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Why Prosecutors Don't Go After Wall Street
DAVE DAVIES, host:
This is FRESH AIR. I'm Dave Davies, filling in for Terry Gross, who has the
When the energy giant Enron collapsed 10 years ago, top executives of the
company faced criminal prosecution, and many served lengthy prison terms. In
the savings and loan scandal of the 1980s, hundreds of bankers went to jail.
But the financial meltdown of 2008 has yielded a very different outcome. In
April, Louise Story co-wrote an article in the New York Times, which began: It
is a question asked repeatedly across America: Why in the aftermath of a
financial mess that generated hundreds of billions in losses have no high-
profile participants in the disaster been prosecuted? Answering such a
question, the equivalent of determining why a dog did not bark, is anything but
We've invited Louise Story here today to try and answer that question - why the
dog didn't back. Louise Story joined the New York Times in 2006. She covers
Wall Street and finance and was a finalist for the 2009 Pulitzer Prize in
Well, Louise Story, welcome to FRESH AIR. You know, in the S&L crisis, the
savings and loan crisis of the 1980s, hundreds of bankers went to jail. More
recently, executives from Enron were prosecuted criminally.
In this horrific financial collapse, have there been criminal prosecutions?
Ms. LOUISE STORY (Reporter, New York Times): There really have been very few
criminal prosecutions, and there has been no criminal prosecution of a senior
executive from a major bank or financial company related to the financial
DAVIES: And what kind of other regulatory actions have occurred?
Ms. STORY: Well, you know, the Securities and Exchange Commission has brought
some civil cases, though very few of them have named individuals who worked at
One case that did name an individual centered on Angelo Mozilo. You know, he
was the chief executive of Countrywide, that giant mortgage company, and that
case contains these emails where he was writing to other executives that he
knew the mortgages that Countrywide was issuing were very toxic.
But he wasn't telling Countrywide investors in that, and he wasn't telling
investors who were buying Countrywide's mortgage bonds. At the same time, he
also was selling some of his own stock in Countrywide.
It's those sorts of accusations that have led some people to think there might
have been a criminal case against Angelo Mozilo. However, it's been reported
the Department of Justice is not pursuing one against Mozilo.
DAVIES: All right, I want to get to why there weren't more prosecutions, but
let me just ask first, You know, some of these civil cases have resulted in
settlements in the hundreds of millions, and some might look and say, well,
that's a pretty painful punishment to inflict on these companies. What's your
sense? How much of a corrective action are these civil suits, in which, you
know, they get a whole lot of money?
Ms. STORY: Well, so for instance, the settlement with Goldman Sachs that the
SEC entered into last summer was a pretty large one, $550 million, and you're
right, some people would say that's a big punishment, $550 million.
But then, you know, other people would say: But Goldman Sachs makes that in
about three weeks of trading. And remember these penalties are paid for by
Goldman Sachs, ultimately by Goldman shareholders, not by the executives or the
traders or the salespeople that actually individually played a role in what
DAVIES: Right, and Lloyd Blankfein, who was the head of Goldman, who has been
there since 2006, remains at the helm, right?
Ms. STORY: They're there, and they're also getting very large bonuses.
DAVIES: When there are these settlements, who gets the money?
Ms. STORY: So the settlements are set up differently. Sometimes, the money goes
to the Securities and Exchange Commission. Often, the money goes to whoever was
the victim of the crime in a sort of restitution. Sometimes it even goes to the
shareholders of the company that committed the crime.
DAVIES: Now, let's take one case. You recently wrote about a suit brought by
the U.S. Attorney's Office in New York against Deutsche Bank. What are they
Ms. STORY: Well, so that was an interesting case, and it's still ongoing, but
it's a case that involves the FHA Fund, which is a government fund that backs
mortgages, kind of like Fannie and Freddie do. And what they found is that a
unit the Deutsche Bank had acquired had been committing mortgage fraud, had
been lying about the quality of these loans.
So that's certainly a case that you could say: Yeah, that may be something
that's related to the financial crisis, lying about the quality of these loans
that the government is backing and ultimately the taxpayer will have to pay for
losses on. But again, there was no person named in this case. They only named
Deutsche Bank, and they did not single out any of the individuals who took
And when you read the case, you read about all these different people making
these lies. They're not named. And you wonder, well, why aren't they held
accountable? That's a question we've been getting a lot.
DAVIES: Right, and when I look at this case, I noticed that it was brought by
the U.S. Attorney's Office of New York, which is of course a prosecuting
authority. They can bring criminal cases, and they can bring civil cases, and
in this case, they chose to make it a civil matter.
And you quoted the U.S. attorney in your story as saying, I believe, there
simply was not enough evidence for a criminal charge.
And when I looked at it, it's - the allegation is that these folks lied to
federal authorities and made a fortune from it. Why is that not a crime?
Ms. STORY: So at the press conference for this case, a number of reporters
really pressed the U.S. attorney on it, and they said but there's a lie, and
someone made this lie. Why aren't they named? And why isn't this criminal? And
he said every lie is not a crime.
And so what he was referring to are the complexities of our laws by which, you
know, you have to follow certain different provisions for it to be considered a
crime, and in his judgment, these lies were not crimes, and so it was a civil
case, which has far lower penalties than a criminal case would have.
DAVIES: So is it a matter of criminal intent, you have to know what the law is
and intentionally, willfully violate it?
Ms. STORY: That's often a big part of it, but there's also a lot of other
complexity in securities law.
DAVIES: Okay, let's talk about a piece, a fascinating piece that you and
Gretchen Morgenson recently wrote about some of the conscious decisions made by
government officials, some as far as back as 2008, when this was just
unfolding, when the financial crisis was, you know, just emerging, decisions
that really shaped the government's response or lack of response.
You wrote that in the summer of 2008, that the Justice Department adopted some
new guidelines which essentially amounted to a softer approach to corporate
crimes. What was this approach?
Ms. STORY: So there are these things called deferred prosecution agreements.
And what they are is basically the government says to a company: Okay, we won't
prosecute you, we won't indict you if you promise not to do this thing that you
did, if you promise not to do it again.
It's a gentleman's agreement, and it really allows companies to keep their
share prices higher, and it helps companies continue to do business with the
government, but it's a lot lighter. And the government had been using those on
and off since the 1990s, but it was never an official option.
And right in 2008, the Department of Justice issued a memo where they said that
was an official option that prosecutors across the entire country were welcome
to use with companies. This was celebrated on Wall Street. We actually found a
memo that Sullivan & Cromwell, a law firm that represents companies like
Goldman Sachs, some of the biggest banks, they sent a memo to their clients,
and they noted this is very important.
And they said it showed that the aggressive days at the Department of Justice
were coming to an end or at least decreasing. And so this decision was really
good news for the banks. And it was interesting that it occurred at the end of
the summer of 2008, right when all of these financial crisis cases that might
have been made were becoming apparent.
DAVIES: Now what did government officials see as the advantages of a deferred
prosecution as opposed to a plain old hard-nosed investigation that ends in
Ms. STORY: So there are a few arguments for it. You know, one, is that you can
have really rough consequences for a company if you indict a company. Remember
when Arthur Andersen was indicted back in the earlier part of this century, it
essentially put that accounting firm out of business, and tens of thousands of
people lost their jobs, and most of those people, of course, had nothing to do
with any role that Arthur Andersen played in Enron's accounting. That's what
that case settled on was Arthur Andersen's role with Enron.
And so a lot of people say you shouldn't indict a company because it can drive
down the stock price, it could put it out of business, it can make people lose
Another argument for deferred prosecutions is the government often enters into
agreements with companies when they cooperate with the government and when they
help the government find out what happened.
But this is a practice that is becoming very common and is becoming criticized
by some people who are long-time lawyers who used to be prosecutors. Those
former prosecutors told us that relying on these companies for cooperation is
not smart because you're essentially outsourcing the investigation to the very
company that is under suspicion.
So when the government gets cooperation with the company, they go to the
company, and they say: We're concerned about X, Y, Z. Can you hire a law firm
and check it out and tell us what happened and tell us if you think there was a
And sometimes the companies come back, and they say yes there was, or they
identify one worker who was involved, but if there was a crime that is not so
clear, if it's a crime that relies on novel legal theory, or if it's systemic
to the company, but what we've been told by former prosecutors is that these
companies are very unlikely to come back and tell the government that a crime
And a lot of the financial crisis cases are probably in that grayer area, where
you don't want to rely on companies investigating themselves.
DAVIES: One of the fascinating side effects of that practice, of course, is
that it generates tens of millions of dollars for law firms that get the
business of investigating these companies.
Ms. STORY: Yeah, lawyers now say they're practically the compliance bar because
they're doing so much work doing these investigations for companies.
DAVIES: As best you can tell, what's behind - what was behind this change in
Ms. STORY: I don't know. I talked to a number of lawyers and former prosecutors
who were there around the time, and it seems like it was just an evolution of a
practice they were already doing. But I haven't found out about any key meeting
where they decided to make it official.
We did find out about a different meeting that was very key to the evolution of
the Department of Justice, but it happened in 2005. And at that meeting, the
deputy attorney general, James Comey opened up the meeting with all the
different top officials from the DOJ and said we need to consider whether we're
being responsible enough.
And he said there were concerns from others, the business communities and
others, that the DOJ had gotten too aggressive, and it was hurting the stock
market. And he said: Just make sure you're being responsible.
And I talked with two people who were at that meeting who told me it was really
a retrenchment away from the aggressive days at the Department of Justice
towards becoming more business-friendly.
DAVIES: So there are cases where the Justice Department suspects wrongdoing,
talks to a company, the company investigates, and then the matter is sometimes
closed, and there is simply no public record of it.
Ms. STORY: That's right. In fact, one current assistant U.S. attorney told me
he was amazed at how persuasive the companies are. He said he would read about
something in the media, or he would hear about something from interviewing a
witness in another case that he thought was surefire going to be a great case.
And they'd call the company in and tell the company to make a presentation, and
he said they were really persuasive, and so then they dropped the matter.
The problem is what I understand from a number of lawyers who represent these
banks is that because the current lawyers at the DOJ don't do as much of their
own investigations, that also means that they don't know the right questions to
ask, and perhaps they're a little too easily persuaded.
DAVIES: Right. I mean, the stuff that happens on Wall Street is enormously
complicated and intricate, and I'm sure it's legally complicated, and if you're
not involved and invested in the investigation, you're kind of outgunned when
you come up against these firms, aren't you?
Ms. STORY: Right, and you know, the other problem the Department of Justice has
been facing is that the part of government that can really help them bring
cases are regulators, regulators like the Federal Reserve and the FDIC and the
Office of the Comptroller. Those are the part of the government that are inside
And another thing that we've found through extensive interviews is that, and
looking at data is that these regulators are no longer bringing a lot of cases
to the DOJ.
So back in the savings and loan cases, the number of referrals, back in the
'80s and the early '90s from the bank regulators, was off the charts, thousands
a year of referrals of wrongdoing for the Department of Justice and the FBI to
This time around, bank regulators have not been digging up wrongdoing on a
large scale and bringing it to the Department of Justice.
And one thing that's interesting is I asked a spokesman for the OCC, the Office
of the Comptroller, I said: Why are your number of referrals down so much? I
mean, it seems like you might have plenty of things that the DOJ should at
least check out in the last few years.
And he said: Well, you know, since the '90s, we've had this great system where
the banks are supposed to refer wrongdoing themselves. And so regulators don't
need to refer as much over.
DAVIES: I want to get into that some more, but let's take a little break here.
We're speaking with Louise Story. She is a business reporter for the New York
Times who has covered the financial crisis and Wall Street. We'll talk more
after a break. This is FRESH AIR.
(Soundbite of music)
DAVIES: If you're just joining us, our guest is Louise Story. She's a business
and financial reporter for the New York Times. She's covered the financial
crisis on Wall Street and some of the efforts to regulate the industry.
You know, we've been talking about the Justice Department and how there was a
trend over the last several years towards softer enforcement of corporate
wrongdoing, and you said that the regulators are a big part of the issue here.
Let's take the Securities and Exchange Commission. I mean, they're the ones who
have been - have done a lot of the enforcement actions that have occurred in
the result of - in the wake of the financial collapse. How has the SEC changed
in recent years?
Ms. STORY: Well, the SEC is under a new administration that has tried to reform
it. Remember, they were very embarrassed by missing the Bernie Madoff Ponzi
scheme. They completely missed that, even though they had a whistleblower
bringing it to them years ago.
So they have a new leader, and they've hired a lot more lawyers, and they're
trying to specialize in financial areas, but the thing that is pretty amazing
is that of the financial crisis cases they have brought - and there haven't
been very many with major financial players - but of the ones they've brought,
they have been shying away from naming individual people.
And so I talked to a number of people who are current lawyers at the SEC or who
are former ones, lawyers who were there in 2008 and 2009. So they know about
how the investigations got going. And I said to them: Well, where are the
cases? A lot of people think that there are things that might be cases. Or was
there no fraud? Or where are the cases?
Ms. STORY: And I learned about a couple key decisions back in 2008 that really
set the tone at the SEC. One, is we found that in the summer of 2008, when the
SEC was negotiating big settlements with the banks related to auction rate
securities, which is a short-term type of security, they were going to make the
banks reimburse all kinds of customers to the tune of many billions of dollars,
you know, 20 billions of dollars for just one bank, for instance.
And the Federal Reserve called them up that summer and told them to back off
and to make the penalty lower, to make them actually only pay back retail
customers. And so what that did was it helped the banks because the banks had a
liquidity problem, and you can see why the Fed was concerned about draining
them of funds.
But at the SEC, lawyers thought: Oh, we're not supposed to be too aggressive.
And then just a few months later, after there was the federal bank bailout, the
SEC actually developed a policy that it kept secret until we wrote about it
this year. They developed this secret policy where if you were a bank that got
bailout money, the SEC would not impose too heavy of a fine on you, even if
there was wrongdoing.
So again, setting the tone, and what I heard from these lawyers was in '08 and
'09, the crucial time to get these financial cases going, that really caused a
malaise there and a slowdown because the lawyers just didn't see a golden
finish line if they found something really important because of this pullback
DAVIES: So you have the Federal Reserve system, Federal Reserve Bank,
contacting this regulator and suggesting that they back off on harsh penalties.
Now, if someone in the government were to call a federal prosecutor or the U.S.
attorney and say, I've got a little suggestion about this criminal case you've
got going, that would be front-page news. I mean it might even be criminal. Is
it improper for the Fed to tell the SEC how to undertake an enforcement action?
Ms. STORY: You know, regulators were in a very tough position in 2008 because
they actually had multiple missions. So bank regulators are supposed to focus
on the safety and soundness of the markets, and we were in a crisis.
And so that was a legitimate part of their role, is to focus on the safety and
soundness of the banks, okay? But they also are supposed to do enforcement. And
part of how you keep a market sound is by - if there's someone who committed
wrongdoing, you hold them accountable.
And so, those goals came into conflict in 2008 and 2009. These regulators were
divided. And not only did the Federal Reserve push to have the banks pay - it
wasn't really a penalty, but they pushed to have them reimburse fewer customers
so that billions of dollars would be saved for the banks.
Also, we found out about a meeting where Timothy Geithner - who, you know, is
now the Treasury Secretary - but back then was at the Fed, he was the president
of the New York Federal Reserve. And in October 2008, he met with the attorney
general of New York, Andrew Cuomo, and he expressed to him how nervous he was
about the markets.
And what I heard from a couple people who had heard about this meeting was it
made a big impression on the attorney general that it wasn't a good time to
throw a bunch of subpoenas around and that it was a really fragile time in the
And so that would be an instance where you would see, you know, Geithner did
not sit there and say, oh, you cannot bring cases. But he expressed a strong
concern for the markets that really gives a slow down message.
DAVIES: Louise Story covers Wall Street and finance for the New York Times.
She'll be back in the second half of the show. I'm Dave Davies, and this is
(Soundbite of music)
DAVIES: This is FRESH AIR. I'm Dave Davies in for Terry Gross. We're speaking
with journalist Louise Story about why no major players in the 2008 financial
meltdown have faced prosecution. Story's pieces have pointed to decisions by
prosecutors and regulators to take a softer approach to corporate wrongdoing,
often relying on financial companies to investigate themselves. Louise Story
covers Wall Street and finance for The New York Times.
So many things that, you know, that Wall Street does are so complicated and the
law is so complicated. Does the SEC have the staff, the brainpower it needs to
be an aggressive regulator if it wants to?
Ms. STORY: Well, that is a huge problem. It's something you've seen a lot of
people in Washington talking about in the last few months. Mary Schapiro, the
head of the SEC, and also the head of the Commodity Futures Trading Commission,
Gary Gensler, they've both testified that they need more funding and they're
not getting it. In fact, there a lot of people in Washington who are trying to
squeeze their budgets down, saying they need to work more efficiently, so there
is a real concern that all of the new regulations that have been passed,
related to the financial crisis, will be very difficult to enforce. And any
wrongdoing that needs to be examined will also be difficult to look at because
these agencies are so stretched for staffing.
DAVIES: And is it clear why Congress isn't authorizing a bigger budget for the
SEC? I mean you would think that given what's happened there would be enormous
public interest and effective financial regulation.
Ms. STORY: Well, part of what's going on is that the financial reform bill that
was passed a year ago, the Dodd-Frank bill, remains very controversial. You
have a lot of lawmakers, mostly Republican, who believe that a lot of the parts
of it are horrible and should be undone. They have held press conferences and
said they'd like to rewrite a lot of that law. And so one of the reasons they
are trying to starve these agencies for funding is because that way some of
these new parts of the law that were past may not come into being. So it's a
tactic at kind of reopening the floodgate on a law that was already past that
You have a lot of people on Wall Street who say parts of this law will make it
very hard for them to do business, and therefore will hurt the economy.
Because, of course, you know, the banks are pipelines of the entire economy.
They are the entities that spread credit throughout to lend money to people,
and so if they're not handled appropriately there can be consequences. It's
really hard so as a server to know how much the banks are dragging their feet
because they just want higher profits and they want to pay higher bonuses and
how many of their concerns are really legitimate and really may hurt the
economy if these parts of the law go into effect.
DAVIES: I'd assume they have lobbyists who are very active on Capitol Hill on
Ms. STORY: Oh, they absolutely do. They've been aggressively meeting with them.
You can look at any of rosters of meetings that the Treasury Department of the
SEC and you see every single bank, J.P. Morgan, Goldman Sachs, Citigroup in the
there, you know, weekly meeting with them on these issues. The other thing that
you have really lingering with this is you have kind of two meta-narratives on
the financial crisis and no narrative as one out. So, one narrative is that
gee, this was all a big mistake. No one saw this coming. It was a confluence of
events. No one could've predicted. Hundred year storm and yes, there were a lot
of really dumb choices. But they were not criminal. They were not fraudulent.
There was no bad intent. That's one narrative. And then you have this other
narrative - that there was a lot of greed. There was a lot of misleading
marketing sales of these mortgage bonds. There were a lot of intentional acts,
where people knew these mortgages were bad but they issued them anyways.
And, you know, really in our political debate and within Wall Street and in
society we are still debating. And people come down on one side or the other.
And so for the people who believe that this was just a lot of stupidity, they
don't think that there should be many cases and they don't think that the
government should put a lot of resources into the enforcement units at the SEC
or the DOJ to look at this. They think the DOJ should keep its resources on
terrorism cases and not go look for cases related to what was actually
stupidity. And so that's also what you're seeing in this funding of these
DAVIES: Well, you know, regulators do what they do and the Justice Department
does what it does. Congress has also been busy. I mean there was a big Senate
investigation into the crisis and then the Financial Crisis Inquiry Commission
also produced reports, all of that revealing some really troubling activity.
What's been the impact of those investigations on regulators and enforcement?
Ms. STORY: Well, the biggest impact of all these reports, really, has been
spurring forward this public question about where are the prosecutions - why
aren't there more cases related to the financial crisis? Because you have seen
lots of people out there, reading these reports. And I'll tell you one of the
most common questions I get in my reader inbox - and same goes for my
colleague, Gretchen Morgenson, who I'm doing a lot of this reporting with - is
notes from readers who say gee, I was reading this Senate report about Goldman
Sachs and Deutsche Bank and Washington Mutual and there seem like there were a
lot of fishy things there. And, in fact, the Senate report even says that some
of those things were acts of fraud. So where are the cases?
And one of the things that legal experts have told us is that these reports are
helpful, they provide a roadmap for prosecutors to follow, they lay out
witnesses that the prosecutor should speak with. But they're not evidence,
often, that can be used in court. Even if it's under oath, whatever is told to
one of the Senate reports or any of these other reports, is considered hearsay
in court. And so we've got these very interesting reports, but there's still a
lot of work the DOJ and the SEC would need to do to take those and bring them
to cases they could bring in court.
DAVIES: You know, prosecutors do like attention. I mean more than one governor
or senator got their start with big cases they brought as federal prosecutors.
I mean I wouldn't think that they would have cold feet. You would think that
these folks if they have a chance to, you know, to put some cuffs on some Wall
Street barons and that they would do it.
Ms. STORY: There is that. You're right. There've been a lot of prominent
politicians that have come from prosecutorial background. But when they've been
told to back off by high people in government, like we discussed earlier in the
program, you know, a conversation that Tim Geithner had with the attorney
general of New York, that sends a real message. The other thing that has become
more and more common at the DOJ is the revolving door. You know, you've always
seen on Capitol Hill staffers who go in and out working for senators and then
working from lobbyists and working for companies. You're seeing it a lot at the
DOJ. It was a time from '02 until really '08, it was a time that financial law
businesses booming and there were a lot of law firms that were higher any
prosecutor who had financial expertise. And a lot of those prosecutors have
already gone back to government or cycled back out. And so, the ties between
the defense community and the DOJ have gotten particularly strong when it comes
to financial sorts of cases.
DAVIES: You've written that the FBI was, I believe, in 2008, about to get more
active and assign more resources to look into mortgage securities fraud. What
Ms. STORY: Well, you know, the FBI was pretty early in identifying the mortgage
fraud problem. There was someone there in charge of their criminal division,
Chris Swecker, who went on to TV as far back in 2005 and said mortgage fraud is
a major problem. And by 2008, their criminal division did a big study has
identified about two dozen parts of the country where they wanted to shift
resources to look at mortgage and financial fraud. And I talked with the head
of the criminal division from that period Ken Kaiser. He told me that they were
going to look not only at mortgage fraud among consumers, but also at the role
of the major financial companies, all the way out the mortgage pipeline. And
they sent out a memo to reallocate resources. After they sent out the memo to
all of their field offices, there was a call that came in from the Department
of Justice telling them to rescind the memo. And - so they did, and what they
did was they told the field offices okay, you could ignore the memo. You don't
need to shift the resources to financial cases if you have other things you
need to use that money for.
DAVIES: Wow. Any idea where that came from?
Ms. STORY: The furthest I got, you know, Ken Kaiser was quoted in our article
about this, and he said that he was the head of the criminal division at the
FBI and he said he was told that the message came in from the Department of
Justice, but he did not know who it came from there, and the Department of
Justice declined to comment to us on that particular situation.
DAVIES: We're speaking with Louise Story. She is a business and financial
writer for The New York Times.
We'll talk more after a break.
This is FRESH AIR.
(Soundbite of music)
DAVIES: If you're just joining us, our guest is Louise Story. She is a business
and financial reporter for The New York Times. She covers Wall Street and has
looked into the financial crisis, its origins and regulations that have
Let's talk about one of these cases that's gotten a lot attention. This is the
young guy at Goldman Sachs, Fabrice Tourre...
Ms. STORY: Yeah.
DAVE DAVIES: Has the nickname Fabulous Fab. Tell us what he is accused of.
Ms. STORY: Fabrice Tourre was a relatively junior salesman at Goldman Sachs in
the unit that marketed what turned out to be some of the most toxic mortgage-
securities they created. And when the case was brought against Goldman Sachs by
the SEC last year, he was the only individual accused of wrongdoing. And he is
accused of not telling investors who would buy these securities that they
weren't designed in part by another investor, John Paulson. He's a prominent
hedge fund manager, who was betting against these very same securities. So John
Paulson was negative on housing and he wanted these securities to do poorly. He
was betting against them. But yet he got to help design them. And the SEC says
that Fabrice and Goldman Sachs should have told the investors who were
positively betting on those securities that that other person who was negative
on them had had an input on how they were created.
DAVIES: Now one of the things that's interesting about the Fabrice Tourre case
is that you've written that a lot of folks believe there were plenty of people
at Goldman who knew about and were involved in this activity but he just
happened to be the one who had I guess that the most indiscreet females, right?
Ms. STORY: Absolutely. I mean as far back as 2009, when my colleague Gretchen
Morgenson and I were writing about these Abacus securities, we were told by a
lot of current and former Goldman people that there were a large team of people
involved. And, in fact, since then many Goldman employees have told us they
were so surprised that only Fabrice was named. Fabrice, of course, himself
thinks it's a little odd he was the only one named. And we recently obtained
the replies - the private reply that Fabrice sent to the SEC trying to convince
them that he should not be the only one named. And in that Wells reply, he laid
out all kinds of people, about six or seven other people who were just as
involved in all of the activities as he was.
DAVIES: And one of the fascinating pieces of this story is that you got that
via a discarded laptop. Is this right?
Ms. STORY: That's right. So Fabrice had thrown out his laptop in 2006 in a
garbage area and it was found by someone who gave it to a friend and that
friend eventually realized last year that she had Fabrice's old laptop because
his name was in the media. And so she gave us a copy of some of the materials
on the laptop and what we found to be newsworthy and interesting was this
private reply that Fabrice and his lawyers had filed to the SEC trying to
convince them that there were many other parties at Goldman who were equally
involved in the deal at the center of that case.
DAVIES: We're speaking with Louise Story. She's the business and financial
reporter for The New York Times.
You know, what's fair and what's legal aren't the same thing. And what's sleazy
and what's legal aren't the same thing. And so when one finds practices that
one doesn't like that doesn't necessarily mean you can make a criminal case.
And one of the things that I wondered when I considered the fact that in the
savings and loan crisis there were hundreds of bankers that were criminally
charged and very, very few, certainly no senior executives this time, was
whether laws have changed that protect those in the financial industry - that
provide layers of deniability. Is that a factor here do you think?
Ms. STORY: I don't think that laws have changed in that manner. I think that
laws have not kept up with the complexities of Wall Street. And what you've
seen in the last couple decades is you've seen more and more large banks and
investment banks that essentially ran large hedge funds within themselves. So
they took all kinds of big trading positions for their own books, even while
they were supposed to be serving clients and making trades for clients and
lending out money to clients.
And that was an essential conflict of interest because sometimes they would
want a trade to go well for themselves and the only way for it to happen was to
do something that was not advantageous for a client. It's really a change from
the Wall Street of several decades ago when the banks were primarily focused on
serving their clients.
DAVIES: There was a piece about Sheila Bair, the outgoing head of the Federal
Deposit Insurance Corporation, over the weekend and she was sort of, you know,
a gadfly in some of the regulatory discussions as the financial crisis
unfolded. And one of the things she said was one of the problems that she found
with the way the government was respondent, I believe she said that it acted as
if no one were at fault. Are there problems with that approach going forward?
Ms. STORY: Well, that gets to this crucial debate about what caused our
financial crisis. There are many people out there on Wall Street and also
within the regulators who believe that this was all a big mistake and that
people made stupid decisions. And there are other people who believe that the
Wall Street traders and the executives knew these loans were horrible but they
purposely carried forward anyways because they were driven by their profits.
And so, Sheila Bair's comments about holding no one accountable hints at the
idea that there are some people who knew they were taking steps that were risky
and harmful and that they haven't been held accountable.
You know, the FDIC where Sheila Bair is departing from, they have brought a
case - it's a civil action - that names a couple executives from Washington
Mutual, that giant bank in California that collapsed and is now owned by J.P.
Morgan. And so, that is a case - it is civil, not criminal - but that is a case
that may hold some executives accountable and it came from the FDIC.
The other thing to think about with Sheila Bair's comments is that Wall Street
might have been held accountable through measures other than lawsuits and jail
time and prosecutions. Wall Street could have been held accountable, for
instance, with just a lot of new rules that really changed the way they
For instance, reforms that broke these companies down into smaller firms or
reforms that made it more difficult to pay such large bonuses when the trading
actions might lead to future risk in the economy.
DAVIES: And that would've been up to Congress, I guess.
Ms. STORY: Well, Congress had a lot of power, particularly in the fall of 2008
when they bailed out the banks, they could have demanded practically anything
in exchange for that money but they actually demanded almost nothing. And that
was because Hank Paulson, who was the Treasury secretary at that time, was
afraid the banks wouldn't take the money if there were strings attached. But in
retrospect, a lot of financial experts say now it's clear the banks were so at
Even Goldman Sachs was borrowing money from the Federal Reserve through a
private, kind of secret transaction that only came out recently. And so these
financial experts say it's very likely the banks would've taken money with
whatever strings came attached. And that might have been a way to hold the
industry accountable, would have been to really impose major changes back then
when they were begging on the taxpayers' door.
DAVIES: Well, Louise Story, thanks so much for speaking with us.
Ms. STORY: Thank you.
DAVIES: Louise Story covers Wall Street and finance for The New York Times.
*** TRANSCRIPTION COMPANY BOUNDARY ***
'Here's The Story' Of TV Creator Sherwood Schwartz
(Soundbite of music)
DAVE DAVIES, host:
Sherwood Schwartz, who created the TV sitcoms "Gilligan's Island" and "The
Brady Bunch," died yesterday in Los Angeles. He was 94. In addition to creating
the series, Schwartz wrote their memorable theme songs.
Schwartz was waiting for acceptance to medical school in 1938 when he asked his
brother, who was writing for Bob Hope's radio show, if he could try his hand at
a few jokes. He forgot about medical school and was soon writing for Hope, then
for the "Ozzie and Harriet" radio show. He shared an Emmy Award with his
brother and others when he was the head writer for "The Red Skelton Show."
"The Brady Bunch" and "Gilligan's Island" were mocked by critics, but they were
both big hits that had long lives in syndicated reruns. Schwartz once said he
envisioned Gilligan's Island as a social statement, with the message that it's
one world and we all have to live with each other.
Here's how one episode opened. Gilligan and the Skipper are lounging on the
island and listening to the radio.
(Soundbite of TV show, "Gilligan's Island")
(Soundbite of radio frequency)
Mr. BOB DENVER (Actor): (Gilligan) Hey, Skipper, they want to hear the news?
Unidentified Actor: The ill-fated Minnow made the headlines again today.
Mr. DENVER: (as Gilligan) The Minnow? The Minnow? The Minnow?
Mr. ALAN HALE (Actor): (as Skipper) Yeah?
Mr. DENVER: (as Gilligan) He said The Minnow.
Mr. HALE: (as Skipper) What? What is it?
Mr. DENVER: (as Gilligan) He said The Minnow.
Mr. HALE: (as Skipper) The Minnow?
Unidentified Actor: Yes, the Minnow, a small charter vessel which carried five
passengers and a crew of two. Today, a maritime board of inquiry sought to fix
the blame for the loss of the vessel and passengers.
Mr. HALE: (as Skipper) Worst storm in history, that's what it was.
Unidentified Actor: At the conclusion of the hearings, the maritime board
decided that the captain of the ship was solely responsible for the disaster.
Mr. HALE: (as Skipper) The captain of the - me? Gilligan, they're blaming me.
Unidentified Actor: It was a clear case of dereliction of duty. Fortunately,
there are a few captains of charter vessels who are as completely incompetent
(Soundbite of laughter)
Mr. HALE: (as Skipper) Oh.
Mr. DENVER: (as Gilligan) Where are you going?
Mr. HALE: (as Skipper) I can't face anyone. I mean...
Mr. DENVER: (as Gilligan) No, Skipper...
Mr. HALE: (as Skipper) It's all my fault.
DAVIES: Terry spoke to Sherwood Schwartz in 1988.
TERRY GROSS: Now, the network was concerned that if you didn't explain within
the story the premise of "Gilligan's Island" each week that the audience would
be lost and they wouldn't understand why there were seven castaways that
couldn't get off this island. You suggested that you could take care of that by
writing a theme song that would open the show each week that would explain the
whole story. That was a very clever idea, I think.
Mr. SHERWOOD SCHWARTZ (Producer): Well, it was a way to do exactly what they
feared, which is dead, dull exposition. You could satisfy that particular
requirement of why they're there and why they can't get off and so forth with a
bouncy theme song.
GROSS: You suddenly found yourself having to overnight deliver to them a theme
song. So before you came up with the song that we actually hear now on
"Gilligan's Island," you wrote another song. And I was wondering if I could get
you to sing the lyrics for the first song that you wrote.
Mr. SCHWARTZ: It was a Calypso song.
(Singing) Tourists come. Tourists go. Tourists rocking to and for.
It was like that. It was Harry Belafonte time, certainly not Sherwood Schwartz
(Soundbite of laughter)
GROSS: So instead you ended up with a parody of a sea shanty.
Mr. SCHWARTZ: Exactly. Exactly.
(Soundbite of song, "Gilligan's Island")
The WELLINGTONS: (Singing) Just sit right back and you'll hear a tale, a tale
of a fateful trip that started from this tropic port, aboard this tiny ship.
The mate was a mighty sailin' man, the Skipper brave and sure. Five passengers
set sail that day for a three hour tour, a three hour tour.
(Soundbite of thunder)
The weather started getting rough, the tiny ship was tossed. If not for the
courage of the fearless crew the Minnow would be lost, the Minnow would be
The ship set ground on the shore of this uncharted desert isle with Gilligan,
the Skipper too, the millionaire and his wife, the movie star, the professor
and Mary Ann, here on "Gilligan's Isle."
GROSS: "Gilligan's Island" was taken off the air pretty suddenly. And I guess
you didn't even have time to do a rescue episode. That means you were able to a
few years later do a special two-hour rescue. But in hindsight would you have
preferred doing a half-hour series ending?
Mr. SCHWARTZ: The real point is that it was better the way it turned out
because when I did the two-hour show called "Rescue From Gilligan's Island,"
the fact that I didn't do a final episode allowed me to make a comeback with
that show which led to two more two-hour shows and I'm currently negotiating
for a show called "Gilligan's Island: the Second Generation," which is about
the sons and daughters of the original castaways.
GROSS: And how do they end up being castaways themselves? Or are they maybe, am
I being presumptuous?
(Soundbite of laughter)
GROSS: Are they not castaways?
Mr. SCHWARTZ: No, you're being correct.
(Soundbite of laughter)
Mr. SCHWARTZ: Thurston Howell IV takes Ginger's daughter and Gilligan's son and
the Skipper's son and they all set out to find the island where their parents
had spent so many years. And they themselves...
GROSS: And oh-oh...
(Soundbite of laughter)
Mr. SCHWARTZ: And as you laugh, and rightly so, a storm comes up and they find
themselves on this island. But they're rescued by their own parents.
GROSS: You also wrote episodes for "Ozzie and Harriet." So maybe you can answer
the question about Ozzie that everyone in America always wanted to know. What
did he do for a living?
Mr. SCHWARTZ: He made a lot of money.
(Soundbite of laughter)
Mr. SCHWARTZ: Which is a good thing to do for a living. No, I wrote that show
GROSS: Oh. Oh, oh.
Mr. SCHWARTZ: I didn't write it in television.
GROSS: So you're off the hook.
Mr. SCHWARTZ: Yes.
(Soundbite of laughter)
Mr. SCHWARTZ: He didn't have a job in radio either.
(Soundbite of laughter)
GROSS: Maybe I'm being presumptuous here, but you strike me as someone who grew
up in an urban area, Jewish, and here you were creating the prototype for what
became the ultimate suburban goyish sitcom.
(Soundbite of laughter)
Mr. SCHWARTZ: So I'm told.
(Soundbite of laughter)
Mr. SCHWARTZ: Yes, it's a, you're talking about the white bread "Brady Bunch?"
GROSS: Well, that, too. Yeah. I was even thinking about "Ozzie and Harriet."
Mr. SCHWARTZ: Look, I have trouble. My rabbi insisted that it would've been a
better name "Goldstein's Island." What's wrong with that?
(Soundbite of laughter)
Mr. SCHWARTZ: Or "The Bernstein Bunch," for that matter.
(Soundbite of laughter)
GROSS: And why didn't you write "The Bernstein Bunch?"
(Soundbite of laughter)
Mr. SCHWARTZ: Above all, I feel I am commercial in the sense that I like my
work to appeal to many people, and that's my satisfaction. So, to aim at the
biggest, broadest base of audience, you're better off doing "The Brady Bunch"
than "The Bernstein Bunch."
GROSS: Well, let me thank you for talking with us.
Mr. SCHWARTZ: Well, thank you very much.
DAVIES: Terry spoke with Sherwood Schwartz in 1988. He died Tuesday in Los
Angeles. He was 94.
Here's the first version he wrote of the "Gilligan's Island" theme.
(Soundbite of song)
Unidentified Singer: (Singing) Two secretaries from the USA, sail on the Minnow
this lovely day. A high school teacher is next aboard, all taking trip that
they can not afford. The next two people are millionaires. They got no worries,
they got no cares.
DAVIES: For Terry Gross, I'm Dave Davies.
(Soundbite of lost theme song from TV show, "Gilligan's Island")
Unidentified Singer: (Singing) ...relaxing on deck on this little ship. The
weather is clear and the sun is hot. The weather is clear? I think it is not.
Tourists come. Tourists go. Tourists...
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