This is an interview that Nomi Prins did recently with Chris Martenson. Nomi Prins spent a number years working on Wall Street at Chase and Goldman Sachs. You get a rare inside perspective when she does public interviews. This is a very in-depth interview looking at how banking on Wall Street in the US has evolved over time. There is a lot of detailed discussion of this history going back all the way into the early 1900's. There are some good questions and thoughtful answers.
You can read the text version of the interview here. For those who prefer to listen, there is an audio version available here. Below a couple of Q&A's from the interview to give you a feel for the topics discussed. The best way to learn from this interview is to listen to it or read the full interview from the links above. I enjoyed listening to the audio version the best.
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Chris Martenson: Oh it’s such a pleasure to have you. So let’s begin with your origin story. Tell us about your time on Wall Street, you know, where you worked and what you learned.
Nomi Prins: Well I started off actually at the Chase Manhattan Bank around the time of the Flash Crash of1987 so quite a ways back as a very junior analyst with a math background. Then I went on to Lehman Brothers, which no longer exists, working on futures and options and sort of the nascent aspects of those and foreign exchange and then on went on to Bear Stearns in London where I built the analytics group there in London and focused a lot on sort of nascent credit products that ultimately became part of what we know as credit default swaps and CDO’s and all the sort of esoteric and combination toxic assets that were the heart of the most financial crash.
Then I went on to Goldman Sachs before I quit Wall Street and decided that it was time to really talk more about what was going on inside it as it had changed, as it had become just not different but far more sinister and far more dangerous.
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Chris Martenson: Well I’ll tell, you know, in a headline that caught my eye this week, which I’m sure you might have run across as well. It came in The Guardian, and it says: "As Inequality Soars The Nervous Super Rich Are Already Planning Their Escapes." So you’re describing a series of statements and letters in the 50’s where people were openly saying "hey, it doesn’t make sense for me to be taking more than my fair share because, you know, our stability, our general welfare is actually really important to all of us." And now the mentality seems to be "listen, I’m going to grab as much as I can and if this stuff gets really bad I’m just going to skedaddle."
Nomi Prins: Right.
Chris Martenson: There’s a very different sense of responsibility towards, and being a participant in, society. It’s almost like there’s two societies. There’s me and my rich friends and then there’s those people and if I have to escape from them I’ll get in my jet and I’m out of here. That was a really striking headline I thought.
Nomi Prins: No definitely and again there’s always been, you know, particularly in our country that there has been this differentiation between the very elite and the guys that hung out at Jeckyll Island and went there for two months with their families and the holidays between, you know, sort of pre-Christmas, post-New Year’s and so forth and talked about events of the day and all of that, they were definitely, definitely apart from the rest of society. There was no doubt. They were rich, they were powerful, they considered themselves different. They had a ratio at the Jeckyll Island club of something like eight servants to each one person. All of that stuff existed. And their period that ultimately led to the crash in 1929, saw an increase of that inequality and then, again, we saw stability for a while and a decrease of the inequality and growth, and growth of those companies and so forth.
Another example is Winthrop Aldrich, who I’ve mentioned who was very much about balancing the public good with being a tremendous capitalist. He was a republican, a capitalist, you know, all the things that—he came into a rich family, married into the Rockefellers and so forth. I mean he was definitely on the cusp of American power, but he was also prudent. And so yes, again, there was a separation then of what we call now the top one percent or whatever the top half of one percent versus everybody else, but there also came into leadership roles individuals who got that you could balance both. You could stay really, really rich and really, really separate and you could still think that balancing that with more public interest and good and works and so forth was useful to you and to, you know, having sort of spirit of a greater society and all of that.
We don’t have that now and part of it’s because—all the types of securities, the types of financial instruments, the ways to hide it, the ways to grow it, all of that has just gained. It’s accelerated in terms of how it’s used to create wealth and to hide wealth. And those are elements of wealth that are not available and it would be dangerous. They’re dangerous with people that create them that they’d be unavailable to most of the rest of society. And so there’s this other avenue that’s grown to separate the people who control it, the people who basically control capital (now) versus the ones who controlled capital (back then). Some of which are in the same families, you know, throughout all of these decades but there’s a difference in how they care about the rest of society and that’s where it becomes dangerous.
Even back then, even when J.P. Morgan sort of pushed for the creation of the Federal Reserve to create liquidity for the larger banks, even back then the idea of using so much of it, you know, of counting on so many trillions of dollars to stabilize their institutions would have been sort of unacceptable to them. And certainly in the 40’s through the early part of the 70’s the people running institutions wouldn’t have accepted—they wouldn’t have even thought it was imaginable to receive so much help from federal policy, from the Federal Reserve and so forth to sustain themselves. You know that all just started happening, again, from the sort of mid-70’s and accelerating up towards now.
So yeah, if it’s so easy to get and so easy to have your losses protected, you know, as you said it’s so easy to socialize the losses and privatize the gains. The idea of exiting with them just seems logical and not really caring about what happens. And that’s really—it’s easier to get, it’s easier to maintain and it’s easier to escape with. So yes that’s another very dangerous element of the system in which we live now.
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Tomorrow we will take a break from all these serious issues for something amazing and good. Be sure to check in tomorrow and see it. You won't be disappointed!
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