WEBVTT - Diana Henriques Podcast 

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<v Speaker 1>You're listening to Bloomberg Business Week with Karl Messer and

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<v Speaker 1>Tim Steneveek on Bloomberg Radio. Well, her next guest is

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<v Speaker 1>an author of many books, including the New York Times

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<v Speaker 1>bestseller The Wizard of Lies, Bernie Madoff, and the Death

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<v Speaker 1>of Trust. That book made into an HBO film. It

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<v Speaker 1>starred Robert de Niro and Michelle Pfeiffer. She also spent

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<v Speaker 1>more than twenty years at The New York Times, where

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<v Speaker 1>she was a finalist for the Pulitzer per Can I

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<v Speaker 1>tell you?

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<v Speaker 2>Robert de Niro for years leading up to with Tribeca

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<v Speaker 2>kept asking him when are you going to do Madoff?

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<v Speaker 3>When are you going to do Maida?

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<v Speaker 1>And then he did it, and then he did it.

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<v Speaker 3>Anyway, go ahead.

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<v Speaker 1>She got him to do Madoff.

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<v Speaker 3>She did.

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<v Speaker 1>Her most recent book is Taming the Street, The Old Guard,

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<v Speaker 1>The New Deal, and FDR's Fight to regulate Capitalism. It

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<v Speaker 1>came out last week. It's an exploration of financial regulation

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<v Speaker 1>during the New Deal, a period of time that included

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<v Speaker 1>the creation of the SEC. The Financial Times called the

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<v Speaker 1>book quote riveting and timely, and I've got to agree,

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<v Speaker 1>we're very pleased to have with us. Diana B. Henriquez

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<v Speaker 1>here in our Bloomberg Interactive Broker's studio. Full disclosure, Diana

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<v Speaker 1>did give me my first job in business journalism when

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<v Speaker 1>I was a researcher assistant on the Wizard of Lies

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<v Speaker 1>back in graduate school. Diana, welcome.

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<v Speaker 2>It's good to see you towards.

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<v Speaker 4>You can I just say thank you to You've turned

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<v Speaker 4>out pretty well.

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<v Speaker 3>I think my judgment was pretty great.

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<v Speaker 1>Well, thanks so much so, Carolyn. I were talking about

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<v Speaker 1>this just because in the last three hours, basically like

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<v Speaker 1>everything we see today reminds us of the Roaring twenties

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<v Speaker 1>and what was happening.

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<v Speaker 3>Isn't it remarkable?

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<v Speaker 4>It is remarkable dejaboo all over again, as catle joke does.

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<v Speaker 4>But you know, these are our roaring twenties and the

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<v Speaker 4>press to deregulate, to reduce the fetters on unfedtered capitalism.

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<v Speaker 4>Some of the arguments that I see in the press

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<v Speaker 4>today were lifted from Calvin Coolidge, almost.

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<v Speaker 3>Word for word, Comma for comma.

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<v Speaker 4>It's amazing how the arguments, the defenses against regulation that

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<v Speaker 4>emerged in the twenties and thirties are have resurfaced today.

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<v Speaker 1>But it's not just the arguments against regulation, it's also

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<v Speaker 1>the concentration of wealth that we're seeing.

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<v Speaker 2>That's what I thought.

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<v Speaker 4>Was concentration of wealth, the disparity of wealth, the amount

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<v Speaker 4>of income growth, it is going to the top one percent,

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<v Speaker 4>the stagnation of average and ordinary workers' incomes. All of

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<v Speaker 4>that is straight out of the nineteen twenties. We're seeing

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<v Speaker 4>technologies disrupting major industry.

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<v Speaker 3>Same in the nineteen twenties.

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<v Speaker 4>Major changes in manufacturing wiped out three million jobs at

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<v Speaker 4>the beginning of the twenties, and a million of them

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<v Speaker 4>never came back.

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<v Speaker 2>So, Dana, does it make you because it's interesting because

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<v Speaker 2>we just talked a lot about AI today and the

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<v Speaker 2>disruption there again. I mean, it's kind of a constant narrative.

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<v Speaker 2>But does it make you say, listen, the world, the economy,

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<v Speaker 2>the market, business, it's cyclical, we go through these changes,

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<v Speaker 2>or does it know?

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<v Speaker 3>How do you think about it?

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<v Speaker 4>I think the market is always going to be a

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<v Speaker 4>very sensitive barometer of a disruptive change, and whether that

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<v Speaker 4>disruptive change is radio as it was in the nineteen twenties,

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<v Speaker 4>which was you know, changeanging the way newspapers operated, changing

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<v Speaker 4>the whole landscape of mass communication, whether it's AI arriving

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<v Speaker 4>at a time when finance is already highly automated. But

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<v Speaker 4>the reliance of the market on the status quo, considering

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<v Speaker 4>that it makes its money because things change, right, It

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<v Speaker 4>is amazing to me that everyone thinks it's going to

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<v Speaker 4>stay the same. And indeed they did in nineteen twenty

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<v Speaker 4>eight twenty nine, right up until October of nineteen twenty nine.

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<v Speaker 4>They said, oh, this is a perfect world. And for

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<v Speaker 4>the pudocrats, it was a perfect world. And it's always

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<v Speaker 4>going to change in within the next decade, as.

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<v Speaker 3>I detail in that.

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<v Speaker 4>That's the stretch of time I cover in Taming the

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<v Speaker 4>Street nineteen twenty nine to nineteen thirty nine, The world

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<v Speaker 4>turned upside down?

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<v Speaker 2>Can I ask how you got there? Like, how did

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<v Speaker 2>you say? You obviously could write about probably anything and everything.

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<v Speaker 2>So what is it that said I gotta do this?

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<v Speaker 4>Oh? You know, I fell in love with the story

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<v Speaker 4>of Richard Whitney, the fall of the great New York

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<v Speaker 4>Stock Exchange President, when I first started covering Wall Street,

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<v Speaker 4>you know, back in the Pleistocene era.

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<v Speaker 3>Stopped and I said, gosh, what a tale.

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<v Speaker 4>And it had been included in a kind of episodic

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<v Speaker 4>anecdotal book called Once in Gauconda by John Brooks, which

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<v Speaker 4>I loved, and I ducked it away, tucked it away,

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<v Speaker 4>and always thought that that period of creation of market

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<v Speaker 4>regulation would have been fascinating to live through. But what

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<v Speaker 4>really peaked my interest, Caroline, was the two thousand and

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<v Speaker 4>eight meltdown. You know, I was going to work at

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<v Speaker 4>the New York Times every day in the fall of

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<v Speaker 4>two thousand and eight after Lehman Brothers closed, wondering if

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<v Speaker 4>that would be the day the ATMs went dark. And

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<v Speaker 4>I was aware, as an amateur financial historian, that I

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<v Speaker 4>was living through history. I was living through events that

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<v Speaker 4>would be historic in the financial history.

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<v Speaker 3>Of the country.

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<v Speaker 4>And I said, you know, people going through nineteen twenty

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<v Speaker 4>nine felt this way, what an incredible experience they had.

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<v Speaker 4>So but that kind of began to crystallize what I

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<v Speaker 4>wanted to do. Then, of course, Bernie Madeoff happened in

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<v Speaker 4>two thousand and eight, and my life went off in

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<v Speaker 4>a different path. And then the thirtieth anniversary of the

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<v Speaker 4>nineteen eighty seven crash came, well, that got me closer

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<v Speaker 4>to twenty nine, because, of course the eighty seven crash

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<v Speaker 4>was the worst day in Wall Street history. Eclipsing the

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<v Speaker 4>worst days.

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<v Speaker 3>Of nineteen twenty nine. And finally, when that.

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<v Speaker 4>Book was done, I said, I think it's time. So

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<v Speaker 4>I started work on this book about five years ago,

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<v Speaker 4>when no one ever mentioned the New Deal, when it

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<v Speaker 4>was as if Roosevelt had never existed.

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<v Speaker 3>But I'm digging in, the digging into the.

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<v Speaker 4>Story and seeing more and more parallels. And then as

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<v Speaker 4>the last five years have unfolded, it is as if

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<v Speaker 4>the puzzle pieces that matched the nineteen twenties and thirties

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<v Speaker 4>just dropped into place.

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<v Speaker 3>That's pretty So it was amazing.

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<v Speaker 1>Well, let's talk about the political environment here in which

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<v Speaker 1>FDR came into office, because you note in the book

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<v Speaker 1>that it's quote alarming political discontent erupting from the extreme

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<v Speaker 1>left and the radical right. I thought to myself when

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<v Speaker 1>I read that sounds familiar. Are you talking about twenty

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<v Speaker 1>twenty one? Are you talking about twenty twenty.

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<v Speaker 4>No, I'm talking about nineteen twenty eight, twenty nine, thirty

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<v Speaker 4>thirty one, thirty two. The right, the suffering in this country. First,

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<v Speaker 4>we can't even take it in today, but twenty five

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<v Speaker 4>percent of the workforce was out of work in those days.

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<v Speaker 3>That was thirteen million people.

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<v Speaker 4>But imagine that one out of every four people you

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<v Speaker 4>know doesn't have a job. Many of them haven't had

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<v Speaker 4>a job in years. People are living in caves in

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<v Speaker 4>Central Park, there are scavenging landfills fields. The degree of

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<v Speaker 4>suffering in the country is reaching such a point that

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<v Speaker 4>it's a powder keg waiting to explode.

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<v Speaker 3>From the left, you have.

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<v Speaker 4>Increasingly militant communist interests that are eager to harness this

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<v Speaker 4>worker anger and outrage to make gains in the political system,

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<v Speaker 4>and that, of course alarms the industrialists and captains of

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<v Speaker 4>capitalism on the right, who were fearful of labor uniting

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<v Speaker 4>with communists. And they start looking longingly at Italy and Germany,

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<v Speaker 4>which have been under fascist control in Italy's case for

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<v Speaker 4>more than a decade, and they say, hmm, they've got

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<v Speaker 4>some pretty good ideas over there. Look how they're getting

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<v Speaker 4>their economy going. Look how they're managing their labor unions,

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<v Speaker 4>locking them up, you know. But so you've got these

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<v Speaker 4>two tensions, and you've got a man who steps in

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<v Speaker 4>FDR and says, if democracy can't fix this, people are

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<v Speaker 4>going to give up on democracy. And so this is

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<v Speaker 4>one last chance for democracy to.

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<v Speaker 3>Relieve this suffering and give people hope.

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<v Speaker 4>And that's what carried him into office.

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<v Speaker 2>The ties between capitalism democracy. Oh, it's tortured, it's important.

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<v Speaker 4>It's actually so simple as FDR saw it. And I

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<v Speaker 4>didn't see it this way until I read speeches of his.

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<v Speaker 4>When he signed the bill creating the SEC he said.

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<v Speaker 2>Wait it again, the bill creating the SEC An institution

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<v Speaker 2>we take for granted.

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<v Speaker 4>Yeah, well, and we take the FDIC for granted.

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<v Speaker 3>That didn't exist before.

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<v Speaker 4>So we have lived our entire lives.

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<v Speaker 3>Yes, right.

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<v Speaker 4>So he saw that a healthy democracy required well regulated

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<v Speaker 4>markets that seemed fair. He believed that if the average

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<v Speaker 4>American didn't feel he could get a fair shake in

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<v Speaker 4>the economy, he would not support the democracy. And so

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<v Speaker 4>to him, the two were completely wetted. And so if

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<v Speaker 4>I say, a lot of people are saying it with

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<v Speaker 4>democracies on the ballot in twenty twenty four, I'm saying, yeah,

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<v Speaker 4>financial regulation is on the ballot in twenty twenty four

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<v Speaker 4>to two, because they are inextricably linked. The fairness of

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<v Speaker 4>the economy in the eyes of the average American is

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<v Speaker 4>what sustains support for this democratic experiment. And Roosevelt saw

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<v Speaker 4>that almost break. There's a anecdote which I love.

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<v Speaker 3>It's perhaps apocryphal, but I love it anyway.

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<v Speaker 4>A visitor to the White House right after Roosevelt was

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<v Speaker 4>sworn in at the depths of the depression, said well,

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<v Speaker 4>you know, if you can cure this depression, mister president,

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<v Speaker 4>you'll be our greatest president. But if you fail, you'll

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<v Speaker 4>be our worst president. And Roosevelt corrected and me said, no,

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<v Speaker 4>if I fail, I'll be our last president. To the

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<v Speaker 4>perspective of the people at the time, it was.

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<v Speaker 1>That desperate, Diana. You devote an entire chapter in this

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<v Speaker 1>book to the deregulation or regulation, I should say, of

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<v Speaker 1>private power companies. And if we're still thinking about the

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<v Speaker 1>parallels between the nineteen twenties and nineteen thirties and now,

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<v Speaker 1>who are the private power companies of today?

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<v Speaker 4>Silicon Valley, the giant technology companies are the equivalent, the

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<v Speaker 4>exact equivalent. The people who controlled electric power in the

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<v Speaker 4>nineteen teens and nineteen twenties controlled the future. They determined

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<v Speaker 4>where industry could flourish because cheap power would be there

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<v Speaker 4>where industry couldn't.

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<v Speaker 3>They determined whether a farmer.

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<v Speaker 4>Could flick a switch and turn on a light or

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<v Speaker 4>had to light an oil lamp. They had total control

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<v Speaker 4>over the electrification.

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<v Speaker 3>Of the American economy.

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<v Speaker 4>FDR saw how much power they had and he said,

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<v Speaker 4>too much, too much. This power was becoming concentrated in

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<v Speaker 4>a handful of giant holding companies that owned everything that

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<v Speaker 4>were these byzantine constructions extremely fragile and after the twenty

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<v Speaker 4>nine crash, extremely.

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<v Speaker 3>Hazardous to investors. And he was determined.

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<v Speaker 4>Even as Governor of New York, he targeted utility companies

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<v Speaker 4>as an area that needed to be regulated in the

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<v Speaker 4>public interest, and when he came into the White House,

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<v Speaker 4>he said, it's time. If we are going to have

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<v Speaker 4>the electric century, if we are going to have this

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<v Speaker 4>incredibly transformative technology reach across our country, it's going to

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<v Speaker 4>have to be with government oversight, government supervision.

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<v Speaker 3>And he spent a.

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<v Speaker 4>Great deal of political capital to pass the Public Utility

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<v Speaker 4>Holding Company Act, one of the most transformative pieces of

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<v Speaker 4>legislation he enacted, but he felt it was worth it,

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<v Speaker 4>and the results were that the American power system was

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<v Speaker 4>far less oligarchic than developed nations in Europe and in.

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<v Speaker 3>The Far East.

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<v Speaker 4>Consumers pay lower prices, they got service where they hadn't

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<v Speaker 4>been able to get service before. It would be an

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<v Speaker 4>interesting thought experiment to dial back and say, ah, too bad.

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<v Speaker 4>Roosevelt didn't get the Public Utility Holding Company Act passed.

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<v Speaker 4>Congress was able to hold him back on the utility

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<v Speaker 4>industry fought him tooth and nail, fought it all the

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<v Speaker 4>way to the Supreme Court. Let's imagine they won. They won,

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<v Speaker 4>and so they continued to buy up local power companies

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<v Speaker 4>and decide where it was profitable to sell power and.

0:12:38.120 --> 0:12:39.440
<v Speaker 3>Where it wasn't profitable.

0:12:40.080 --> 0:12:42.600
<v Speaker 4>And so that would have been the world that we

0:12:42.640 --> 0:12:47.280
<v Speaker 4>would have had today. So they were today's equivalent are

0:12:47.320 --> 0:12:50.440
<v Speaker 4>the technology companies, those controlling artificial intelligence.

0:12:50.559 --> 0:12:53.319
<v Speaker 2>So do we need a lot more oversight of all

0:12:53.320 --> 0:12:53.600
<v Speaker 2>of them?

0:12:54.080 --> 0:12:54.920
<v Speaker 3>I think we do.

0:12:55.080 --> 0:12:58.800
<v Speaker 4>But I think more than just saying we need more oversight,

0:12:59.200 --> 0:13:04.320
<v Speaker 4>we need to modernize our regulatory system for the day

0:13:04.360 --> 0:13:09.600
<v Speaker 4>we have today. Just as Roosevelt designed his regulatory ideal

0:13:09.920 --> 0:13:14.000
<v Speaker 4>for the market that he had then, our regulatory system

0:13:14.320 --> 0:13:19.680
<v Speaker 4>over the years has become fragmented, you know, uh balkanized.

0:13:19.760 --> 0:13:22.160
<v Speaker 3>It's it's week, it's it's weak.

0:13:22.040 --> 0:13:27.280
<v Speaker 4>It's rusty, it's underfunded, it's under respected, and it needs

0:13:27.360 --> 0:13:31.320
<v Speaker 4>an overhaul. A top to bottom overhaul to give it

0:13:31.800 --> 0:13:35.520
<v Speaker 4>the the resources and the brain power to tackle what

0:13:35.760 --> 0:13:36.280
<v Speaker 4>needs to.

0:13:36.200 --> 0:13:37.400
<v Speaker 3>Be regulated today.

0:13:37.440 --> 0:13:39.880
<v Speaker 4>And like we can start with cryptocurrency and move all

0:13:39.920 --> 0:13:45.720
<v Speaker 4>the way through to AI the idea that that business

0:13:45.760 --> 0:13:51.800
<v Speaker 4>can just be unleashed to pursue its profit and somehow

0:13:51.840 --> 0:13:53.240
<v Speaker 4>the rest of us will benefit.

0:13:53.520 --> 0:13:55.640
<v Speaker 3>There's I want to forgive ye.

0:13:56.040 --> 0:14:01.800
<v Speaker 2>There's so much money that shapes policy or regulation or

0:14:01.880 --> 0:14:06.080
<v Speaker 2>lack thereof today. How does that have to go way

0:14:06.080 --> 0:14:08.000
<v Speaker 2>before we make some progress in this area.

0:14:08.120 --> 0:14:09.200
<v Speaker 3>Well, I hope not.

0:14:09.559 --> 0:14:13.040
<v Speaker 4>It's certainly people who look back at the Depression, and

0:14:13.080 --> 0:14:15.640
<v Speaker 4>there are some economic historians who say, look, that was

0:14:15.679 --> 0:14:16.720
<v Speaker 4>an exceptional period.

0:14:16.800 --> 0:14:18.040
<v Speaker 3>We'll never have that again.

0:14:18.480 --> 0:14:22.040
<v Speaker 4>The devastation of the Depression made it possible for Roosevelt

0:14:22.040 --> 0:14:25.240
<v Speaker 4>to do things that no future American president will ever

0:14:25.360 --> 0:14:28.560
<v Speaker 4>be able to do. I'm not a pessimist about that.

0:14:29.520 --> 0:14:32.280
<v Speaker 4>I don't think we have to have twenty five percent

0:14:32.280 --> 0:14:35.080
<v Speaker 4>of our workforce out of work before people wake up

0:14:35.120 --> 0:14:39.000
<v Speaker 4>to the fact that the way capitalism is operating today

0:14:40.000 --> 0:14:44.080
<v Speaker 4>isn't benefiting the average American in the ways that it should.

0:14:44.160 --> 0:14:46.440
<v Speaker 2>But I mean, like money in politics that shapes parts.

0:14:46.480 --> 0:14:48.880
<v Speaker 4>There was money in politics in the nineteen twenties.

0:14:49.840 --> 0:14:52.840
<v Speaker 3>Actually, there was a not quite a.

0:14:52.800 --> 0:14:55.840
<v Speaker 4>Popical story that businessmen knew how much it cost to

0:14:55.880 --> 0:14:59.920
<v Speaker 4>buy a US senator. I mean that prices were passed around.

0:15:00.560 --> 0:15:04.520
<v Speaker 4>Money has dominated politics for a long long time, but

0:15:05.440 --> 0:15:08.840
<v Speaker 4>a charismatic leader who can go over the heads of

0:15:08.880 --> 0:15:12.000
<v Speaker 4>the money and talk to the people can effect an

0:15:12.080 --> 0:15:13.400
<v Speaker 4>extraordinary change.

0:15:14.200 --> 0:15:17.440
<v Speaker 2>Is Donald trumpet Well, both of.

0:15:17.360 --> 0:15:18.280
<v Speaker 3>Them have.

0:15:19.520 --> 0:15:29.680
<v Speaker 4>A gift for communicating the simplicity of their ideas. Trump

0:15:29.840 --> 0:15:33.720
<v Speaker 4>has made it clear that he is opposed to regulation.

0:15:33.960 --> 0:15:37.040
<v Speaker 4>He bragged in his State of the Union in twenty

0:15:37.040 --> 0:15:40.840
<v Speaker 4>eighteen that his administration had eliminated more regulations than any

0:15:40.880 --> 0:15:45.160
<v Speaker 4>administration in history. Well, even allowing for Trumpian hyperbole, that

0:15:45.880 --> 0:15:48.600
<v Speaker 4>was close to true. He has made it clear that

0:15:48.680 --> 0:15:51.600
<v Speaker 4>if he is in office again, we will continue to

0:15:51.640 --> 0:15:57.400
<v Speaker 4>see the dismantling of the regulatory regime that we've all

0:15:57.480 --> 0:15:58.880
<v Speaker 4>kind of taken for granted.

0:15:59.800 --> 0:16:02.960
<v Speaker 3>I wish I could could see Joe.

0:16:02.720 --> 0:16:10.240
<v Speaker 4>Biden more outspokenly defending that regulatory machinery and laying out

0:16:10.280 --> 0:16:13.480
<v Speaker 4>a plan for modernizing it and making it more responsive

0:16:13.520 --> 0:16:18.720
<v Speaker 4>to today's crushing issues. But he's certainly got the right

0:16:18.840 --> 0:16:20.240
<v Speaker 4>policies in the place.

0:16:20.440 --> 0:16:22.960
<v Speaker 1>Regulation though in this day and age is a bad

0:16:23.000 --> 0:16:25.680
<v Speaker 1>word first for politicians. Just have a minute left, I.

0:16:25.720 --> 0:16:31.440
<v Speaker 4>Know, but you know, deregulating finances like deregulating traffic. Take

0:16:31.480 --> 0:16:34.040
<v Speaker 4>down all the stop signs, take down all the speed limits,

0:16:34.040 --> 0:16:37.000
<v Speaker 4>eliminate all the insurance requirements. And who's going to be

0:16:37.080 --> 0:16:41.320
<v Speaker 4>left on the street. The tanks, the tanks of the Giant,

0:16:41.720 --> 0:16:45.160
<v Speaker 4>the haymoths, and the reckless little hot rods are whipping around.

0:16:45.320 --> 0:16:47.120
<v Speaker 4>There's no room on that street for you and me,

0:16:48.640 --> 0:16:51.640
<v Speaker 4>So don't deregulate markets.

0:16:52.920 --> 0:16:59.000
<v Speaker 2>I feel like I want another hour with you. Democracy, capitalism,

0:16:59.120 --> 0:17:01.400
<v Speaker 2>they can survive together. Just got about twenty five seconds.

0:17:01.520 --> 0:17:02.640
<v Speaker 3>Yes, I think they can.

0:17:02.720 --> 0:17:06.760
<v Speaker 4>In fact, I think democratic capitalism has been proven to

0:17:06.840 --> 0:17:10.800
<v Speaker 4>be the best way to improve the quality of life

0:17:11.840 --> 0:17:15.960
<v Speaker 4>for ordinary people. But it won't do it without smart

0:17:16.400 --> 0:17:18.199
<v Speaker 4>oversight by the people who lead us.

0:17:18.240 --> 0:17:20.440
<v Speaker 3>And we have to elect those people. Come back.

0:17:20.720 --> 0:17:23.879
<v Speaker 1>Diana Bienriquez, the author of Taming the Street, The Old Guard,

0:17:23.880 --> 0:17:27.280
<v Speaker 1>The New Deal, and FDR's Fight to Regulate American Capitalism.

0:17:27.280 --> 0:17:30.720
<v Speaker 1>Of the book is out now in This is Bloomberg BusinessWeek,