news today violence is once again flared up. these are the images the world has been seeing from the streets of canada. trying to corporations rule the day. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for thursday july nineteenth two thousand and twelve bloomberg reports wall street may face upper middle will flow in the library scandal itself if investors and firms sue each other and the financial times reports regulators are narrowing in on at least four of europe's biggest banks in this rate rigging probe h.s.b.c. deutsche bank credit to group the law and society in general but will lie mark

a turning point and authorities serious pursuit and punishment of wall street crime will talk about it and why haven't there been convictions of senior level executives from big wall street firms for crimes related to the financial crisis in the several years since well here is how it was laid out and the oscar winning documentary inside job. was go for more do you think there is some more systematic investigation being undertaken because of your find the concrete spinal please i have to disclose something. well the director of that film discussed it with us we interviewed charles ferguson who is out with a new book i should mention and we took stock of where he sees us now and from wall street clients shelling out for consultants to help their daughters get into the best sororities to the royal version of austerity in europe we'll cover the financial stories that triggered our gag reflex today let's get to today's capital

account. it's been roughly four years since the financial crisis and it doesn't feel like a whole lot has changed on wall street big banks are bigger six hundred fifty trillion dollars of over the counter derivatives are still out there let's look back though at the aftermath of the financial crisis as presented in the oscar winning documentary that came out in two thousand and ten inside job goldman sachs lehman brothers what was happening what do you think about selling securities which your own people sink or. bother you as

a hypothetical no this is regal. so hypothetically and really looking at the recent news it seems like history just repeats itself we have the barclays settlement over library manipulation and investigations of other banks in relationship to that j.p. morgan making outsized bets on a boil trade that grew larger that originally reported with depositors money u.s. regulators probing j.p. morgan to over manipulation of power markets h.s.b.c. executives facing a senate panel over money laundering those are just a few of the litany of stories we've seen out in the last month or so now some of these are related to the financial crisis yours i should mention but some of them aren't many of them are lingering on and on ongoing things some of them are new the question is why haven't we learned our lesson in the sense of why are we still collectively allowing this to go on i asked charles ferguson director and producer

of inside job and author of this book predator nation corporate criminals political corruption and hijacking in america and here is what he had to say to that. we didn't literalist. although. the deregulation of the financial sector over the last twenty five thirty years has certainly played a role in its increasing criminality and i think another major factor in fact probably the single most important factor is that crime has gone unprosecuted since approximately the early to mid one nine hundred ninety s. . and. in all the cases that you just mentioned and many more besides there is not been a single criminal conviction for. what those bankers have done and what the banks have done and i want to get more into into the criminality and the issue of

prosecutions but first i want to remind anyone that doesn't remember this famous moment and your academy award acceptance speech where you famously started like this i must start by pointing out that three years after or horrific financial crisis caused by massive fraud not a single financial executive has gone to jail and that's wrong now it's been more than a year since that speech you're saying we haven't seen any criminal convictions have you seen any material movement do you feel in the direction of prosecuting senior level financial criminals at all. well until very recently i would have said no in fact i would say that if anything the situation had been getting worse in the sense that a number of criminal investigations that had previously been opened were closed. and the federal government made the justice department made quiet announcements

that there would be no prosecution for example of countrywide or of a.i.g. . recently however i think that. political pressure in unquestionably the fact that it's a presidential election year has some role in this political pressure and popular pressure generated by the rather incredible recent wave of new scandals in the financial sector is is causing some movement towards finally prosecuting people will see what actually happens and then when you're talking about that movement are you talking for example of reports that barclays traders may face criminal charges in september bloomberg is just out with that and there are other indications from the justice department that they're building criminal cases are these some of the things that you're referring to and do you think as some have said this could be finances tobacco moment.

again we'll see but yes that that is what i was referring to and in addition to the recent announcements about. the justice department opening a criminal invest most have been calls in other nations particularly britain for even to gay chanson possible criminal prosecution related to live work and even a couple of other cases also about a week ago twelve democratic congressman sent a letter to the justice department calling for aggressive criminal investigation of recent financial scandals so i think that there is some movement in the career direction but we'll see what actually happens and whether it survives the presidential election year you know it's very possible i fear that as soon as the election's over this law be quietly gone and that's a great point i want to get more into kind of the nuts and bolts of this too because there's a whole argument about whether or not these create these financial allegations if they hold up to the letter of the law first i want to quote obama you quote him

saying this in your book predator nation which was just out this spring where he's commenting on the prospects of prosecution related to the financial crisis citing specifically the problems in doing that with the collapse of lehman and the subsequent. whole subprime lending fiasco let me just play a little bit of that before i ask you about it a lot of that stuff wasn't necessarily illegal it was just immoral or. inappropriate or reckless. is that true that most of the projects in behavior can't be punished because the conduct wasn't illegal in terms of the letter of the criminal law what's your reaction that. that in fact it was criminal and that's one of the principal reasons that i wrote the book in about a third of the book is devoted to a very very detailed analysis of the behavior that led to the financial crisis behavior of the cause the housing bubble in the financial crisis and

a great deal of that behavior was criminal we now have over well you know but instead there was. then later in congressional and other testimony perjury and also criminal sarbanes oxley violations if you as either the c.f.o. or the c.e.o. of. the adequacy of your firm's internal financial controls then you were committing a felony punishable by ten years in prison and we know that there is very very clear evidence that there were false and occasions by senior management of citi group in senior management of lehman brothers among others i'm curious and you know there are lots of different theories about this but i'm i want to know your why do you think we haven't seen those personal it the answer is very simple it's a very depressing answer it's very sad answer but it is that the financial sector

is now so economically financially in politically powerful that it is immune not only from regulation but also from law enforcement. and it is it's it's control federal and state and federal policy is now so great that it is as a practical matter impossible to prosecute senior financial executives the united states so that you think that will be a continued trend we see for example with libel if there are charges they will be for low level traders not for the people that were overthinking them. that's very much my fear is that if the political pressure if the popular. anger about this generates enough political pressure then a few low level or mid-level people will be sacrificed in order to keep the system in and people who run it safe from prosecution should say by the way that it's not

quite correct when i said a minute ago that it's impossible prosecute these people perfectly possible it's impossible only in the sense that. our political leaders don't have the courage to try to do it because for catch and i want to just take this opportunity to be as specific as we can because you detail it sarbanes oxley and fraud as just one example of where senior level executives could be had to held accountable but one thing that i often hear from people is oh it's difficult to prove things like fraud in the court of law because you have to prove intent and it's difficult to prove that someone intentionally did these things for example with m.f. global they had technology that they couldn't properly monitor their liquidity in the way that they needed to for how complex that firm was so that could be used to say oh hey they didn't have the intent to steal customer money they just didn't have the right software so i am hoping you can be specific and to some other most

profound profound or most material are finite ways or examples of where we can prosecute crimes related to the financial crisis or financial crimes before or after. well there are quite a number actually and. in the book i go through several dozen. people in the examples in companies so one example for example with the with regard to lehman brothers sarbanes oxley violations in may of two thousand and eight eliminate executive matthew levy sent a memo didn't send he and delivered a memo to four senior lehman executives one of whom was the c.f.o. of lehman brothers. and said in the memo and this executive matthew lee was in charge he was executive in charge of lehman brothers global balance sheet so he was a very relevant high level person and he said in the memo. i feel that it is like

ethical and legal obligation to bring to your attention the fact that there are billions of dollars of unjustified assets on lehmann brothers balance sheet now that seems to me a pretty clear indication that there's something inadequate with your financial controls. and and there's similarly equally explicit evidence about. many other examples including the executives of goldman sachs lying to customers. about the nature of the securities that they were being sold right and i thank you for getting some of those that concrete examples i do think that's helpful. and you got lots more helpful information from my charles ferguson interview after the break also still ahead wall street bankers may know the beta of a stock or portfolio but it seems they're also saying you're paying to get to know some other letters of the greek alphabet to tell you more in the exchange but first

your closing market numbers. the fold did those stores are here. for going global and it's why are. you. choose your place take your stuff. to.

make your statement. spread the word. if you want to string a moment. of fold. flow from. place.

the book. welcome back before we get back to the interview i want to set this up a little bit because it's not just wall street and washington that you have to worry about with a revolving door ferguson has documented conflicts of interest involving academia in this regard and a few of the people he talks about i just want to make sure we all know glenn hubbard he talks about he's the dean of the columbia business school he was a top economic advisor to bush jr and he co-chairs the committee on capital markets regulation which ferguson calls a de facto public policy lobbying organization for wall street hubbard was paid for example one hundred thousand dollars to testify for the criminal defense of to bear stearns hedge fund managers prosecuted in connection with the bubble who were acquitted then there's larry summers who was treasury secretary under clinton in

that administration he was involved in the deregulation of derivatives obama he was an advisor to as well he returned to harvard he's been in and out of academia and has raked in millions during this period of service and out of service from out of service actually i should really say from speaking engagements for financial services companies and frederick michigan professor at columbia business school he's a former fed official and one thing that ferguson points out actually an inside job is he wrote a paper on stability in iceland that was paid for by the icelandic chamber of commerce but there was no mention of it at the time now we'll get more into those but first a little more on live war with charles ferguson director and producer of inside job and author of predator nation. i thought it was interesting with bob diamond the c.e.o. of barclays who had to leave his position after the library scandal. didn't article proposing that perhaps his departure was because he isn't as politically connected

of a c.e.o. he's a us guy he was never accept accepted by the political or financial establishment of the u.k. this is according to the wall street journal i thought that was quite interesting and i'm wondering if you think that if u.s. banks are found guilty of libel or rigging and these investigations that are ongoing if you think c.e.o.'s will suffer the same fate as diamond or not. well it's not they certainly haven't yet. and we know that a number of other banks were involved although none others have you know settled in the allegations what would distinguish barclays was they actually admitted it and nobody else has yet at least not officially. i don't think that diamonds being an american really was terribly relevant the british case though i think that. the british are showing that although they haven't yet prosecuted anybody criminally either that they were actually and you know i think

a couple of them have been in britain a couple of lower level people have already been crippled prosecuted in the lower case. but what's what's clear is that overall the british do take these violations more seriously and there was very serious pressure from the political and regulatory system for documents to step down but it wasn't just him it was also who's chairman and it was also barclays number two neither of whom is american by the way so i don't think that the diamonds being american was a major factor so you think that essentially the u.k. is just tougher on these issues than the us is a story coming out of that to be clear that's yes i think that's right ok well wall street journal doing their own little spend there i'm i'm just getting but it seems that let's talk about the revolving door that extends beyond just maybe how people would traditionally think of it with wall street and washington because you talk about the revolving door among academia along with the financial sector the

executive branch and the federal reserve and this sets up and your view is some enormous conflicts of interests for individuals who are really critical in shaping policy so you go into this in some length in your book some of the people you mention also are in the movie glenn hubbard larry summers frederick meskin what activities have they engaged in that impact their judgment in your view and what have been the consequences well. the these people now make millions of dollars per year each by the way. from the financial sector directly and indirectly by being on boards of directors by being on advisory boards being consultants. they give expert testimony in regulatory proceedings they testify in congress they give speeches. there is in all of those activities or are frequently paid for by their financial sector clients and that fact is frequently not disclosed when you see famous

economists testifying in congress these days the odds are extremely high that he or she is being paid and paid very well by somebody who has a very strong interest in the outcome so. what's happened over the past thirty years in parallel with the rise of money in politics has been the rise of money in academia and it has had the same effect it has had the same corrupting effect on academic work in on the public and political statements of famous academics as it has had in our political system and. that has not until recently been very well appreciated in fact i think it was my film that was really the first kind of clear public description of this situation and i'm very happy to say that there has been some response in academia about this the behavior continues but now people are much more aware of it and much more skeptical about what they hear and sense

that have at some universities adopted disclose their agreements since their move they rarely yes as our universities and academic departments and also several industry associations. professional associations the american economic situation for example have adopted disclosure requirements and codes of conduct for the first time i think that's really interesting it shows that this does matter. i do want to just harp on this point for one more moment though because a former fed official frederick michigan is someone you interviewed an inside job he's in your book too you talk to him about how he wrote a paper about financial stability in iceland which was paid for by that is land chamber of commerce the irony is our producer found one of michigan's older articles from two thousand and three i believe which was entitled policy remedies for conflicts of interest in the financial system and do you think that these guys these economists are even aware that they themselves could be part of the conflict of interest problem oh i think they're extremely we're. going to have ferociously

resisted disclosure requirements limits income. but i think they're extremely aware of the nature of what they're doing yes and just to carry that on for one one more moment i do have a question i guess it's a little operational because after watching inside job and seeing some contentious interviews were probably those those gentlemen were expecting the kind of you know tough interview that you gave glenn hubbard's thanking you got three minutes give it your best shot i'm just curious how it's been since and you know how was getting interviews for your book and how i there's one story you tell in your book about larry summers not allowing the inside job to be shown at harvard but then saying it could but then finding out you were going to be there so then he said no no what is that it's what is that been like the reaction. well you know i've i've lost a few friends. you know some of these people were personal friends of mine or at

least acquaintances for fairly long period of time. and. also you know city somewhat to my surprise and certainly regret. people in the obama administration and people close to you bob inspiration. will no longer speak with me which is so last you know these are people in many cases that i respected that i've known for a very long time but. you know i felt that i had to say what i believed in and describe the facts as i saw them so. the fact that you know there's a couple of dozen people who are not going to be able to talk to anymore that's just one of those things you have to put up with there you go very earnest answer coming from charles ferguson director and producer and side job we're going to post a little more of that interview that didn't make air on line so you'll need to look out for a web extra on our you tube channel. all

right let's wrap up with loose change dimitri and shannon we hear a lot of things that wall street shells out for but i don't know if this is one that even i anticipated one of them is including helping their daughters get into the very best of these. morrow night we're going to host over a thousand girls for a rash and we're going to get. the best so of course we accept nothing less now so according to reporting by the new york times wall street clients are hiring image consultants who charge eight thousand dollars that's the one that's profiled

in the story for a weekend workshop to work with these girls to prepare for a sorority rush teaching them how to have small talk what to wear i cannot believe that this is real this is the loser thing i have ever heard in my life if you need to pay eight thousand dollars to learn how to be cool then that unto itself makes you one cool. yeah i also like i don't know if we can get a look you're like this graphic here because these girls are rushing i don't really know exactly how russian works but i don't know if it involves actually rushing but they're running. i don't know and it is your world would get to the best sororities that this behavior well i mean you have to back in front so the question is you know what because j.p. morgan's are behind the i'm asking you know is there is something going on here as far as foretelling for the future and then we have bank of america over here looks like a total disaster i mean i don't know ok this this is you know obviously this is pretty

ridiculous it's the new all the guard to the financial oligarchy they can afford to give not only their kids the best education that other people can afford but they're also doing them the tools they need to rush into sororities whatever that is here is my thing you know money can buy a lot of things i don't think it can buy you class and i don't think it can buy you coolness i don't think it can buy you likeability i don't think you can buy is not advantage of the eight ball just because you can pay for it doesn't mean that you can get results shannon what do you think. i think you've heard this a lot in college too that we've paid for and so. paid for our friends who pay for their bread and everyone says that when you're in his for tea you pay for your friends because you have to pay dues and there were never was enough for. stuff on all the stuff about where you were you and i was innocent but well you but i don't really know where you're cool to begin with floor of the so i will go to the grocer already part me extra qua bisley so i definite only use for already clearly well because they're for there for women to meet three men men joined for

eternity that's right we're going to vote for her but you're sort of the extent to which this is a new subject for you we broaden your horizons today dimitri i hope you broaden yours because that's all we have time for thank you so much for watching and don't forget to come back tomorrow and in the meantime you can follow me on twitter at lauren lyster and give us feedback on the show or catch any you missed at youtube dot com slash capital account you should also definitely go subscribe and look out for web access to our web outtakes from our charles ferguson interview you can see us on h d on hulu that's the only place where h.d. and until tomorrow thanks so much for watching and have a great night. see official t. hopefully keisha your only so long called time from the. lights

on the. video. mission street now in the palm of your.