Robert Scheer SI Podcast

Nomi Prins: Big Banks Got the Sweetest Deal from the Covid-19 Bailouts

The banking expert explains why Congress’ stimulus bill has been a boon for Wall Street and not the small businesses that need it most.

It’s been over a decade since the 2008 banking meltdown, and yet many Americans are still living with the consequences of the financial crisis and the Obama administration’s decision to bailout banks over people with their own tax money. As Covid-19 spread around the world, and the economic impacts of the public health crisis began to take shape, the U.S. government once again faced a similar choice regarding bailouts. This time, Congress passed the CARES Act, which, on paper, aimed to help working people and small business owners most affected by both the virus and the lockdown measures used to combat the crisis, seemingly marking a shift from the 2008 crisis handling. Yet, as banking expert Nomi Prins points out to “Scheer Intelligence” host Robert Scheer in the latest installment of his podcast, banks and large companies are once more taking advantage of a crisis to swindle the public. 

“Now that we’re in an even greater economic crisis [than the 2008 meltdown] as a result of this pandemic around a virus, the bailouts are much, much larger,” begins Scheer, “but there is concern that a disproportionate amount of this money is going to people who are indifferent to the problems of ordinary Americans, and they’re going to be made whole. 

“Is this going to be another one of those things of lifeboats for the big bankers and the powerful people, and forget everyone else?” the “Scheer Intelligence” host asks Prins.  

It is, is the short answer,” responds Prins. “It’s a little bit more complicated this time around.”

Illustration by Mr. Fish

The former Goldman Sachs executive and author of “Collusion: How the central bankers rigged the world” goes on to explain how banks stand to gain from distributing the two installments of $350 billion in stimulus money allotted in two federal bills for small businesses. 

“How it goes down is not necessarily that real people running small businesses with a handful of employees or even, you know, multiple handfuls of employees, necessarily get all $700 billion,” explains Prins. “The reason for that is that the big banks [realized] that they could get fees for sort of being the middleman between this money that was set aside for small-business loans through the Small Business Association. […] Problem number two was if [small business owners] were banking with a smaller bank, that smaller bank–say a community bank, a local bank–didn’t necessarily get the same allocation of funds as the big banks. So they simply had less to give under the same program. ” 

Prins goes on to give a detailed example using massive banks such as Bank of America and Wells Fargo, where many Americans have accounts, to illustrate how this process has benefited banks and big businesses instead of small businesses, which the banking expert calls “the backbone of our economy.” As the conversation develops, Scheer brings up a question likely on many people’s minds: Where is all this “funny money” coming from? When Prins explains that the Federal Reserve has essentially printed the money, the “Scheer Intelligence” host makes a powerful comparison.

So why can’t the Fed just lend us the money?” Scheer laughs. “It’s incredible–if you didn’t call them banks, and you called them the Mafia, it would sound like a real scam, right? They get money for nothing, and then they turn around and charge you what, 13, 15, 18, even 25%.”  

Although much of their discussion highlights the corrupt nature of both political parties, and how Democrats and Republicans alike have played a role during different administrations from Clinton’s through to Trump’s in transferring public money to the pockets of the 1 percent, Prins and Scheer do find a slimmer of hope to be found in the midst of the coronavirus pandemic. 

“The reality is that the ideas of being both physically and economically healthy are having a sort of fusion moment,” concludes Prins. “And the idea of a virus that does not select people based on their socioeconomic stature, or who they vote for, and that is something that can attack and is prevalent throughout the world, is something that has shown us that people being able to protect themselves from a health perspective means that society and the population as a whole can be healthier, and can be better protected. 

“I do think there’s an economic benefit as well which has been recognized,” Prins adds, “that people at the foundation of the economy actually are a necessity of the whole economy. So even though, again, this time around there’s been some disproportionate sort of subsidizing here and there, there has at least been the realization that you can’t just ignore an entire swath of individuals from either a health or an economic standpoint. And so that joint realization [can] be a pivot point.”

In the media player above, listen to the full conversation between Prins and Scheer as they compare the two crises as well as the approaches taken by Democrats and Republicans, and what Americans can expect to result from the coronavirus crisis that has turned their worlds, along with the whole world, upside down. You can also read the full transcript of the conversation below the credits.

Credits

Host:

Robert Scheer

Producer:

Joshua Scheer

Introduction:

Natasha Hakimi Zapata

RS: Hi, this is Robert Scheer with another edition of Scheer Intelligence, where the intelligence comes from my guests. In this case, Nomi Prins. And no doubt, she is one of the leading experts on banking in the United States. Actually started out working for Goldman Sachs at one point as a manager; she went on to write books about the Great Recession, the bailout–the shameful bailout of Goldman Sachs and other banks. Books like Collusion, All the Presidents’ Bankers, Other People’s Money. There’s really probably no one better at knowing the inside of the banking world. 

And that is critical once again, as it was with the Great Recession. In the Great Recession–and the only thing great about it was the suffering it visited upon people who lost their homes and life savings all over the world. And the thing that happened is the banks were bailed out, but the people were not saved from losing their homes. There was no moratorium on foreclosures, and so forth. Now we’re in an even greater economic crisis as a result of this pandemic around a virus. And there’s–the bailouts are much, much larger, but there is concern that a disproportionate amount of this money is going to people who are indifferent to the problems of ordinary Americans, and they’re going to be made whole. 

So I want to just open it up with Nomi Prins, asking: Is this going to be another one of those things of lifeboats for the big bankers and the powerful people, and forget everyone else? Is it shaping up that way?

NP: It is, is the short answer. It’s a little bit more complicated this time around, for two reasons. One is there has been money set aside through two federal bills to provide stimulus to small businesses that apply through the Small Business Association, and receive, if they get approved, money from that proportion of set-aside funds from the government, which was $350 billion in the first go-around and basically another $350 billion, give or take, in the second go-around. 

But how it goes down is not necessarily that real people running small businesses with a handful of employees or even, you know, multiple handfuls of employees, necessarily get all $700 billion. So that’s one problem. And the reason for that does come under the big bank situation. The reason for that is that the big banks, when they heard that they could get fees for sort of being the middleman between this money that was set aside for small-business loans through the Small Business Association, and they realized they could get fees by administering those funds, what they received was allocations of those funds for that bank. So for example, Wells Fargo got a large allocation; JPMorgan Chase got a large allocation; Bank of America got a large allocation. And what they were supposed to do with their allocations is abide by the–in the first go-around, the first $350 billion, the sentiment, let’s say, of those funds, which was to give it to their–and anyone who effectively had a small business and was asking for it. 

That’s not exactly what happened. What they did was they provided that money first come, first served–and obviously, there was a lot of people who were struggling who needed it–to their existing clients. And so what that automatically meant was that a very small business that wasn’t banking with a very large bank wasn’t one of their clients. And that was problem number one. Problem number two was if they were banking with a smaller bank, that smaller bank–say a community bank, a local bank–didn’t necessarily get the same allocation of funds as the big banks. So they simply had less to give under the same program. 

So they tried to fix that in the second round of the $350 billion, in a small way. They took $60 billion and they set it aside for the smaller banks, for the community banks, for the local banks, to be able to provide more directly to small businesses in those communities, in those localities. But that was only $60 billion out of the other $350-odd billion worth as well. So a similar thing happened, but it happened less, in terms of who got what from the big banks versus the small banks. So the proportionality was still skewed to the larger banks, even though the sentiment was, to an extent, to provide for the small businesses which are the backbone of our economy.

RS: So let me just ask you, where does this money come from? You know, when we wanted to do something about the homeless population, or helping people who had suffered, black people who had suffered under segregation and slavery, to improve schools and education–when we try to deal with any other problems, even the infrastructure or what have you, there doesn’t seem to be any money. Now, we know when we go to war there’s always money. That’s how we got out of the Great Depression. We really didn’t solve the problems of the Great Depression, but we had a war, and then suddenly we could spend money and create money with abandon. Right now we’re into, what, $4 trillion or something and more from the Fed, and people are even talking about $8 trillion. And where is it coming from, and what does it do? And that’s just the U.S. part; the whole world economy is caught up in this. How come there’s suddenly all this funny money available?

NP: So that’s also kind of a two-part answer. The Fed in the last financial crisis, and since the last financial crisis, effectively subsidized the big banks to the tune of having low rates or zero rates through much of the period since the last financial crisis in 2008–which allowed the banks to borrow at effectively zero interest from the Fed. Banks get to do that; real people don’t. And secondarily, what the Fed did was they bought bonds, Treasury securities and mortgage bonds, from those banks–this is still in the last crisis, but I’ll move on from there–in order to put extra cash into the pockets of the big banks that were holding these bonds, in return for stuff that they were already holding that they just gave to the Fed, and now the Fed’s holding it. Right? So the Fed effectively electronically manufactured money to give to the big banks in exchange for stuff the banks were holding, including Treasury bonds. So they effectively gave the money to the banks that had debt they were holding from the Treasury Department, and then they gave it back to the Fed. So there’s this weird triangle happening. 

In the wake of this crisis, the Fed immediately stepped in and said a couple of things. One is: We are going to do that again, and this time, we will not put a limit on how much Treasury bonds and mortgage bonds we can buy from banks. Now that is step one. That’s called quantitative easing. That’s the same exact thing they did last time. What that did was it increased what the Fed was holding from the banks from approximately $4 trillion to where it stands right now, which is six and a half trillion dollars. So in the course of about five weeks, they bought–they created money electronically and bought two and a half trillion dollars–trillion–dollars of stuff from banks. So that’s–that’s good for banks.

RS: Well, let me just stop you on that one. OK, so they did this for the banks. Those banks–I know, because I deal with some of them. And American Express, for example, is a bank, basically. If you get money from American Express, even now, they’ll charge you 25% interest for cash. If you have a credit card, it’s somewhere between 15 and maybe 20% on your credit card. Wells Fargo, Bank of America, it’s the same deal. You know, 13, 15, 18%. But they’re getting money from the Federal Reserve for nothing. For nothing.

NP: Well, American Express is getting it at a little bit more than a regular bank. A regular bank, i.e. the big banks–JPMorgan Chase, the ones that are considered dealers, primary dealers is what it’s called, of U.S. Treasury debt, get the special rate of close to zero or zero. And yes, and they will turn around and they will fund places like American Express; they’ll fund places like Visa, MasterCard, and so forth, in order for them to go out and be sort of the extra middle person between people and what they pay in interest to get credit. And that ultimately starts with the cheapest funds, which do go to the banks first. 

In this particular situation, it starts to get out of control very quickly. Of course, as you mentioned, you know, the rates that are charged in general for credit to real humans are far, far greater than what banks get that money at. And in fact, even before this particular crisis, before the coronavirus pandemic, credit cards were already on average charging more than they were charging before the financial crisis, but they were receiving their funds at cheaper rates. So they were already doing that. 

RS: So why can’t the Fed just lend us the money? [Laughs] Why can’t they–you know, I mean, it’s an incredible–if you didn’t call them banks, and you called them the Mafia, it would sound like a real scam, right? They get money for nothing, and then they turn around and charge you what, 13, 15, 18, even 25%. 

NP: That’s right.

RS: And it’s all legal. And this is what happened the last time. And then if you can’t pay it, they seize your house or what have you. Nothing has changed, has it?

NP: No, except for it’s bigger this time, if you can–well, if one can imagine that. So again, that extra two and a half trillion dollars, just in the last five weeks, took about two and a half years to put on their books in the last financial crisis, for the banks, that amount, right? So it’s gone very quick. But in addition to that this time around, the Fed in conjunction with Steve Mnuchin, the Treasury Secretary, created all these extra buckets where they could stick other things they were buying. So now instead of simply buying Treasury debt or mortgage bonds–like they’re also doing, and like they were last time–they can buy corporate bonds. They can buy risky corporate bonds; they can buy risky commercial loans; they can buy risky mortgages that are combinations of commercial loans. So the host of things they can buy, with no limit in some cases, and with another limit in others, which–the way they do that, some of those corporate bond pockets do have a limit. But that limit’s funded by the Treasury Department, which means by us taxpayers.

So what happens in that situation is–and it did in this; it was part of the sort of stimulus package noise–is that the Treasury Department said, OK, we will give the Fed–and this is just one element–$30 billion, right. Now, that comes directly from the Treasury, which means it comes directly from taxpayers. And what the Fed does is it sort of magically creates off of that seed money, right–that $30 billion that we basically gave the Fed–another $300 billion. And it uses that $300 billion to go out and buy corporate bonds from larger companies who, if the Fed buys their bonds, look better than they would otherwise. This doesn’t mean that that money goes to their employees. It doesn’t mean that that money goes to sort of necessarily retaining payroll for the future, although some of the language said it could. It actually goes to buying their bonds. Now, if money is going to buy their–which is their debt. So it’s like the Fed is stepping in to repay their debt, right. And we’re funding that, in a small way, and then they’re going from there. 

And then the kicker on all of that is that BlackRock, which is the largest money manager or asset manager in the world, is actually going to manage, for a fee that we also pay for, the corporate debt or the corporate bonds that the Fed can buy from big corporations. And what we’ve just talked about up to this point, Robert, is like only a few of the ways in which there is help to the bigger banks and the larger corporations during this crisis.

RS: So we have a feeding frenzy. And the Senate and the House, whether they’re Republican-run or Democrat, no one really questions that. Those were unanimous votes to do all this. And just to–you know, and then we’re grateful because yes, they’ve increased the amount of pay you get if you’re unemployed. You can get your bank to hold off on your mortgage for three months and tack it in at the end of the loan, or ask for it in a lump sum. All of which is really quite reckless for people; they’ll find themselves deeper in debt to the banks and everything. 

And just to make it very personal [Laughs], I bank with Wells Fargo. And you know, oh, I’m happy; they said if you don’t have the cash right now, we could, you know, you don’t have to pay the mortgage for three months, but then you’ll have to pay in three months, or maybe we’ll tack it on to the end of your loan, but you lost that value. On the other hand, in order to get a small business loan to do these podcasts, for instance, which I have been doing for four years, I applied for one of those loans. And they said, well, you actually, on the basis of your taxes you can get a $10,000 loan. 

NP: Yes.

RS: However, I haven’t heard–I’ve been delayed, I’ve been delayed, I’ve been delayed. [Laughs] And that’s a loan; presumably I’ll have to pay it back. It’s a lower interest rate. But they’re administering it. And at the same time, they’re giving it out to very large institutions, millions of dollars.

NP: Right.

RS: And there’s no appeal. There isn’t even a phone number you can call. There’s no check on what they’re doing. And then maybe, mysteriously, I’ll be getting my $10,000 loan. And you know, I’ll be so grateful. And I won’t look critically at all the other big loans that they gave. And what I’m wondering about is where is the media in all this? Where are–where is the opposition of politicians? Where are the checks and balances? Why did they vote unanimously for this in the Senate and the House, basically one of the biggest giveaways of government money, of taxpayer money? And we should point out, by the way, when they buy those mortgage-backed debts from the banks, and other lousy paper, they’re buying junk that the banks created in the last crisis with those bad mortgages.

NP: Yes, and they’re still holding junk from the last crisis. And–

RS: [Laughs] So the government is buying their junk and actually improving their position dramatically, leaving the Fed holding junk. And yet if an individual is trying to keep his grocery store open or something, and needs the $10,000, he’s going to be looked at with great suspicion. But this goes on, the government deals with the banks with total trust, whatever you want, we’ll give it to you. Nothing has changed–

NP: Yeah, and also as you discovered with Wells Fargo, as one of the larger banks. You know, the other thing that happened with Wells Fargo, of course, is they were kind of under probation for having ripped off their customers through making up, you know, sort of fake accounts and then charging them late fees and all sorts of other fees on these late accounts. And they’re still under sort of a penance from the Fed. However, in this scenario they went to the Fed and said, well, we want to be a part of providing, you know, facilitating funds to small businesses. And can you raise the cap that you’ve kept us under, in terms of the amount of lending we can do, just because we’re helping? And the Fed just said, yeah, sure. So not only did you not necessarily get approved for the loan that you requested specifically, and I don’t know what the full amount was, to do this podcast–

RS: It was $10,000, because I have this little business of doing a website and doing podcasting, and I do actually employ people. And so I thought, well, that’s a pretty good deal. And only I–you know, maybe I’ll get it. But $10,000 is chump change compared to–

NP: Well first of all, you–if you’re wondering now whether you’re going to get it or not, that in itself is a problem. Because–and I can’t tell you whether you’ll get it or not. I can tell you what I would guess will happen, which is it could be a problem, but also it really depends what pocket it comes from in the whole allocation of these SBA loans. But the crux of it is that there might be, in the second round–it didn’t sort of happen as much in the first round. It’s happening very much–well, not a lot in the second, but a little bit more–is perhaps there was an allocation to very, very small businesses even from a Wells Fargo. And then it’s a first come, first served, only because there was a tiny bit of pushback the last go-around, because you had places like, you know, hotel chains and major franchises and steak houses and stuff that did receive multimillion-dollar loans from banks like Wells Fargo and Chase and Bank of America, with whom they had existing customer relationships. And that obviously took away money from the smaller businesses who only have a handful of people, or even just individuals, or an individual, to fund throughout this period. 

So none of that should have been the case. Right? If we really wanted to, as was said by both parties when they were talking about these stimulus packages, really get them to real people, is that you–you set a cap on them. And you say to banks, look, up to this number–not the number of employees, but the number of, the amount of funds–that’s what we’re giving you money for. And not the big companies beyond that, because you know what, we have other facilities to do that. And also, a lot of those other companies can potentially get other types of business loans, which aren’t available–and haven’t been available, and have actually been less available since the last financial crisis anyway–to small businesses to begin with. 

So you know, this has kind of just magnified a lot of the inequality of funding with a large pot of money. Now today, in fact, the Fed basically said they’re going to create another bucket that they’ve worked on with the Treasury Department, which will help to back the risk of these small-business loans that are going out to some of the smaller businesses. And the way they will do that is not to give loans directly to these small businesses, but what they will do is they will sort of purchase the loans from the big banks, just like they did with pools of mortgages from the big banks. And they will effectively take the risk from the big banks, who are only middlemen to begin with, in this entire process of funding small businesses. 

And I don’t mean for that to sound complicated, but what it actually means is the Fed is not only helping to fund a lot of what’s going on now at every single level, it’s also backing the risk and taking more of the loans and different debts off of the larger banks and bigger companies than it is, obviously, with smaller people. And as you mentioned before, even if smaller–when I say smaller people, obviously I mean [Laughs] smaller in terms of wealth–you know, even if they have mortgages, they’re not being forgiven. They’re not being taken off of their books, right, in return for cash. They’re merely being deferred to some later date, which could, yes, be part of another problem. 

So whereas in this case we haven’t seen, for example, foreclosures yet, we’ve seen so many other negative things happen with the shutdown, and shutdown of businesses and shutdown of paychecks, and shutdown of so many services and activities in such a large swath of the economy, with so many people, 30 million now filing for unemployment. We haven’t yet seen foreclosures. And that’s because there’s a little bit of a moratorium, but not necessarily because there’s a forgiveness for this period. 

RS: But it’s like a reverse mortgage. The fact of the matter is, if they tack it on at the end of your loan, it only means that the money, the equity you thought you had in your house is disappearing. And when you sell and you think it’s your retirement or so forth, you find you have less of it, because instead of foreclosing they merely increased your loan. And it should be pointed out, by the way, I’m not picking on Wells Fargo, although they certainly deserve to be picked on. But at the same moment I’m waiting for Wells Fargo to give me this small business loan, they’re still charging me 13, or 15% on another one, on loans that I have with them. You know, so they’re getting money for nothing from the government, charging me 13, 15% on small loans, and telling me that they have to hold off giving me $10,000, which is actually the government’s money. 

I don’t want to bore anybody anymore with these details, but let’s cut to the chase. How are these decisions made? And right now you have a Treasury Secretary–and a lot of people listening to this probably don’t like Donald Trump very much. And so they say, yeah, he’s doing it bad, and he picked this guy Mnuchin, who–what did he run, OneWest bank, right, before? 

NP: Yes.

RS: Yeah. And they say, well, he’s a bad guy. However, his opponent Joe Biden once again has a cozy relationship with Lawrence Summers, who was not only the Treasury Secretary that did the deregulation of the banks after Robert Rubin under Bill Clinton, but he was one of the key people in the Obama administration that decided to bail out the banks and allow people’s homes to be foreclosed. And for those people who think the Democrats are always on the side of people of color or poor people, black people in America lost 70%–college graduates. Black college graduates, according to the Federal Reserve, lost 70% of their wealth in the great housing recession, and brown people lost 60% of their wealth. That’s the Federal Reserve of St. Louis. So the Democrats claim to be great friends of minorities, of working people, but they do the same thing. What’s the big difference between a Lawrence Summers and a Mnuchin?

NP: There’s not, really, except for Steve Mnuchin had been a partner at Goldman Sachs and ran a bunch of private equity companies. And I mean, it’s really honestly an issue of position. You know, getting into the Treasury Department in terms of where they were beforehand. But in terms of sort of status and stature and sort of the disconnect, really, between their perception of what funds should be used for, and the inequality that their decisions impose upon the rest of the population, they’re fairly similar. 

And you know, you point out the major subsidy that’s happened for the banking system and for the stock market. So basically any of the financial assets, and one of the reasons why this particular coronavirus pandemic crisis period is also going to hit hard in terms of the general restart of the economy, from small businesses up through the larger businesses, is because of all the borrowing, all the debt that’s been created because rates have been so low for so long as per the Fed. And that’s something that, you know, it started under Obama, it continued under Trump. I mean, it’s no real difference in policy, you know, given kind of the impact of it. And that’s created a lot of debt, and that’s created much more inequality in terms of people’s personal, like real economic, real foundational growth. And what we had seen, until there was a lot of giveback because of this crisis period, in stock markets and other financial assets, because all of that cheap money kind of floats to the top; it doesn’t actually fund the foundation of the economy. 

And what we’re seeing now is a massive disruption at the foundation of the economy, as well as a disruption at the top. But what’s going to happen is this recreation of subsidies for the financial system will at some point drive financial assets higher again, and real people who have to deal with sort of real losses and don’t have that kind of leverage and that kind of support, for nothing, in their lives will have a much harder time of it. 

So what’s going to happen once this period–and when I say “once” I don’t, obviously we don’t know when that can be, and how many iterations it can have. But there will be a point at which I think the stock market is going to be back to where it was, and the inequality between what that looks like and where people are in terms of resurrecting their lives, the foundation of the economy will be that much more in terms of, like, the distance between the two.

RS: So let me ask you, Nomi Prins–and I mentioned at the beginning, you’ve written very important books. You know, Collusion, All the Presidents’ Bankers, Other People’s Money. And what’s great about what you’ve done is first of all, you knew these people up close. You worked at Goldman Sachs, you know how they talk, what they think, and so forth. You know the insides of the financial system. And then you’ve also, most recently I know you were traveling all around the world trying to figure out the world banks, the world banking system, all the central banks and so forth. 

So let’s–we only have a little time left. Let’s focus on these two characters, Steve Mnuchin and Lawrence Summers, two Treasury Secretaries. One who was Treasury Secretary Lawrence Summers for Bill Clinton, and a very key economic advisor to Barack Obama. And then you have Steve Mnuchin, who is Treasury Secretary and the guy driving all this under Donald Trump. What is really the difference between these two folks? What, really? Does one have a conscience? Do they think differently? One pretends to be something of an enlightened Democrat, the other is a Trumpian Republican. But really, in terms of the decision and who they consult, does it matter?

NP: I don’t think it does. I mean, what they do in their, you know, personal moments of quiet, I don’t know how different that could be. But in terms of what they do with respect to their positions in their respective administrations, and coming in to them and where they’ll be leaving them–or coming back, or however that whole revolving door works. As you mentioned, Larry Summers had been around when Bill Clinton did deregulate, as per Robert Rubin, the banking system. Which was the catalyst, really; he was actually there when the act, Gramm–Leach–Bliley Act, to get rid of the Glass–Steagall Act, which had separated bank deposits from speculative securities, had been passed. Robert Rubin teed it up; Larry Summers signed it, right, or was there upon the signing.

But the reality is the policies that both of these men follow, in terms of the enabling the banking system to kind of make its own rules. In the case of, you know, originally Larry Summers with deregulating substantially the banking system, which allowed them to create all the stuff they’ve created on their books, and all the risks that they’ve put into the rest of the economy by virtue of the restructuring, through deregulation, the banking system and sort of its totality at the time, in 1999. But also where we’ve gotten to now, in the last 20-ish years, is actually plugging the gaps in the risk that that created by using the relationship with the Treasury and the Fed. By using this idea that, you know, if the banks are hurt then the whole economy will fall apart; by assuming that banks can handle their own stress tests, and will be honest with the types of answers they give to the Fed as to how situated, how well they could do in a crisis. Which obviously wasn’t true, because what we’re now seeing is they’re getting these extra subsidies. We know that, you know, things that they say aren’t true. And benefiting all along the way from things that are passed. 

You know, the fact that Steve Mnuchin–and what I would say about Steve Mnuchin, where there is a difference, is probably he’s more savvy in terms of how to create, you know, this financial situation which he’s done in this go-around during this crisis, of using taxpayer or Treasury money to fund Federal Reserve creation of money. So that little bit of nuance of kind of, you know, treating the Treasury Department and taxpayer money and the Fed kind of like two parts of the same deal–that might be more his kind of add-on to this whole thing. But in terms of where they go and what they do and how they see the banking system, given their decisions, given their policies, given what they’ve actually done, there’s not a tremendous difference. I don’t really think there’s any difference.

RS: Well, then that sort of raises a basic question about how do we effect change. I mean, we’re all hurting now. You know, I think that’s pretty widespread. Maybe not all. But we all hurt during wars; we all hurt during the Depression, to some degree. However, the history of those, of wars and depressions and so forth, shows that in fact the people who are good at gaming the system, the superrich and their advisors and so forth, come out much better. They benefit, they exploit, you know; companies like BlackRock and Blackstone and others, they get into buying up foreclosed houses, they benefit on the downside as well as the upside. 

And given–let’s just talk about one real issue here, and one would hope there would be a divide between Democrats and Republicans, yet there doesn’t seem to be. Ever since George Walker Bush was president, and when Bill Clinton came in, the divide between the rich and everyone else has increased dramatically, and the middle class has been withering away. We all know that. We all know that’s why we have populism in the air, whether it’s right-wing or left-wing populism. We know why Bernie Sanders was popular, and we know why Donald Trump is popular on the right-wing side. Because, basically, ordinary people have been screwed over, and the American dream has disappeared for large numbers of them. But the fantasy of our politics is that Nancy Pelosi, for instance, has got our back–meaning ordinary people–and Donald Trump is indifferent to it. Now, if you’re on the other side of the spectrum, you say Nancy Pelosi doesn’t have our back, she’s really with Wall Street and Schumer and these people, and Donald Trump cares about us at the county fair. But these are two illusions. They end up really serving the same interests. Isn’t that the tale here?

NP: You know, I look at it like this. Yes, if you follow the money, right–if you merely look at what happens from the standpoint of numbers, whether or not a policy or a perspective is articulated one way or the other, you know, Nancy Pelosi speaks with very empathetic words. Donald Trump doesn’t. You know, but again, it depends who’s listening to them; different people might hear different things. 

But when you look at what actually happens, and the results of the major policies that actually get adopted, the number shows that that inequality–and it’s two types of inequality. It’s an economic inequality and sort of a power inequality. But it’s also an access, as we’re seeing now, more so; it’s an access to funds inequality as well. Which people could use, if they were cheaper, to grow their own personal economies, their own small businesses, right, their own localities in a different way. All of that, all of the numbers associated with all of that, are what they, you know, indicate. That there’s just not a tremendous difference in the execution at the end of the day, and in its results, even if some of the words going into the policies or going into that execution could potentially be different. 

And that’s not to say that within the Republican and Democratic parties there aren’t people who have stronger feelings about issues and how things should be done from a policy perspective than other people. But it does mean that what tends to get passed has a result of increasing that divide, on both sides and in both parties. And I think this time around–and I say this every book. I mean, it’s–you know, I said this in Other People’s Money back in 2004; I said it in It Takes a Pillage in 2009, and in Collusion last year. The net result is that the availability of money goes to the people that, yes, can and do rig that system, whether they’re politicians involved with people who have that power, that clout, that wealth, or just those people. And that, by definition, by just sheer numbers, increases the divide.

Now, I think what could happen–and this is just something as a, I don’t know, I’m just sort of processing this for a potential way out–is that maybe this time, people will tend to work more on a local sort of level, at the foundation of an economy, together. The people that did get a decent access to small-business loans did get them–or smaller businesses that did–did get them through smaller banks. Because those allocations went directly to communities. And so there are some spots in this whole scenario right now to potentially, you know, look into with some more light, in terms of where people actually are better at working together, whatever party they support, from a financial-access and business-access perspective, to reduce some of that inequality than necessarily relying on the federal government.

RS: Well, another way to look at it is if the Mafia did all this they’d be in jail, but these folks get the laws rewritten and interpreted to make this all legal.

NP: All legal.

RS: [Laughs] All legal. And at the end of the day, you have more ordinary people unhappy about it. Now, I do want to end on a positive note, and I do want to encourage people to read your books, because you lay it out as clearly as anyone does. And you can’t–you know, you have–there is a value in actually reading the book and looking at the documentation and the account. And I think people have got to become familiar with this stuff. And I think they will want to, because when we–when we, hopefully, get out of this, there’s going to be a lot of people who are in bad shape. We don’t know how fast this economy is going to come back. And if you’ve delayed your mortgage payments, and then they tack it on or they expect a lump sum pay; or the increased unemployment insurance is cut off at the end of July, which is only as far as it’s supposed to run now, and they don’t extend it; if we go into a depression, and so forth, we’re really talking about the destruction of a society as we know it. 

And the only alternative is some idea of accountability. And there are–you offer one proposal of smaller banks; another is at least to guarantee certain necessities of life like health care, and you know, not have evictions, and not kick out renters or foreclosures at a time like this. Have guaranteed medical care that is a universal right. So at least when these pirates are playing with the larger economy, you’re not worrying about people losing the roof over their head, not being able to have medical care, not being able to put food on the table with their children, OK. 

And so it seems to me the real judgment here to be made, is it’s one thing to say these people just rip us off. You know, this elite, whatever they call themselves, liberals or conservatives. But they don’t even have the decency to guarantee people access to the necessities of life, so that there’s food, medicine, shelter. They don’t even have that. And that was the promise of FDR and the New Deal after the last Great Depression. And here we may be heading into another Great Depression, and we’re not in any basic way better off in terms of caring for the average person. And that’s a hell of an indictment of what we’ve been doing ever since the Great Depression. No? Yes? Last word. 

NP: [Laughs] That’s certainly not positive. Yeah, it is. And–

RS: Oh, let me throw in the positive. I’m sorry, I forgot. I’m gettin’ older. It is a positive. Because I think now, increasingly, people see through it. They see through it, and they’re demanding more. And there is the basis, you know, for–I mean, even Donald Trump has had to say the ordinary person didn’t create this pandemic, it was not the ordinary person who didn’t prepare us for the pandemic, and therefore the ordinary person should not pay the price. I think that is in the air now. 

I do think that if you have another primary season or presidential debate, I don’t think the question of Medicare for All will be even controversial. I think people now know everyone needs to be tested, everyone needs to have medical care, everyone has to go in and get treatment. Because medical illnesses are not your creation, and you as a human being are entitled to have health care. I think that goes for not losing your home, not being evicted by your landlord, having adequate food, a guaranteed annual income–that’s in the air now. That’s what even Trump did, by sending out those $1,200 checks; that’s not an income, but you know, it’s a start. You know, the increase in unemployment. 

There’s a recognition that the individual does not have power over our economic circumstance. It’s manipulated by others, including nonhuman elements like viruses. And the fact of the matter is, any decent society has to make sure there’s a floor that guarantees the necessities of life to everyone. I think that’s in the air now, and that’s the positive point I wanted to make. And you can tell me whether you agree or not, and we’ll wrap this up.

NP: Well, no, I do think that’s a positive ripple effect of this throughout everyone. And the reality is, the idea of being both physically and economically healthy are having a sort of fusion moment. And the idea of a virus that does not select people based on their socioeconomic stature, or who they vote for, and that is something that can attack and is prevalent throughout the world, is something that almost–because of it, you know, it has shown us that the idea of therefore people being able to protect themselves from a health perspective, every individual who can protect themselves means that society and the population as a whole can be healthier, and can be better protected. Now, that’s on the health side, and I think that that is a positive undercurrent of what’s happening and what people realize. 

And I think on the economic side, you know, we’ve talked the whole time about the negative impact of having so much economic distress and disruption and chaos that’s caused by this, and has been caused by other factors in how our society economically has been sort of created recently and in the past. But I do think there’s an economic benefit as well which has been recognized: that people at the foundation of the economy actually are a necessity of the whole economy. And so even though, again, this time around there’s been some disproportionate sort of subsidizing here and there, there has at least been the realization that you can’t just ignore an entire swath of individuals from either a health or an economic standpoint. And so that joint realization that we have to see right now, or at least it should be obvious right now, can be a pivot point. 

RS: You know, the way I–I’m going to wrap it up with an image that keeps coming to my mind to try to get this across to people who are clueless about the class contradictions in our society, the extreme economic class contradictions, and their stake in the well-being of less fortunate people. And I think of these cruise ships that became a center of the epidemic, of the pandemic. They were cruise ships. And you know, I’ve lectured on a few of those cruise ships. And the fact of the matter is, you could have the fanciest, most secure, most beautiful suite of rooms on the top floor of the ship, with the best view. But if some undocumented Indonesian worker, working down in the kitchen, was exposed to illness, that will spread through the whole ship. 

And so we’re in this together. We’re in the boat together. And I think never, certainly–well, in a long time, ever since I was a kid, have I found this country to be as clearly aware, clearly aware that you’re not going to go live on some island somewhere. We’re in this together. Everybody needs their health taken care of, their sustenance of life. 

And so let me wrap it up with that positive point. For people who want to know more about these issues of the banking, where this money is going, where the funny money comes from, you’ve got to read Nomi Prins. There’s no one better at unraveling the innards of the banking system, in terms of her own personal experience at Goldman Sachs, and as recently as touring around the world talking to central bankers and figuring out what it’s all about.

But that’s it for this edition of Scheer Intelligence. Our producer at KCRW is Christopher Ho, Natasha Hakimi Zapata is the editor, and Joshua Scheer is the producer who brings it all together. See you next week with another edition of Scheer Intelligence. 

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