Speaker 1: You're listening to Bloomberg Business Week with Karl Messer and
Speaker 1: Tim Steneveek on Bloomberg Radio. Well, her next guest is
Speaker 1: an author of many books, including the New York Times
Speaker 1: bestseller The Wizard of Lies, Bernie Madoff, and the Death
Speaker 1: of Trust. That book made into an HBO film. It
Speaker 1: starred Robert de Niro and Michelle Pfeiffer. She also spent
Speaker 1: more than twenty years at The New York Times, where
Speaker 1: she was a finalist for the Pulitzer per Can I
Speaker 1: tell you?
Speaker 2: Robert de Niro for years leading up to with Tribeca
Speaker 2: kept asking him when are you going to do Madoff?
Speaker 3: When are you going to do Maida?
Speaker 1: And then he did it, and then he did it.
Speaker 3: Anyway, go ahead.
Speaker 1: She got him to do Madoff.
Speaker 3: She did.
Speaker 1: Her most recent book is Taming the Street, The Old Guard,
Speaker 1: The New Deal, and FDR's Fight to regulate Capitalism. It
Speaker 1: came out last week. It's an exploration of financial regulation
Speaker 1: during the New Deal, a period of time that included
Speaker 1: the creation of the SEC. The Financial Times called the
Speaker 1: book quote riveting and timely, and I've got to agree,
Speaker 1: we're very pleased to have with us. Diana B. Henriquez
Speaker 1: here in our Bloomberg Interactive Broker's studio. Full disclosure, Diana
Speaker 1: did give me my first job in business journalism when
Speaker 1: I was a researcher assistant on the Wizard of Lies
Speaker 1: back in graduate school. Diana, welcome.
Speaker 2: It's good to see you towards.
Speaker 4: You can I just say thank you to You've turned
Speaker 4: out pretty well.
Speaker 3: I think my judgment was pretty great.
Speaker 1: Well, thanks so much so, Carolyn. I were talking about
Speaker 1: this just because in the last three hours, basically like
Speaker 1: everything we see today reminds us of the Roaring twenties
Speaker 1: and what was happening.
Speaker 3: Isn't it remarkable?
Speaker 4: It is remarkable dejaboo all over again, as catle joke does.
Speaker 4: But you know, these are our roaring twenties and the
Speaker 4: press to deregulate, to reduce the fetters on unfedtered capitalism.
Speaker 4: Some of the arguments that I see in the press
Speaker 4: today were lifted from Calvin Coolidge, almost.
Speaker 3: Word for word, Comma for comma.
Speaker 4: It's amazing how the arguments, the defenses against regulation that
Speaker 4: emerged in the twenties and thirties are have resurfaced today.
Speaker 1: But it's not just the arguments against regulation, it's also
Speaker 1: the concentration of wealth that we're seeing.
Speaker 2: That's what I thought.
Speaker 4: Was concentration of wealth, the disparity of wealth, the amount
Speaker 4: of income growth, it is going to the top one percent,
Speaker 4: the stagnation of average and ordinary workers' incomes. All of
Speaker 4: that is straight out of the nineteen twenties. We're seeing
Speaker 4: technologies disrupting major industry.
Speaker 3: Same in the nineteen twenties.
Speaker 4: Major changes in manufacturing wiped out three million jobs at
Speaker 4: the beginning of the twenties, and a million of them
Speaker 4: never came back.
Speaker 2: So, Dana, does it make you because it's interesting because
Speaker 2: we just talked a lot about AI today and the
Speaker 2: disruption there again. I mean, it's kind of a constant narrative.
Speaker 2: But does it make you say, listen, the world, the economy,
Speaker 2: the market, business, it's cyclical, we go through these changes,
Speaker 2: or does it know?
Speaker 3: How do you think about it?
Speaker 4: I think the market is always going to be a
Speaker 4: very sensitive barometer of a disruptive change, and whether that
Speaker 4: disruptive change is radio as it was in the nineteen twenties,
Speaker 4: which was you know, changeanging the way newspapers operated, changing
Speaker 4: the whole landscape of mass communication, whether it's AI arriving
Speaker 4: at a time when finance is already highly automated. But
Speaker 4: the reliance of the market on the status quo, considering
Speaker 4: that it makes its money because things change, right, It
Speaker 4: is amazing to me that everyone thinks it's going to
Speaker 4: stay the same. And indeed they did in nineteen twenty
Speaker 4: eight twenty nine, right up until October of nineteen twenty nine.
Speaker 4: They said, oh, this is a perfect world. And for
Speaker 4: the pudocrats, it was a perfect world. And it's always
Speaker 4: going to change in within the next decade, as.
Speaker 3: I detail in that.
Speaker 4: That's the stretch of time I cover in Taming the
Speaker 4: Street nineteen twenty nine to nineteen thirty nine, The world
Speaker 4: turned upside down?
Speaker 2: Can I ask how you got there? Like, how did
Speaker 2: you say? You obviously could write about probably anything and everything.
Speaker 2: So what is it that said I gotta do this?
Speaker 4: Oh? You know, I fell in love with the story
Speaker 4: of Richard Whitney, the fall of the great New York
Speaker 4: Stock Exchange President, when I first started covering Wall Street,
Speaker 4: you know, back in the Pleistocene era.
Speaker 3: Stopped and I said, gosh, what a tale.
Speaker 4: And it had been included in a kind of episodic
Speaker 4: anecdotal book called Once in Gauconda by John Brooks, which
Speaker 4: I loved, and I ducked it away, tucked it away,
Speaker 4: and always thought that that period of creation of market
Speaker 4: regulation would have been fascinating to live through. But what
Speaker 4: really peaked my interest, Caroline, was the two thousand and
Speaker 4: eight meltdown. You know, I was going to work at
Speaker 4: the New York Times every day in the fall of
Speaker 4: two thousand and eight after Lehman Brothers closed, wondering if
Speaker 4: that would be the day the ATMs went dark. And
Speaker 4: I was aware, as an amateur financial historian, that I
Speaker 4: was living through history. I was living through events that
Speaker 4: would be historic in the financial history.
Speaker 3: Of the country.
Speaker 4: And I said, you know, people going through nineteen twenty
Speaker 4: nine felt this way, what an incredible experience they had.
Speaker 4: So but that kind of began to crystallize what I
Speaker 4: wanted to do. Then, of course, Bernie Madeoff happened in
Speaker 4: two thousand and eight, and my life went off in
Speaker 4: a different path. And then the thirtieth anniversary of the
Speaker 4: nineteen eighty seven crash came, well, that got me closer
Speaker 4: to twenty nine, because, of course the eighty seven crash
Speaker 4: was the worst day in Wall Street history. Eclipsing the
Speaker 4: worst days.
Speaker 3: Of nineteen twenty nine. And finally, when that.
Speaker 4: Book was done, I said, I think it's time. So
Speaker 4: I started work on this book about five years ago,
Speaker 4: when no one ever mentioned the New Deal, when it
Speaker 4: was as if Roosevelt had never existed.
Speaker 3: But I'm digging in, the digging into the.
Speaker 4: Story and seeing more and more parallels. And then as
Speaker 4: the last five years have unfolded, it is as if
Speaker 4: the puzzle pieces that matched the nineteen twenties and thirties
Speaker 4: just dropped into place.
Speaker 3: That's pretty So it was amazing.
Speaker 1: Well, let's talk about the political environment here in which
Speaker 1: FDR came into office, because you note in the book
Speaker 1: that it's quote alarming political discontent erupting from the extreme
Speaker 1: left and the radical right. I thought to myself when
Speaker 1: I read that sounds familiar. Are you talking about twenty
Speaker 1: twenty one? Are you talking about twenty twenty.
Speaker 4: No, I'm talking about nineteen twenty eight, twenty nine, thirty
Speaker 4: thirty one, thirty two. The right, the suffering in this country. First,
Speaker 4: we can't even take it in today, but twenty five
Speaker 4: percent of the workforce was out of work in those days.
Speaker 3: That was thirteen million people.
Speaker 4: But imagine that one out of every four people you
Speaker 4: know doesn't have a job. Many of them haven't had
Speaker 4: a job in years. People are living in caves in
Speaker 4: Central Park, there are scavenging landfills fields. The degree of
Speaker 4: suffering in the country is reaching such a point that
Speaker 4: it's a powder keg waiting to explode.
Speaker 3: From the left, you have.
Speaker 4: Increasingly militant communist interests that are eager to harness this
Speaker 4: worker anger and outrage to make gains in the political system,
Speaker 4: and that, of course alarms the industrialists and captains of
Speaker 4: capitalism on the right, who were fearful of labor uniting
Speaker 4: with communists. And they start looking longingly at Italy and Germany,
Speaker 4: which have been under fascist control in Italy's case for
Speaker 4: more than a decade, and they say, hmm, they've got
Speaker 4: some pretty good ideas over there. Look how they're getting
Speaker 4: their economy going. Look how they're managing their labor unions,
Speaker 4: locking them up, you know. But so you've got these
Speaker 4: two tensions, and you've got a man who steps in
Speaker 4: FDR and says, if democracy can't fix this, people are
Speaker 4: going to give up on democracy. And so this is
Speaker 4: one last chance for democracy to.
Speaker 3: Relieve this suffering and give people hope.
Speaker 4: And that's what carried him into office.
Speaker 2: The ties between capitalism democracy. Oh, it's tortured, it's important.
Speaker 4: It's actually so simple as FDR saw it. And I
Speaker 4: didn't see it this way until I read speeches of his.
Speaker 4: When he signed the bill creating the SEC he said.
Speaker 2: Wait it again, the bill creating the SEC An institution
Speaker 2: we take for granted.
Speaker 4: Yeah, well, and we take the FDIC for granted.
Speaker 3: That didn't exist before.
Speaker 4: So we have lived our entire lives.
Speaker 3: Yes, right.
Speaker 4: So he saw that a healthy democracy required well regulated
Speaker 4: markets that seemed fair. He believed that if the average
Speaker 4: American didn't feel he could get a fair shake in
Speaker 4: the economy, he would not support the democracy. And so
Speaker 4: to him, the two were completely wetted. And so if
Speaker 4: I say, a lot of people are saying it with
Speaker 4: democracies on the ballot in twenty twenty four, I'm saying, yeah,
Speaker 4: financial regulation is on the ballot in twenty twenty four
Speaker 4: to two, because they are inextricably linked. The fairness of
Speaker 4: the economy in the eyes of the average American is
Speaker 4: what sustains support for this democratic experiment. And Roosevelt saw
Speaker 4: that almost break. There's a anecdote which I love.
Speaker 3: It's perhaps apocryphal, but I love it anyway.
Speaker 4: A visitor to the White House right after Roosevelt was
Speaker 4: sworn in at the depths of the depression, said well,
Speaker 4: you know, if you can cure this depression, mister president,
Speaker 4: you'll be our greatest president. But if you fail, you'll
Speaker 4: be our worst president. And Roosevelt corrected and me said, no,
Speaker 4: if I fail, I'll be our last president. To the
Speaker 4: perspective of the people at the time, it was.
Speaker 1: That desperate, Diana. You devote an entire chapter in this
Speaker 1: book to the deregulation or regulation, I should say, of
Speaker 1: private power companies. And if we're still thinking about the
Speaker 1: parallels between the nineteen twenties and nineteen thirties and now,
Speaker 1: who are the private power companies of today?
Speaker 4: Silicon Valley, the giant technology companies are the equivalent, the
Speaker 4: exact equivalent. The people who controlled electric power in the
Speaker 4: nineteen teens and nineteen twenties controlled the future. They determined
Speaker 4: where industry could flourish because cheap power would be there
Speaker 4: where industry couldn't.
Speaker 3: They determined whether a farmer.
Speaker 4: Could flick a switch and turn on a light or
Speaker 4: had to light an oil lamp. They had total control
Speaker 4: over the electrification.
Speaker 3: Of the American economy.
Speaker 4: FDR saw how much power they had and he said,
Speaker 4: too much, too much. This power was becoming concentrated in
Speaker 4: a handful of giant holding companies that owned everything that
Speaker 4: were these byzantine constructions extremely fragile and after the twenty
Speaker 4: nine crash, extremely.
Speaker 3: Hazardous to investors. And he was determined.
Speaker 4: Even as Governor of New York, he targeted utility companies
Speaker 4: as an area that needed to be regulated in the
Speaker 4: public interest, and when he came into the White House,
Speaker 4: he said, it's time. If we are going to have
Speaker 4: the electric century, if we are going to have this
Speaker 4: incredibly transformative technology reach across our country, it's going to
Speaker 4: have to be with government oversight, government supervision.
Speaker 3: And he spent a.
Speaker 4: Great deal of political capital to pass the Public Utility
Speaker 4: Holding Company Act, one of the most transformative pieces of
Speaker 4: legislation he enacted, but he felt it was worth it,
Speaker 4: and the results were that the American power system was
Speaker 4: far less oligarchic than developed nations in Europe and in.
Speaker 3: The Far East.
Speaker 4: Consumers pay lower prices, they got service where they hadn't
Speaker 4: been able to get service before. It would be an
Speaker 4: interesting thought experiment to dial back and say, ah, too bad.
Speaker 4: Roosevelt didn't get the Public Utility Holding Company Act passed.
Speaker 4: Congress was able to hold him back on the utility
Speaker 4: industry fought him tooth and nail, fought it all the
Speaker 4: way to the Supreme Court. Let's imagine they won. They won,
Speaker 4: and so they continued to buy up local power companies
Speaker 4: and decide where it was profitable to sell power and.
Speaker 3: Where it wasn't profitable.
Speaker 4: And so that would have been the world that we
Speaker 4: would have had today. So they were today's equivalent are
Speaker 4: the technology companies, those controlling artificial intelligence.
Speaker 2: So do we need a lot more oversight of all
Speaker 2: of them?
Speaker 3: I think we do.
Speaker 4: But I think more than just saying we need more oversight,
Speaker 4: we need to modernize our regulatory system for the day
Speaker 4: we have today. Just as Roosevelt designed his regulatory ideal
Speaker 4: for the market that he had then, our regulatory system
Speaker 4: over the years has become fragmented, you know, uh balkanized.
Speaker 3: It's it's week, it's it's weak.
Speaker 4: It's rusty, it's underfunded, it's under respected, and it needs
Speaker 4: an overhaul. A top to bottom overhaul to give it
Speaker 4: the the resources and the brain power to tackle what
Speaker 4: needs to.
Speaker 3: Be regulated today.
Speaker 4: And like we can start with cryptocurrency and move all
Speaker 4: the way through to AI the idea that that business
Speaker 4: can just be unleashed to pursue its profit and somehow
Speaker 4: the rest of us will benefit.
Speaker 3: There's I want to forgive ye.
Speaker 2: There's so much money that shapes policy or regulation or
Speaker 2: lack thereof today. How does that have to go way
Speaker 2: before we make some progress in this area.
Speaker 3: Well, I hope not.
Speaker 4: It's certainly people who look back at the Depression, and
Speaker 4: there are some economic historians who say, look, that was
Speaker 4: an exceptional period.
Speaker 3: We'll never have that again.
Speaker 4: The devastation of the Depression made it possible for Roosevelt
Speaker 4: to do things that no future American president will ever
Speaker 4: be able to do. I'm not a pessimist about that.
Speaker 4: I don't think we have to have twenty five percent
Speaker 4: of our workforce out of work before people wake up
Speaker 4: to the fact that the way capitalism is operating today
Speaker 4: isn't benefiting the average American in the ways that it should.
Speaker 2: But I mean, like money in politics that shapes parts.
Speaker 4: There was money in politics in the nineteen twenties.
Speaker 3: Actually, there was a not quite a.
Speaker 4: Popical story that businessmen knew how much it cost to
Speaker 4: buy a US senator. I mean that prices were passed around.
Speaker 4: Money has dominated politics for a long long time, but
Speaker 4: a charismatic leader who can go over the heads of
Speaker 4: the money and talk to the people can effect an
Speaker 4: extraordinary change.
Speaker 2: Is Donald trumpet Well, both of.
Speaker 3: Them have.
Speaker 4: A gift for communicating the simplicity of their ideas. Trump
Speaker 4: has made it clear that he is opposed to regulation.
Speaker 4: He bragged in his State of the Union in twenty
Speaker 4: eighteen that his administration had eliminated more regulations than any
Speaker 4: administration in history. Well, even allowing for Trumpian hyperbole, that
Speaker 4: was close to true. He has made it clear that
Speaker 4: if he is in office again, we will continue to
Speaker 4: see the dismantling of the regulatory regime that we've all
Speaker 4: kind of taken for granted.
Speaker 3: I wish I could could see Joe.
Speaker 4: Biden more outspokenly defending that regulatory machinery and laying out
Speaker 4: a plan for modernizing it and making it more responsive
Speaker 4: to today's crushing issues. But he's certainly got the right
Speaker 4: policies in the place.
Speaker 1: Regulation though in this day and age is a bad
Speaker 1: word first for politicians. Just have a minute left, I.
Speaker 4: Know, but you know, deregulating finances like deregulating traffic. Take
Speaker 4: down all the stop signs, take down all the speed limits,
Speaker 4: eliminate all the insurance requirements. And who's going to be
Speaker 4: left on the street. The tanks, the tanks of the Giant,
Speaker 4: the haymoths, and the reckless little hot rods are whipping around.
Speaker 4: There's no room on that street for you and me,
Speaker 4: So don't deregulate markets.
Speaker 2: I feel like I want another hour with you. Democracy, capitalism,
Speaker 2: they can survive together. Just got about twenty five seconds.
Speaker 3: Yes, I think they can.
Speaker 4: In fact, I think democratic capitalism has been proven to
Speaker 4: be the best way to improve the quality of life
Speaker 4: for ordinary people. But it won't do it without smart
Speaker 4: oversight by the people who lead us.
Speaker 3: And we have to elect those people. Come back.
Speaker 1: Diana Bienriquez, the author of Taming the Street, The Old Guard,
Speaker 1: The New Deal, and FDR's Fight to Regulate American Capitalism.
Speaker 1: Of the book is out now in This is Bloomberg BusinessWeek,