milliseconds to a few seconds. if you slow music down or speed music up too much or slow speech down slow speech up, it ceases to be speech or music. it is very critical range or the goldilocks zone of time. ..

i would like to turn it over to him. >> thank you very much. welcome, everybody. as was said i'm head of the history department at nc state university, and i want to thank ed for asking me to moderate the panel. i'm looking forward to it. ed has already been introduced to you. he is a member of the faculty, he history department of duke university and also vice provost for interdisciplinary studies and leading a study support bid national endowments for the

humanities as long as is lats and the father of a soon to be hope to be ph.d in the humanities. he certainly has wanted to explore career opportunities. the rest of the panel, from ed's left back toward me, next to ed is kevin anderson, who is currently the senior deputy attorney general for the state of north carolina. he also heads the consumer protection division, and he has been directing that for the past five years. he has been lead attorney on a wide range of cases and investigations involving financial fraud, health care, telecommunications and internet ires and argued many cases before the north carolina supreme court. and next to me is former congressman brad miller from the 13th district, or what once was the 13th district before it was jerrymandered into different misses. he represented the 13th do it

from 2003 to 2012. earned his bachelors degree from chapel hill, masters degree tom free london school of economics and a law degree from columbia university and was a law clerk on the u.s. fourth circuit court of appeals in virginia. and he has been practicing law here in north carolina for to years and more. we'll start off with ed making a couple of remark about the book he has written which is for sale. and copies are available at the end. then we'll turn it over to the panel to make some comments, and we'll also leave plenty of time for audience questions and answers as well. so, ed. >> thank you so much, david. this book that i've written is about business fraud in the united states from the early 19th century, right up to 2016. and it's filled with individual stories there are a lot of stories of specific business

fraud, stock promoters, marketing scamsters in the consumer marketplace. it's also filled with stories about how difficult it is to many context to distinguish nowed from enthusiastic promotion, puffery, exaggeration. a nice example of that is the case of the sears roebuck company which you are all familiar with it but might not be familiar with it if the post office closed it down in 1894 is a came close to do as result of allegations of deceptive practices in marketing. the book also provides a great number of stories -- this is the key theme of the book -- about responses to the problem of commercial deception and financial deception by americans. some of those responses are really market kinds of

responses, the rise of accounting, the emergence of attempts to use advertising to warn people about the dangers of deception in the markplace. some of the stories are about ngos, nonprofit organizations, that became heavily focused on the problem of business fraud. but the lions sayres of the stories are about responses by government. chart in the book a long arc of movement in the united states from a tendency to set policy according to the principle of caveat emptor, let the buyer be ware, the base hundred in the 19th century to an expanding set of protections for consumers and investors in many different sectors of the economy. that move policy more in a direct toward caveat vendor, let the seller beware. then i pivot back back back to v

caveat emfor, and what the consequences of that have been. i show -- i argue that shift has gone along with a dramatic increase in the scale of fraud, movement from the worse fraud in the ten's millions to the billions or tens of billions and also a shift in the places where we find it, to -- so that fraud scandals in the last 30-40 years have increasingly insnared some of the biggest and most important corporations in our economy, whereas before that point in the mid-20th century, most frauds involved marginal firms or small relatively small, medium sized corporations. i've written the book for social scientists and historians, political scientists, and also the broad public and perhaps more important than any other

constituency, i've written the book for policymakers who have to deal with the problem of deception in the marketplace on a daily basis. that's why i'm thrilled we have congressman miller and senior deputy attorney general anderson us. i'd like to start the conversation just by inviting them to reflect on what the value of historical perspective is for policy and particularly what the found the book that helps them see the kinds of issues they've been grappling with for years, actually decades. >> i'll jump in on that. one of the thing that struck me about the book is that i think ed makes the point that some of these scams have been around for a long time,, in their core for. they may change on the nuances and the details may change, but the core framework of a lot of these scamps -- scams has been around for a long time, and we see that in practice.

for instance, there are scams that -- you all have probable -- if you haven't received these phone calls or your friends have, at the irs phone call or someone posing as the utilities company and they say your power will be cut off unless you send them some immediate payment, and it can be by wire, by prepaid card. sometimes it's an itunes gift card but the whole premise of the scam is creating this emergency situation and trying to get someone to quickly shoot out money somewhere, and that type of scam has been going on for a long, long time. again, the details change and every time there is some new event the detail made change. but it is, i think, both important and interesting to note the core principles of some of these scams have been the same for a long time, and i

think it also comes through in the book and i can kind of confirming this through experience that a lot of these scams are very well-thought out and there's a lot of brain power behind them and we all have to be wary how much intelligence is behind some scams and some of these phishing e-mails that people get, someone impersonating ebay and the logo looks exactly the same. it's not often a shoddy misrepresentation but they do a really good job of impersonating the logo, and there's some very sophisticated hacking techniques that are used these days to breach information. so, to me that kind of comes through as well just how we really have to be vigilant about

how intelligent some of the scams are, and they target vulnerable people, whether it's elderly people or other people with some sort of vulnerability and it's important that people are educated as to these scams and it's important that we, as a society, know of them, try educate our parents are other others who are vulnerable, and i think a lot of that historical perspective comes through in the book as well. >> the thing that struck me is this is not an unimportant topic but it is treated as an unimportant topic. fraud as a factor in the economy is hardly mentioned in economic textbooks, if mentioned at all remember it's barely mentioned in any kind of political history. i know there's the public image of academics, scholars who need to publish a paper so they pick

some incredibly obscure topic, so they can be the world's foremost expert on some remarkably obscure topic. this is not that. its not like ed has done, the definitive medical study of hiccups. so if you're a physician and you have that rare patient who has had kick hiccups for months and months you can turn to ed's work. this is something that has affected our economy. ed's book sets out ways it does. it undermines confidence in investors and makes its harder to rates money, capital, for legitimate business enterprises, innovative new business enterprises. undermines consumers' confidence bus they're reluctant to borrow or buy things because they're afraid they will be cheated. it is a significant factor in our economy. a suggestionan quack for in hour

history. we just had major financial crisis, probably read bit. it was called largely by fraud. it was not a perfect storm. it was not -- the other explanation, who could have known. it was rooted in fraud. yes there was a bubble and the asset that was inflated was borrowed against and there was a great deal of debt that had that as collateral and when the bubble collapsed, people couldn't pay their debt and that what's happened in the great depression when the stock market collapsed. but there as was rampant fraud in the mortgages themes and what people were told getting the mortgages and what investors were told when they were buying the secure advertized mortgages -- securitized mortgages, the way the mortgages were packaged and sold, someone

argued the book, the bank had every incentive not to make fraudulent mortgages because they had the mortgage on their books and they would lose money. they weren't on their books. they sold the mortgages to investors and they had very little to lose and either from the fraudulent representations to the homeowners homeowners hot reignses to the people -- representations to the people who bought them, and the response -- another point that ed makes that has been continuous throughout history is that the political power, the economic power of the bad actors, not to be held accountable, is probably why our nation's politics and world politics is where it is right now. there is a strong sense that there is an economic elite, an establishment that looks after themselves and what is good for them is not good for most

people. and that is fundamentally correct. i think the response to it is fundamentally incorrect, but that basic sense that be people in charge aren't helping me and they don't care about me, don't understand my life and don't care before my life. that's fundment'll correct, and at the -- fundamentally is expect that's happen in europe with the far right wing possible -- populist an a lead not look after ordinary people. that's not a small thing remember it's been true throughout our history. i also was struck by the continuity of the arguments. i served in congress ten years and one, more to the point i introduced legislation to -- like academics need to pick some obscure topic, members of

congress need to pick in obscure topic to make that their issue, and the issue i was about to take on that nobody else had taken on that would lead me on a path to obscurity, which was okay, was subprime mortgage lending. that was in 2004. it was not seen as a career enhancing position to take on. the folks who actually do it were -- they're based here in north carolina. they're a national group. because they new me through friends and i was brant new on the financial services committee, and they only later told me they first approached our then senior senator, john edwards,'s being the champion for that issue and he said, no, i want to run for precision, trying to position him as the southern centrist, that is what earn knew as the profile to run for president, be elected

president as a democrat. four years later, he did everything short of -- to move to the left but at the time he was positioning himself as a sorensen tryst and thought this would be an issue that would not help him but hurt him. the arguments have been exactly the same. over the course of the history the arguments why not to regulate were the same in 2004 when i first introduced that bill. the same in 2009 and 2010 when we were working on dodd-frank and creating the consumer financial protection bureau. the arguments are the same. >> let me throw out a couple of question asks -- and then open up to the audience. i want to pick up on something that kevin said. one thing that resonate when you

said a lot of the core -- the core of a lot of these scams don't change, and i think you have -- one thing i found fascinating in your book, ed, some things i thought were quote-unquote modern, on been done with the internet, you showed a version of that back in the 1830s, and other case is thought that thing died out when the automobile came in. you show the same old people game people did in the 1830s, still down in the 2010s. so i guess i'd ask ed or inelse, can you thick of a couple of examples of ones that have staying power and why you think they persist? just they're fleecing the same sheep or what? >> i'll give you one example. one common investment fraud is the pyramid scheme which promises wild profit anti-ability and then initially

delivering on the promises by taking the money that later investors put in and use that to pay off early investors. can't last forever because eventually you run out of people at the bottom of the pyramid. one of the -- the actual form of that is very consistent but so is the mode of marking. almost all of these type of schemes, the approach is to look for some group of insiders and to have someone in that group, almost all of the schemes are perpetrated by individuals who can expect to have trust because they are selling this scheme to people like them, who are distinct from the rest of society. so the most famous example of this probably still is the ponzi scheme. charles ponzi operated in boston

in the 1920s and he focused on the italian community remember the earlier example is a scheme bay woman, sarah howe in the 1870s in boston. she focused on unmarried women. bond of trust. i'm unmarried. you're unmarried, and there are quakers who have given me resources that enable me to make good on my promises of wild investment returns, and once that then started going, the chief marketers of the scheme -- it's not advertising, it's word of mouth. and that is a pattern that has recurred right up to our times. >> i was struck by the persistence of affinity fraud, which you just mentioned without calling it that. that ponzi marketed to italians when italians were very much an ethnic minority, somewhat isolate, did not feel particularly well-served by the

institutes of society. even madoff, largely market it what we was doing to jews. >> the early phases particularly. >> yes, but the subprime mortgage market, subprime mortgage lending, was largely affinity fraud directed specifically at communities of color. african-americans, lower middle class homeowners generally but in the african-american community and in the latino community. it was mortgage by a person who looked like them and they did not feel they had been well-served over time by traditional financial institutions, banks. they didn't trust them. and when someone came to them and the needed to borrow money and the only way to borrow money is by borrowing against their home, when someone says, we are alike, you can't trust the people that you would otherwise have to deal with.

know this stuff, can help you. that was a well trod path in the history of fraud. >> just to echo some of these things, a lot of these scams are based in some way -- there's a story behind them, there's psychological element. they're targeting people who are susceptible to certain types of scams. scams that try take advantage of people's desire to hit it big and so there's a scam where you are told you have won the sweepstakes but if you -- you have to pay a small fee to get your wings and that's -- your winnings. that's been around for a long time. now you get that from an e-mail on the internet as opposed to someone in person or a letter or there's the one that tries to prey upon people's desire to help other people so hence the e-mail you get from the nigerian

prince or might be a new wrinkle on that scam, different type of friend. en earlier version of that type of story would have involved a different story with different details but, again, it's premised on trying to prey on people's desire to help other people, and it's very sad but that's where a lot of these things come from, and related to that -- i always find this to be extremely sad and frustrating as someone would works on a daily basis in the fraud world, the scams that are really disheartening are the scam that arise, charities related scams. a natural disaster, hurricane matthew, we know that these things happen and n the wake of a natural disaster. we know that there will be false charities that come out trying to get people to donate money to them. so one the first things we do is get the word out and warn people

to do their research and not fall for scams like that. but those are some of the worse types of scams, i think, where people are really hit hard, they're in trouble, and then out comes a scam to try to take advantage of it and make it even worse, and again, things like that have been going on for a long time, but the details change, the technology changes, and if anything, sometimes technology makes prevalence of the scams and the difficulty fighting them even more rick because then it becomes harder to track down the scammer because they might not even be in your community. they might be overseas and the scam is being conducted of the internet or the telephone, so technology is great in a lot of ways it but it can make it easier for the scammers to perpetuate their scams.

>> let me mention one other pattern that has persisted and that is the tendency to blame the victim for being incautious, for being foolish. a fool and his money are soon parted. that would never have happened to you. you should feel smug and superior and you should not feel sympathetic to the guy who got hood winked because he was not careful and the way that you would have been. >> he was a sucker. >> he was sucker. you mention the -- i think in the first chapter the tendency to kind of -- it was barnum who made himself this endearing scoundrel with stories another -- and wc fields, never give a circumstance an even break, you can't cheat on honest

man, and never smarten up the -- the sense you would not have been cheated, that be person would not be cheated had that not gotten something they should have known better and wait their own fold. and that makes them feel ashamed. people feel more ashamed of their financial circumstances than anything else, and being hoodwinked really makes people not come forward. you also point that out in the book. how can victims of fraud actually complaint about it? >> a key element over the long-standing centuries old cav caveat emfor emtor is to create -- people look out for themselves but a if you protect them too mach they won't do that.

the best antidote is so have people wisen up and be careful and vigilant. the problem with that argue -- this is why we see a growth in more stringent regulatory protections for consumers through the late 19th century and the 20th, is in a modern capitalist society the gaps in information between sellers and buyers are often so great, that it's just a structure problem. >> what made me think of that is working on mortgages, where the argument was, well, they should have read their mortgage. they should have known what kind of mortgage they were signing. who does that? you have a closing, they hand you a stack of documents like this we yellow stickies and says sign here, sign here. who reads their mortgages? it's like the tv ad, did you read page five? no, only lawyers do that.

and it's -- it's much worse for mortgages and what is the opportunity cost for society if everybody -- every consumer in america is reading mortgages and mutual fund statements and credit card bills and all the insurance contracts and on and on. >> just after that, i read a book recently, all about disclosures, and one of the authors of the book did a video on youtube, printed up the terms and conditions from an internet company and he print it it out physically. this is something that normally you're just looking at on the internet, scrolling through and clicking and it says you have read all the terms and conditions. he actually printedded out and it stretched from the second or third story of the library in his building and was numerous feet long, and again, who reads that? it's -- we're all bombarded we information daily. life is complex, and most people

just don't have the time and it's a lot of legales, hard to understand to begin with. >> this is wellly one key reason why fraud is a hard problem to solve because often in the last 50 years, before that, one common response to the realization that there's fraud and deception is to think about disclosure. to say, no, no, we have to make sure when people provide information they disclosees honestly and that they do so in a way that enables people to reduce this gap between buyers and sellers, and yet if that means an avalanche of information, it's not necessarily useful or salient. >> there's information asymmetry , but there's also an inequality of bargaining power. don't care at all about a commercial lease between two multimillion dollar corporations or what called surplus lines

insurance policy, something that is not routine but covers 17 factories. those are manuscript policies drafted between lawyers sitting across the table from i'm other, metaphorically if not literally. that's not available to the rest of us. try go in a bank with a laptop or legal pad and say, i want to borrow money but i don't want to use your forms. let's work this out. and you want to be the party of the first part or me to be the party of the first part? they're going to say, no, we only make loans on our forms that our lawyers drafted. so there's an enormous disparity in power as well. >> there's another point i wanted to make. you can continue. >> let me -- ed, you made a point at the beginning that i thought was worth discussing and that is that the pattern of who

is doing the fraud seems to shift, specially through the 20th century, from more marginal shady fly-by-nice operator -- that's the intention -- but a lot more fraud today is committed by quote-unquote reputable corporations. make that was always drew they were getting away with it more but seems to be the seasons the fraudster 100 years ago seemed more to be the jade -- the shady dealer and now the public thinks the fortune 500s are all out to defraud us. >> well there are scandals and enforcement actions that would suggest that all too more the last several decades that has been the case. we have had major contracting frauds against the federal government in the defense and healthcare industries. we have had a series of banking

scandals, the savings and loan crisis. congressman miller made reference to the rampant misrepresentation and outright lies, called liar's loans at the core of the mortgage market and the financial crisis in 2008. these kind of events, episodes, were not going on at fly-by-night firms or even small companies. these were actually members of the fortune 500, and i think we'll need a lot of careful thinking about exactly how to explain this. the argue. i put forward in the book is that it's related not just to deregulation but also to the rise of culture wind corporate america that has been premised on short-term financial results at all costs costs and that thee of executive compensation and compensation for middle managers

and also even people say who are bank managers at that at local s given powerful incentives to create accounts that don't exist or authorized to meet their quotas. that type of development which was really something that emerged broadly in corporate america from the 1970s, the 1980s onward is a mural dimension why we have seen a larger scale of fraud and one that is hitting central corporations in our economy. >> the financial crisis, the mortgage lending itself, the people who actually mortgage originators or brokers set all the cultural stereotypes, the fly-by-night people, the affinity fraud but the people would were directing it and knew what was going on at that level, in the origination of mortgages,

the making of mortgages, and the selling of the mortgages to investors, that was done by people who went to all the right schools, belonged to all the right clubs, have perfect social graces, they know which fort to use, they are -- >> no which lawyer to call. >> know which lawyer to call. they're in every way the people who use would want to associate yourself with, and think well of you, and all the cultural cues said those were the anymore america who are egg cal. they weren't ethical. in fact they're were pretty much crooks. and we need to get past that. it's deeply engrain inside our culture of -- engrained of in our culture who we think of as the better people, ethical people and people who are not. you mentioned richard whitney in

the book just once but you don't mention later, what late end happen with him. richard whitney was the president of the new york extol exchange and the early news reels in the crash and then the beginning of the new deal, the early news reels of the new deal, he is a spokesperson for wall street saying that the securities laws are overreaching, they're unnecessary, and he was the perfect picture of a patrician. everything you think of as a pa tradition. looks like he came straight out of -- the perfect patrician, and then as now, assume all of the cultural cues in society, that is someone who is very trustworthy. he was indicted and convicted and served an active prison sentence for embezzlement, and i think that instrument actually

was a big part of why the new deal was able to get their reforms through, is because that incident, his conviction for embezzlement from his stock firm undermined the credibility of our patrician class, and made americans realize that, yes, we do need to regulate wall street. >> he was the trustee for the new york yacht club, which actually provided money to widows and orphans, and he embezzled from them as well. all of this basically -- this was actually another common tale in fraud. he got in over his head with trades and wanted to cover it up. he is just going borrow the money for a little while and make it good, make other trades which would unable him to back

phil the losses. that only creators further into the hole and there's no way out. you're absolutely right, that prosecution, very clear evidence, broke the unwillingness of many people on wall street to actually engage -- >> we never really had that in the financial crisis. we didn't have anything like the core -- anything like the indictment and conviction of richard whitney. we didn't have anything by government that pointed fingers at who had actually done criminal or at least blame bury things, and i think -- blameworthy things and part of that was the people in government didn't want to do it, didn't want much more ambitious reforms than what we got. >> points as well to what obtains for several decadeses after the 1930s which is not

the coziest relationship between corporate america and the regulatory state around consumer protection bus but more constructive kind of engagement rearing that are outright an tag him in or an effort to make sure the regulatory environment was as minimal as possible which is something we have seen in more recent decades. >> eddie murphy and dan akroyd. >> she we -- should we open it up for questions from the audiences? >> sure. >> so, i think we sort of been dancing around but perhaps the panel could comment on the coopting of the regulatory environment and scheme by campaign finance contributions, drives to deregulation, the repeal of the division between

investment banking and regular -- >> everybody suspects know answer that question. >> it's the panel. >> i'll make one comment and then i'll leave it maybe for congressman miller to add on there. in this arena, investor and consumer protection, often the era of deregulation has meant not so much uprooting rules and regulations and institutions, agency us, as in other domains in policymaking. it's been more a disinclination to put in rules of the road with new kinds of markets, like derivatives in the face of proposals to do so out of concern for things like misrepresentation and the potential destabilization of the financial system. the other has been a mix of appointing people to regulatory agencies who are disinclined to have really stringent

enforcement posture and cutting in enforce: the question of the role of campaign contributions, i'll leave that for congressman miller. >> there are friend its have this debate with recently. the role of ideology or political philosophy or -- we'll call it dogma -- of not regulation, the market will take care of it all, versus the influence simply of money. i don't think many people actually look in the mirror and think i'm a crook, i'm going to use my position. they do convince themselves that there's some broader public good by the position they're taking, but i think sinclair lewis said,

it's hard to convince a man of something that his salary depends on not believing or not understanding. trying to make a man understand something that his livelihood depends upon not understanding. that was sinclair lewis. >> a reference to food in his stomach. >> it's hard to get a politician to understand something that his campaign budget requires he not understand. so there's -- it's hard not to notice the confluence of self-interest and dogma. the dogma does explain doing what you're doing. it does justify what you're doing but the dogma does frequently -- belief in the dogma requires that you ignore how life works, like you really think someone is going to sit and read owl of their mortgage documents the way that it -- and sit and read all their insurance contracts and all their mutual fund contracts or statement or whatever.

and that there is this equality of information and bargaining power that makes a market work. so you can rely upon market forces because market forces will work when there's enormous differences in information and enormous differences in economic power. >> if you rely on market force us it only creates new kind of potentials for deception. if you rely on account, then your reliance on the accountants being honest and then you could have a new set of problems. >> you'll see different approach bid different agencies as well and sometimes these issues can be complicated. the state and state attorney general offices, even back before the financial crisis hit, were doing a lot, taking a lot of action in the predator loan space and trying to get federal authorities to do more and some of the battles we had to fight

where the occ, the office of the comptroller of the currency was always trying to pre-empt that, and i can't speak their motivations. auld talk about the safety of the banking system but they were both not doing a whole lot in terms of consumer protection and trying to prevent others who were trying to take consumer protection action from doing anything. and so they are very different approaches among differentials and that will happen. -- among different agencies and that will happen. >> i have some perspective of the last 40 or 50 years. i in the mid 'of 0s i was a wet behind the ears attorney on wall street. the new deal was accepted as a fact and complain we are the most regulated industry but i it was accepted. other thing that has clearly

changed is the securities and exchange commission was considered the blue ribbon or gold standard of regulation. i haven't read your book so i don't know if you mentioned anything like that. but it understood it had two mandates and those mandates were not no conflict, actually worked together. one was to keep the capital markets open and thriving, and the other mandate was to protect the investors, which some people would say you can't do one without the other but they were very good at doing both, walking that very fine line in making sure. now, their philosophy, someone mentioned disclosure, and i'm sure you know the sec philosophy was disclosure instead of doing merit regulation, we won't -- in fact in theory -- never heard it happen -- the theory was if

somebody tried to sell interest in a trash pond on the grounds there may be gold in it, as long as they disclosed everything and said we don't have any reason to believe there is any gold in there, it was perfectly all right. but on the disclosure, i still have some of the prospectus that i worked on then and they were this thick. now they're this thick. it's not unusual for them to be that thick. and like you say, that is a lot of material to try to go through, and unless analysts wade through and it then comment on it and say, recommend what they think ought to be done, it is just overwhelming. >> a couple of quick reflections. you're absolutely right and part of the backdrop for that acceptance was the depth of the great depression. there was a capital strike in the early set 30s. there were no deals happening, almost no market to be had even

the secondary market either, and there's no livelihood without a degree of confidence to promote trade. [inaudible question] >> -- attorneys -- one of the older attorneys in the firm told me the started practicing law on wall street in the early '20s and he said by '27 or '28 he thought he got the hang of it. then the depression hit and all of a sudden all those big thick indentures and bond documents came back to haunt him and they were having to scramble through them because both sides were fighting over who should get what, and before that they had just been -- they were ground out by routine, just as i think happened during the recent trend. >> it is important to keep in blind, though, that there's a little bit of a practice of generational amnesia that can

happen. so when the great depression is 30, 40 years before, there are fewer people, like that individual who were there remembered it can communicate what was like. other problem quds into view. the 1970s and 1980s there was foreign competition in the securities market in way that had not obtained before and people are concerned about new york losing ground to london if the regulatory rules are too stringent. and i think there are -- it's a complicated story as to why there was a movement away from that, but there absolutely was a sec, by the '80,'90,2000s, the goals that are really shaping the tradeoffs wind the agency about how they should handle particular issues tilted in a direction away from investor protection. >> if could i add to what you said, i'll put in a plug for why

we need history to combat that generational amnesia. example to me is someone already mentioned in the 1990s, under the clinton administration, we eliminated the barrier between investment and commercial banking. the glass-steagall act. now, when that was lifted, i'm willing to bit 99% of the american public had no idea what the heck the glass-steagall act was, including american -- many attorneys or ion bankers. i remember talking to colleagues and no one knows what this law is but this is a really bad idea. this country -- i hate to say -- i was probably wrong about every edisk but that day, we all said nothing good is going to come occupy this. there was a good reason that's was pass held in the mid-'730s but there was incredible am nieca, the depression is long gone. we can never have another depression.

of course it can't happen. that sort of thing. housing prices never go down. all these -- so, that. >> that's a nice example. the fed predicated its modeling of derivatives in the mortgage market on the presumption that was the case, because derivatives -- the financial instruments had not gone back before the 1980s so that's as far back as you needed for data as the 1930 ask and --s and the housing market was irrelevant. >> the three biggest frauds we have seen recently are volkswagen, wells fargo, and don't jump out of your seat, unc chapel hill academics. but i'm wondering how many large organizations have somebody make on a vice presidential level that their job is only one thing, they report to the

president or the chairman of the board, and they have more or less freedom to question anything that corporation is doing and their role would be protect the customer, the student, i think to get the gist. in other words, might get fired because he stirs up too much stuff, but do many big corporations have like a hired gun for the consumer or the client? >> well, i think it's really important not to suggest that all corporations are dishonest. i don't think it's true. obviously corporations with hundreds of thousands, tens of thousands of people, wog within them. even though that engage in marketing practices we might want to question are still with many deeply -- people with deep integrate who are disinclined to engage in that behavior. there are now right across

corporate america efforts -- not just one person didn't ash entire ethics and compliance unit in every large corporation with the role of thinking hard about what kinds of activities are going on within the corporation and reporting, the whistle blowing mechanisms within corporations. many of these things are in response to scandals, and they are -- their impact goes beyond the pick company. when there's a healthcare seasonal, it tends to reshape the whole industry in the way they do things, not just individual corporations. >> i think it's a great question. think part of what ultimately needs to happen -- and ed is right there a lot of companies that have ethics officers or in theory the general counsel can serve that rule to a certain extent or someone else can serve that role but has to be a cultural within the company that is acceptable to question something or it's acceptable to come forward when you see

something that is improper, and it's somewhat shock that in some of these situations, some of -- like volkswagen, it's shock nothing one came forward and disclosed that was going on. took an independent test are of the emissions to randomly -- wasn't even the federal government that discovered it. and so it is really, i think -- i think the culture needs to change and people within the companies need to be willing to question things and feel like they can come forward and point it out when something is happening that is wrong. >> that means it needs to come from the top and if you have that ethics office that is just box checking. >> before i got congress, the congressional response to scandals was sarbanes-oxley and that was to make sure the thing

did get to the ceo desk. the ceo had to sign on -- with criminal penalties, if signed it incorrectly, or without -- not in good faith or without a good-faith question into the truthfulness. certain representations -- when jamie diamond, crowe of jpmorgan-chase, testified before the house financial services committee, on the london what's debackle, he really laid into their risk controls. they just did not have good risk controls in place, and they were going to fix that. and i said -- i asked, just a month before this, you signed a quarterly certification required by law with criminal penalties that you had adequate risk controls in place. i don't remember doing that. i don't remember that discussion. well, tell me what you do

generally. tell me what you practice us? what do you do every quart enwhen it's time to seem that? do you call on your staff? and behind them, all the rows of lawyers, jpmorgan-chase lawyers, were having -- at the very least facial ticks because the questions were about things for which he had criminal liability. that was something congress tried to do to make sure it got to the ceo's desk, and with no apparent effect at all. >> sometimes company does do the right thing. we have had some companies come to our office and say, hate to tell you this but we had someone make a mistake at our company and there was a billing error and we overbilled all these people and we want to do the righting? provide refunds to them, and you're the entity in the state

that enforces unfair deceptive trade practices and we want to tell you about and it tell us what we can do to make it right. so that does happen sometimes. and we certainly like to see that and we treat that situation differently from a situation where someone is aware of fraud and just sits on it and does nothing. we would much rather have someone come forward and do the right thing win something like that happened. >> almost every antifraud reform has a business that wants a playing field that is fair. >> we hear that, too. we hear business says we want the playing field to be even. we want you to go after fraud. we don't want there to be a benefit for engaging in unfair behavior. we do hear that. i think there's truth to that. >> you bring that up in your book, ed. in some ways you're tapping into that scholarship on the -- dates back 50, 60 years,

there's always been a wing of the business community that sort of wants to play fair, and actually welcomes certain -- doesn't mean they welcome all reform but welcome certain ones that keep third really bad actors from undercutting them, here in the state rights now we're having a debate over classification of workers. have to be a labor historian so this on my radar. just reading the newspapers, do seems to be some employers who say we want these laws because i can't get on a law because the guy treating worker ill locally is undercutting me by 30% and that's the percentage he is skimming from the worker. >> there isn't nearly enough another that now. that has been my personal experience. not nearly enough of it now, and there a couple of things. one is the antiregulation dogma, the antistate dogma, is pervasive, and everyone that does those things, can't call it regulation even itch it's for something they aren't doing and

know 0,able, it's almost genetically coded. and with respect to national organizations, the people who most active in the national organizations, who control the national organizations are the ones who are active are the ones doing the bad stuff. the ones minding their own business, providing needed goods and services on a pretty honest basis, why are they going to spend a lot of time on national -- on their national association? why they're going to get really involved? why give to the pac? make sure they're on the executive committee or whatever else? and i think that has been a big part of the problem as well. >> time for one more question. >> okay. well, we have an issue of not only deregulation and of course now it's happening at warp speed

but we have situation where the regulators are not effectively regulating either, and they're doing wink, wink, nod, nod. and i'll gave perfect example of that. that's regular z truth in lending. i've done a fair bit of research on this, dare say that everyone in this room that has a mortgage, that their mortgage, if it's a fixed rate mortgage, is not in compliance with reg z truth in lending. and i spent many years trying to bring this to the attention of the senate banking committee, and i was essentially told by the chairman of the senate banking committee, if we insisted upon strict enforcement of this, you would upend the lending industry. so, there's regulators not

paying attention. >> that was an issue raised earlier. i didn't comment on. there is a resolving door, not just the congressmen becoming lobbyist -- i have not done that but between the tony white shoe establishment lawyer law firms and the regulatoriy agencies. the result has been disappointing. they may be democrats and may check a lot of boxes of the chairman of the ftc who i think has just left, is is a la teen newscast. two books. she went to harvard law school and is a friend of president barack obama. another box. i'm sure the was a democrat, but he only credential since law school -- she had been a partner, an associate and been partner at a big law firm.

you kind of become part of the culture of that firm and there's an assumption that your clients, okay, maybe they did something a little wrong but, you know, boys will be boys, and it's -- what they're doing is pretty useful, and the -- they're paying this for the guys on wall street to defend them. the result is an unwillingness to take on a lot of those practices and it's the sec, cftc, ctc had some good leader ship under gary ginsburg but some disappointed. ftc. fcc, leakinger to agency that require three votes, they come from the same -- have the same resumes and that resume means you are very smart, i think if you went to harvard law school and you did well there you have a pretty eye high iq but don't

see the world through the eyes of anything other than the environment in which you have lived. >> my last comment, very quickly at the end here, is that if you turn out to be right, if we're going to turn our back on a whole host of regulations on investor and consumer protection, we can expect to see more corporate scandals and erosion of public confidence in the markets. >> well, thank you, on behalf of the panel, thank the audience, too. [applause] ...