Danny Schechter: Financial meltdown is a crime story
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. Danny Schechter is a well-known writer, investigative journalist, runs a website called MediaChannel.org, and has a new film, called Plunder, about Wall Street and the financial meltdown and those who made millions from it. Here’s the trailer from the film.
[movie trailer plays]
JAY: Now joining us from New York City is Danny Schechter, the news dissector. Thanks for joining us, Danny.
DANNY SCHECHTER, MEDIACHANNEL.ORG: Pleasure, Paul.
JAY: So the thesis of the film is that what happened on Wall Street wasn’t just some banking crash, that it was a crime. If it’s criminal, why aren’t they being charged? And what’s criminal about it?
SCHECHTER: Well, that’s a good question, why aren’t they being charged. Partly because the media has framed this only as a business story, not as a crime story. And so there’s been very little investigation into how this happened and who profited from it. There is a new financial crisis investigating committee which will hold its first hearings in January, but there’s been no effort to really get to the bottom of this, and the Obama administration sort of doesn’t want to. They’ve been too busy pumping money into the the banks and other institutions that have profited from all of this. So I argue that it’s a crime story because there were several crimes that were committed, blatant crimes, involving, believe it or not, trillions of dollars.
JAY: Okay. Get specific. Start with one thing you think was a crime and who was involved.
SCHECHTER: Alright. First, there was extensive, pervasive mortgage fraud. The FBI calls it an “epidemic” of mortgage fraud, in which people were induced to take homes that people selling knew they couldn’t afford, and they were tricked by all sorts of interest-rate changes and offers and what have you into getting into homes that were unaffordable and unsustainable, and as a result we’ve seen 14 million foreclosures, with more to come, in America.
JAY: Why is that a crime? I mean, if somebody—you know the argument.
SCHECHTER: It’s because you’re inducing people on certain terms that aren’t true, you know that they aren’t true, and you know the people can’t afford it. But the goal was to get them into homes, not really to benefit the people, but to actually resell, repackage, re-bundle, and securitize the mortgages. That’s part two of the whole crime, selling this junk and representing that it has assets, that its asset-backed. And the various rating agencies played along and gave these products triple-A ratings, which meant that they were top investment-grade securities, when in fact they were backed by almost nothing. And what we have now are many of the banks around the world who bought these products and lost billions of dollars suing, banks like JPMorgan Chase suing, you know, other institutions that sold them this crap, representing that it had value. The third component of the crime of our time (is what I call it) was the insuring of all these assets, basically protecting people from defaults they knew would occur, and then leveraging, borrowing against this, trillions of dollars at a 30-to-1 or more ratio, so that more of the people on Wall Street could make tremendous paydays. And that’s what happened here. As a result, there are estimates—one in my film is $197 trillion vanished, lost, and ripped off as part of this. But, see, this is an institutional crime; it’s not in the individual crime. Most of the media needs a bad guy. They need a Bernie Madoff. They need somebody who they can blame. And in this case, these were institutions in a sense conspiring together. And that’s why we need the RICO conspiracy statutes to investigate these.
JAY: But it is real people. There’s real people at the rating agencies, real people at Goldman Sachs. And this relationship between the rating agencies and Goldman Sachs, why isn’t that a conspiracy to commit a crime? The rating agencies knew they were giving triple-A ratings to crap.
SCHECHTER: Well, I believe it was a crime. I believe they knew it was bogus.
JAY: Is there any investigation now at the FBI level that treats this as a crime?
SCHECHTER: The FBI has indicted a lot of people at the first level, the mortgage fraud level. They’ve been very engaged in that. And they’ve done some investigations, in some cases, involving people at the investment bank level. There’ve been some indictments there, but relatively very few. You got to remember that the financial services industry spent millions of dollars deregulating their own industry and allowing them to do what they wanted to do with no cops on the beat, so to speak. And so they were able to get away with this and claim that it was legal. And that’s one of the issues that I raised in my film, about what’s legal and what isn’t legal. I’ve also written a book on this, The Crime of Our Time, documenting and detailing how all of this worked, including Goldman Sachs’s involvement, Bear Stearns’, Lehman Brothers’, and the like. But most of what we’ve seen is the hunt for pretty low-level criminals or individuals who profited, without much looking at the large firms and their shareholders and their various bonus plans and all the rest of it, based on these ill-gotten gains.
JAY: So what should be done?
SCHECHTER: Well, I think we need—you know, I think we need a jail-out, not just a bailout. I think we need a national investigation, a national panel like the Pecora Commission that Roosevelt established to investigate financial crimes. But I think we need a real effort here by state attorney generals and various, you know, people in the Justice Department to really set up, you know, an emergency, you know, effort here, you know, a special effort, a task force, to go after these people, and they haven’t done that. At Obama’s press conference last July, the one involving Henry Louis Gates, and it devolved into this whole controversy about race and racism and cops. You know, he was asked one question about the financial crisis, he said plainly, he said the people on Wall Street knew they were selling products that were bogus. If that’s true and if the president believes it’s true, that’s a prima facie grounds for an investigation and for criminal indictments, because that’s clearly illegal. That is fraudulent. Reuters has a story out, you know, today, about the ten top financial scandals. So there is an appreciation of this, but it’s still sort of positioned not as a crime against the society, not as a crime against homeowners and workers in people who have lost jobs as a result of this, but a crime against shareholders. In other words, if people who are investors lose money, they get first priority. If the people who are the victims of these crimes, you know, are rarely—you know, those crimes are rarely pursued. And that’s the problem, that the legal system itself has been restructured, with the cooperation of these big banks, to prevent them from being prosecuted. So these companies have ways of avoiding all accountability and all responsibility.
JAY: Thanks very much for joining us, Danny.
SCHECHTER: My pleasure.
JAY: And thank you for joining us on The Real News Network
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