Nomi Prins used to be one of them. She climbed the Wall Street ladder to become a managing director at Goldman Sachs. From there, she witnessed behavior that led to the scrambling of many nest eggs, the nation’s recent financial collapse and now, President Obama’s determination to rein in big banking.
And because of what she saw during her tenure at several firms, and since then, Prins, like so many other Americans, is now angry: at her former banking colleagues who continue to get millions in bonus money—most recently, on your dime—while continuing the same practices that led to the economic fallout. She’s angry at Washington, which funneled trillions in taxpayers’ money into a broken banking system without really fixing it. And she’s angry at the irresponsible pre-crisis deregulation, the greed and thirst for power, and the current ignorance and arrogance of those who allow it all to continue.
Even before the economic meltdown—and despite earning big bucks—Prins knew that Wall Street wasn’t for her. “The job is exhausting, but even more so, it becomes very meaningless,” she says. Now a muckraking journalist and consumer advocate, Prins brings her expertise and years on Wall Street to her new book, It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals From Washington to Wall Street. She spoke with Bulletin Today about events that led to the worst financial disaster since the Great Depression—and why your tax dollar-funded bailout was, in her words, “shameful.” [Read an excerpt from It Takes a Pillage.]
Q. Why shameful?
A. Because of the huge taxpayer bailout, banks have been able to get back on their feet to pay themselves obscene bonuses. But it’s not as though everyone else is. From every possible measure—less available credit, more fees, higher bankruptcies and unemployment—everyone else is doing worse after this immense transfer of money. Not only is that immoral, unethical—whatever else you can say—it is the most unfair, shameful and worst use of public office.
Q. There’s been a lot of tough talk from Washington directed at Wall Street, but no real action.
A. Exactly, and the recent Financial Crisis Inquiry Commission’s hearing underscored that. The bankers who ripped us off punted every single question on anything that mattered in terms of the link between their practices and the crisis—the entire point of the commission. It’s the bankers’ job to deflect their answers, but the commission should have been slapping those guys left and right. The big bankers didn’t have enough money to back their bets—complex securities stuffed with various mixes of mortgage loans, packages of loans and credit derivatives. This should be the crux of this commission’s investigation.
Q. Your book lays out other bad moves and missteps by federal officials before and during the bailout. Who really dropped the ball?
A. The Federal Reserve certainly did, and chairman Ben Bernanke is now deflecting blame, saying the Fed wasn’t the only regulator. That’s true, but when some of the biggest institutions were creating toxic assets, it would have been useful to note these banks were making some of their most accelerated profits.
Q. Who else fumbled?
A. The Securities and Exchange Commission also seemed to be missing in action in monitoring broker-dealers and regulating the integrity of balance sheets of big investment bankers—Bear Stearns, Lehman Brothers, Goldman Sachs and Merrill Lynch. There should have been questioning about what was going on to throw out some warning signs and to take preventative action. That was not done at all.
Q. Should Washington get more blame for the crisis than Wall Street?
A. Wall Street did what it does, which is find opportunities to make money and take advantage of it. But even if you discount the issue that it made fraudulent loans and other risky deals that may have been immoral, unethical and perhaps not legal—which has yet to be determined—Washington was letting it all happen by not asking for more information about where and how some of these banks were making their money. Regulators were not paying attention to the large balloon of risk occurring when there was a lot of deregulation occurring in the industry, such as mergers that should have come under tighter federal vigilance.