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Bill Moyers: Are the Monster Banks on the Verge of Unleashing Fresh Economic Disaster?

Culture change in the financial world may be coming, but not fast enough says banking expert Shelia Blair.

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BILL MOYERS: So it could impact all of us?

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

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

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

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

BILL MOYERS: So what's going on?

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

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

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

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

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

BILL MOYERS: Defending big banks.

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

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

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

 
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