it's very, very hard to understand the world if you don't know where we've come from. so thank you doing what you do and i really liked your question. >> thanks for kicking off our coverage of the "l.a. times" book festival. >> it was a pleasure. i wish you all could be at t festival. thank you very much, peter. bye. have a good day. >> the author of "it takes a pillage: behind the bailouts, bonuses and back room deals" took booktv phone calls at the "l.a. times" festival of books. it's 25 minutes. >> and now joining us on the set is nomi prins, whose book was written in 2009.

the senate is currently working on financial regulation matters. what do you think what the u.s. senate is doing? . >> well, i think they appear to be trying but unfortunately if you really dig into how banks operate and i worked with them and i've written extensively about them, unfortunately, the financial reform package as it stands now, the bill that senator dodd has put forth so far will really not get to the core of the kinds of risk that banks put into the general overall economy. >> you say you used -- you were a managing director of goldman sachs? >> yes >> what did you work on? >> i worked on the credit derivatives that the -- a portion of these toxic assets that blew up and blew out into the rest of the economy. when i worked on them i left in 2002, they were predominantly made up of high yield or junk bonds. they weren't made up of the

subprime loans that they ultimately came to be. that's what wall street does it, takes a method -- it takes alike the crust of a pie and then it fills it with different kinds of fillings as those become available and makes money out of them. >> let's put up the numbers so we can get right to calls with nomi prin. also you can send us is tweet. if you have a question via tweet, twitter.com/booktv so you are twitter address. you mentioned cdo collateralized debt obligations. >> yes >> junk bonds. where did all this stuff come from? i mean, why are we talking about that and not talking about profits and econ 101. where does econ 101 fit in all this?

>> well, that's a good question. the cdos are these packages of weird things that became part of the public consciousness when the financial crisis happened in 2008. but were really constructed back in the late 80s most michael milliken the junk bond king and drexel, and the wall street guys with the bigger banks, the more speculative banks do or in their speculative components of the big banks is they say, all right, what can we stuff into and re-engineer and rejiger and everything into new packages whatever we call them, cdos and it's just a name and they make money slicing and dicing them and marketing them to little pension funds in iowa to little towns in iceland. and basically take money up front, throw the risk out to the world and not care about what

happens to it. they are risk transfer products. they always were. and there's a lot of money to be made out of them. >> are they marketed that way? is it all clear? and how regulated are they now? >> they're not regulated securities. that's one of the problems with the market. despite the problems it's had over the years, it is not regulated. there's no exchange that says, all right, well, here's a cdo. here's what's in it. here's how it's trading on any given day. they are so tailored-made for that deal, for those clients, for those backers each time they're created, that there isn't an exchange. there isn't regulation. regulations are -- regulators are so far behind considering it. even and in these bills that have been proposed the house and the senate there's nothing in there that really gets at making them more open. so almost anything goes. if you want to bet against the weather and i want to bet against the weather and we go to

goldman sachs create something on both sides. okay. i'll structure the piece of weather here and brazil. you take a bet you'll take a bet. and we'll make money on both sides. >> because they do the structuring? >> they do the structuring. and they do the trading. they put it together and they sell it. >> is that what happened with john paulson. he came to goldman sachs and said, hey, i want to put this package together and i want to bet against it? >> for the most part. most of that is perfectly legal within, unfortunately, the structure that we have. >> is it important -- is it an important economic thing to do? does it -- does it help the national economy in any way? >> it is purely a betting mechanism. there's certainly no help that paulson gives. paulson took a bet that the housing market was going to go down. frankly -- >> which is perfectly legitimate to do. >> there are many writers including myself who thought there were problems with the market and things were looking too good to be true. so that in itself that wasn't the problem. the problem was that he came to

goldman and said i want to do this structure. i want to select the things that you're going to buy from me but i'm going to bet against you. and so that's kind of, again, sort of legal because the fact that i'm betting against you, you're still taking the bet on your side. you shouldn't care that i'm betting against you. the problem comes in and the the charge is going to try to get to should goldman should have disclosed who bought part of the deal, but that he selected some of the securities and was on the other side? but he was a part of the selection process which was not disclosed in the marketing material. and that's going to be where it will hinge. >> first call for her comes from richmond, virginia. good afternoon, richmond, please go ahead with your question. >> i just wanted to ask, with the huge bailout, is there a danger with that? with the devaluation of the currency through inflation or

whatever? >> well, i think the currency question is good. a lot of people want to know if any of these problems will affect the dollar. and so far they haven't. and part of the reason why is because all these assets, all of the transactions, all of the marketing was very global. so problems that happened on one side that might have emanated from the united states for most of the manufacturing of these assets were taking place. and most of the bailouts and the subsidies to fix the market were given out, there's still impacts across the world from having been involved in those products. so like technically the dollar shouldn't remain as strong by virtue of the fact that we have and continue to hold so much money behind these assets. without really knowing where they went. they didn't just disappear. a lot of them exist. they are being marketed in different ways and that's exactly how we got into this problem. so having money behind them. having debt accumulate behind them. having the fed put out a lot of money behind them only work when

we can pretend they're still valuable or they become valuable again. the moment that becomes less clear is when we have more problems with the currency even though it's been a globalized problem, i think. >> please go ahead. norco, california. >> it's really important. i think americans are beginning to figure out that congress is really being run by the big money companies. they bankrupted greece and iceland, the ceos and the like. with them embedded in the government every term, who can come against this cartel? and i heard money is going to crash this year. at the library all the sites say that the dollar is going to crash. do you know anything about that? thank you very much.

>> boy, as i mentioned to the other question, whether the dollar crashes or not really depends on whether we get another revelation that indicates that a lot of these educates really aren't worth what the fed and banks are saying they're worth, which is not impossible. i don't believe they're worth what either of those entities say they're worth. and we do have a problem. we have a problem that wall street and certainly the senior managers and ceos of wall street have an incredibly tight relationship in washington. lloyd blankfein is being charged and has close relationships with obama. and there are ceos having meetings with the white house and the treasury secretary. the treasury secretary -- tim geithner was involved in an enormous portion of the bailout and the subs -- subsidy but no

strings on the bailout loans, the that guaranteed all these gifts that were given to wall street and that's the tight relationship between the people. the real personal relationships definitely are a box. i don't know how he fix that. i think we people have to continue to be -- we only really angered about this in our votes and comments and everything else. it's not going to change by itself. >> and, in fact, nomi prins writes if it seems the culture of the goldman sachs pervades the halls of washington, that's because the people of goldman sachs pervades the halls of washington. that's why despite all the talk in washington about reforming the system, the same exact who orchestrated its failures were the ones hobnobbing with the political leaders of the bush and obama administrations. >> yeah, i mean, that's the thing to realize here. this is not a partisan situation. this is not like bush was bad,

obama is good or -- there's a series and years of interrelationships. no matter which party is in power in congress and no matter which party has the presidency. hank paulson, who was the former ceo of goldman sachs -- >> when you were there. . >> when i was there. there was a treasury secretary involved in the portion of the bailout. the other person involved in the bailout tim geithner was working with hank paulson saying there's a consistency and approach related to goldman people and someone like paulson wanted. robert reuben, just before i got there, was very instrumental in deregulating the banking system to devolve into the problems that we now have. under clinton's administration. so you have these series of both goldman ties as well as deregulatory actions no matter who's in control. politically. that culminate to create a

situation where we see crisis and then wonder how did that happen? >> you used to be bear stearns as well? >> yes. >> what did you do for them? >> i was involved in structuring these type of assets. i do know these very well. and i left to write about them. but i wasn't uninvolved. and when i was at bear stearns, it was in london. and i worked on a lot of different types of analysis. i worked in giving suggestions to investors. it's not just buying toxic assets which government bonds to boy and which was worth better and any type of analytical advice. and i think when you're in the environment -- and that's why i can look at it from outside and really dissect it, you don't think about the ramifications necessarily of the products you're making. there's all of this pressure to make money. there's all this pressure for your area to make money within the firm. for your firm to make money within the industry.

[inaudible] >> it's absolutely constant. and there's a real -- it depends on the day and the firm and everything else. but everyone is talking about how to get to the bonus. there's months where this is discussed toward the end of each year before they are set. everything leads up to really making money. and you don't have conversations like go from betting and creating a structure that's going to hurt agrees gross -- greece oh, my god what's going to happen to the greek people and that doesn't enter into the conversation and that's a really bad part of the entire industry. and it continues to get worse because everything that's made and all of these products and all this risk that's been accumulated, there's nothing to counter it. the rules that are being put forth in congress really won't. and so it continues to just spiral badly and every so often it has to correct itself for a second because the market comes down and buyers go out. but they come back in and it goes on.

>> next call for nomi prins, decatur, georgia, good afternoon. >> yes, you know that the ceo is a stock future and there's always a seller on the other end on that type of trade. with regards to whether it was john paulson or john doe, the bank that was on the other end of that trade actually, they tried to upgrade that investment but putting it at 14 of their own mortgages to troy to uprate it which they would be and they ended downgraded it which they didn't know. so the government case disclosed that john paulson was on the other end is without merit. this is more of political football. would you agree with that? >> well, i mean, as i said before, the fact that paulson was the other side is to me not an issue. and for that to be made a part of the issue really isn't where

the potential thought i believe where it would lie. the problem potentially is this. when the deal is put together, and, yes, they were on the other side but there was a management team that signed off on the securities and that was five different parties including jp morgan and merrill lynch and they were the selectors and put on the materials on the selectors. paulson was also a selector. and he was specifically not put on the marketing material. so the question is, would this management group have done the deal? would people have invested had they known? maybe they would. they obviously wanted to invest in this deal. but things could have turned out differently had they known that. and it was not disclosed, specifically not disclosed. and i think that's where there's the potential case. >> why are you in california?

>> it's a nonpartisan public policy think tank that deals with issues from voting rights to financial reform and everything in between. it's based in new york. it's actually going to have its tenth anniversary next month. i joined right after i left goldman. when worldcom was the crisis of the moment. and that was the first thing i was speaking about, about corporate fraud and world banks and how they all related to each other. but it's 60 or so individuals now. they're based in new york. they have an office in d.c. >> is this a george soros funded? >> it's not funded by george soros. i mean, there are other funders and ford is a funder and there are other types of funders. i believe the rockefeller foundation is or was. there's some significant funders behind it. and a lot of the work is very research-businesses. there's a lot of data that is

also used for the reports. i did a report on bank risk. really looking into the books and really seeing where their numbers were and those kinds of things take time and research. i am out in l.a. really trying to be an off-chute because i kind of like l.a. it's a change for other reasons and other types of writing and things as well. >> what -- was there something that happened or did it just kind of add up for you to leave the world of finance? >> i think it was an accumulation process. i think even when i was at bear in london before i moved back to new york to be a part of goldman, i was kind of already a bit disenchanted with everything we were doing and how it was turning out. it just wasn't feeling right. and also just the environment. the internal politics, the bureaucracy and the intensity on

the money just seemed really empty. and yet, i did move back to new york. i did join goldman the last place in the industry that i worked and i really hated it. the intensity of how a firm operates and what it does and how that doesn't connect into what's going on outside in the rest of the world really hit home for me there. and after 9/11 where i was on wall street, i was in goldman at the time, you know, there's the kind of moments where i think a lot of us just think, is this what i want to do with my life or do i want to educate? or do i want to do something. >> "it takes a pillage" is the name of the book but she's written "other people's money: the corporate bugging of america" and "chat: how they are picking your pocket." next call for her comes to philadelphia. philadelphia, you're on the air.

>> hello, ms. prins. i just wanted to react to a program that i saw last night and i would encourage you to check it out bill moyer's journal. it comes on every week. you may not know that he's going to retire from the program as of next week. he had william black on. and he was reacting to testimony given by geithner on august 10th. they were talking about the financial crisis and some of the bank regulators. and during his testimony geithner stated that during the time all this was blowing up, aig, and goldman and what have you, that fed, the new york fed, and the other central banks had no authority on the wall to limit risk-taking amongst all these entities.

and that essentially they talked about how frustrated they were. and ms. schapiro expressed her frustration at why the fdic could not do more. and the reason they couldn't do they were unable to do to curtail this fiasco because the fed had lobbied to recall glass steagall. and they were the architect of themselves, taking the tools of the toolbox so to speak. and then going to congress and saying that we had no way of stopping this because we didn't have enough tools. i was just wondering -- >> caller, nomi prin. >> you're right. you're pointing to a real

disingenuous kind of component on the whole argument on the both sides. glass-steagall was repealed in 1999. that allowed big banks to safe deposit their money and a deal with creating loans and also bet. betting requires speculative trading requires putting capital behind it. you can choose where you can put that capital and you still can. instead of putting capital behind creating or renegotiating new loans with individuals, we want to put capital against betting subprime loans or oil on food on anything else we want to bet on. that's just the choice. we will move it on there. the viewer says it has a very close connection to wall street. it is wall street's bet and the federal reserve, of course, has the ability to see information as this stuff is coming to a head. they also had information about what was going on with the subprime loans underlying what became all these toxic assets. it was obvious between 2006 and 2007 that foreclosures were doubling. these securities were having a problem. rating was going to be as

disingenuous as they are and going to come down on these securities. and your responsibility as the regulatory enforcer of the banking industry is not to sit there on your hands and say i can't do something. that wasn't the decision that was made when the bailout decision was taken. there wasn't a we can't do anything. it was like here's some cheap loans and some other stuff to get you through the day. and so there are emergency powers acts within the federal reserve act that allowed the fed to do whatever it needs to do to promote economic stability. and if it is that there are information lacking or nontransparencies where it it's coming from the banking sector, it is their job to take a look at that stuff. the sec failed at its job. and it allowed the risk-taking the leverage against these type of securities and others to accumulate from 2004 when they changed the rules to allow that to happen. when you change your rules to allow something to get more

risky and then you don't watch it as it becomes more risky, that's a failure on the part of the regulatory body. so they contribute to their own failure but then they fail in executing their defense against what they contribute to it. it's a bad cycle. >> and you call -- you say that the repeal of glass-steagall was one of the biggest mistakes ever made. why? >> because it allowed banks to both have the benefit of having fdic backing and to have their deposits backed and to have that capital assurance, that cushion, in order to go off into other areas and bet more. and what was happening -- i should talk about in my first book "other people's money," it's really big competitiveness within the banking industry. there was banks like jason morgan chase and citigroup, banks that deal with customers with more vanilla loans and

deposits and then you have the goldman sachs and the lehman brothers and others we will leverage to buy much more so we compete with these bigger banks. even though they weren't combined glass-steagall they were just investments for a while. the competition against what was going on with the new kind of commercial investment banks post-glass-steagall drove up all the risk in the market. and right now the bills that are put forth so far in congress don't actually repeal the repeal of glass steagall. there are senators who want to put glass-steagall and they have not been put in these bills. >> what would you like to see in the reform package? >> we should have a repeal of glass-steagall. we should go back -- >> that's not even under consideration? >> again, yeah, it's under

consideration by some senators and some house representatives. what is under consideration instead which they are saying, many senators saying will be the helpful thing and so is tim geithner and so is the fed chairman that if we just increase the capital that banks have to put behind and reduce the risk that way but the glass-steagall separationle will be okay. -- separation will be okay it won't be okay. they'll still make that choice it will hurt the other side of the economy more. >> this is her most recent book "it takes a pillage." if you would like to see more of nomi prin she taped an "after words" program last year and taped an "after words" so you can go to booktv.org. you can just search her name and come up with all the programs and you can watch it all online at booktv.org. nomi prins thank you for being us. >> thank you.

she's the author of other people's money, the corporate mugging of america. she ran the international analytics group at bear stearns. for more information, visit nomi prins.com. >> we're at the cpac conference talking with mark halperin one of the authors of "game change" can you tell us, mr. halperin, did you get the reaction that you thought you got when you write a book. >> every author hopes they have some success by john and i, we're proud and proud we wrote the book we set out to write after our very first conversation about it. it's nice to execute a plan. and i would say it's fair to see we had a little bit more success than we had hoped for. >> anything unexpected come from the reaction? >> you know, one of the things we really did hope for by -- we

didn't know that we'd achieve is the book really has been well received by both the left and the right. most political books, a lot of the books being sold at cpac are people inspired on the far left and far right. what our heart is to write a nonpartisan book of the 2008 presidential campaign as a story with great characters and great plot but from a factual adjournisic point of view. as we come to meetings like this and done talk radio across the country, we've been really heartened and somewhat pleasantly surprised by the fact that people aren't viewing it as a partisan weapon to be used by one side or the other but a great story that we hope we told well to live up to the material. >> did any of the subjects in the book contact you? >> we're making a practice if we don't talk about who we talked to, not to talk about the reaction we've gotten but without exception all the contact we've had from people we wrote about in the book has been positive.

people may not like every also thing in the book but they've been pleased with the overall portrait and been nice about the book overall. >> do you know what your next project is yet? >> maybe. you know, right now the goal we have is to try to the sell as wide as audience to be. and without a political campaign this is not a book about politics or politicians so much as it is about interesting people. who just happen to be involved in politics but it's a story about couples, married couples involved in a great competition under a lot of pressure. and so our hope now is rather than thinking about the next project trying to extend people -- extend the book to people who don't necessarily think well, i want to read a book about politics but rather just a book about a great story. >> are you able to read any books while you're on the road? >> you know, someone very smart told me not too long ago you basically of a choice this life these days. you can read stuff on the web. you can read newspapers and magazines or you can read books.

and i tend to be someone who reads a lot of newspapers and magazines. so right now my book-reading is not at its peak. >> thanks very much for your time. >> you've been watching booktv on c-span2. every weekend we bring you 48 hours of nonfiction books, public affairs, history, and biography saturday morning at 8:00 through monday at 8:00 am eastern. ..