan saw– can’t remember if it was
$11 million or $13 million fine. The–
>>Billion.>>$13 billion, right? The biggest fine in
history, I think. We’ve seen– you know,
Hillary Clinton has gotten a lot of pushback for her
ties to, you know, Wall Street. Is there any kinda shift in–
any substantial shift in the way
this is seen? And then, just
a quick follow-up– I think a lot of people
were looking forward to Racket
coming online. Will there be any kind
of ideation of that that we might be able
to see in the next– in any
foreseeable future?>>Well, I’ll answer that
last part first– no. I don’t work for
that company anymore, so I’m back at
“Rolling Stone,” and I’m, you know,
writing books again, so. But about, you know, a
see change– Chase paid– they were hit with a
$13 billion settlement. Actual– in reality, it was
a $9 billion settlement. If you did the math
a certain way, $4 billion of that was
really forgiveness of homeowner
obligations, which didn’t come out
of Chase’s pocket. Another portion of that fine
was, again, tax-deductible, so, when you really
got down to it, it wasn’t that
big of a fine, and it was– you know, the
company still turned a profit at the end
of the year. There– the issue, really,
is these companies– they can afford
the money. You know, it doesn’t really
hurt them, in the end. The issue is whether any
individuals are gonna pay. ‘Cause they did even– they did
even cross a line last summer, where they actually
criminally charged a couple of
foreign banks– Credit Suisse
and BNP Paribas were both hit with criminal
charges, for different things. But again, it was
no individuals. Nobody– no person actually
had to pay a penalty. And there’s
a possibility– there are a couple of
criminal investigations that are still alive. But, you know,
I’m kinda taking the “I’ll see it when
I believe it” thing. I think most people feel like
it’s probably not gonna happen. You know…
so, thanks.>>Could you talk about how
what you’ve talked about relates to corporate
personhood, and how furthering the idea
of corporate personhood, or possibly
abolishing it, could contribute to
more accountability or more impunity, as it
relates to white collar crime?>>Yeah, that’s
a great question. What did Ambrose Bierce
say about corporations? “It’s an ingenious mechanism
for individual profit “without individual
responsibility.” Right? And this whole episode was
a perfect example of that, because what
happened– enormous, massive crimes
were committed, right? And in the few cases where
people– where the companies were actually caught, there
was no individual consequence. The only consequence was
for the corporation, which is technically a person
but doesn’t feel any pain. The only pain is felt
by the shareholders. And so, yes, we’re–
we have a situation where, if you can commit the
crime under the auspices of a big corporation, then, really, it’s like
a license to steal. I think if they maybe either
abolish corporate personhood or at least made it
so that all penalties had to read down to
some kind of a person in the end, that would be–
instead of a corporate person– I think that would put a dent
in this problem, for sure. Sir.>>All right, so a lot of
us knew that it was bad, but maybe not how
bad it was, so–>>(chuckling).
>>Pretty eye-opening–
thank you. You kinda touched on it
a little bit, just now. Is there anything
that can be done about what you just told us
about for the last hour?>>Yeah, the solutions
question, right? Which I don’t
do too well at. It’s tough. I mean, the problem with
this whole issue is– when you boil down
all these problems, it all comes down to
money and politics. And, you know, how do
you overcome a system where, for instance,
all the regulators, the high-ranking regulators in
places like the SEC or the CFTC or the OCC, these
financial regulators– they all know that,
when they leave government, that they have a $2-million- or
$3-million- or $4-million-a-year partnership
waiting for them. You know,
Robert Khuzami, the former head of the
SEC enforcement division, just left a couple
of years ago, and he’s making
$5 million a year, now, in a law firm
in New York. So, you know, where’s the
incentive for regulators to go really hard against
any of these companies, when they know that there’s this
big, fat, NBA-level contract waiting for them when
they get out of office? There’s no incentive. And so, we’ve– we’re
seeing this flowering of these sort of corporate
defense-type people in the
regulatory areas where, you know, people like
Eric Holder and Lanny Breuer, who both came from
Covington & Burling, which had represented
all of these companies that had gotten
in trouble. And so, they’re
inherently conflicted, and these companies give an
enormous amount of money to both parties,
and so– it’s just– the whole thing
is difficult. What do you
do about it? You have to somehow break the
chain of money and politics and politicians relying
on the easy money that they get
from Wall Street, because what they’re gonna do
is they’re gonna nominate people to these regulatory positions
who are gonna go soft on these
companies, and then those people
are gonna go back to work for Wall Street
when they’re done, and the whole process is
gonna start all over again. I don’t know
how you fix it. I mean, in the age
of Citizens United, we’re farther away from a
solution than we were before. The more money you have,
the more influence you have and, conversely, because
we’re not prosecuting that kind of offender, they’re prosecuting defenseless
people in their place. So, the– you know, it’s–
the lack of money is becoming a weakness for
another kind of person, and so, those people are
increasingly becoming victims of the criminal
justice system. So, I dunno. I– they have to do something to
fix this– that whole problem, because money shouldn’t have
anything to do with justice, but it does.>>Is this more of
a recent issue, or has this been goin’
on for a long time? And is this just strictly
related to the United States, or is this more of an
international issue?>>Well. Clearly, rich people have
always had it easier. The poor people had always
had the business end of every government
in history. I don’t think that’s a
newsflash, but it is– the reason it’s interesting
now is because it has clearly and quantitatively
gotten worse than it was even 30
or 40 years ago. Again, to bring up the
SNL crisis example, not only did we prosecute
1,800 people after that, not only did 800 people
go to jail after that, not only did we have defendants
from the other scandals involving people– the junk bond
scandals like Mike Milken– they all went to jail. But the other– the sort of
non-prosecutorial regulators, the groups like the OCC, even
sort of quasi-private regulators like the New York
Stock Exchange– back in those days, they
were sending thousands of what they call “criminal
referrals” every year to the justice department. Essentially, they were starting
to make cases against offenders, and they would deliver these
cases sort of half done to the prosecutors
to finish ’em off. These days, the regulators
are not delivering referrals anymore at all. The numbers were closer to
zero, in the years after 2008. And so, it’s not
just the SNL– the SNL scandal was
sort of one example. Ten years later, you had the
accounting controls scandal with Enron and Tyco and
Adelphia and WorldCom, where we didn’t put as
many people in jail, but we did put a lot of
key executives, symbolically, on trial. That was the Bush
administration. They at least
did that. And then, eight years after
that, we had this enormous, you know, beyond
all comprehension, much bigger
financial scandal, and the number of people
brought to trial was zero. So, we’ve seen this
steady progression. I think it is
quantitatively worse, now, in the United States. We– and in terms of
whether it’s worse here than in other places– well,
in the industrialized world, the problem is
that America– it’s– one of its last
commercial advantages is that people saw
our financial system as being
relatively clean. And so, that’s why we’ve been
a place where the Saudis and the Japanese
and the Indonesians wanna keep their money, because
they think we’re not dirty. Well, that’s changing
now, because… (chuckling)
they think we are dirty. And that’s
a problem. That hasn’t been
true before. So, I do think it’s– you know,
maybe we’re not as bad as some other places,
but we’re getting there. And people on
Wall Street– all my sources are
Wall Street people. They’re all hardcore
capitalists. They’re not lefties. They want business
to go back to being honest,
capitalist business, and they hate what’s
happened to their business, ’cause they’re losin’
their reputations, so. Sorry, it’s a long-winded
answer to your question, but, yeah, it is
getting worse. Yes, sir.>>And when this whole
bank bailout went down– you know, I had no clue
what was goin’ on, and I followed your pieces
in “Rolling Stone,” and you explained
derivatives very good. So, thank you
for that. So, with your friends on
Wall Street and whatnot, the bank bailout
is behind us. Now, we’re looking at
this oil shale boom, and the gas prices
have gone down, and I know there’s a lot
of moneys in derivatives for oil and whatnot.
>>Right.>>Do you have
any pulse on that? Are we lookin’ at a bailout for
the oil industry comin’ up any– and I know– you know, I’m
not asking for solid–>>(indistinct),
yeah, yeah.>>Just wonderin’ your
pulse on it, right now. Is there another one looming in
the future, in your opinion?>>You know,
I dunno. Every now and then, I get
these apocalyptic phone calls from people in the street,
who say, “It’s coming, man!” You know, “Duck!”
you know? And the last time was
when quantitative easing
came to an end. Everybody thought that that
was gonna result in this– well, it didn’t
come to an end. They slowed it down. And this was when the
government was pumping, you know, trillions of
dollars of invented money into the economy to sort of prop
up all these different markets. When they tapered that off,
there was concern that there would be collapse
in various industries that this money
had gone to, or it had forced a
private investment to go. Yeah, I don’t know. I– the problem is with
all these derivatives is that everything is
so interconnected now, if you have a crash in
any particular industry, the consequences can radiate
out everywhere instantaneously, because everything is
pegged to everything else. That’s what
we saw in 2008, where, you know, all
these different actors had swapped some
derivative contracts that were based on everybody
else’s investments. And so, when Bear Stearns
went under, everybody else
coulda gone under. And that’s what’s so dangerous
about the economy is not just– it’s not just the amount of debt
and leverage that’s piled up underneath all
this stuff. It’s the interconnectedness
that’s really the problem, which is, you know– the next
time we have a correction, it could, again, have
that kind of a, you know, across-the-economy
consequence. So, I don’t have a
specific answer for you, except that everybody
says it’s dangerous. Yeah. Yes, sir.>>Being a black man
in America, I have– I’m still
trying to figure it out. I was thinkin’ about
it on the way up. I am around a lot
of black people. And, they– you
know, there’s a– many, many, many talks
that always get a rise. These are people that have
Master’s, Doctorates, yadda yadda yadda. And I was wonderin’ if you
could possibly give some sort of advice in weeding
out what is conspiracy and theory
versus fact.>>You mean, in terms
of, like, police presence and things like that?
>>Yeah.>>Well, I don’t think there’s
any question that racism plays a huge factor
in all these policies. I mean, whether it’s
an active conspiracy, whether a bunch of people
got together and said, “We’re really gonna stick
it to the black community–” I don’t think it happened
necessarily that way, but it– you know, it’s
sure turned out that way. You know? And it’s no accident that the
community policing presence, these constant sort of harassing
contacts with the police, that young
African-American people– especially young,
black men– I’m sure, you know,
you heard those stories. You know, white people
don’t go through this. I lived in New York
for 20 years. I’ve never once been stopped
by the police for anything. But in other parts of New York,
it’s incredibly common. That’s not– it
can’t be an accident. You know, whether it was
an act of conspiracy or not
is irrelevant. It’s a fact…
you know? And the Ferguson study
that just came out clearly shows an incredible
amount of bias in the system, right down to these
amazing details, like the fact that
every single person that they had data on who’d ever
been bitten by a police dog in Ferguson was
African-American. So, you know, the bias
even radiates down into the police dogs. It’s incredible. And, I think– I think white
America’s in incredible denial about the extent of how
bad this problem is, how infuriating it is, to
be stopped for no reason, you know, and how
demeaning it is to have to go through these
interactions constantly. If it’s not a conspiracy, it
has the impact of a conspiracy, just as well, so…
you know? I dunno
what to say. I– it’s a fact. That’s for sure.>>How’s it goin’, Matt?
>>Hi.>>I’d like to think
about the difference between the roaring ’20s
and right now, and we’re often
hearin’ comparisons with the wealth gap
from that time and now. And then, I remember openin’
my 10th grade textbook in history class and seeing pictures of people
who were Wall Street traders, back in the day, sitting
on the side of the street in New York, with signs
that said, you know, “Will work for food,”
or whatever else. Do you remember
those pictures? First of all, here’s to
hoping that the textbooks of our future have pictures
of Wall Street traders with their
golden parachutes.>>(chuckling).
>>Hopefully that will happen. But I’d like to
know what you think is the big difference between…
>>Then and now?>>That time and this time, and
why the game is so rigged now? What is the major cause for this
shift from the ’20s to now, as far as, like, the
depression from the recession?>>That’s a great
question. It’s real interesting, ’cause
I covered the negotiations for Dodd Frank. And I remember talking to lots
of people in both the House and the Senate,
and, you know, the situations were
so similar, right? Because we’d had this
explosion of irresponsible and often criminal
speculation that resulted in this
spectacular, speculative boom that collapsed and affected
the entire country. And the response, back
in the ’20s, or after– more appropriately,
the ’30s– was they said, “Well, let’s
create a few simple rules “to make the whole
thing transparent. “Let’s put everything–
all this stock trading– “let’s put it on open,
regulated exchanges, “so that
everybody can see “what the price of everything
else is at all times. “There’s nothing in
the dark,” right? You know, “Let’s make sure
that publicly-traded companies “have to offer
some data, “so that investors
know what’s going on, “who’s making how much, how much
the executives are making, “how much they invested
in their own companies. “Let’s shine some
light on that,” right? These weren’t– the regulations
weren’t, like, this thick. They were really simple rules
that they undertook to clean the
whole thing up. There were some people
who wanted to do exactly the same
thing, after this. And they could have,
with derivatives. They could’ve created open
derivative exchanges, where everybody could see the
price of everything else, and everybody
could see when there was too much
leverage building up, when people held
dangerous positions, and they
didn’t do that. Wall Street successfully
bought off enough people in the House
and the Senate to make sure that these
markets stayed opaque, and they’re
in the dark. And so, they had
an opportunity. There was a moment where
they could’ve said, “Let’s clean the
whole thing up. “Let’s make
this civilized. “Let’s make it a
booming market.” ‘Cause derivatives actually
have a lot of really positive, interesting, wealth-creating
possibilities, if they’re handled
responsibly. (chuckling)
But what ended up happening is it became
this mechanism for all kinds of crazy,
irresponsible gambling that the ordinary person
just doesn’t understand. And so, I– the major
difference is that, back then, FDR had the political will
and the organization to overcome the obstacles, and,
this time, Barack Obama didn’t. Whether he wanted to
or not, I don’t know. But certainly, the Democrats
had an opportunity, maybe, to try to implement
something like that, and they just
didn’t do it. So, it was– it’s too bad,
’cause they had an opportunity. Anyway, thank you, so much,
for coming out, tonight. (applause)>>If you could please
leave your evaluation on the information table–

7 comments on “GRCC Diversity Lecture: Matt Taibbi

  1. Keep up the good work Matt. It's unfortunate how many people are in the dark about these issues. Certainly corporate controlled main stream media wants it that way and is succeeding. Hopefully more people like you will speak out and some momentum can take effect that will lead to real change.

  2. Let"s continue to screw the screwed,talking to probably a mostly all white audience is a waste of time.While Matt's talking, minorities are being oppressed.

  3. He nailed it with "no one is surprised,because that's the way it is." I'm going to take it further by saying, minorities going to jail for crime further solidifies white people's racial beliefs about minorities,furthered by white people's unjustified belief that they are innocent and "pure".

  4. Matt ends up warning about how the US is following 2 sets of laws–one for the poor and one for the rich. He compares the US today to the Soviet Union where the same dysfunction was in play: the people just got used to it, they didnt like it of course but they accepted it and were shocked when the Soviet Union ended and they seemed to wake up but I wonder if they dont have the same old problem today—widespread and notorious corporate crimes and corruption goes scot free while the little guy goes to jail.

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