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Full Disclosure And The Goldman Sachs Investigation

Gretchen Morgenson, who covers the world financial markets for The New York Times, discusses the investigations into Goldman Sachs by the Securities and Exchange Commission, the Justice Department and a Senate subcommittee — and reflects on the role Goldman Sachs played in the financial crisis.

40:12

Other segments from the episode on May 4, 2010

Fresh Air with Terry Gross, May 4, 2010: Interview with Gretchen Morgenson; Obituary for Lynn Redgrave.

Transcript

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Full Disclosure And The Goldman Sachs Investigation

TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

The investment bank Goldman Sachs has been a player in several of the
plot twists in the financial crisis, and we're going to try to connect
the dots.

Goldman created and sold some of the mortgage investment vehicles like CDOs, collateralized debt obligations, which became toxic when the
housing bubble burst. Goldman is now being investigated by the
Securities and Exchange Commission, which filed a suit accusing it of
fraud in a deal where the bank allegedly created and sold a CDO in
conjunction with a hedge fund without telling the buyers that the CDO
was designed to fail.

The Justice Department has opened a criminal investigation into Goldman.
Last week, executives from Goldman testified before the Senate
Subcommittee on Permanent Investigations. Goldman received $10 billion
in federal bailout money, which it paid back last year.

Our guest is Pulitzer Prize-winning journalist Gretchen Morgenson, who
is a financial reporter and columnist for the New York Times.

Gretchen Morgenson, welcome back to FRESH AIR.

So we're going to be talking about Goldman Sachs. Let's start with just
like an overview of the role Goldman played in creating and spreading
the toxic derivatives, just like a brief overview, and then we'll get
into all the specifics.

Ms. GRETCHEN MORGENSON (New York Times): Well, Terry, as you know, all
of Wall Street was feeding at the subprime trough during the mortgage
mania. There were a couple of banks that took an extra role in creating
these really kind of wacky derivative pools of mortgages that really did
not contain mortgages at all but just referred to other pools of
mortgages.

These were these so-called synthetic collateralized debt obligations.
This was a sort of step beyond just the pooling of mortgages and slicing
and dicing them and selling them to investors, as had been happening for
many years.

Goldman was one of the larger creators of these. Merrill Lynch was
enormous in this, Deutsche Bank also. But what has brought scrutiny to
Goldman recently is the creation of a particular pool of mortgages that
was really built by someone who was taking a negative stance on
mortgages, someone who wanted to create a portfolio that would be more
likely to fail, to collapse, to decline in value, than one that would
perform well.

GROSS: This leads right into the investigation or investigations ongoing
now into Goldman Sachs. The SEC, the Securities and Exchange Commission,
is investigating fraud involving one of Goldman's funds. This is a civil
suit for deceiving investors in mortgage-related derivatives. What
exactly is the SEC investigating?

Ms. MORGENSON: What the SEC really is saying is that they have omitted a
material detail in the selling of this security. Here's how it was
created. It was created with a very big hedge fund that was a client of
Goldman Sachs. It was called the Paulson and Company Hedge Fund, and it
was run by a man named John Paulson, who has subsequently become very
famous for making billions of dollars betting against subprime mortgages
when people were still sort of thinking everything was fine.

Now, he and Goldman put together this portfolio of mortgages that were
then sold to Goldman's clients. But the element that is at the crux of
the case is Mr. Paulson had interest in this portfolio being filled with
sort of toxic mortgages, mortgages that were less likely to perform
well, that were really sort of on the precipice already.

So was it right for Goldman Sachs to sell such a portfolio to its
clients without disclosing that this person who was selecting the
portfolio had a negative bet on and was therefore opposed to the people
who were buying it, who were hoping that it would perform and that the
mortgages would continue to pay?

GROSS: So the suit names Fabrice Tourre, who is a vice president at
Goldman, who helped create and sell these derivatives. How come the suit
doesn't name the hedge fund manager who helped create the derivative and
then betted against it?

Ms. MORGENSON: Well, John Paulson, the hedge fund manager who is
involved, did not have a duty to disclose to investors his role in it
because he was not selling the securities. Goldman Sachs did have a
duty, perhaps - that's what the SEC is asking – because it is the seller
of the securities and the securities laws require full disclosure of
material information when you make a sale of securities.

So it really wasn't Mr. Paulson's duty to, you know, tell the banks that
were buying these securities, hey, look, I'm here, I want them to fail,
I'm making a negative bet - but it might have been Goldman's duty to do
so, and that is what the case will adjudicate.

GROSS: So you know, what you're saying, or I guess what the SEC is
saying, is that Goldman intentionally designed derivatives to fail,
knowing that the mortgage market was going to fail, or betting that the
mortgage market was going to fail, and then sold it to customers without
telling them that these derivatives were designed to fail.

Ms. MORGENSON: Exactly. Now, Goldman Sachs, of course, has strenuously
denied that that it did anything wrong. In fact, they say we didn't know
the mortgage market was going to collapse and so therefore we could have
been wrong; and you know, we were not in a position to know with
certainty that it was going to collapse. But yes, that's essentially the
heart of the matter: should they have disclosed to their customers who
were buying this portfolio that, in fact, it had been, you know, sort of
almost rigged?

GROSS: So the SEC is investigating Goldman Sachs now, and a criminal
investigation was just opened in New York. So what is the Justice
Department investigating?

Ms. MORGENSON: We don't know with any certainty what the Justice
Department is looking at in this matter, but we can really take some
good ideas about where they're going. The problem is, I think, Terry,
that much of Wall Street has become so riddled with conflicts of
interest that there are tremendous opportunities for mischief and worse
if you are a very well connected, politically connected, and powerful
investment bank.

For instance, you get very crucial information from your customers about
what they're doing, which may have a real impact on the market. The
temptation to trade in front of that, to profit from that information
ahead of it being made public is very tempting.

Even by just seeing the flow of trades that very large institutions do
gives a brokerage firm immense information on where the market is going
because these huge trades can really move the market, whether it's a
stock, a bond, even a currency. And so just knowing what their customers
are doing or are about to do is tremendously important information.

There is just all kinds of information that, say, an investment advisor
who is advising a company on a merger or an acquisition or any other
divestiture, any other kind of corporate finance decision, that kind of
information - you know, are there very firm and strict rules against
that? The firms say there are. But if you were to investigate, might you
find that the so-called Chinese walls between these businesses are sort
of porous? Well, you might. And so perhaps the Justice Department is
looking at that.

These are very, very complex and interconnected businesses, and they
might be looking to see if the large firms were taking advantage of the
really important information that they were receiving.

GROSS: So what you're describing basically is variations on the theme
insider trading.

Ms. MORGENSON: Insider trading, trading ahead. You're not supposed to
trade ahead of your customers because that makes the market move ahead
of them, gives them a worse price than they would've gotten otherwise in
that security, whatever they're trading.

You know, you're supposed to keep this information to yourself and not
use it and not take advantage of it or profit from it.

GROSS: So do you think either of these investigations, the SEC
investigation or the criminal investigation, stand a chance? And I ask
this in the sense that the instruments that are under investigation
aren't regulated.

Ms. MORGENSON: But the firms that sold them are regulated, and that is
the crux of the SEC case. Goldman Sachs is regulated by the SEC, and so
to the degree that it, you know, does something wrong in the creating
and selling of a security, then it absolutely is regulated.

It's perhaps not as well-regulated as stocks are, but, you know, it
still is the creator of these kinds of securities and instruments, and
it is therefore regulated.

Now, as for the fact of, you know, whether this case, this SEC case,
will be won or lost by the government, it's very hard to say. I've, as
you have, I'm sure, read a lot of opinions by, you know, established
securities lawyers about whether or not this case has merit, will be
difficult, winnable, et cetera.

And you know, I think that the bottom line is – I am obviously not a
lawyer, I don't know whether they will win it. But the bottom line to me
is, and a very important thing is that the disclosure of this
transaction, of its creation, how it was structured, the designed-to-
fail element of this, is so important for people to understand that just
putting it out there in the public domain as the SEC did in its civil
complaint against Goldman Sachs is a huge service, because people need
to know what kinds of instruments are being created.

And people are still grasping for why we got into such a, you know,
disastrous situation because a couple of, you know, hundreds of millions
of subprime mortgages were written. Well, how did we get to trillions of
dollars in losses? Well, these kinds of securities are at the heart of
why.

GROSS: So let me ask you this. Lloyd Blankfein, who's the CEO of Goldman
Sachs, was on Charlie Rose Friday night, and he said we're like a
machine that lets people buy and sell what they want to buy and sell.
That's not the advisory business. That's just a facility for market
making. Does he have a point?

Ms. MORGENSON: He has a point, but I think that if you read the emails
that the Senate Permanent Subcommittee on Investigations released last
week, you will see that Goldman Sachs salespeople were selling this
hard.

This was not a case where the investors were coming to them begging them
for exposure to this portfolio. Like other things on Wall Street, this
portfolio was sold, not bought, and many of these portfolios were sold,
not bought.

And you can see it in these emails. They're fascinating, Terry. They
talk about let's increase the amount of money that the salesmen will get
to move this merchandise. We've got to get it out. Let's move it, move
it. I mean, they're just pushing it like crazy.

So, you know, I take what he says with a grain of salt because this was
not stuff that was so popular it was flying off the shelves, not like a
Google IPO, for instance, or an Amazon IPO, something where the interest
in it from investors was so huge that you couldn't - you know, the
supply was not, you know, enough for the demand. This was very
complicated stuff that was sold, not bought.

GROSS: There's an email that was released by Fabrice Tourre, who was the
Goldman executive involved with the creation of this fund. I'll read an
excerpt of an email he wrote to a friend in 2007: When I think I had
some input into the creation of this product, which by the way is a
product of pure intellectual masturbation, the type of thing which you
invent, telling yourself, well, what if we created a thing which has no
purpose, which is absolutely conceptual and highly theoretical and which
nobody knows how to price, it sickens the heart to see how it's shot
down in mid-flight. It's a little like Frankenstein turning against his
own inventor.

Ms. MORGENSON: Well, he speaks very eloquently about what is essentially
a product that was created out of thin air, that had no social purpose,
that in fact exacerbated the mortgage meltdown because it created more
losses for the same amount of subprime loans. You know, you didn't
create more subprime loans to build this security, but you created more
losses on the same number of subprime loans because you really weren't
putting new loans into this security.

So it has no social purpose. It benefits only the people who are, you
know, selling it, creating it and winning from it. It doesn't create
jobs. It doesn't create wealth for, you know, large numbers of people.
This is just about a transfer of wealth from people who were ignorant of
perhaps important details about the elements of this security, transfer
of wealth from them to someone who was picking the portfolio so that
they could benefit.

GROSS: My guest is Gretchen Morgenson, a financial reporter and
columnist for the New York Times. We'll talk more after a break. This is
FRESH AIR.

(Soundbite of music)

Ms. MORGENSON: If you're just joining us, my guest is Gretchen
Morgenson. She's a Pulitzer Prize-winning journalist who's a financial
columnist and reporter for the New York Times, and we're talking about
the role of Goldman Sachs in the financial crisis and the investigations
that are ongoing into Goldman Sachs.

Now, we're trying to trace some of the ways that Goldman Sachs shows up
in the financial crisis, and one of the places that Goldman becomes a
big player is in the bailout of AIG, the big financial giant that
insured so many of these bets that went bad during the financial crisis.

So why – you've actually described this connection between AIG and
Goldman as the heart of darkness in the financial crisis? What leads you
to say that?

Ms. MORGENSON: AIG and Goldman had a very, very long and very lucrative
relationship. So when these mortgages started to go bad, AIG was on the
hook, had to come – had to start generating cash back to Goldman Sachs
in the form of collateral to cover the decline in the underlying
securities that they had insured.

That is really what pushed AIG to the precipice. These demands for cash
from Goldman and other parties, but Goldman predominantly, really was
what really stressed AIG and forced the government's hand in having to
come in and supply it with initially an $85 billion loan and then an
additional amount that's now up to 170. So AIG and Goldman are really
central to the crisis and to one of the biggest taxpayer bailouts.

Then subsequently one of the most disturbing aspects of this episode was
the fact that AIG, because it had insured these bets, still had many of
them on the books with its clients, such as Goldman Sachs. And what the
government decided to do as a part of the bailout was to rip up these
contracts and to pay the trading partners, in this case Goldman and some
European banks, 100 cents on the dollar for the value of those
contracts.

What makes this discouraging and dispiriting is that other transactions
that were done between parties in a similar vein were done at far lower
prices, like 22 cents on the dollar, 30 cents on the dollar. So the fact
that the government did not negotiate harder with these counter-parties,
with Goldman Sachs, and say, look, you're going to take less than 100
cents on the dollar for these contracts, we're going to give you 80,
we're going to give you 75, to save the taxpayers' dime; the fact that
that wasn't done is really a complete puzzlement.

GROSS: So when the housing bubble burst, and the securities that Goldman
created started losing money, Goldman started asking for its insurance
money from AIG and forced AIG to pay it. What's wrong with that? I mean,
AIG had insured the stuff. So why, what's wrong with Goldman saying pay
up immediately?

Ms. MORGENSON: Well, there's nothing wrong with it. That was actually
the terms of the contract, and so it was something that was enforceable
and, you know, actually did occur. But the problem with it, there are a
couple of issues that I think need to be further investigated.

One is: What were the terms? Who was deciding what the valuation of
these securities was? Was it Goldman Sachs? That's a question, because
the collateral calls were based upon the valuations.

I think that we also really just want to know why they needed to receive
100 cents on the dollar when ripping up these contracts when other
parties were receiving far less.

GROSS: So Goldman received a lot of direct bailout money, and then it
also received money through the AIG bailout (unintelligible) the AIG
bailout money ended up going to Goldman.

Ms. MORGENSON: That's right, and Goldman became a bank holding company,
which meant that it could have access to all of the Fed's facilities,
which was an extremely, you know, important sort of shelter for any kind
of financial institution that felt that they were, you know, under any
kind of duress to be able to, you know, use the Fed's windows and
exchange securities with the Fed, and that's a very, very important
thing for a bank to have.

And when it was a securities firm, it did not have access to that, but
suddenly it was a bank holding company, and it did. So that was another
element of government protection that Goldman Sachs received.

GROSS: For a while it was looking like Goldman was the bank that was –
or a bank that was going to do really well while other banks were having
serious problems, right after the financial crisis and during the
financial crisis. But Goldman's stock has plummeted. Its rating was
downgraded. So Goldman isn't looking so good right now.

Ms. MORGENSON: Well, the reason that its stock plummeted, Terry, is
because of the investigations. Goldman is extremely profitable. It just
had an enormous profit in the first quarter of this year.

It did do far better than other investment banks during the period and
after the crisis, and part of the reason for that was that they were so
negative on mortgages and they had made tremendous bets against the
mortgage market and had won big time on those bets.

They had eliminated some of their risk by selling off mortgages that
they had on their books to their customers. When they realized that they
felt that the mortgage market was at peril - this was in, you know, say,
February, March of '07, the emails show - it was like sell everything,
get rid of everything, we've got to move this stuff off our books
because we think, you know, it's really going to get ugly.

GROSS: Gretchen Morgenson will be back in the second half of the show.
She's a financial reporter and columnist for the New York Times. I'm
Terry Gross, and this is FRESH AIR.

(Soundbite of music)

GROSS: This is FRESH AIR. I'm Terry Gross, back with Gretchen Morgenson,
a financial reporter and columnist for The New York Times. We've been
talking about the role of Goldman Sachs in the financial crisis and the
current investigations into this investment bank. Goldman is being
investigated for selling derivatives that were allegedly designed to
fail because they were created in conjunction with a hedge fund that
planned to bet against the derivatives, yet these derivatives received
good ratings.

Let's talk about the ratings agencies. In an article that you co-wrote
with your colleague at The Times, Louise Story, you wrote: One of the
mysteries of the financial crisis is how mortgage investments that
turned out to be so bad earned credit ratings that made them look so
good.

So what would you like to add here about how this whole story wouldn't
have been possible without the ratings agencies giving triple-A ratings
to some of the things that have now been downgraded to junk status?

Ms. MORGENSON: The ratings agencies are really central to how this
episode unwound and how many trillions of losses investors are
sustaining because they really did not do the due diligence that they
needed to do to be able to assign ratings that were actually reflective
of what these securities' likelihood of default were. One of the things
that we found in our reporting for that article was that the rating
agency's models were basically shared with Wall Street. And this was
done with, you know, all above board and in the best of all intentions
in the idea of transparency.

But what they did was they would share their models - these were
computer models that you could, you know, dump certain characteristics,
put in mortgage, you know, pieces of mortgage tranches and the model
would then sort of spit out a rating. So you would put in these
different elements, and then you'd get your rating.

Well, what the Wall Street firms would do is that they soon learned how
to massage these models, how to change one or two little inputs and then
get the better rating as a result. And so the Wall Street firms sort of
learned how to game the system. They learned how to game the rating
agency's models so that they could put lesser quality bonds into these
portfolios, still get a high rating, and then, you know, sell the junk
that they might not have otherwise been able to sell.

GROSS: And you reported that Goldman and other banks hired analysts from
the ratings agencies to help them game the system, to help them
construct these deals so that they'd look better than they really were.

Ms. MORGENSON: Well, you know, there is always, always an element of the
revolving door in these stories. And, you know, I think one thing to
remember is that rating agencies paid these people far, far less than
the Wall Street firms would. And so there was always this idea that that
was the goal. That was the hope that rating agency analysts would have.
Wow, to go to work at Goldman Sachs or Morgan Stanley or Merrill Lynch,
that was a, you know, that was the Holy Grail. So, again, it was easy to
bring them on, because the money was just so much greater.

GROSS: So the Senate subcommittee that's looking into Goldman Sachs
uncovered an email from a Standard & Poor's employee, and S&P is one of
the big ratings agencies, and the email explained that a meeting is
necessary to, quote, "discuss adjusting criteria," unquote, for
assessing housing-backed securities, quote, "because of the ongoing
threat of losing deals," unquote.

What does that mean?

Ms. MORGENSON: Well, you know, there are three credit rating agencies,
and they all compete for business. The payments that they received for
rating these very complex pools of mortgages were enormous. They were
very, very lucrative, and they did not want to lose business. And so,
let's say you're an issuer. Let's say you're a bank. You're Goldman
Sachs. You're putting together this pool, and you wanted to have,
obviously, the best possible rating, because then more institutions will
be able to buy it and be interested in buying it. And let's say Standard
& Poor's says, I'm sorry. I'm going to give it this slightly lower
rating.

Well, then you say, well, I'm going to take it to Moody's and Fitch.
I'll take it to them. They'll rate it. You know, if you don't come
across, then that's the outcome. You're going to lose the business. It's
a very lucrative business. I can go elsewhere. And so, it became this,
you know, yet again, desire for profits that really sort of made the
system kind of fall down. Because if you're only worried about profits
and you're not worried about what the outcome is for the buyer of the
security - keep in mind Terry, it's not the buyer of the instrument that
pays for the rating. It's the seller, the issuer of the instrument that
pays for the rating. So, you know, to keep the issuer happy, it seems
that the ratings agencies were willing to cut corners.

GROSS: Let's go back for a second to the derivative in question in the
Goldman investigation, the one that was designed with the help of a
hedge fund manager that was going to bet against the mortgages in the
derivative.

Ms. MORGENSON: Mm-hmm. Mm-hmm.

GROSS: Did this derivative get a good rating from the rating agency?

Ms. MORGENSON: The Abacus deal that's at the heart of the SEC case did
get good ratings from the rating agencies. And interestingly Terry, a
former executive from Moody's testified to the Senate Permanent
Investigations Subcommittee that he did not know that Paulson - John
Paulson - was choosing the portfolio, and that it would have certainly
changed Moody's view of the portfolio had they known that this person
was, you know, selecting a portfolio with an idea that it would fail or
that it would be, you know, likely to decline in value. So it what was
interesting that that came up at a hearing that was prior to the Goldman
Sachs hearing, but by the same subcommittee, and it was very interesting
to hear that person say that.

GROSS: Is there a legitimate argument in saying the people who bought
the derivatives from Goldman, it was their job to investigate whether
these securities were worth investing in or not? It's Goldman's job to
sell them. It's the buyer's job. Buyer beware. It's the buyer's job to
do due diligence and investigate the product.

Ms. MORGENSON: That's a very good question, Terry, and I think that that
is a key defense that Goldman will have in its case here. This, again,
gets to the point of the importance of the rating agencies in these
transactions. These were securities that had thousands of loans in them,
and there was absolutely no transparency about these loans for the
average buyer to be able to look at. I mean, you didn't have weeks to
look at this portfolio and say, yes, I'll buy it after I've examined all
of the loans in it, or even a sample of the loans in it.

These investors were taking the rating agencies at their word, that the
rating agencies had done the work, that these, in fact, were high-grade
securities that would be likely to perform over time and not default.
And so shame on the buyers for relying on the ratings agencies, but
shame on the ratings agencies for not doing their work. The chain of
blame is very extensive here. But it's not clear to me that an investor
could actually have gotten to the bottom of all of these securities in
the amount of time that they had to make their decision about whether
they were going to buy it or not.

GROSS: My guest is Gretchen Morgenson, a financial reporter and
columnist for The New York Times.

We'll talk more after a break.

This is FRESH AIR.

(Soundbite of music)

GROSS: If you're just joining us, my guest is Pulitzer Prize-winning
journalist Gretchen Morgenson. She's a reporter and financial columnist
for The New York Times. We're looking at the role of Goldman Sachs in
the financial crisis and the current investigations into the investment
bank.

Congress is currently debating a financial reform bill. Would any of the
provisions that are on the table now have stopped what we're talking
about? Would they have stopped the creation of a more mortgage-related
security that was done in collaboration with a hedge fund, and it was
designed to fail? Would they have stopped ratings agencies from
competing with each other, and therefore maybe giving better ratings
than securities deserved because they want the business of the
investment bank, and it's the investment banks that hire the ratings
agencies, not the people who are buying the vehicles from the banks?
Would what's on the table address any of that?

Ms. MORGENSON: Unfortunately, no. The reform bills that are floating
around and, I think, are up for discussion this week, you know, really
don't do much about the credit rating agencies at all. And it's really
very discouraging, because they did play such a central role. As far as
the, you know, putting some sort of limits on the creation of these
types of securities, you know, absolutely not. In fact, you know, Wall
Street is known for its creativity, and I think that you would have
immense pushback from investment banks, commercial banks, etcetera, if
people started of prescribing all kinds of securities they could create.

And also, keep in mind Terry, it's always, you know, you're looking
backwards on this kind of thing, and, you know, the next crisis will be
about some other type of security. It won't be about mortgages. And so
the degree to which you were prescriptive on mortgage securities may not
even have any, you know, meaning for the next crisis down the road. You
know, I think that the most kind of distressing aspect of these bills is
that they don't really do anything about the element of too big and too
politically interconnected to fail companies, and that is the heart of
this matter.

And there's really very little in the bills to discourage companies from
becoming large. There's certainly nothing in it to make companies
smaller so that they're less threatening to the entire financial system.
So it's an enormous bill, many, many, many, many, pages between the two
of them, and yet some of the most crucial elements are not being
addressed.

GROSS: What kind of regulation is being proposed in those bills for the
kind of derivatives that are behind the financial crisis?

Ms. MORGENSON: Well, I think one of the pieces that is out there is that
they would require companies that pool mortgages into securities to keep
a portion of those securities on their balance sheet, sort of skin-in-
the-game type of a mentality. So it gets rid of this idea that you're
just offloading things to somebody else and you have no interest in
doing due diligence and no interest in really making sure that the
mortgages will perform.

GROSS: So, finally, how do you think the investigation into Goldman
Sachs and the revelations that are coming out of those investigations is
affecting Wall Street in general?

Ms. MORGENSON: I think that the investigations are shedding light on
Wall Street practices, and that's very, very good for the public to pay
attention to. You know, these are very powerful companies who like to
maintain that they are, you know, pillars of the community, that they
are creating jobs, that they're creating capital, helping to facilitate
capital raising for companies. You know, but the degree to which you see
creation of securities that really have no purpose other than to benefit
either the firm itself or one of its favorite clients I think is a good
education for people to see.

I think it's important that we understand, you know, sort of how far
afield from the idea of raising capital for companies to create jobs -
which is Wall Street's, you know, supposed reason for being - how far
afield from that we have come. And I think that's a really important
piece for people to understand. So it's devastating Wall Street. Goldman
Sachs's stock has declined tremendously since the SEC's case was filed.
And I think that people are worried about possible other, you know,
headline risk, as they call it, going forward.

But I think that it is not simply limited to Goldman Sachs. Other firms
did these kinds of things, and I think that the degree to which it
brings scrutiny to these practices so that we can have a real airing and
a real discussion about what is - what are their purposes? What were
they designed for? Is it good for America? I think that's good. I think
that's a wonderful conversation to have, and we really must have it.

GROSS: Gretchen Morgenson, thank you so much for talking with us and for
explaining some of what's going on now. Thank you.

Ms. MORGENSON: You're welcome.

GROSS: Gretchen Morgenson is a financial reporter and columnist for The
New York Times.

There's now a great song about CDO's and the financial crisis, thanks to
our friends at Chicago Public Radio's THIS AMERICAN LIFE. They recently
featured a story about people making money off the financial crisis in a
vain strikingly similar to the recent news about Goldman Sachs. That
story about a hedge fund called Magnetar was investigated by reporters
at ProPublica for NPR's Planet Money.

Here's the song written especially for that story, "Bet Against the
American Dream," with music and lyrics by Robert Lopez, produced by
Stephen Oremus.

(Soundbite of song, "Bet Against the American Dream")

Mr. JOHN TREACY EAGAN (Singer): Step 1: We write a check for $10 million
dollars, hand the check to a Wall Street bank and ask them to make us a
CDO. Step 2: They create the CDO using risky stuff, very risky stuff -
extremely risky stuff. Step 3: Other investors commit hundreds of
millions of dollars to the CDO. Step 4: We bet against the CDO using a
credit default swap. Step 5: The housing market crashes. The CDO's value
drops to zero. Our bet pays off, and we make hundreds of millions of
dollars. And before you can say step six, we're rich.

(Singing) We're going to bet against the American dream, we're going to
be on the winning team, purchase risky debt on a massive scale. Then
place a bet that the debt will fail.

Mr. CHRISTIAN BORLE (Singer): (Singing) Hundreds of millions for
Magnetar, the economy collapsing like a dying star.

Mr. EAGAN: (Singing) No one will know till it's on NPR.

Mr. EAGAN and Mr. BORLE: (Singing) And who cares?

Mr. EAGAN: (Singing) It's time to hit the town.

Mr. BORLE: (Singing) This sucker could go down.

Mr. EAGAN and Mr. BORLE: (Singing) The housing market's losing steam.
And all we got to do to make our dreams come true is bet against the
American dream.

GROSS: Thanks again to THIS AMERICAN LIFE for that song. You'll find a
link to it, along with links to some of Gretchen Morgenson's articles on
Goldman Sachs, on our Web site: freshair.npr.org.

Coming up: We listen back to an interview with actress Lynn Redgrave.
She died of cancer Sunday.

This is FRESH AIR.
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Remembering Film and Stage Star Lynn Redgrave

TERRY GROSS, host:

We're going to listen back to an interview with actress Lynn Redgrave.
She died Sunday of cancer at the age of 67. She was part of the famous
British acting family that included her father Michael Redgrave, her
sister Vanessa and Vanessa's daughter Natasha Richardson, who died after
an accident in March 2009.

Lynn Redgrave first became known in the U.S. for her role in the 1963
film "Georgy Girl." More recently, she was in the films "Shine" and
"Gods and Monsters." She also did theater and TV and wrote and performed
a series of one-woman shows based on her family history.

I spoke with her in 1986.

The character you played in "Georgy Girl" was a little chubby, a little
overweight, wanted to really be beautiful, but certainly didn't think of
herself in...

Ms. LYNN REDGRAVE (Actor): Not at all. No.

GROSS: ...that way. Yeah. Did worry that that would give you the screen
persona of being someone who was unhappy with themselves and, you know,
couldn't make it as a beauty? 'Cause, let's face it, in movies, people
like to see beauties, right? And did you think it would narrow your
chances for playing leading roles later on?

Ms. REDGRAVE: Well, at the time that I made it, no, I didn't think that
at all because it was a wonderful break. I was, at that time, with the
National Theatre of Great Britain with Olivier and was playing some
wonderful parts there. That was really how I envisioned my life. So
doing a movie was a wonderful experience, but not something that I
thought I was going to make a career of in any way - nor have I, because
I've always mixed up the mediums enormously.

But at the time that I made it, she was another person to be. It wasn't
until I saw it that I realized that that's how people saw me, and that's
probably how they saw me, anyway, quite apart from the character. And it
wasn't until the movie was a success - which nobody at the time knew it
would be, in the way that it was - that I then did find the double-edged
sword of great success in a particular role. Because, of course, all the
next few parts I was offered would be, you know, she ambled down the
street on her heavy hips, wheeling a baby carriage. You know, those
would be the opening statements, and I would scream with horror and -
not because I didn't love playing "Georgy Girl," but because I've always
felt that if played somebody once, why would I play them twice? I see no
purpose to that. I also think it is very limiting, you know.

GROSS: What were your first big breaks that got you established? And did
you find that having the name of Redgrave helped you or hurt you?

Ms. REDGRAVE: Well, the name of Redgrave did both, really, to begin
with. In England, unlike in America, nepotism is a really dirty word. If
somebody knows you because of your parents, they probably, in England,
won't even see you. They'll say, oh, you know, Michael's daughter. I
can't see - you know, preferential treatment here. There's not - I mean,
I tried for ages to get an audition for a certain theater company who
absolutely wouldn't see me. I'm not even talking about giving me the
job, but just see me, purely on the basis that they didn't want play
favorites. Well, I was applying like anybody else. I had a right to be
seen. Those things go against you, certainly they did in England.

I think the advantages of it: They'll look at you. You know, the thing
that actors cry out for is just give me that chance, just give me that
moment to be noticed. If you have a famous name, they're going to watch
and they're going to listen. Now, that has a - is a double-edged sword.
When you're starting out, they expect you to be either brilliant, or
they may expect you to be terrible because, well, obviously you won't be
any good, because they're just there because they're the kid. You know?

But either way, you're expected - you're - in some way, there is an
expectation put upon you as a starting, a beginning actor that has no
right to be there. So you're in the spotlight, which is good, because
they're going to notice you. But if you're less than brilliant, they're
going to remember. So you're not going to be able to come back next
time.

I mean, I've got friends who've talked about their early audition days
and they did a terrible audition for somebody, and six months later they
went with trepidation for another audition to the same director. My
goodness, they'll remember that I was terrible last time. The director
didn't remember them, and this time they got the job.

Well, if your name's Redgrave, they remember you. And that's great if
you're any good. And it's just a...

(Soundbite of laughter)

Ms. REDGRAVE: You know, but it does put you in a spotlight that may be
you shouldn't be in when you're just starting. You know?

GROSS: You must have developed an incredible sense of speech growing up
in your family, because your parents were both great actors. And they'd
both done Shakespeare, right? And you have to just know about speaking,
and you usually have a very nice voice...

(Soundbite of laughter)

GROSS: ...if you're involved in that pursuit. Were you very aware of
voice when you were growing up?

Ms. REDGRAVE: Well, very much so. Yes. First of all, while I was growing
up, my father was incessantly on us just about our speech. Just in every
day, the thing - for example, putting an extra R where there isn't one.
I saw it sitting on the table. He said: You what? You saw it. You didn't
saw it. There's no R there. He would pick us up. I mean, and we hated
that. But, of course, we listened, you know, because he's dad, you know?
And we - at that point, nothing to do with acting, just that he hated
poor speech. He hated poor grammar. So one had that all around one.

As to good speech, of course, because he was a Shakespearean actor and a
classical actor, and my mother, too, they both knew as only stage and
classically trained actors know that you can't just happen upon a good
voice. You may have some things about your voice that are more melodic
than somebody else's naturally or pitched a little better, but that you
still have to train, and you've got to train a lot. Now I used to have a
very, very high, thin voice, and I have trained and continue to train. I
would never go on the stage without warming up my voice vocally.

GROSS: What did your voice used to sound like?

Ms. REDGRAVE: I'm not sure I could do it, but it was pitched very - it
was pitched high, and it was back here. And it was very sort of like
that.

(Soundbite of laughter)

GROSS: What did you do to deepen it?

Ms. REDGRAVE: Well, first of all, I did train for three years in drama
school, in British drama schools. And I can't speak for American drama
schools because I haven't been to one. British ones certainly spend an
enormous amount of time every day on vocal dexterity, on diction, but
more specifically, on breathing. All of good voice comes from, really,
initially, from how you breathe and how you support the voice in the
same way that a singer does. It's just that most people speaking don't
think that's necessary. They can get by without. But you can't get by on
the stage, and you can't - what you can't really do is have any
flexibility of a voice.

If you want play somebody who doesn't talk like you, then why would one
just stick with what you've got? I mean, I know plenty of actors who do
and avidly say, you know, this is the way I talk, and tough. And I just
think that's stupid. I think that's limiting. You know, you should be
able to do anything. In theory, your voice should be able to do whatever
you tell it to. And sometimes for certain parts or certain roles, you're
going to have to train all over again at any age in order to get that
dimension and not hurt your voice. Otherwise, you can't play at
performances.

GROSS: Do you think of yourself as being good at doing dialects and
getting other people's voices?

Ms. REDGRAVE: I am. I have a natural ear for dialects, for accents, for
mimicry, in a way. And that's just luck, I suppose, that, you know, some
people have to work a lot harder at getting an accent. I recently did a
movie. I've played quite a few parts where I've had to, in my terms,
have an American accent, in your terms, lose my English accent.

(Soundbite of laughter)

Ms. REDGRAVE: And because everybody knows I'm English, of course, it's
especially important that I be totally specific, because everybody's
listening to hear, oh, well, she doesn't really sound - she really
sounds English, you know. So you have to kind of make them suspend
disbelief by getting it even more perfect.

GROSS: Throughout your career, while you've been married and since
you've been a mother - and you were saying you have three children...

Ms. REDGRAVE: Yeah.

GROSS: ...you've, I think, tried to really not sacrifice the family part
of your life for your career. What have some of the things been that
you've done to make sure that you're able to keep that balance?

Ms. REDGRAVE: Well, I like my - all my children to know what I do and
understand where I do it. So they have always come and seen me backstage
of where I work, if it's a theater. I think it's - first, as little
children, it helps them a lot to - just that you have to go out in the
evening to know where it is you're going and have an idea that it's
something very practical. You have to sit down. You have to fix your
wig. You have to put on your makeup, that there are a whole bunch of
tasks, that there's a certain discipline in the theater. I've had all of
the children back stage with me at various times.

Annabelle, last year, when I was doing "Aren't We All" on Broadway, she
was not quite four when - the first time that I brought her to a matinee
- I used to take her to all the matinees. And she helped me. She was -
she helped me with my shoe changes, because, you know, obviously, she -
at not quite four, she couldn't do the zippers. She couldn't reach. But
I gave her a job, and I also took her all around the theater and showed
her why she had to be so quiet, why there were certain rules. And I've
done that with all the children. The older children used to tour with
me. We used to pack up school books, and off we'd go on the road, all of
us.

GROSS: Lynn Redgrave, recorded in 1986. She died of cancer Sunday at the
age of 67. You can download podcasts of our show on our Web site:
freshair.npr.org.
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Transcripts are created on a rush deadline, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of Fresh Air interviews and reviews are the audio recordings of each segment.

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