1 00:00:02,000 --> 00:00:07,000 Downloaded from YTS.MX 2 00:00:08,000 --> 00:00:13,000 Official YIFY movies site: YTS.MX 3 00:00:19,570 --> 00:00:21,223 - It was July 1st, 2009. 4 00:00:24,980 --> 00:00:27,180 I was living in Hamburg Germany at the time. 5 00:00:31,960 --> 00:00:36,633 I was in my flat with my wife that I had just married. 6 00:00:39,250 --> 00:00:40,563 Two men came to the door. 7 00:00:42,282 --> 00:00:44,203 I did not recognize them, did not answer the door. 8 00:00:46,250 --> 00:00:49,640 Minutes later, I left the building, walked to the car, 9 00:00:49,640 --> 00:00:53,090 and two unidentified Deutsche police officers 10 00:00:53,090 --> 00:00:55,510 showed up in front of me and in German 11 00:00:55,510 --> 00:00:58,904 basically identified themselves and said they were there, 12 00:00:58,904 --> 00:01:02,483 Interpol, FBI warrant, come with us. 13 00:01:07,660 --> 00:01:10,210 - That was not at all what he was expecting obviously. 14 00:01:10,210 --> 00:01:13,196 He looked at his wife and blew her a kiss 15 00:01:13,196 --> 00:01:16,453 and was pretty sure he would never see her again. 16 00:01:18,770 --> 00:01:22,817 - That's a feeling of total fear because you have 17 00:01:22,817 --> 00:01:26,253 the total unknown of what the future holds. 18 00:01:30,290 --> 00:01:33,890 - [David] Phil Baker was taken on a plane to Chicago 19 00:01:38,710 --> 00:01:40,960 which is where he had been criminally charged 20 00:01:43,210 --> 00:01:45,700 and entered the United States justice system 21 00:01:45,700 --> 00:01:47,833 which is a really scary place to be. 22 00:01:51,840 --> 00:01:55,250 - I was facing charges of absconding 23 00:01:55,250 --> 00:02:00,033 with $460 million from the FBI, for fraud. 24 00:02:10,120 --> 00:02:12,220 My name is Philip James Baker 25 00:02:12,220 --> 00:02:13,700 and I'm the former managing partner 26 00:02:13,700 --> 00:02:15,720 of a billion dollar investment fund 27 00:02:15,720 --> 00:02:17,870 that collapsed during the financial crisis. 28 00:02:19,510 --> 00:02:22,253 My story is a rise and fall to redemption story. 29 00:02:24,320 --> 00:02:27,283 I've been rich, I've been on the top, 30 00:02:28,610 --> 00:02:29,913 I've been behind bars. 31 00:02:31,280 --> 00:02:34,143 I know what it is to be called a financial criminal. 32 00:02:35,520 --> 00:02:36,483 I admit my guilt. 33 00:02:37,670 --> 00:02:40,260 But now I'm free and I want to speak out 34 00:02:41,440 --> 00:02:42,613 because of what I saw, 35 00:02:43,460 --> 00:02:45,350 because I've been there. 36 00:02:45,350 --> 00:02:47,000 I can tell that if we do nothing, 37 00:02:47,950 --> 00:02:50,063 everything can happen again. 38 00:03:07,460 --> 00:03:08,763 They had no consequence. 39 00:03:10,560 --> 00:03:13,453 The titans of Wall Street basically faced nothing. 40 00:03:15,760 --> 00:03:18,393 For my life, I went to prison. 41 00:03:21,590 --> 00:03:23,980 Some people would say, you know what, 42 00:03:23,980 --> 00:03:27,270 you did wrong, it's fair, it's just. 43 00:03:27,270 --> 00:03:29,023 The argument could be I agree. 44 00:03:31,610 --> 00:03:34,410 But what about the people and the titans of Wall Street? 45 00:03:51,310 --> 00:03:56,250 I was born here in Toronto, Canada in August of 1965. 46 00:04:01,770 --> 00:04:05,530 - Philip started in our home downstairs. 47 00:04:05,530 --> 00:04:07,480 He didn't tell us a lot about it 48 00:04:08,380 --> 00:04:10,050 other than there was a partnership 49 00:04:10,050 --> 00:04:15,050 and they were, when he started to get investors etc., etc. 50 00:04:18,160 --> 00:04:21,456 - The business started in the basement of my parents 51 00:04:21,456 --> 00:04:25,853 and this company grew to be a billion dollar company. 52 00:04:28,800 --> 00:04:30,703 Lake Shore was a hedge fund firm. 53 00:04:32,330 --> 00:04:34,210 - Philip Baker set up a hedge fund 54 00:04:34,210 --> 00:04:37,423 that was designed to trade in commodities. 55 00:04:39,600 --> 00:04:43,170 So, prices of oil, coal, things like that. 56 00:04:43,170 --> 00:04:46,020 He was a marketer, he was the client guy. 57 00:04:46,020 --> 00:04:47,460 He was the one who would go out 58 00:04:47,460 --> 00:04:49,890 to wealthy individuals or institutions 59 00:04:49,890 --> 00:04:53,173 and get them to put their money with Lake Shore. 60 00:04:56,080 --> 00:04:58,290 - Our clients were global investment 61 00:04:58,290 --> 00:04:59,750 banks from around the world. 62 00:04:59,750 --> 00:05:01,780 Goldman Sachs, Royal Bank of Canada, 63 00:05:01,780 --> 00:05:02,930 Canadian Imperial Bank of Commerce, 64 00:05:02,930 --> 00:05:06,900 HSBC, Bank of Nova Scotia, Credit Suisse, UBS. 65 00:05:06,900 --> 00:05:08,100 So, that's quite a list. 66 00:05:12,290 --> 00:05:13,930 We operated in close to 40 67 00:05:13,930 --> 00:05:15,420 different countries around the world, 68 00:05:15,420 --> 00:05:19,472 Brazil, Peru, Panama, Colombia, Japan, Taiwan, 69 00:05:19,472 --> 00:05:22,063 Hong Kong, obviously throughout Europe. 70 00:05:27,390 --> 00:05:29,360 - [David] He was for a time 71 00:05:29,360 --> 00:05:31,550 a very successful hedge fund manager. 72 00:05:31,550 --> 00:05:34,610 He set up offices in Switzerland and London, 73 00:05:34,610 --> 00:05:36,733 in the United States and Canada. 74 00:05:38,120 --> 00:05:39,890 - The marketing and business development 75 00:05:39,890 --> 00:05:42,910 was based in London so I was based in Mayfair 76 00:05:42,910 --> 00:05:45,423 which is the hedge fund capital of the world. 77 00:05:54,520 --> 00:05:57,003 - He was living a very nice life for himself. 78 00:05:58,900 --> 00:06:01,270 He was always trying to prove himself to people 79 00:06:01,270 --> 00:06:06,030 who doubted that he had the capacity to succeed. 80 00:06:06,030 --> 00:06:10,003 So, he built this life where he had a chauffeur-driven 81 00:06:10,003 --> 00:06:13,573 luxury car that would take him all over London. 82 00:06:15,150 --> 00:06:17,510 He had a beautiful apartment on 83 00:06:17,510 --> 00:06:19,253 the banks of the River Thames. 84 00:06:22,370 --> 00:06:26,293 - The life I lived was a life of luxury, 85 00:06:27,270 --> 00:06:30,770 having a butler, not worried about expenses of anything, 86 00:06:30,770 --> 00:06:34,150 everything I ever wanted I could have. 87 00:06:34,150 --> 00:06:37,350 I sponsored an ocean racing team competing against 88 00:06:37,350 --> 00:06:40,933 Hugo Boss, UBS, and that was just for fun. 89 00:06:51,785 --> 00:06:53,350 - [David] He was not a sailor, so that meant he had 90 00:06:53,350 --> 00:06:57,840 to basically pay his way onto these elite sailing crews 91 00:06:57,840 --> 00:07:00,500 and would do these very competitive races 92 00:07:00,500 --> 00:07:02,593 I believe from New Zealand to Australia. 93 00:07:10,090 --> 00:07:12,548 - We were making millions per month, 94 00:07:12,548 --> 00:07:16,383 offshore accounts, not paying taxes. 95 00:07:19,480 --> 00:07:20,630 I was living the dream. 96 00:07:25,860 --> 00:07:28,090 Weren't worried about anything but in my 97 00:07:28,090 --> 00:07:30,640 particular instance I had something to worry about. 98 00:07:33,710 --> 00:07:35,450 - All sorts of investors all over the world 99 00:07:35,450 --> 00:07:37,330 were very eager to put their money with him 100 00:07:37,330 --> 00:07:40,480 because he was generating very good returns 101 00:07:40,480 --> 00:07:42,970 and that's what investors want. 102 00:07:42,970 --> 00:07:46,160 He turned out to be doing something else 103 00:07:46,160 --> 00:07:49,890 which was he was misappropriating the investors' money 104 00:07:49,890 --> 00:07:52,115 and the investors thought they 105 00:07:52,115 --> 00:07:53,700 were achieving these excellent returns. 106 00:07:53,700 --> 00:07:56,220 In reality, they were not. 107 00:07:56,220 --> 00:07:58,313 Philip Baker and his partners were 108 00:07:58,313 --> 00:08:02,072 essentially making it up, they were lying. 109 00:08:02,072 --> 00:08:04,989 (electronic music) 110 00:08:12,650 --> 00:08:14,174 The second thing, 111 00:08:14,174 --> 00:08:15,800 and in some ways the more damaging issue, 112 00:08:15,800 --> 00:08:18,270 is that as they sought to recruit 113 00:08:18,270 --> 00:08:20,560 additional investors, new investors, 114 00:08:20,560 --> 00:08:22,100 which were essential because they needed 115 00:08:22,100 --> 00:08:26,260 to paper over the money that they'd already lost, 116 00:08:26,260 --> 00:08:28,040 they were in their prospectuses, 117 00:08:28,040 --> 00:08:30,440 in the documents they provided to investors 118 00:08:30,440 --> 00:08:33,290 to show investors how well they'd been doing, 119 00:08:33,290 --> 00:08:34,360 they were lying there, too, 120 00:08:34,360 --> 00:08:36,414 and they were saying instead of having 121 00:08:36,414 --> 00:08:39,112 lost 50% of their assets in the first year, 122 00:08:39,112 --> 00:08:42,140 they were saying, oh, look at us, we've got 123 00:08:42,140 --> 00:08:46,363 this long track record of very impressive returns. 124 00:08:51,610 --> 00:08:53,160 They were lying not only about the returns 125 00:08:53,160 --> 00:08:56,150 but they were lying about the longevity of the fund. 126 00:08:56,150 --> 00:08:58,712 So, they were saying they had, I believe, 127 00:08:58,712 --> 00:09:00,670 a 14 year track record which just wasn't true, 128 00:09:00,670 --> 00:09:02,873 that they had not been trading for 14 years. 129 00:09:05,040 --> 00:09:07,774 - Trading results were falsely reported 130 00:09:07,774 --> 00:09:11,200 and hence that was fraud, you can't do that. 131 00:09:11,200 --> 00:09:14,613 One penny not reported properly is wrong. 132 00:09:21,490 --> 00:09:24,990 - The victims were everyone who had invested with him. 133 00:09:24,990 --> 00:09:27,690 Investors who lost their money initially, 134 00:09:27,690 --> 00:09:30,030 investors who put their money 135 00:09:30,030 --> 00:09:32,420 in after the initial fraud had occurred. 136 00:09:32,420 --> 00:09:34,570 And so, there were hundreds of millions 137 00:09:34,570 --> 00:09:38,283 of dollars that vanished as a result of this. 138 00:09:41,560 --> 00:09:43,660 - I've been asked why did I break the law? 139 00:09:45,160 --> 00:09:47,490 I wanted to protect what I had, 140 00:09:47,490 --> 00:09:50,033 money, family, power. 141 00:09:51,060 --> 00:09:52,993 Everybody does that, don't they? 142 00:09:54,430 --> 00:09:56,100 - [Interviewer] What do you mean? 143 00:09:56,100 --> 00:09:58,340 - How many people say no, I don't want the power, 144 00:09:58,340 --> 00:10:01,463 I don't want the money and walk away? 145 00:10:08,000 --> 00:10:11,280 - We had to accept that he had made a terrible mistake 146 00:10:11,280 --> 00:10:15,050 and there's a penalty for making that mistake 147 00:10:15,050 --> 00:10:17,100 and that'll be something he'll have 148 00:10:17,100 --> 00:10:18,800 to live with the rest of his life. 149 00:10:24,207 --> 00:10:25,040 - [Interviewer] Would you say that you 150 00:10:25,040 --> 00:10:26,473 are a white collar criminal? 151 00:10:27,977 --> 00:10:28,810 - Yes. 152 00:10:35,540 --> 00:10:37,793 It's very interesting when you see your name, 153 00:10:39,060 --> 00:10:42,513 Philip James Baker versus the United States of America. 154 00:10:43,450 --> 00:10:44,373 It's overwhelming. 155 00:10:45,420 --> 00:10:47,230 Then you face the Assistant U.S. Attorney 156 00:10:47,230 --> 00:10:49,460 as he's looking you in the eye. 157 00:10:49,460 --> 00:10:51,511 And when you go to that circumstance, 158 00:10:51,511 --> 00:10:54,020 there are no words that really can describe 159 00:10:54,020 --> 00:10:56,753 the depths of the loneliness you feel at that moment. 160 00:11:11,480 --> 00:11:15,980 I ultimately completed a plea deal 161 00:11:15,980 --> 00:11:17,680 with the United States government. 162 00:11:20,950 --> 00:11:25,293 I was sentenced to 20 years for wire fraud. 163 00:11:41,020 --> 00:11:44,327 There's no way to really describe 164 00:11:44,327 --> 00:11:47,900 the process and the life of when you're 165 00:11:47,900 --> 00:11:50,650 held in a maximum security pre-trial 166 00:11:50,650 --> 00:11:52,723 federal institution in the United States. 167 00:11:54,970 --> 00:11:59,340 You have gangs, you have gangs amongst the gangs, 168 00:11:59,340 --> 00:12:02,120 you have violent offenders. 169 00:12:02,120 --> 00:12:05,358 There's no separation between a white collar criminal 170 00:12:05,358 --> 00:12:07,593 and very hardened criminals. 171 00:12:08,450 --> 00:12:09,650 They're all put together, 172 00:12:09,650 --> 00:12:11,730 there is no explanation for the world 173 00:12:11,730 --> 00:12:14,040 that you are left to enter. 174 00:12:14,040 --> 00:12:15,103 It's about survival. 175 00:12:17,960 --> 00:12:19,683 The days just come and they go. 176 00:12:21,540 --> 00:12:23,540 It becomes the routine of doing nothing. 177 00:12:24,570 --> 00:12:28,363 You have no hope, you have absolutely no future. 178 00:12:29,960 --> 00:12:33,420 And you have no reason to continue. 179 00:12:33,420 --> 00:12:35,343 No reason to look forward. 180 00:12:40,281 --> 00:12:41,114 - Philip Baker's a criminal. 181 00:12:41,114 --> 00:12:43,530 Is he the type of financial mastermind 182 00:12:43,530 --> 00:12:45,370 that caused the financial crisis? 183 00:12:45,370 --> 00:12:46,203 Absolutely not. 184 00:12:46,203 --> 00:12:51,203 This a guy who was not very sophisticated about his crime, 185 00:12:51,720 --> 00:12:55,721 was not very malicious about his crime, 186 00:12:55,721 --> 00:12:58,820 but he admitted that he committed a crime. 187 00:12:58,820 --> 00:13:00,940 This is a classic example of where 188 00:13:00,940 --> 00:13:03,410 the Justice Department takes a shortcut. 189 00:13:03,410 --> 00:13:05,620 They want to generate publicity 190 00:13:05,620 --> 00:13:08,040 for themselves as going after financial crooks 191 00:13:08,040 --> 00:13:09,810 and everyone wants them to do that. 192 00:13:12,050 --> 00:13:13,870 And yet time and time again, 193 00:13:13,870 --> 00:13:14,970 the people that they're going 194 00:13:14,970 --> 00:13:19,010 after are these little minnows. 195 00:13:19,010 --> 00:13:20,900 They're not going after the big fish, 196 00:13:20,900 --> 00:13:23,410 they're not going after the bankers for the most part, 197 00:13:23,410 --> 00:13:25,690 they're certainly not going after the senior executives 198 00:13:25,690 --> 00:13:28,180 at the banks or other big financial institutions. 199 00:13:28,180 --> 00:13:29,940 They were the decision makers 200 00:13:29,940 --> 00:13:31,690 leading up to the financial crisis. 201 00:13:39,770 --> 00:13:42,733 - 10 years after the financial crisis, except Iceland, 202 00:13:44,350 --> 00:13:46,863 how many white collar criminals are behind bars? 203 00:13:49,420 --> 00:13:52,570 Kareem Serageldin from Credit Suisse. 204 00:13:52,570 --> 00:13:54,060 He's the only banker of Wall Street 205 00:13:54,060 --> 00:13:55,860 to go to jail related to the crisis. 206 00:13:57,170 --> 00:13:59,130 He lost just a few million. 207 00:13:59,130 --> 00:14:02,223 Not really a big fish, not a true Al Capone. 208 00:14:05,380 --> 00:14:08,563 Could you tell me only one big bank, top executive name? 209 00:14:11,390 --> 00:14:13,480 Here are the number of people convicted of crimes linked 210 00:14:13,480 --> 00:14:16,840 to the crisis in the U.S. according to the Financial Times. 211 00:14:16,840 --> 00:14:18,813 324 people from Main Street. 212 00:14:21,080 --> 00:14:23,780 Zero Wall Street chief executives have been to prison. 213 00:14:26,270 --> 00:14:28,915 Even though there is today absolutely no doubt 214 00:14:28,915 --> 00:14:31,160 that Wall Street executives and politicians 215 00:14:31,160 --> 00:14:33,073 were complicit in creating the crisis. 216 00:14:46,800 --> 00:14:48,720 This is the story of how massive global 217 00:14:48,720 --> 00:14:52,150 banks made billions by packaging 218 00:14:52,150 --> 00:14:54,890 toxic mortgage loans and financial products 219 00:14:54,890 --> 00:14:56,640 and sold them all around the world. 220 00:15:01,340 --> 00:15:03,540 The American politicians pulled the trigger. 221 00:15:05,660 --> 00:15:07,830 It all started with the political philosophical 222 00:15:07,830 --> 00:15:11,343 grand ambition of allowing everyone to own a home. 223 00:15:14,490 --> 00:15:16,900 - Our government is supporting homeownership 224 00:15:16,900 --> 00:15:19,963 because it is good for America, 225 00:15:21,050 --> 00:15:22,753 it is good for our families, 226 00:15:23,670 --> 00:15:25,223 it is good for our economy. 227 00:15:28,010 --> 00:15:30,470 - Part of the American dream that was pushed 228 00:15:30,470 --> 00:15:34,300 by all sorts of presidents, Clinton, Bush, 229 00:15:34,300 --> 00:15:37,373 whatever, for years, was homeownership. 230 00:15:42,610 --> 00:15:44,210 - Authorities kept interest rates very low 231 00:15:44,210 --> 00:15:47,533 in order to make money, very easy to borrow. 232 00:15:50,100 --> 00:15:52,900 Wall Street and politicians had agreed to work together. 233 00:15:54,160 --> 00:15:56,059 Wall Street with the pursuit of profits, 234 00:15:56,059 --> 00:15:58,460 and politicians with the pursuit of government 235 00:15:58,460 --> 00:16:00,240 interference on economic growth 236 00:16:01,772 --> 00:16:03,630 which could be turned into election 237 00:16:03,630 --> 00:16:05,323 victories for years to come. 238 00:16:09,780 --> 00:16:12,003 This was the beginning of the housing bubble. 239 00:16:14,840 --> 00:16:18,423 - When the bubble's expanding, everybody is a winner. 240 00:16:19,880 --> 00:16:21,473 Everybody is a genius. 241 00:16:22,520 --> 00:16:24,310 The lenders make money, 242 00:16:24,310 --> 00:16:27,270 the real estate development companies make money, 243 00:16:27,270 --> 00:16:29,290 the construction workers make money, 244 00:16:29,290 --> 00:16:30,783 everybody loves a bubble. 245 00:16:34,290 --> 00:16:35,440 - [Philip] But this was a devil's deal 246 00:16:35,440 --> 00:16:37,240 between politicians and Wall Street. 247 00:16:39,360 --> 00:16:40,933 The setting to a perfect storm. 248 00:16:44,250 --> 00:16:48,290 - What happens in a boom is lenders take more and more risk 249 00:16:48,290 --> 00:16:51,240 and borrowers take more and more risk 250 00:16:51,240 --> 00:16:53,160 because they both think things 251 00:16:53,160 --> 00:16:54,873 are safer than they appear to be. 252 00:16:55,810 --> 00:16:59,726 And one of the ways they persuade themselves 253 00:16:59,726 --> 00:17:04,726 to take more risk is through financial innovations. 254 00:17:10,820 --> 00:17:13,250 - Wall Street created the risky loans called subprime 255 00:17:13,250 --> 00:17:16,910 to Americans who could ill afford to pay 256 00:17:16,910 --> 00:17:20,023 the bank loans that they had just applied for. 257 00:17:24,500 --> 00:17:27,520 The public were given access to zero, low-income, 258 00:17:27,520 --> 00:17:28,863 and even no job loans. 259 00:17:32,230 --> 00:17:35,682 - So if you wanted the absolute craziness, 260 00:17:35,682 --> 00:17:38,360 it would be the NINJA loan. 261 00:17:38,360 --> 00:17:43,360 So, NINJA stands for no income, no job, and no assets. 262 00:17:48,290 --> 00:17:51,390 The idea is that you would lend money 263 00:17:51,390 --> 00:17:54,018 to people that gave you no information 264 00:17:54,018 --> 00:17:57,015 about whether they had any income, 265 00:17:57,015 --> 00:17:59,670 whether they had any job, 266 00:17:59,670 --> 00:18:01,333 or whether they had any assets. 267 00:18:10,480 --> 00:18:14,130 It will allow you to grow enormously 268 00:18:14,130 --> 00:18:17,697 'cause now you can loan in the U.S. context to tens 269 00:18:17,697 --> 00:18:21,913 of millions of people that can't repay the loan. 270 00:18:24,930 --> 00:18:29,850 How many people out there are there who can't get a loan? 271 00:18:33,810 --> 00:18:36,710 Tens of millions of people in the United States. 272 00:18:36,710 --> 00:18:40,393 Tens of millions of people in France in these circumstances. 273 00:18:42,980 --> 00:18:46,560 This goes under the general category of predation. 274 00:18:46,560 --> 00:18:47,870 In the United States, 275 00:18:47,870 --> 00:18:51,660 the people that were targeted for the worst loans 276 00:18:51,660 --> 00:18:55,610 were overwhelmingly a combination 277 00:18:55,610 --> 00:18:58,530 of four demographic factors, 278 00:18:58,530 --> 00:19:03,530 Blacks, Latinos, the elderly, and females. 279 00:19:05,370 --> 00:19:07,800 That is incredibly immoral. 280 00:19:07,800 --> 00:19:10,810 This is why almost everywhere in 281 00:19:10,810 --> 00:19:13,473 the world these things are crimes. 282 00:19:15,381 --> 00:19:17,964 (gentle music) 283 00:19:27,340 --> 00:19:29,230 - These toxic loans became a gold rush 284 00:19:29,230 --> 00:19:31,730 for the whole U.S. banking and financial industry. 285 00:19:34,890 --> 00:19:36,380 All the major actors of Wall Street 286 00:19:36,380 --> 00:19:38,230 wanted a piece of the subprime party. 287 00:19:41,420 --> 00:19:44,700 Goldman Sachs, Lehman Brothers, 288 00:19:44,700 --> 00:19:47,120 Morgan Stanley, Merrill Lynch, 289 00:19:47,120 --> 00:19:51,003 Bear Stearns, J.P. Morgan, Citigroup and so on. 290 00:19:54,460 --> 00:19:56,270 The frenzy extended itself when loans 291 00:19:56,270 --> 00:19:58,770 were sought by the public by falsifying their 292 00:19:58,770 --> 00:20:01,293 own financial situation on loan applications. 293 00:20:02,520 --> 00:20:04,130 Therefore the public and banks 294 00:20:04,130 --> 00:20:06,233 were complicit in committing bank fraud. 295 00:20:07,699 --> 00:20:10,282 (gentle music) 296 00:20:25,380 --> 00:20:30,290 - My name is Richard Bowen, I was Senior Vice President 297 00:20:30,290 --> 00:20:33,883 and Business Chief Underwriter for Citigroup. 298 00:20:41,620 --> 00:20:45,723 At the time Citigroup was the largest bank in the world. 299 00:20:48,110 --> 00:20:50,729 It was my responsibility to make sure 300 00:20:50,729 --> 00:20:54,700 that the $90 billion a year that we 301 00:20:54,700 --> 00:20:57,610 were purchasing in mortgage loans that were 302 00:20:57,610 --> 00:21:00,860 originated by other banks and mortgage companies, 303 00:21:00,860 --> 00:21:03,433 these met our policy standards. 304 00:21:06,300 --> 00:21:11,300 In early 2006, I discovered that over 60% 305 00:21:11,865 --> 00:21:16,865 of these mortgages did not meet our guidelines. 306 00:21:17,410 --> 00:21:20,110 They were by definition defective. 307 00:21:20,110 --> 00:21:24,963 When I discovered this, and this was June of 2006, 308 00:21:26,740 --> 00:21:29,100 silly me, I thought it was my job. 309 00:21:29,100 --> 00:21:31,790 I started issuing warnings because I was supposed 310 00:21:31,790 --> 00:21:36,030 to make sure that these met our policy guidelines. 311 00:21:36,030 --> 00:21:40,040 And I sent email, I put it in my weekly report, 312 00:21:40,040 --> 00:21:42,730 I made committee presentations. 313 00:21:42,730 --> 00:21:45,870 I'm not a shy guy, I cornered people in the hallways, 314 00:21:45,870 --> 00:21:47,093 at the water fountain. 315 00:21:48,040 --> 00:21:50,100 And everyone said, yeah, yeah, 316 00:21:50,100 --> 00:21:55,100 we need to fix that but nothing would happen. 317 00:21:56,190 --> 00:22:00,649 And through 2006 and 2007, 318 00:22:00,649 --> 00:22:04,110 the volumes kept increasing 319 00:22:04,110 --> 00:22:06,410 and the rate of defective mortgages 320 00:22:06,410 --> 00:22:10,413 increased from 60 to an excess of 80%. 321 00:22:11,492 --> 00:22:15,690 80% of these mortgages that we were in turn 322 00:22:15,690 --> 00:22:20,014 selling and giving our representations and warranties 323 00:22:20,014 --> 00:22:22,814 that met our policy guidelines 324 00:22:22,814 --> 00:22:26,690 did not meet our policy guidelines. 325 00:22:26,690 --> 00:22:28,840 - [Interviewer] This is misrepresentation. 326 00:22:28,840 --> 00:22:30,010 - That is true. 327 00:22:30,010 --> 00:22:31,710 As a matter of fact, it was fraud. 328 00:22:37,060 --> 00:22:39,900 - I've seen plenty of loan documents 329 00:22:39,900 --> 00:22:42,292 with my own eyes that were falsified 330 00:22:42,292 --> 00:22:46,883 and the borrowers still signed them as if they were correct. 331 00:22:49,460 --> 00:22:54,460 - People who were typically hairdressers, gardeners, 332 00:22:54,640 --> 00:22:59,640 and such reporting incomes of over $100,000 a year. 333 00:23:00,400 --> 00:23:02,070 Now their actual incomes would be 334 00:23:02,070 --> 00:23:05,550 in the range of about $16,000. 335 00:23:05,550 --> 00:23:10,550 In those cases, their income is inflated by six times. 336 00:23:12,540 --> 00:23:14,480 - You would have waiters in restaurants 337 00:23:14,480 --> 00:23:17,580 showing that they made $150,000 a year. 338 00:23:17,580 --> 00:23:22,580 I mean that clearly is out of line but nonetheless, 339 00:23:22,729 --> 00:23:25,653 the loan type permitted that to happen. 340 00:23:28,260 --> 00:23:31,780 - Richard Bowen and his staff very carefully, 341 00:23:31,780 --> 00:23:36,780 very professionally, are documenting that these loans, 342 00:23:36,946 --> 00:23:40,363 their reps and warranties are false. 343 00:23:42,500 --> 00:23:44,930 But Citi is overwhelmingly turning 344 00:23:44,930 --> 00:23:47,223 around and reselling these loans. 345 00:23:49,190 --> 00:23:52,700 Citigroup didn't want to know 346 00:23:52,700 --> 00:23:54,940 because if it looked at these places, 347 00:23:54,940 --> 00:23:59,940 it couldn't possibly continue to use them. 348 00:24:03,950 --> 00:24:06,284 - It was all about generating the revenue. 349 00:24:06,284 --> 00:24:08,340 The people who worked on Wall Street conceived 350 00:24:08,340 --> 00:24:12,220 of the idea of securitizing mortgages, 351 00:24:12,220 --> 00:24:16,210 packaging mortgages up into securities, 352 00:24:16,210 --> 00:24:19,543 they actually arranged to buy the mortgages, 353 00:24:19,543 --> 00:24:23,550 they would package them up into securities, 354 00:24:23,550 --> 00:24:24,930 they would file documents with 355 00:24:24,930 --> 00:24:26,790 the Security Exchange Commission that they 356 00:24:26,790 --> 00:24:28,750 had to be able to call them securities 357 00:24:28,750 --> 00:24:31,040 and then they would sell them to investors all around 358 00:24:31,040 --> 00:24:34,120 the world and all along the way they were making money. 359 00:24:34,120 --> 00:24:37,850 It was almost like it was a perfect product that 360 00:24:37,850 --> 00:24:40,963 anybody who touched a mortgage made money off of it. 361 00:24:45,730 --> 00:24:50,320 - November the 2nd of 2007, 362 00:24:50,320 --> 00:24:55,143 sitting at my kitchen table I put together an email. 363 00:24:56,010 --> 00:24:58,754 And I sent the email to Robert Rubin 364 00:24:58,754 --> 00:25:00,870 who the next day on Sunday at 365 00:25:00,870 --> 00:25:03,563 the board meeting was named Chairman of the Board. 366 00:25:05,650 --> 00:25:08,430 I also sent it to the Chief Risk Officer, 367 00:25:08,430 --> 00:25:09,927 the Chief Financial Officer, 368 00:25:09,927 --> 00:25:11,283 and the Chief Auditor. 369 00:25:12,700 --> 00:25:17,690 I said, "Urgent, read immediately, financial issues." 370 00:25:17,690 --> 00:25:20,173 I put that in all capital letters. 371 00:25:21,340 --> 00:25:24,300 I called for an outside investigation. 372 00:25:24,300 --> 00:25:26,930 I said come in here from the outside 373 00:25:26,930 --> 00:25:29,451 and investigate what is going on here 374 00:25:29,451 --> 00:25:32,973 because everybody here already knows. 375 00:25:34,390 --> 00:25:36,720 And no one contacted me. 376 00:25:36,720 --> 00:25:39,930 Throughout November, throughout December, 377 00:25:39,930 --> 00:25:44,733 there was no contact, no one said a word. 378 00:25:48,320 --> 00:25:51,720 I will tell you that at that particular point in time, 379 00:25:53,490 --> 00:25:56,353 before I would even get in my car, 380 00:25:59,540 --> 00:26:01,513 I was doing what they do in the movies, 381 00:26:02,619 --> 00:26:03,560 I was looking underneath my car 382 00:26:03,560 --> 00:26:05,210 and opening the hood and looking. 383 00:26:06,660 --> 00:26:08,753 It was a very frightening time. 384 00:26:12,250 --> 00:26:17,250 February the 6th, I received, 385 00:26:17,670 --> 00:26:19,380 there was an email that went out 386 00:26:19,380 --> 00:26:21,373 with regard to reorganization. 387 00:26:22,650 --> 00:26:25,200 And in that reorganization I was 388 00:26:25,200 --> 00:26:28,770 stripped of all my underwriting responsibilities. 389 00:26:28,770 --> 00:26:33,460 That next week I was put on administrative leave 390 00:26:33,460 --> 00:26:35,560 and told I'm not to come back to the bank. 391 00:26:57,310 --> 00:27:01,243 Greed was definitely the driver on all of this, 392 00:27:02,220 --> 00:27:04,363 as it is on most fraud, I'm told. 393 00:27:09,620 --> 00:27:11,270 - Citigroup was not the only one. 394 00:27:12,510 --> 00:27:14,720 A comparable level of fraudulent mortgage loans have 395 00:27:14,720 --> 00:27:18,123 been seen in all of the big Wall Street banks. 396 00:27:20,380 --> 00:27:22,363 Ignoring the risk of bankruptcy, 397 00:27:22,363 --> 00:27:25,260 banks began to borrow a massive amount of money 398 00:27:25,260 --> 00:27:27,010 to buy more and more mortgage loans 399 00:27:27,920 --> 00:27:29,620 and package them into derivatives. 400 00:27:32,070 --> 00:27:34,170 The top underwriter in the peak years 401 00:27:34,170 --> 00:27:38,267 of 2005 and 2006 was Lehman Brothers at $106 billion. 402 00:27:43,160 --> 00:27:48,160 - Lehman was one of the largest makers and sellers 403 00:27:48,610 --> 00:27:53,250 of the absolute most toxic loans in the entire world. 404 00:27:53,250 --> 00:27:56,018 Lehman Brothers was one of the largest fraud 405 00:27:56,018 --> 00:27:58,183 vectors in the history of the world. 406 00:28:10,660 --> 00:28:13,103 - My name is Anton Velukas. 407 00:28:14,898 --> 00:28:15,893 I go by the name Tony. 408 00:28:21,230 --> 00:28:26,210 In the year 2009, about three months 409 00:28:26,210 --> 00:28:28,780 after the Lehman bankruptcy, 410 00:28:28,780 --> 00:28:30,650 I was appointed by the federal court 411 00:28:30,650 --> 00:28:34,293 in New York to act as an examiner. 412 00:28:35,810 --> 00:28:38,830 I was independent of any of the parties. 413 00:28:38,830 --> 00:28:40,880 And among the responsibilities the court 414 00:28:40,880 --> 00:28:44,390 charged me and my team with was to determine 415 00:28:44,390 --> 00:28:46,943 how and why Lehman went into bankruptcy. 416 00:28:47,870 --> 00:28:50,680 And when you're talking about the Lehman bankruptcy 417 00:28:50,680 --> 00:28:53,813 you are talking about the largest single bankruptcy 418 00:28:53,813 --> 00:28:58,310 in the history of financial institutions. 419 00:28:58,310 --> 00:29:02,043 Total amount of the bankruptcy $693 billion. 420 00:29:04,920 --> 00:29:08,193 So, we told the story of what happened. 421 00:29:14,060 --> 00:29:15,730 - [Philip] Lehman Brothers were the fourth largest global 422 00:29:15,730 --> 00:29:20,730 investment bank in the world led by famous CEO Dick Fuld. 423 00:29:23,650 --> 00:29:26,010 - Hi, my name is Dick Fuld, I'm the Chairman 424 00:29:26,010 --> 00:29:28,510 and Chief Executive Officer of Lehman Brothers. 425 00:29:28,510 --> 00:29:31,550 Now's a terrific time to be joining Lehman Brothers. 426 00:29:31,550 --> 00:29:34,030 I've been here 30 years and I can't think 427 00:29:34,030 --> 00:29:35,976 of a better time for you to take part in 428 00:29:35,976 --> 00:29:38,663 the changes and opportunities that are going on here. 429 00:29:42,973 --> 00:29:44,190 - [Interviewer] If I tell you Dick Fuld, 430 00:29:44,190 --> 00:29:46,690 what will be the first thing that cross your mind? 431 00:29:48,660 --> 00:29:52,660 - A person who was viewed as a lion on Wall Street. 432 00:29:52,660 --> 00:29:55,420 I believe that in the year 2008, 433 00:29:55,420 --> 00:29:56,810 the very year of the bankruptcy, 434 00:29:56,810 --> 00:29:58,600 he was named by Forbes as one of 435 00:29:58,600 --> 00:30:01,583 the top 10 executives in the country. 436 00:30:04,870 --> 00:30:06,340 - They called him the gorilla 437 00:30:06,340 --> 00:30:08,130 and I think they called him that for a reason, 438 00:30:08,130 --> 00:30:13,130 he was brusk, boorish, take no prisoners kind of guy, 439 00:30:13,650 --> 00:30:16,872 you know run through a wall for Lehman Brothers, 440 00:30:16,872 --> 00:30:21,573 hyper competitive, hyper narcissistic. 441 00:30:23,490 --> 00:30:28,043 - Squeeze some of those shorts, squeeze 'em hard. 442 00:30:33,040 --> 00:30:34,587 Not that I want to hurt 'em. 443 00:30:36,460 --> 00:30:39,413 Don't get that please, 'cause that's just not who I am. 444 00:30:41,320 --> 00:30:43,733 I am soft, I'm lovable, 445 00:30:44,570 --> 00:30:47,920 but what I really want to do is I want to reach in, 446 00:30:47,920 --> 00:30:51,283 rip out their heart, and eat it before they die. 447 00:30:52,980 --> 00:30:55,850 - The man who lost Lehman Brothers, 448 00:30:55,850 --> 00:30:58,690 the man who presided over its decline and fall, 449 00:30:58,690 --> 00:31:00,360 the man who could have done something 450 00:31:00,360 --> 00:31:01,610 about it but chose not to, 451 00:31:01,610 --> 00:31:04,970 the man who refused to see the writing on the wall, 452 00:31:04,970 --> 00:31:09,690 the man who, you know, kicked off in many ways 453 00:31:09,690 --> 00:31:11,423 what became the Great Recession. 454 00:31:18,170 --> 00:31:20,170 - My name is Oliver Budde 455 00:31:20,170 --> 00:31:21,490 and I was an in-house lawyer 456 00:31:21,490 --> 00:31:23,243 at Lehman Brothers for eight years. 457 00:31:27,670 --> 00:31:29,560 I discovered many things that were 458 00:31:29,560 --> 00:31:33,120 at least unethical if not illegal 459 00:31:35,000 --> 00:31:36,993 and eventually I decided to quit. 460 00:31:38,440 --> 00:31:40,203 I was earning a lot of money. 461 00:31:44,024 --> 00:31:46,010 But it was not enough for me to turn a blind eye 462 00:31:46,010 --> 00:31:47,810 to all that was happening around me. 463 00:31:51,070 --> 00:31:54,020 The tone coming from the top, Dick Fuld, 464 00:31:54,020 --> 00:31:57,200 the guys around him were go for it, push it, 465 00:31:57,200 --> 00:31:59,390 go beyond the limits. 466 00:31:59,390 --> 00:32:03,135 The key at Lehman was to evaluate the risk and the reward 467 00:32:03,135 --> 00:32:07,190 and nevermind the law that might be in between there. 468 00:32:07,190 --> 00:32:09,638 If the reward is high enough and the risk is low enough, 469 00:32:09,638 --> 00:32:12,373 we will do it and we will sort it out later. 470 00:32:14,350 --> 00:32:18,513 This was a culture of risk and this was all about money. 471 00:32:20,110 --> 00:32:23,110 - Lehman Brothers risk analysis program 472 00:32:23,110 --> 00:32:25,010 was considered a model on Wall Street. 473 00:32:25,890 --> 00:32:28,423 I mean it was brilliantly conceived of. 474 00:32:29,412 --> 00:32:31,988 The problem was it was simply ignored. 475 00:32:31,988 --> 00:32:34,540 You have to understand, you're talking about Dick Fuld. 476 00:32:34,540 --> 00:32:37,280 Dick Fuld made his fortune at Lehman Brothers. 477 00:32:37,280 --> 00:32:38,403 He was a billionaire. 478 00:32:39,520 --> 00:32:41,720 So, if you say, well, I think he had it wrong. 479 00:32:41,720 --> 00:32:44,140 He'd ask you, are you a billionaire? 480 00:32:44,140 --> 00:32:45,720 Have you made a billion dollars trading? 481 00:32:45,720 --> 00:32:46,770 I have. 482 00:32:46,770 --> 00:32:47,603 And he had. 483 00:32:56,247 --> 00:32:58,590 - In the years leading up to the crisis, 484 00:32:58,590 --> 00:33:02,400 everything, the financial health of Lehman Brothers 485 00:33:02,400 --> 00:33:04,933 could not have been better, at least on paper. 486 00:33:07,790 --> 00:33:09,380 - [Philip] They expanded the use 487 00:33:09,380 --> 00:33:11,263 of their toxic derivatives. 488 00:33:11,263 --> 00:33:13,143 And the ratio of lending expanded. 489 00:33:17,010 --> 00:33:20,683 In 2008, Lehman's was massively leveraged. 490 00:33:23,690 --> 00:33:28,040 - Lehman Brothers had one of the highest leverage 491 00:33:28,040 --> 00:33:32,983 ratios in American financial institutions. 492 00:33:32,983 --> 00:33:37,983 A leverage ratio is a ratio of your debt to your equity, 493 00:33:38,100 --> 00:33:41,120 another word for equity is capital. 494 00:33:41,120 --> 00:33:46,120 Its ratio depending on the exact time was 30 to 40 to one. 495 00:33:46,140 --> 00:33:50,280 In other words, for every dollar of supposed capital it had, 496 00:33:50,280 --> 00:33:53,403 it had $30 to $40 in debt. 497 00:33:55,720 --> 00:33:59,487 - Lehman became the focus of worldwide attention 498 00:33:59,487 --> 00:34:03,190 because they were perceived as the next weakest link. 499 00:34:03,190 --> 00:34:05,713 They were the next domino to fall. 500 00:34:08,000 --> 00:34:10,709 - So, Lehman engaged in a scheme, 501 00:34:10,709 --> 00:34:14,890 an accounting scheme to make it look better. 502 00:34:14,890 --> 00:34:19,713 And what they did was what was called Repo 105s. 503 00:34:23,020 --> 00:34:25,389 - This was something that Lehman used every quarter 504 00:34:25,389 --> 00:34:29,330 to hide some of the borrowed money. 505 00:34:29,330 --> 00:34:32,140 You see, Lehman would borrow money and they would 506 00:34:32,140 --> 00:34:35,183 pledge securities that they had as collateral. 507 00:34:37,150 --> 00:34:39,190 At the end it was $50 billion each quarter. 508 00:34:39,190 --> 00:34:41,320 They would borrow $50 billion. 509 00:34:41,320 --> 00:34:43,823 And they would give $50 billion in collateral. 510 00:34:46,130 --> 00:34:48,380 But they would actually say that this was a sale, 511 00:34:48,380 --> 00:34:50,600 this was not a pledge for a loan 512 00:34:50,600 --> 00:34:54,290 but this was a sale of those assets for $50 billion. 513 00:34:54,290 --> 00:34:56,020 And they would treat the $50 billion 514 00:34:56,020 --> 00:34:59,653 not as debt but as cash that they just got. 515 00:35:01,670 --> 00:35:03,280 And by doing that and using that 516 00:35:03,280 --> 00:35:05,869 cash to pay down still other debt, 517 00:35:05,869 --> 00:35:08,573 they could materially, significantly 518 00:35:08,573 --> 00:35:11,053 move that leverage ratio down. 519 00:35:13,190 --> 00:35:14,750 Then as soon as the quarter was over 520 00:35:14,750 --> 00:35:16,467 and they had published their number, 521 00:35:16,467 --> 00:35:20,930 they would undo that transaction and presto, 522 00:35:20,930 --> 00:35:25,510 they would give back the money, take back the securities, 523 00:35:25,510 --> 00:35:29,040 and again be leveraged just as high as they were before. 524 00:35:29,040 --> 00:35:33,023 They did this only to fool the public and no other reason. 525 00:35:36,730 --> 00:35:39,440 - The effect of that was in June they were able to show 526 00:35:39,440 --> 00:35:42,710 that their leverage had been dropped dramatically. 527 00:35:42,710 --> 00:35:46,273 And the Street said, wow, Lehman's doing okay. 528 00:35:48,030 --> 00:35:51,550 - Our firm is strong today and we will emerge 529 00:35:51,550 --> 00:35:53,373 from this cycle even stronger. 530 00:35:54,680 --> 00:35:59,680 We've done it before and we will do it again. 531 00:35:59,740 --> 00:36:02,600 - [Interviewer] So, they fudged the number? 532 00:36:02,600 --> 00:36:05,880 - Yes, in my opinion, they absolutely fudged the numbers. 533 00:36:05,880 --> 00:36:07,030 They engaged in the trend. 534 00:36:07,030 --> 00:36:09,080 Even within their own emails they refer 535 00:36:09,080 --> 00:36:12,572 to it as a drug they were on, a sham, 536 00:36:12,572 --> 00:36:16,860 an accounting gimmick to make themselves look better. 537 00:36:16,860 --> 00:36:18,270 So, they knew what they were doing. 538 00:36:18,270 --> 00:36:19,400 - [Interviewer] So, they were hiding 539 00:36:19,400 --> 00:36:20,800 information to the public? 540 00:36:20,800 --> 00:36:24,270 - Yes, that was the opinion we reached in the report. 541 00:36:24,270 --> 00:36:26,073 - [Interviewer] Isn't it against the law? 542 00:36:26,960 --> 00:36:29,640 - Well, if you file a misleading statement 543 00:36:29,640 --> 00:36:31,850 and you knowingly file a misleading statement, 544 00:36:31,850 --> 00:36:34,940 and a judge concludes that you have done so or a jury does, 545 00:36:34,940 --> 00:36:36,330 that is against the law, yes. 546 00:36:36,330 --> 00:36:37,950 There was a basis by which such 547 00:36:37,950 --> 00:36:40,940 a claim could be made, yes we did. 548 00:36:40,940 --> 00:36:43,660 - [Interviewer] Including against Dick Fuld, the CEO? 549 00:36:43,660 --> 00:36:45,180 - Yes, yes. 550 00:36:46,490 --> 00:36:50,410 - [Interviewer] But nobody was arrested or charged for this? 551 00:36:50,410 --> 00:36:53,100 - No, there were no arrests, there were no charge, 552 00:36:53,100 --> 00:36:56,598 there was no jury trial, there was no civil case brought 553 00:36:56,598 --> 00:37:00,450 in which the jury heard the case and then decided the case. 554 00:37:00,450 --> 00:37:02,250 None of those things took place, no. 555 00:37:08,590 --> 00:37:11,017 - Let me start by saying that I have 556 00:37:11,017 --> 00:37:12,640 absolutely no recollection whatsoever 557 00:37:12,640 --> 00:37:16,930 of hearing anything about or seeing documents related 558 00:37:16,930 --> 00:37:21,343 to Repo 105 transactions while I was the CEO of Lehman. 559 00:37:22,640 --> 00:37:23,790 - [Interviewer] Do you think it's possible 560 00:37:23,790 --> 00:37:25,440 that Dick Fuld didn't know? 561 00:37:25,440 --> 00:37:28,398 - No, of course not, of course not. 562 00:37:28,398 --> 00:37:30,830 There were senior executives at Lehman 563 00:37:30,830 --> 00:37:33,510 who were interviewed by Mr. Valukas and others 564 00:37:33,510 --> 00:37:35,430 who said that yes, he did know. 565 00:37:35,430 --> 00:37:37,681 That emails were sent to him that showed 566 00:37:37,681 --> 00:37:42,640 the Repo 105 portion of the financials, 567 00:37:42,640 --> 00:37:45,160 to show the effect of this. 568 00:37:45,160 --> 00:37:47,790 And then Dick Fuld's answer was, well, they might have sent 569 00:37:47,790 --> 00:37:51,030 me emails but I don't know how to work a computer. 570 00:37:51,030 --> 00:37:53,690 I don't know how to open an attachment 571 00:37:53,690 --> 00:37:55,640 that would have a spreadsheet to show this 572 00:37:55,640 --> 00:37:57,830 so I never saw it, I was never aware. 573 00:37:57,830 --> 00:37:58,813 This was historic. 574 00:38:05,630 --> 00:38:06,463 - One more time, 575 00:38:06,463 --> 00:38:08,930 Wall Street misrepresented its financial condition. 576 00:38:10,810 --> 00:38:12,690 At the same time, millions were 577 00:38:12,690 --> 00:38:14,353 spent in bonuses for traders. 578 00:38:17,230 --> 00:38:18,283 This was a jackpot. 579 00:38:21,694 --> 00:38:23,057 - The place to make money and 580 00:38:23,057 --> 00:38:24,533 the most money was Wall Street. 581 00:38:26,840 --> 00:38:29,676 - Bonuses reached levels that had never 582 00:38:29,676 --> 00:38:34,123 been even approximated in the world. 583 00:38:35,520 --> 00:38:36,980 - Millions of dollars a year, 584 00:38:36,980 --> 00:38:40,100 it's like the greatest job you could ever imagine 585 00:38:40,100 --> 00:38:43,537 getting without putting any of your own capital at risk. 586 00:38:43,537 --> 00:38:46,120 (upbeat music) 587 00:38:54,120 --> 00:38:57,820 You name it, beautiful apartment on Park Avenue, 5th Avenue, 588 00:38:57,820 --> 00:38:59,560 beautiful house in the Hamptons, 589 00:38:59,560 --> 00:39:00,810 beautiful art collection. 590 00:39:03,320 --> 00:39:06,090 - Buy the house you want, have a nice vacation house, 591 00:39:06,090 --> 00:39:08,256 have two or three cars, have a boat, 592 00:39:08,256 --> 00:39:10,393 have whatever you wanted. 593 00:39:11,330 --> 00:39:14,130 I mean once you're in the millions, there are no limits. 594 00:39:16,080 --> 00:39:18,703 - They had excessive lifestyles, 595 00:39:20,140 --> 00:39:23,403 they were willing to take risks to support that lifestyle. 596 00:39:24,360 --> 00:39:26,550 There's a great bit of narcissism 597 00:39:26,550 --> 00:39:29,122 and antisocial personality disorders 598 00:39:29,122 --> 00:39:31,760 and with this they might feel like 599 00:39:31,760 --> 00:39:33,410 they have a sense of entitlement 600 00:39:33,410 --> 00:39:34,830 or they're above the law 601 00:39:34,830 --> 00:39:36,993 or they're too good to get caught. 602 00:39:39,220 --> 00:39:43,843 - So, it's dominance, it's power, it's status. 603 00:39:44,720 --> 00:39:48,400 I'm bigger, tougher, better endowed than you are. 604 00:39:48,400 --> 00:39:50,593 I got a bigger swinging dick than you. 605 00:39:54,160 --> 00:39:56,190 - They're thrill seekers, 606 00:39:56,190 --> 00:39:59,970 they derive some sort of high from taking risks. 607 00:39:59,970 --> 00:40:01,640 They do that in their careers 608 00:40:01,640 --> 00:40:04,621 so naturally it spills into their personal lives. 609 00:40:04,621 --> 00:40:07,901 Lots of drugs, lots of cocaine use, 610 00:40:07,901 --> 00:40:11,323 even prostitution, indiscriminate sex. 611 00:40:12,800 --> 00:40:15,220 People were spending a lot of money on sex. 612 00:40:15,220 --> 00:40:20,220 People were spending a few hundred to a few thousand a week. 613 00:40:22,030 --> 00:40:27,030 - This whole culture is all just swimming in a sea of greed 614 00:40:27,298 --> 00:40:31,270 but the big thing is who's gonna 615 00:40:31,270 --> 00:40:34,740 be dominant in this sea of greed? 616 00:40:34,740 --> 00:40:36,440 That's the real thing. 617 00:40:36,440 --> 00:40:38,610 Who's gonna have the power? 618 00:40:38,610 --> 00:40:41,763 Who's gonna be able to face down the other guy? 619 00:40:46,900 --> 00:40:50,740 - On Wall Street, these CEOs, they pull in, 620 00:40:50,740 --> 00:40:53,310 some of them would pull in $100 million a year. 621 00:40:53,310 --> 00:40:55,560 And Dick Fuld had several years where 622 00:40:55,560 --> 00:40:59,053 it was $70, $80, $90, $100 million in one year. 623 00:41:00,390 --> 00:41:03,300 He had a multimillion dollar home in Greenwich 624 00:41:03,300 --> 00:41:04,770 and that's where he lived most of the time 625 00:41:04,770 --> 00:41:06,860 but he also kept a very fancy 626 00:41:06,860 --> 00:41:09,550 multimillion dollar apartment on Park Avenue. 627 00:41:09,550 --> 00:41:11,510 He had another home down in Florida 628 00:41:11,510 --> 00:41:13,770 also worth $10, $15 million. 629 00:41:13,770 --> 00:41:17,100 Another place in Idaho, Sun Valley, 630 00:41:17,100 --> 00:41:19,010 some sort of a cabin in the woods there, 631 00:41:19,010 --> 00:41:21,633 but again multimillion dollar property. 632 00:41:24,350 --> 00:41:29,026 - Since 2000, you have taken home more than $480 million. 633 00:41:29,026 --> 00:41:31,640 That's almost half a billion dollars. 634 00:41:31,640 --> 00:41:33,380 Your company's now bankrupt, 635 00:41:33,380 --> 00:41:35,426 our economy is in a state of crisis, 636 00:41:35,426 --> 00:41:38,283 but you get to keep $480 million. 637 00:41:39,590 --> 00:41:43,080 I have a very basic question for you, is this fair? 638 00:41:43,080 --> 00:41:46,477 - I would say to you the 500 number is not accurate 639 00:41:46,477 --> 00:41:48,980 and I believe the amount that I took out 640 00:41:48,980 --> 00:41:52,223 of the company over and above that was, 641 00:41:53,410 --> 00:41:56,100 I believe, a little bit less than $250 million, 642 00:41:56,100 --> 00:41:57,340 still a large number though. 643 00:41:57,340 --> 00:41:58,616 - [Waxman] Still a large number. 644 00:41:58,616 --> 00:42:02,620 - [Crowd] Greed, you're going to jail, greed. 645 00:42:02,620 --> 00:42:05,050 - In fact, both numbers were wrong 646 00:42:05,050 --> 00:42:06,700 and both numbers were low. 647 00:42:06,700 --> 00:42:11,560 The true number was $530 million for 2000 to 2007 648 00:42:11,560 --> 00:42:14,450 and Dick Fuld said, yeah, I only made $310. 649 00:42:14,450 --> 00:42:18,224 That's over $200 million he took off his total, 650 00:42:18,224 --> 00:42:21,047 under oath, I swear to tell the truth, the whole truth. 651 00:42:21,047 --> 00:42:23,410 He did it on television to the world 652 00:42:23,410 --> 00:42:25,613 and this stood up. 653 00:42:26,508 --> 00:42:27,610 - You should go to jail right now. 654 00:42:27,610 --> 00:42:29,040 - [Man] Take him away. 655 00:42:29,040 --> 00:42:30,133 Take him away. 656 00:42:31,847 --> 00:42:33,060 - I don't even think I could resist. 657 00:42:33,060 --> 00:42:35,560 If you gave me the opportunity 658 00:42:35,560 --> 00:42:38,344 to make $550 million and all I had to was 659 00:42:38,344 --> 00:42:43,260 hurt six billion people, I would think about it. 660 00:42:43,260 --> 00:42:44,853 The temptation is there. 661 00:42:49,210 --> 00:42:52,863 - People are simple, they do what they're rewarded to do. 662 00:42:54,690 --> 00:42:57,040 So, if you're rewarded to take big 663 00:42:57,040 --> 00:42:58,640 risks with other people's money, 664 00:42:59,760 --> 00:43:01,660 that's what you're going to do. 665 00:43:01,660 --> 00:43:04,690 I believe it was Voltaire in Candide 666 00:43:04,690 --> 00:43:09,470 who wrote about a British general who 667 00:43:09,470 --> 00:43:11,420 lost a battle in France 668 00:43:11,420 --> 00:43:15,223 and when he came back to England he was killed. 669 00:43:20,420 --> 00:43:25,030 You know, Voltaire was a very smart guy, right? 670 00:43:25,030 --> 00:43:27,210 That's human nature. 671 00:43:27,210 --> 00:43:29,110 People do what they're rewarded to do. 672 00:43:31,150 --> 00:43:34,910 - The real message is we don't care how you did it, 673 00:43:34,910 --> 00:43:36,100 we don't care whether it's real, 674 00:43:36,100 --> 00:43:38,941 we don't care whether it's honest, just do it, 675 00:43:38,941 --> 00:43:42,543 'cause you'll be rich and I'll be rich. 676 00:43:44,920 --> 00:43:47,260 In the financial context, 677 00:43:47,260 --> 00:43:50,563 modern executive compensation didn't just 678 00:43:50,563 --> 00:43:53,220 create the most criminogenic environment, 679 00:43:53,220 --> 00:43:58,220 it created the biggest crimes in financial history 680 00:43:58,590 --> 00:44:00,563 and there's nothing close. 681 00:44:04,320 --> 00:44:06,380 - [Reporter] This is absolutely stunning, 682 00:44:06,380 --> 00:44:10,143 Wall Street has seen very, very few days like this. 683 00:44:11,550 --> 00:44:14,030 - [Philip] The inevitable happened. 684 00:44:14,030 --> 00:44:15,943 The house of cards came falling down. 685 00:44:17,610 --> 00:44:20,630 - [Reporter] Lehman Brothers, a 158 year old firm, 686 00:44:20,630 --> 00:44:22,580 filed for bankruptcy. 687 00:44:22,580 --> 00:44:24,830 Brought down by bad mortgage investments, 688 00:44:24,830 --> 00:44:28,543 Lehman, which has 25,000 employees, will be liquidated. 689 00:44:29,620 --> 00:44:33,610 - Someone said, you know, corporations die of cancer, 690 00:44:33,610 --> 00:44:35,823 investment banks die of heart attacks. 691 00:44:37,350 --> 00:44:40,830 - There was a time when these assets were completely toxic 692 00:44:40,830 --> 00:44:42,185 and they're completely toxic, 693 00:44:42,185 --> 00:44:45,190 anybody owns it has a terrible problem 694 00:44:45,190 --> 00:44:47,783 and that's the situation Lehman found itself in. 695 00:44:50,550 --> 00:44:54,328 People basically ran on it, ceased to lend to it 696 00:44:54,328 --> 00:44:58,703 and the government didn't stand behind it, so it collapsed. 697 00:45:00,770 --> 00:45:02,851 - [William] The 15th of September 2008, 698 00:45:02,851 --> 00:45:05,283 Lehman Brothers goes bankrupt. 699 00:45:06,430 --> 00:45:08,270 The New York Stock Exchange had its 700 00:45:08,270 --> 00:45:11,693 biggest drop in a single day since 9/11. 701 00:45:14,200 --> 00:45:16,600 Banks began to stop lending money to each other. 702 00:45:19,090 --> 00:45:20,620 - [Reporter] The collapse of Lehman Brothers 703 00:45:20,620 --> 00:45:23,380 triggered turmoil in markets around the globe. 704 00:45:23,380 --> 00:45:27,013 Stocks tumbled in Taiwan and India then plummeted in Europe. 705 00:45:29,570 --> 00:45:32,160 - [William] The 2008 financial crisis displayed what 706 00:45:32,160 --> 00:45:35,143 the world now identifies as financial contagion. 707 00:45:37,300 --> 00:45:39,123 - There was a worldwide recession. 708 00:45:40,090 --> 00:45:42,540 The value of real estate plummeted. 709 00:45:42,540 --> 00:45:43,670 People lost their homes. 710 00:45:43,670 --> 00:45:46,810 You could go through southwest side of Chicago 711 00:45:46,810 --> 00:45:49,430 and see foreclosure, foreclosure, foreclosure. 712 00:45:49,430 --> 00:45:51,449 Home after home after home that were 713 00:45:51,449 --> 00:45:54,003 going belly up as a result of that. 714 00:45:55,160 --> 00:45:57,313 Numerous businesses went out of business. 715 00:46:05,200 --> 00:46:08,180 - This is a fraud. 716 00:46:08,180 --> 00:46:12,893 This is not random, it's not oops. 717 00:46:18,930 --> 00:46:20,750 - [Anton] Everybody got hurt. 718 00:46:20,750 --> 00:46:22,771 I mean the impact across the world 719 00:46:22,771 --> 00:46:25,050 was measured in the trillions of dollars. 720 00:46:25,050 --> 00:46:27,190 The value of what was lost during 721 00:46:27,190 --> 00:46:30,540 that period of time is almost incalculable. 722 00:46:30,540 --> 00:46:33,023 We had never seen anything like that since 1929. 723 00:46:49,060 --> 00:46:51,786 - This crisis has changed our world 724 00:46:51,786 --> 00:46:55,823 in many long lasting ways. 725 00:46:57,290 --> 00:47:00,410 Without the crisis, Brexit would not have happened 726 00:47:00,410 --> 00:47:01,440 and Donald Trump would not 727 00:47:01,440 --> 00:47:03,193 be president of the United States. 728 00:47:04,730 --> 00:47:07,890 This is a major turning point, 729 00:47:07,890 --> 00:47:09,970 you never know what it will be. 730 00:47:09,970 --> 00:47:12,896 But the '30s transformed the world because 731 00:47:12,896 --> 00:47:16,070 of course it brought us the Second World War. 732 00:47:16,070 --> 00:47:17,710 Hitler would certainly not have become 733 00:47:17,710 --> 00:47:20,310 Chancellor of Germany without the Great Depressions. 734 00:47:21,230 --> 00:47:22,530 So, it changes everything. 735 00:47:31,477 --> 00:47:33,310 - None of the leading company executives 736 00:47:33,310 --> 00:47:34,760 were ever brought to justice. 737 00:47:37,290 --> 00:47:38,253 I lost everything. 738 00:47:39,440 --> 00:47:42,830 All the money, everything I had, 739 00:47:42,830 --> 00:47:47,090 my wife, my family, connections. 740 00:47:47,090 --> 00:47:48,470 I lost everything. 741 00:48:05,300 --> 00:48:07,640 I still owe money to the U.S. government. 742 00:48:07,640 --> 00:48:12,640 I have 154 million reasons to know what I did wrong. 743 00:48:15,420 --> 00:48:17,070 - [Interviewer] You owe how much? 744 00:48:18,319 --> 00:48:23,319 - $154 million, plus interest. 745 00:48:29,737 --> 00:48:33,833 I'm just a small fish and I was brought to justice. 746 00:48:34,720 --> 00:48:35,670 They all went free. 747 00:48:39,940 --> 00:48:42,330 The system is what it is. 748 00:48:43,380 --> 00:48:45,855 And until the system changes, 749 00:48:45,855 --> 00:48:48,473 the powerful continue to walk. 750 00:48:54,090 --> 00:48:55,730 - You've seen that there were some 751 00:48:55,730 --> 00:48:59,210 very large settlements that were made 752 00:48:59,210 --> 00:49:01,923 but they never admitted that they did anything wrong. 753 00:49:02,783 --> 00:49:05,700 (electronic music) 754 00:49:23,230 --> 00:49:25,350 There was no admission of guilt, 755 00:49:25,350 --> 00:49:29,140 there was no charge of any criminal activity. 756 00:49:29,140 --> 00:49:33,337 And I have always represented that those payments 757 00:49:33,337 --> 00:49:36,330 were nothing more than payments of extortion 758 00:49:36,330 --> 00:49:40,000 to the Department of Justice to seal the evidence, 759 00:49:40,000 --> 00:49:42,799 to lock up the evidence so the public would 760 00:49:42,799 --> 00:49:45,801 never see how widespread and pervasive 761 00:49:45,801 --> 00:49:49,260 the fraud was that was committed. 762 00:49:49,260 --> 00:49:50,733 And I truly believe that. 763 00:49:52,610 --> 00:49:55,176 - These crimes are so vastly larger 764 00:49:55,176 --> 00:49:57,580 than any blue collar crimes. 765 00:49:57,580 --> 00:50:01,670 It's just off the charts non-comparable 766 00:50:01,670 --> 00:50:03,350 in terms of these things. 767 00:50:03,350 --> 00:50:07,247 It's what Balzac actually said, 768 00:50:07,247 --> 00:50:11,173 "Behind every fortune that you can't explain, 769 00:50:13,057 --> 00:50:18,057 "lies not just a fraud but a fraud executed 770 00:50:18,887 --> 00:50:22,397 "so well that it wasn't prosecuted." 771 00:50:30,866 --> 00:50:34,163 - We're now in Midtown Manhattan on Park Avenue. 772 00:50:35,553 --> 00:50:40,150 This is where Lehman was after 9/11. 773 00:50:40,150 --> 00:50:41,570 And this building across the street 774 00:50:41,570 --> 00:50:43,180 is where Dick Fuld, the CEO, 775 00:50:43,180 --> 00:50:46,600 is working today in his new company Matrix Capital. 776 00:50:46,600 --> 00:50:47,440 Nothing has changed, 777 00:50:47,440 --> 00:50:49,820 he's in the same business he always was. 778 00:50:49,820 --> 00:50:51,390 Some people may think of him as some 779 00:50:51,390 --> 00:50:55,060 sort of guy that was banished forever, 780 00:50:55,060 --> 00:50:56,483 but no, he's just fine. 781 00:50:58,400 --> 00:51:00,070 The world's collapsed, 782 00:51:00,070 --> 00:51:02,460 there were trillions of dollars of damage. 783 00:51:02,460 --> 00:51:04,710 It didn't cost Dick Fuld a dollar. 784 00:51:04,710 --> 00:51:08,430 The man put $550 million into his pocket. 785 00:51:08,430 --> 00:51:10,790 He kept it all and presumably 786 00:51:10,790 --> 00:51:13,500 he's probably grown that pile quite considerably. 787 00:51:13,500 --> 00:51:15,190 Perhaps he has a billion by now. 788 00:51:15,190 --> 00:51:18,140 The stock market has been doing very well since the crisis. 789 00:51:25,170 --> 00:51:26,110 - [Interviewer] What is the difference 790 00:51:26,110 --> 00:51:29,423 between a gangster who robs a bank and this banker? 791 00:51:30,590 --> 00:51:32,473 - The gangster that robs a bank, 792 00:51:32,473 --> 00:51:36,700 A, gets an average about $2,000 793 00:51:36,700 --> 00:51:41,700 and B, is virtually always successfully prosecuted 794 00:51:41,800 --> 00:51:44,675 and C, spends 20 years in prison, 795 00:51:44,675 --> 00:51:48,253 and the CEO has none of those things happen 796 00:51:48,253 --> 00:51:53,253 and is immensely wealthy and gets to keep his reputation. 797 00:52:00,950 --> 00:52:03,013 - Prison was the beginning of the redemption. 798 00:52:04,690 --> 00:52:08,303 The judge told me, do something good with your life. 799 00:52:09,320 --> 00:52:11,020 And that's why I'm trying to make a difference 800 00:52:11,020 --> 00:52:15,197 by speaking to the public about my failures 801 00:52:15,197 --> 00:52:20,197 and how they can be aware of what the world is facing. 802 00:52:27,760 --> 00:52:29,253 - Someone described it to me, 803 00:52:30,390 --> 00:52:33,230 you drive down the street in a school zone 804 00:52:34,440 --> 00:52:38,423 and you see a sign that says 30 kilometers an hour. 805 00:52:39,760 --> 00:52:44,760 You see a police car, you slow down, right, you go slow. 806 00:52:44,830 --> 00:52:46,397 Then you drive a little further. 807 00:52:46,397 --> 00:52:48,420 You drive a little further. 808 00:52:48,420 --> 00:52:49,410 Police car's in your back, 809 00:52:49,410 --> 00:52:50,503 you forget about that police officer 810 00:52:50,503 --> 00:52:52,490 and all of sudden you start to speed up 811 00:52:52,490 --> 00:52:55,040 and start to speed up, and start to speed up, right. 812 00:52:55,040 --> 00:52:56,990 That's what happens, it's human nature. 813 00:52:58,317 --> 00:53:02,630 We forget the disaster and we keep moving forward like that. 814 00:53:02,630 --> 00:53:05,440 So, do I think it can happen again, 815 00:53:05,440 --> 00:53:08,853 do I think that's, I think that's, yes, I do. 816 00:53:11,270 --> 00:53:13,760 - The seeds of the next financial crisis have 817 00:53:13,760 --> 00:53:16,739 already been planted, they're growing, 818 00:53:16,739 --> 00:53:20,210 we can't see them yet but there are plenty 819 00:53:20,210 --> 00:53:23,923 of signs all around of trouble brewing. 820 00:53:27,400 --> 00:53:30,190 - I think there is no doubt that 821 00:53:30,190 --> 00:53:32,640 we're going into another crisis of 822 00:53:32,640 --> 00:53:35,443 a greater severity than we have just been through. 823 00:53:37,260 --> 00:53:40,540 I can't predict what the instruments are going to be, 824 00:53:40,540 --> 00:53:42,198 I can't predict the specifics, 825 00:53:42,198 --> 00:53:44,499 but I know it will be driven by greed 826 00:53:44,499 --> 00:53:47,820 and misbehavior has no consequence. 827 00:53:47,820 --> 00:53:48,863 We have shown that. 828 00:53:51,350 --> 00:53:54,543 - We, the public and decision makers, 829 00:53:56,310 --> 00:53:58,450 basically haven't learned because 830 00:53:58,450 --> 00:54:01,350 we never much understood the crisis. 831 00:54:01,350 --> 00:54:03,775 But the bankers have learned the lessons. 832 00:54:03,775 --> 00:54:08,103 And the lesson was, this is sweet. 833 00:54:08,980 --> 00:54:10,750 This is perfect. 834 00:54:10,750 --> 00:54:12,760 This is a sure thing, 835 00:54:12,760 --> 00:54:15,550 I will be fabulously wealthy, 836 00:54:15,550 --> 00:54:18,093 and I will not pay any price for it. 837 00:54:19,270 --> 00:54:20,113 Thank you, lord.