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>>> we are finally seeing signs that the government or part of it is tarting to crack down on
banks that are still profiting off the crisis. over the last few weeks, attorney general
eric snyderman has reportedly opened a probe and requested information from wall street
banks about their mortgage security operations during the credit boom. he specifically requested
meetings with representatives from bank of america, goldman sachs, and morgan stanley.
the investigation has not yesterday been made public, but the probe is expanded to include
j.p. morgan chase, ubs, and deutsche bank. all right. you go get them, eric. the inquiry
appears to be quite broad. he has requested mortgage-related documents and could be looking
into fraud, god bless his heart. can he pull off this investigation that the rest of the
government seems wildly disinterested in? i hope so. or are they simply too big to jail?
let me bring in pulitzer prizewinning columnest and editor for numbs number of times, gretchen
morgan sout with "reqless endangerment."
>> thanks for having me.
>> first there's a theory out there that it wasn't the government, they forced the bankers
to make his risky loans, to minorities and poor people, and the banks didn't want to
do it, they just got forced into it. is there any truth in that?
>> it's so interesting that there's so much blame to go around in this whole crisis. as
you know, anything that could achieve trillions in losses really cannot be just a few people
at the wheel here, but really what these lenders did, as wee finding out more and more, even
four years after the crisis erupted, they actually targeted minorities and targeted
first-time home buyers, people who are unsophisticated, with some of the most poisonous mortgages
you can imagine, mortgages with low interest rates and would explode higher, really mortgages
that were very different for even the most sophisticated even higher net worth individuals
to pay, so it really wasn't that they were forced to do it, these were very lucrative
loans.
>> yeah, no question about it, of course, nobody made them make billions of dollars,
but i think a lot of people wonder, why is making these risky loans more profitable for
them?
>> you know, it really is true, the more poisonous the loan, let's say there's a prepayment penalty
associated with it. if you're a borrower that has a bit dicier credit, you have to pay a
higher rate of interest. these are all elements that go into the profitability of a loan.
so the loans that were given to people that were maybe on the lower rungs or who never
had a home before or no credit, they really paid through the nose.
>> now, they got crushed by that, right? there's another set of victims. all these mortgages
would get wrapped up into the securities, that then the big banks would sell off to
the clients.
>> that's right.
>> but meanwhile, they were bheting against their clients. if they were isn't that fraud?
>> some were betting against their clients. they argue it was not fraud, because they
disclosed they were making bets or disclosed that they making bets. now, that is their
argue, what you have to think of as an everyday person, is that the kind of investment bank
i want to buy products from, where they're betting against me, and i, you know, really
would have to say no, i think those are the kinds of practices that normal, everyday people
would find questionable.
>> so how have they been getting away with this for all this time? obviously the collapse
happened in 2008. finally eric schneiderman appears to be going after them right now.
why hasn't the federal government been doing anything?
>> i think it's important to remember that the regulators who were really charged with
watching over these markets in the buildup to the boom, i.e. 2003, '04, '05, '06, were
'sleep at the switch, not really doing their jobs. what that ended up doing is not only
did it not protect people during the boom, it also meant there were very few facts, figures
and less data than ever to bring cases now. so it's a double failure that's really, really
problematic.
>> look, i think realistically those banks give a lot of money to those politicians.
one last real quick question for you, gretchen, is this thing fixed at all, or will it blow
again?
>> we did have the dodd/frank law to try to fix some of the problems, but my feeling is
that it did not fix the biggest problem, which is that we have large politically connected
institutions that will not be allowed to fail.
>> yeah, that's a huge, huge problem. gretchen morgenson, thank you for joining us.
>> thank.