YouSaid · the spoken record

Steven Pearlstein

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2018-10-08

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2018-10-08

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1. “You can't have trust in each other if you don't have trust in each other and trust in social institutions. You don't have a willingness to cooperate that not only does democracy not work, but capitalism doesn't work.”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

2. “So we just don't have the law, we don't have the case law, and we actually don't have the underlying economic theory yet to create a new antitrust law, but I can assure you there will be no new antitrust law as long as Brett Kavanaugh is on the Supreme Court.”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

3. “What the antitrust law says now is you do nothing because they're lowering prices. So therefore, it must be good for consumers. Well, that's actually not true anymore. We have products that don't cost anything. What does Facebook cost? It doesn't cost anything. So how can you talk about raising and lowering prices when there is no price?”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

4. “No, for example, I have a whole big thing on how we need to revamp antitrust law because the precedents all come from the industrial era. And now we're not only in a post-industrial era, we're sort of in a post-industrial era. And we have precedents that don't apply and can't deal with the kind of consolidation that you have with a company like, say, Amazon. All the precedents that come back from the 80s are that you know when a company has gotten too big and too powerful when it can raise prices. Okay, so what do you do about a company that's lowering prices and taking over the world?”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

5. “This is very clever lawyering. Okay, we can admit that. But Kavanaugh basically said, okay, well, that's right. What that is, it was like a roadmap to all these wise guys on Wall Street. Now this is how we're going to securitize loans. We'll never take ownership of it. And now probably the most important thing that they did in Dodd-Frank in terms of regulating the shadow banking system, the only thing they were able to get away with, now Kavanaugh and his two federal society colleagues, because they both were federalist society, And that's the kind of judge that you can expect on the Supreme Court. He will be very clever in finding any possible excuse to throw out any major regulation.”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

6. “And that we, the investment bank, or the packagers, never actually take ownership of the loans, therefore we can't be forced to retain anything because we never owned it. So how could we retain it?”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Identifies it alone, identifies the people who want to buy the packages, and sets up a trust so that the loans go immediately to the trust This independent entity that's owned by basically nobody.”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

8. “So, what did the wise guys on Wall Street do? They said, ah, the law said that the entity that packaged and sold alons must retain, the word was used, retain a 20% interest. So what did the wise guys on Wall Street and their Yale law educated friends in the legal firms do? No, Harvard people in there. Yeah, none there. What they decided to do was, look, we can set this up so that the investment bank or the manager of this package”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Knowing perhaps that some of those loans aren't such good loans. Here's what we're going to do. We're going to say if you want to make those packages and chop them up and sell them off to people, you have to retain 20% of the risk so that if you're making bad loans, that you're selling off to other people, you're going to suffer with them. And Congress couldn't have been any more clear and explicit about it. They said this applies to every kind of loan and every kind of package and every kind of issuer.”

   2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

10. “Court and that relates to environmental regulation, antitrust, consumer protection, financial regulation. I'd like to tell you about one recent decision that very few people ever, and it goes back to our original conversation, that very few people are aware of. Recently, in the last several months, his court, he's one of the three on the panel who voted for this. He didn't write the decision. Said Congress and Dodd Frank said, Look, if you're an investment bank and you're going to collect all these loans and put them in the packages and sell them,”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

11. “Kavanaugh is leading the fight to say we shouldn't defer to the agencies. And he's announced a sort of doctrine which is on major regulations, i.e. all the ones that really count on major regulations unless the law says exactly, specifically, you may do this in this way that the court should say, sorry, you can't issue that regulation if you want Congress to say that, go back and get Congress to write the law, which, as you know, getting Congress to do anything, let alone something controversial, is virtually impossible. So the effect of his approach, which is to get rid of Chevron Deference as it relates to major regulation, what really will mean, David, is that there won't be any major regulation as long as he and his cohorts are in a majority in the”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Congress writes the laws this way, and we should defer to the agencies in the way in which they respond, use the law to respond to changing conditions. And if they take a reasonable effort to issue regulations under the law, we should defer to their judgment. Both their judgment about the law, but also their judgment about what's needed to be done.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Significant. He is the leader of a group of judges, including, by the way, Neil Gorsuch, who is already now on the court, who have challenged a precedent called the Chevron precedent. And the Chevron precedent, which dates back to the 1980s, was the Supreme Court said, look. When Congress writes laws, they write it in general language, and while they should because they're trying to deal with problems that haven't yet come up with. They want to make the law flexible enough to be able to respond to changing conditions and changing technology. And they leave it. And the Chevron decision said, look.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

14. “It's hypocrisy, really. They are now the activist judges. And I, by the way, am not arguing that the liberals weren't in the Warren Court era really up until the 1980s quite activist.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

15. “And after all this work, he just basically threw it out saying, oh, you didn't dot this i and you didn't cross this t and you, you know, just a sort of ridiculously nitpicky effort to derail that regulation. He was, by the way, that decision was overturned. But it was a pretty good example of basically activist judging.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

16. “It was about a decision that he had authored having to do with an environmental regulation. And this regulation was incredibly complicated. And the EPA and all 50 states had been working on this regulation and negotiating for years and years. It had actually been up to the court already once and sent back down. Just almost a decade of work had been spent trying to come up with regulations that all the states could do. And what it concerned, David, was pollution that was produced in one state that wafted over the border into other states and how to apportion The cost of fixing it up. Because how do you know where it came from? It's sort of hard to know. And so they came up with some formulas that they thought made sense”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

17. “And I think his nomination is dangerous because of his philosophy having to do with regulation. And to some degree, protecting interests that are associated with and big contributors to the Republican Party, but he is in the vanguard of what...”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

18. “He was having trouble attracting top technology talent and top marketing talent because those young people who had a choice of where to work would rather work at companies that they felt had better corporate culture behavior. And it's the competition for talent that I think was probably more important than anything. He's going to try to open a new somewhere. We don't know where yet. We're hoping in Washington that it's somewhere around Washington. But anyway, he's going to hope in a whole new corporate headquarters employ tens of thousands of people. And he's going to have to attract talented people from all over the country in order to do that. And if he's in competition with the Googles of the world or the Facebooks of the world or the Teslas of the world, he can't be a bad corporate actor because they don't want to work for him. As my students are telling me,”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

19. “He announced that he was raising the minimum wage quite considerably across his company and by the way saying urging other companies to do the same and saying he was going to support legislation to make every companies do the same. That was a huge change. But why did Jeff Bezos do that? He did it because of changing social norms. There were customers of his who were starting not to do business with him because they didn't like the way he conducted his business, particularly as it related to employees. And here's what I think is the more important factor, although I don't know this for sure. I'm guessing.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

20. “Concentration in too many industries, which, by the way, happens naturally in today's world because of technology and because of globalization. It's not that someone, you know, that Jeff Bezos rigged the system. That's just the way competition goes. But because of that, we need to change our antitrust law to reflect the changing conditions, and we're not doing it. But anyway, as to Amazon, so I wrote that story. I passed it in. I don't think anyone changed a word. I never heard a word about it from anybody above me. And so one thing about Jeff Bezos is he does let reporters do their work. But the second thing that you mentioned, Jeff Bezos, just this week.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

21. “No, I wrote a pretty big story a few months back called Is Amazon Too Big? I think that was the headline. But it was not just about Amazon, but it was about the failure of our antitrust law to keep up with a changing economy and a changing way in which companies compete each other and that sort of thing.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

22. “And we need to reassert ourselves as investors and as consumers and as employees in ways that make that kind of behavior not acceptable. And if you do that, then the laws and the regulations change sort of naturally. And I guess when your question presupposes that we change the laws and the regulations because of politics, and that changed the norms, and I would argue it goes the other way around. The norms changed, and that changed the laws and the regulations. And if we want to change the laws and regulations back, we need to change the norms first.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

23. “That's hard. Changing social norms is hard, David, but it's not impossible because we see it happening right before our eyes. Whatever you think of the Me Too movement, whether you think it's gone too far or not far enough, that is a change of social norms right in front of our eyes. You can change them. What is socially acceptable? Yesterday is not socially acceptable today.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

24. “Became better at doing those rather than just keeping them out with the tariffs and other barriers. We needed to do those things and we needed to take some hard choices. But when you lay off your IT, thousands of IT employees as some companies did and they say, look, we won't give you your severance unless you train the Indian workers who are bringing over here to replace you. That's the sort of thing that people say, you know, that's wrong. When you hear about Wells Fargo, thousands of people had accounts set up in their name by employees who fake accounts so that employees could meet their objectives. And then we find out later that, well, there's a lot of executives who knew about that kind of fraud and didn't do anything about it. That's a change in what is moral acceptability. There was a time in American business where if you found out your colleague did that, you wouldn't have accepted that.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Significantly, but I don't consider that the main driver of this because I think the original sin is that we embrace these ideas that allowed us to change social norms and business norms. Suddenly it became okay that Steve Schwarzman makes $800 million a year. If you've gone back to the 1960s, if any CEO had tried to pay himself that much, he would have been socially shunned, not just, by the way, by his employees or when he went downtown, but when he went to the country club. The other CEOs would have said, you know, you can't do that. That just makes us all look bad. The behavior of companies toward their employees, yes, companies needed to get leaner and meaner, and there needed to be some layoffs. And we needed to compete with foreign products so that we...”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

26. “Right, it was indignant. You were stealing from me what I earned, what I legitimately earned, which is true. He legitimately earned it, but he thought that what he earned was an objective measure of his contribution. And it isn't an objective. It's a subjective measure. And that's where he's wrong about.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

27. “You slice the pie in more equal slices, you'll make the pie smaller, that there's a trade-off between fairness and growth. And if you want more fairness, you're just going to have to take less growth. And it turns out that many of these ideas, although there was a germ of truth to it, they were wrong. And so what I wanted to do in this book is to show how and why they're wrong so that we can sort of start again to think about a system that works differently and that is more consistent with the moral instincts that we all have when we hear a story about say a guy who earns a guy who runs a company called the Blackstone Group who earns $800 million Steve Schwarzman. Right. Do you think anyone really contributes Steve Schwartzmann really contributes $800 million?”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

28. “So, what happened? Well, what happened is we pushed things too far. Some of the ideas that we needed to embrace in order to make our economy more competitive again in the late 80s and the early 90s, we pushed those ideas way too far, ideas like greed is good, ideas like companies only exist to maximize shareholder values, ideas like the money that we earn in the marketplace is an accurate and objective reflection of each of our individual economic contribution and we shouldn't tamper with that because it's so much sacred. The market has determined that. Or here's this another idea we embrace, that if you make things fairer,”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

29. “I do, and I do. And I tried to figure out what happened because, you know, back, it wasn't that long ago when we were feeling pretty good about American capitalism. It not only had a defeated communism, but some of us are old enough to remember when competitiveness was the big issue. We're going to lose out to Japan and Germany. And we turned that around.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

30. “That wants to go and work in big companies, wants to go work on Wall Street. Know 25 kids, maybe one or two, maybe will raise their hand somewhat sheepishly knowing that the others won't actually look well on that and say they want to do that. You teach at George Mason? I do. I teach at George Mason and I teach in the honors college every semester, one sort of like a freshman seminar. And I love those classes, but those kids don't like capitalism. They think it's run off the moral rails. They think it's lost its moral legitimacy. Well, that's what I try to do.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

31. “Yeah, and that didn't used to be. So you asked the question of why I wrote the book. I got sort of frustrated. You know, I do, I've been doing this for a long time and I've been writing about these issues for a long time. And I noticed that this sort of conversation about these issues had gotten very stale. It gotten very predictable, a lot of easy moralizing on both the left and the right. And I felt that maybe what I could contribute was trying to figure out this dilemma that in fact you raised right from the beginning, which is why if everything is going so well in our economy, do we feel so bad about it? Why is it that more than half a millennials don't support capitalism? Why is it 50% of Democrats are intrigued by the idea of socialism, whatever that happens to me, and I'm not sure they know, but in any case, why is it that my students, when I say, who wants to go, my good students, who is...”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

32. “Greed is good, or the corporate equivalent of that, which is companies must be run solely for the benefit of their shareholders.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

33. “And inequality and the ruthlessness by which businesses conduct themselves and basically this sort of I'm out for this myself ethic that characterizes too much these days of our interaction also the”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

34. “There's an level of speculation in them, and they represent the value that are pumped up by cheap money and by the fact that the government is spending more than it's taking in creating this artificial prosperity on a steady, state, sustainable basis where prices shouldn't be this high, income shouldn't be this high, GDP shouldn't be this high. And it's a mirage. And, you know, the market will finally, you know, the fever will break or the bubble will burst and we'll see that. It doesn't have to be as bad as last time. I don't think it would be. But there's going to be a significant correction in financial markets, and that will cause, you know, an economic shrinkage of some sort.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

35. “I've already written it. It's a mirage, just it was a mirage in 2007. It looks like everything's great. And statistically it looks it. If you borrow an extra trillion dollars a year, live beyond your means and pump that back into the economy so people are demanding a trillion dollars more in goods and services than they really can afford, then you can make things look pretty good. But it's not sustainable and it's not real. Those stock prices are mirage. They're overvalued. Those property values, and I'm not talking about homes necessarily, although in places like New York and Boston and Washington and San Francisco I am, those prices have nothing to do with the ability of people's incomes.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

36. “Unadicted to this kind of stimulus and it will be painful. Honestly, you're and my friends who are Democrats on the Fed did not do the country well in 2015 and 2016 by refusing to raise rates. They thought that we needed to let the economy run in order to get the recovery up. And it's true that the recovery was stronger because they did that. But the long-term consequences is that all that money they pumped in wound up going into the financial sector to create a credit bubble, which is what we were talking about. Corporate lending and borrowing that went on, we created an And we just can't keep going from bubble to bubble to bubble. We need to get the economy so it's not so dependent on cheap money.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

37. “Stopped adding to it, but they haven't really done much to bring that money in. Well, that's still out there, which means if they want to pump more monetary stimulus and they're going to have to add on top of that. In both instances, David, what we have is a situation where the economy has become addicted to the medicine. We now have an economy that's addicted to this monetary and fiscal stimulus, and now we're going to have to give it more. And just the analogy holds, at some point you're going to start giving the thing so much medicine that you're going to hurt the patient. And we need to get.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

38. “No. Look, we're going in, we're at the top of a cycle, the top of the economy, and our government is running virtually record level of budget deficits. So if we're going to start doing fiscal stimulus and borrowing and spending more, it's going to be on top of a trillion dollars a year already in federal deficits. And at some point, the world isn't going to lend us that money. And similarly, although the Fed is raising interest rates now, remember something. When we went into this 2008 crisis, and I may be off slightly on this, the Fed had what's called a balance sheet, meaning they had basically borrowed two, they printed $2 trillion. And by the time we were finished, I think we're up to $5 trillion. Okay, so, and we haven't sucked, they haven't sucked that extra $3 trillion back up yet. They've stopped.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

39. “That's right, and that's why what's going to happen. Interest rates were so low, the cost of borrowing money was essentially zero for those folks. And so not surprisingly, they borrowed a lot. And as the price of money goes up and it gets to be 3% and 4%, and all of a sudden these loans, either the interest rate goes up on them or they become due and they have to roll them over and they're going to roll them over instead of at 0%, they're going to roll them over at 4%. All of a sudden it doesn't make so much sense. And they're going to get people who are going to get squeezed. And, you know, when people, when people, when companies and entities stop paying their bills and say, look, we're not going to be able to pay you back on time or in full, then people start to get scared. And they say, ah, I wonder who else has got this problem. And they start selling all of them. So that's the run.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

40. “Not much because the obligations are out there. The debt is incurred. So there's not much to do about it. I think it probably comes in the next two years. I think the focus will be in sort of corporate credit. A lot of companies have taken on a lot of debt despite having record profits. They've still taken on record amount of debts, oftentimes to buy back their shares or to buy other companies.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

41. “The packaging of mortgages has come back, but it's been pretty well done. But now we have other kinds of new products that they're focused on, mainly having to do with corporate and business loans and the packaging of those and a lot of high leverage in the corporate credit sector that is going to be the source of the next problem so that our failure to deal with the practices of the shadow banking system, which involve a lot of complicated instruments and derivatives, again, still unregulated, still no Fed backstop, still know as a lender of last resort, still no deposit insurance and no capital requirements. Those will come back to Hondas one more time. And I think we're... You know, we're getting pretty close to that time.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

42. “He, as he left the Fed a few year or so ago, admitted that they hadn't really been able to address the shadow banking system because that would require legislation. And they left the shadow banking pretty much as it is. And so what's happened, David, for example, is that”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

43. “The short answer is that Dodd-Frank was a very reasonable and effective response for making sure that the banking system remained better capitalized and less risky and less susceptible to short-term Interruptions in their financing. That said, it did very little to deal with the shadow banking system. And even the person at the Fed who was put in charge of that, Dan Terullo, maybe you knew Dan.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

44. “As a backstop, we have deposit insurance. There's no deposit insurance equivalent of deposit insurance in the shadow banking system. There's no Federal Reserve as a lender of last resort. There's no capital to absorb the early losses. And so we had basically a run on the shadow banking system that brought down the banking system. The banking system itself was in pretty good shape, but it's the shadow banking system that actually brought down the system.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

45. “Shadow banking system is unregulated, it's untransparent, you don't have to have the people who are involved don't have to have capital tied up doing nothing just to be there in case something goes bad. In short, the shadow banking system is a way to get around all the regulations and institutions we set up after the Great Depression to prevent there from being bank runs. It's a way of getting around it. It appeared like it was more efficient that it lowered the cost of capital, meaning it lowered what interest rates people had to pay to borrow money, but it didn't have all those safeguards. And so when we had the first test of that in 2008, it flunked the test. You had a run on the shadow banking system when everyone wanted to sell all these funny instruments and no one wanted to buy it. That's the equivalent of a bank run, except when we have a bank run, we have the Federal Reserve.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

46. “Okay, so it used to be a bank makes a loan, holds the loan until the loan is paid back and they earned interest every year, and that's how they make their money on the interest payments that they got. That's not how banks make money now. They make loans and then they package them and slice and dice the packages and sell them off to investors who buy essentially a form of a bond, which is backed by all of these loans. And they buy a piece of every loan in the package. And the way banks make money is through fees. They make a fee for making the loan. They make a fee for packaging the loan. They make a fee for selling the loan, but they have nothing to do with the loans once they sell the package. They wiped their hands of it. And that's called the shadow banking system. And right now it's bigger than the real banking system. What's the difference?”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

47. “Where did they get these things? And I just thought it was sort of crazy. So I started writing about, you know, here's what's going on, folks. And it just, I just kept following the trail thinking, and I would find people on Wall Street who would explain to me, you know, how they're slicing and dicing these things. And I would say, well, does that make sense? Isn't that a little dangerous? And they say, oh, yeah, yeah, it is. And so I became an early person who was saying, this is not going to end well. And the thing that I noticed was that this is where the big investment houses investment banks were making all their money. You know, normally investment banks make their money by bringing bonds to the market or new stocks to the market. They were doing all these other things. They were making fees. And this was the beginning, or this was not so much the beginning, but this was the...”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

48. “In February and March of 2007, There was a failure of an investment bank that had been involved in creating a lot of these instruments, a very obscure one that not many people had heard of, including me. But it went under and it had actually, the reason I got interested in it, it had also a relationship to an investment bank, a small one in Washington at the time, which I knew about. So I started looking into what they did. I just couldn't believe it. You mean mortgage loans where you don't have to have a credit check? You mean they make them where you don't have to put any money down? I mean, I had already bought a couple of houses myself, and I don't know whether you go, you have to fill out a gazillion papers and they check you this way to Sunday. Yeah, and all of a sudden these people...”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

49. “So that was how I got into that. And you won't remember this, but in the early 1990s I did a series of articles called The Winner Take All Economy. And many of the things that we are talking about in these days were talking about then, which is, for example, the rise of winner-take-all markets, particularly in technology. I didn't know that there was going to be a Facebook or a Google at that time, but you could see it already with Microsoft how it was a world in which the world only wanted one operating system. That made the world easier to deal with. And so there was these natural monopolies developing. I wrote about inequality in that series.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source

50. “Halfway there. I was already halfway there. They gave me a lot of latitude. Almost all the stories I was writing were labeled. You'll remember this news analysis, which was a little hedge for saying, okay, this isn't being written like a straight news story exactly, but it's not opinionated, it's mostly analytical.”

    2018-10-08 · The Axe Files with David Axelrod · Ep. 275 — Steven Pearlstein · IDENTIFIED FROM THE TRANSCRIPT · source