When Goldman decided in
December of '06 to take a very significant short position in the
mortgage market, understanding—as they did—that things were going to
collapse, did they, in any way, shape, or form, pick up a phone to a
regulator, the Fed, the treasury, the OCC? Did they say, "You know what?
There's a societal problem here. There's an overhang, and we have to
deal with it"? Did they pick up the phone to their colleagues in the
marketplace and say, "Hey guys, we're responsible for regulating
ourselves in this political environment—that's what we asked for and now
we have to do it." No, they did not speak up. They simply figured out
how to make money on the deal. And then they had to be bailed out with
our tax dollars. It's one of the most grotesque violations of
public-spiritedness that I've ever seen. And I think Goldman deserves
all the condemnation it's now getting.
Some bankers and
business owners, when faced with deregulation, cite their belief in a
government that doesn't interfere with the free market. But don't many
of these same entities enjoy substantial benefits from government
intervention—Coca-Cola benefits from government subsidy of corn, for
example, or Goldman Sachs benefits from bailout money? Why does this
This is one of the most cynical
plays out there. Either they are ignorant and have no idea what the
market really is, which is the case for some of them—or, they're
cynically playing to the public's desire to create the marketplace that
they've described. They ask the public to put confidence in this
mythical marketplace where you don't need rules—until of course they
need a bailout, and then they beg and plead for, or demand, dollars. So
the hypocrisy of this knows no bounds and the cynicism also knows no
Whose job was it, in your view, to prevent the financial calamity that came to a head in 2008?
The regulators who are being paid to
stop the sort of behavior that metastasized into the crisis. Having
said that, investment banks had created an intellectual environment
where libertarianism had become the flavor of the decade—or the flavor
of several decades, going back to President Reagan as the leading
politician that embraced this line of thought. It became the ideological
framework within which we operated for quite some period of time.
The investment banks helped create it, they politically lobbied for it,
they pushed back on Capitol Hill, and elsewhere, against any flex of
regulatory muscles. They came down very hard on those who did try to
enforce regulatory rules. All this leads to their shared culpability. So
there are multiple parties—but regulators, who at first issue have the
responsibility to stop the behavior, should have done much more.
Attorney General of New York, you brought suits against firms like
Merrill Lynch for engaging in predatory lending practices, and against
AIG for fraud. Some would argue you built your reputation on not being
afraid to pursue white-collar crime cases. Why are these types of suits
so rarely seen, why are convictions and regulatory overhaul so elusive,
when there's broad public support?