GUEST: Joe Nocera
AIR DATE: 07/25/2011
I’m Richard Heffner, your host on The Open Mind. And at the end of March, as I read the last of his New York Times “Talking Business” columns, I was relieved and delighted to know that in fact – but on the paper’s OP Ed Page – I’d still enjoy reading my guest Joe Nocera’s always insightful and frequently caustic comments about the business world, about Good Guys & Bad Guys (The Saints and Scoundrels of American Business), to use the title of one of his books.
His most recent volume, of course, is Portfolio/Penguin’s All The Devils Are Here…The Hidden History of the Financial Crisis, by my guest and Bethany McLean.
And it is about the financial crisis and all those “Devils” that I’d like to begin our conversation today…going back to a Joe Nocera “Talking Business” column of June 2009, one titled “Only a Hint of Roosevelt in Financial Overhaul”…and ask my guest what it tells us of his own evaluation of Barack Obama’s economic convictions as compared to FDR’s.
What Joe Nocera wrote was quite direct:
“Three quarters of a century ago, President Franklin Roosevelt earned the undying enmity of Wall Street when he used his enormous popularity to push through a series of radical regulatory reforms that completely changed the norms of the financial industry.
“Wall Street hated the reforms, of course, but Roosevelt didn’t care,” wrote my guest.
“Wall Street and the financial industry had engaged in practices they shouldn’t have, and had helped lead the country into the Great Depression.
“Those practices had to be stopped said the President,” FDR, that is … to him, “that’s all that mattered.”
“On Wednesday” Nocera wrote, as he published this article, “President Obama unveiled what he described as … quote … ‘a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.’
“In terms of the sheer number of proposals,” wrote my guest, “that is undoubtedly true. But in terms of the scope and breadth of the Obama plan – and more important, in terms of its overall effect on Wall Street’s modus operandi – it’s not even close to what Roosevelt accomplished during the Great Depression.
“Rather, the Obama plan is little more than an attempt to stick some new regulatory fingers into a very leaky financial dam rather than rebuild the dam itself.”
All of which seemed to justify the Nocera column’s heading: “Only a Hint of Roosevelt in Financial Overhaul”…and I would ask my guest today if it also means he thinks there’s only a hint of FDR in Barack Obama.
NOCERA: Well, I, I … in terms of economics and in terms of reform … financial reform … I’d say the answer is “Yes”. I, I think we have learned more now than we knew … when I wrote that in 2009 that the President is a cautious man.
And I think it is particularly unfortunate in this particular case because … he doesn’t … he doesn’t have a grounding in economics. He, he came to the job with fully formed thoughts about many things … healthcare especially, but not economics.
And yet he found himself in this miasma of, of, of the aftermath of the crisis with all its … with the clear need to do something to at least stop the excesses that had caused the financial crisis.
And, and … but …when, when I think about Roosevelt, when I think about the, the, the Great Depression … you know the reforms … think about Glass-Steagall … think about what that did.
The government said, “You … JP Morgan … are going to be split in two. The commercial bank’s going to be here … it’s going to be small … no it’s going to be a large, but dowdy institution that doesn’t make a lot of money because it doesn’t take a lot of risk … because it has … guess what … Federal Deposit Insurance … the taxpayers are at risk.
And, and you … investment bank division are going to become Morgan Stanley … you can do whatever you want … we don’t care … trade, risk, whatever … it’s not our problem.
There’s nothing remotely comparable to that in this series of reforms.
There are some things that are pretty good if … you know, now we have a House Republican … a house, a house that is under the control of the Republicans which means there’s a lot of back-filling and fighting over how these regulations will go into place.
But assuming they all went into place the way they were originally envisioned, they would definitely do some good.
Derivative regulation would be certainly helpful … the wind down of “too big to fail” is helpful. Systemic risk council … yada, yada, that’s all helpful but it’s not radical and it, it doesn’t … it, it operates on the margins, it doesn’t take a … it doesn’t go directly at the companies that caused these problems and say, “We’re going to create situations that will not allow you to act the way you used to act.”
Financial crises come about or this financial came about in no small part because the, the incentives were all wrong.
Compensation incentives. So the incentives to do short term deals that fundamentally harm the country … with the tax payers picking up the tab.
Those incentives are still in place. And until you change them, you’re always going to have a threat of something similar happening.
HEFFNER: Now, you used the word in describing the President … “cautious”. Is that, do you think the right word or should we be using words that describe his political philosophy?
NOCERA: Well, you’re not going to like this answer … but, you know, I have only been on the OpEd page for three weeks … (laugh) … as of this taping.
I am not a political pundit or prognosticator. And one of the things I told Andy Rosenthal … my new boss … is that I’m not going to, you know, spend a lot of energy … in my column … analyzing the President. I’m not that interested in it. There’s a million other people at The New York Times and on the OpEd Page who can do that.
It’s not … it’s not what I care about. I care about the President in terms of business and finance. And I see him as a very cautious person in that context.
Ah, ah … I also think, as I said … I said earlier … I said I thought that he didn’t come to office with fully formed ideas about economics.
I think fundamentally he picked the wrong person to be the Secretary of the Treasury. And I think that he is greatly influenced by what his Treasury Secretary thinks. And … a willing … he doesn’t override him very often. And that the Secretary of the Treasury is somebody who is fundamentally … who fundamentally sees the world the way the banking industry sees the world.
I’m not saying he’s a bad guy. I’m not saying he’s on the take … I’m not saying anything like that. I’m not even saying he intellectually corrupt. I just think he sees the world more or less the way Jamie Dimon sees the world.
And given, given what happened a few years ago, that strikes me as an inappropriate stance for the person who runs the Treasury Department.
HEFFNER: Now, you think that’s a function of the President’s not really having a well-defined economic policy or that he just doesn’t know much.
That he could say as I say … whenever a person like you sits at the table and I say, “My eyes glaze over when I think of economics”.
NOCERA: Well, I think that’s unfortunate. Because I think that this stuff is really interesting and, and much of my career as a writer has been about trying to make this as interesting … and to cause people like you to not have your eyes glaze, but to say to yourself, “I understand that this material is not only important, but it can be engaging and entertaining as well”.
HEFFNER: I do understand it is important.
NOCERA: (Laugher) You know, David Remnick, I think the same way which is why there’s so little business … good business journalism in The New Yorker.
It’s, it’s … you know … business is much more at the center of the universe today than it was when I first started writing about it in the early 80’s.
But, you know, there’s still moments when you sort of feel like it’s an uphill struggle.
HEFFNER: Well, it’s … look, looking at your most recent book … All the Devils Are Here … the Hidden History of the Financial Crisis. I mean that’s where the stuff is. I know that. That’s why I … I don’t disagree with you about what I should know and I should be thinking about.
But most of us don’t. You’re in the catbird position now … you financial writers, you business writers. What … wouldn’t you say that’s true?
NOCERA: That we’re in the catbird seat?
NOCERA: I think it’s still easier to get a juicy political story on the front page than a juicy business story.
HEFFNER: Despite all the juicy things you write?
NOCERA: I think that … there are an awful lot of people, like you, for whom the subject makes their eyes close over.
And, you know, one of the things I learned early on is that business stories are fundamentally not about numbers. They’re about the same Shakespearean drama that drives most great stories.
Foibles and triumphs and ego and tragedy. Then if you, if you frame it that way … if you cast it that way, if you sort of understand human dynamics and, and, and why people behave the way they do, you can illuminate business stories in a way that, that is, in fact, engaging.
HEFFNER: Well, of course, I’ve wondered whether … and probably somebody else has asked you this … whether you could have written “All the Angels Are Here … The Hidden History of Finance … or the Hidden History of what happened in our crisis”.
NOCERA: Well, I don’t … well, what do you mean by that?
HEFFNER: Well, I mean something very, very definitive. And that is whether you … yourself … feel that it is possible, within the context of our business … free enterprise, capitalist system … to have angels rather than devils?
NOCERA: Well … (laughter) … the financial crisis is probably not the best place to be looking for angels. I, I, I think … but I … let me give you two answers on that.
Human … you know, people don’t change. Psychology, human psychology doesn’t change. And one of the things that I have said … since this financial crisis took place … is that at bottom … even though we view ourselves as smarter and more sophisticated and more learned … it’s no different … it is literally no different than, than, that the Dutch tulip bubble 450 years ago. It’s not …
People think an asset class is going to rise forever … some of them get greedy. Some of them are grasping … some of them think this is their one shot at, at the brass ring.
Some of them become traders, some of them speculated in Dutch tulips. It’s no different.
In this case, the asset class that was never going to go down was housing … was the price of a house. It’s not … and so humanity acted the way humanity acts.
Now, you can say “Yes, greedy Wall Street”. And that’s true. And you could say “Crooked sub-prime companies” and that’s true, too.
But it’s … what was behind it, what drove it … was the same psychology that drives, always … always drives humanity.
And so I don’t … although I do believe things happen that, that, that were criminal and should cause people to go to jail … I, I don’t … I fundamentally don’t come of the subject thinking “You know, this is the work of evil corporations”.
Because I generally don’t think of that. I think, I think life is more complex and more interesting than that. And … so in the larger context, if you put the financial crisis aside for a second …and talk … I understand what you’re saying about angels … I think that we live in a time where there’s enormous destructive institutions, corporations are part of that distrust.
Some of that is deserved; some of it isn’t. And I … one of the things I have tried to do, in my life, is make those distinctions, which requires, I think, you know … a willingness, sometimes, to say unpopular things and, and also requires a willingness to dig a little deeper and … I mean the classic example to me is … what is the best run, cleanest oil company in the world?
NOCERA: The answer’s Exxon.
NOCERA: Well, it’s because they had a disaster 20 years ago. But … but, you know, in your life have you done things that, that you not only regretted, but learned from?
HEFFNER: Too many.
NOCERA: Well …
HEFFNER: Not too much … not too much that I’ve learned, but too many things that I’ve done that I regret.
NOCERA: No. Prior to the BP oil spill … BP got all this great publicity for being quote/unquote “the green oil company”. You know … but if you, if you look under the surface, they were incredibly slipshod and had very poor safety standards and they spilled a ton of oil. And they, you know, they had blow ups in Texas City that killed refinery workers and they had the Alaska problem and, and, and in some ways the Gulf was the culmination of that.
Meanwhile BP … hasn’t had a serious accident in 20 some odd years and the safety record is pristine. But everybody views Exxon as the big evil oil company and BP was the, was the favorite of the “greenies”.
HEFFNER: So what do you think we’re going to be thinking for the next several generations …
NOCERA: I’m going to regret saying “greenies”. I, I know that.
HEFFNER: Of course. Of course. But seriously, what … what … look you haven’t written enough OpEd pieces for me to know … is this the old Joe Nocera or do … are we being treated to a new one?
NOCERA: Well, the answer to that is … ahmm … a little of both. There, there … from a purely technical point of view it has to change because I don’t have 1,750 words a week to play with any more. And 1.750 words …which is what my old column was … meant that I could really tell a story and I could structure … my articles had a certain sort of magazine-y kind of structure. And I could get in some back story and some nuance and, and I could use a story to make a point.
I can’t do that any more. I write 820 words … at most … in the new column. And so it’s impossible to be the kind of storyteller in the new form that I was in the old form.
Thank God for the New York Times Magazine which … it, it will at least publish my stuff, if I write something that, that they think is worthy. So I do have an outlet for longer storytelling.
So the form will change. So it becomes, inevitably, more of an opinion column and less of a storytelling column just by the nature of the, the word count.
But what I hope doesn’t change is the cast of mind that I bring to subjects. Which is, you know, occasionally contrarian and often tries to, at least … you don’t have to agree with me, but at least I want to give you something to think about.
I don’t want to preach to the choir twice a week. I, I think that’s, you know, pointless, frankly.
I do … there are times when I’m going to write things that the broad readership of The New York Times is going to like a lot. And there are times, already I’ve done it … where I’ve written some things that the broad readership of The New York Times is, you know, throwing rotten tomatoes at me.
HEFFNER: Come on now. Where, where did the tomatoes land?
NOCERA: I came …
HEFFNER: What were they about?
NOCERA: Well, I came out in favor of drilling for natural gas in the United States. Apparently we don’t like that here in New York.
HEFFNER: Yeah, I, I kind of wondered “What has happened to Joe Nocera?”.
NOCERA: Why do you … why do you say that?
HEFFNER: Because I’ve always thought of you and I have column after column after column to indicate a kind of progressive-ism that I don’t identify with that …
NOCERA: I don’t view … I don’t view myself as a progressive at all. I view myself …
HEFFNER: You don’t see yourself politically, I gather.
NOCERA: I view myself as a, as a, as a person looking generally for practical solutions to problems. I think … I, I do get mad about things and certainly the … you know, I said to somebody the other day … nothing can make you a Liberal more than investigating the financial crisis … because the practices that went on were … are infuriating. And the regulatory actions were horrible.
NOCERA: Well, yeah … yeah, inactions. Or there are occasions, as we point out in the book where the OCC … the bank regulators … actively, you know, blocked attempts to clean up some of the worst of the sub-prime predatory lending.
You know, so … those questions that actually make me angrier than I’ve been in a long time … but, but as a general rule, I’m, I’m a pragmatic person who believes in, in sort of sensible problem solving.
And so when, when I … you know … who … which two countries have the largest reserves of natural gas in the world today?
NOCERA: China and the United States. Now much of this is this new gas, the shale gas that you have to use hydraulic fracking …
HEFFNER: What was the figure you used … enough for 100 years?
NOCERA: Boone Pickens who is the guy who’s put this idea …
NOCERA: … in my head … believes it’s 200 years. But at least 100 years. At least.
HEFFNER: And I wondered as I read that … look, I’m 85 and I’m worried about what’s going to be a hundred years from now.
NOCERA: Well …
HEFFNER: You’re not worried about that?
NOCERA: (Laugh) Well, you know, if you can buy a hundred years … you might actually have a battery … by then … that can, that can fuel a car. I mean all the … so …
You know … what is China doing? You think they’re stilling around thinking “Oh my god, this would be so terrible if we drill our natural gas”. They’re drilling like crazy. They’re going to have their entire car fleet using natural gas instead of oil. So they don’t have to deal with OPEC, you know.
What drives me crazy is not … so when people write to me and say, “Well, well … you know, what about wind and solar?”
Well, great. Wind is great except that you actually put it front of somebody’s house, they go crazy because they block their view of Nantucket. I’m being a little harsh, but …
HEFFNER: Or they blow their eardrums.
NOCERA: And, and solar … solar is not yet economically viable. It will be. I’m, I’m convinced it will be. I mean I actually think … I think solar more than anything else, more than any of these other technologies is closer to being economically viable than, than any of the other renewable technologies.
But when you talk about vehicles … when we talk about cars … that I mean, you know, battery technology is really hard. And it’s a grind it out business … more than any, any other sort of innovative technology … battery … battery is hard.
And one of the reasons that we don’t have full scale electric car production is because we don’t have batteries that will power them to the extent that they need to be powered, for you to feel comfortable getting in one. We don’t have infrastructure.
You know, it’s … so when, when I think of natural gas, I think … you know, okay, it’s got its problems. Although I think they’re solvable and it does … in the one thing the readership is completely right about … is that, you know, we live, we live in a time where you don’t really trust regulation and yet the way to ensure the safety of this hydraulic “fracking” is to have decent … you need good regulations. That’s definitely something worth worrying about. I don’t deny that for a second.
But I look at natural gas and I think, “Boy, if you’re trying to wean yourself off oil, which a) we’re running out of and b) we buy from our enemies … if you’re trying to wean yourself off oil … and you’re trying to transition to these new renewable technologies, which are not, most of them economically viable at this point, or impractical for some reason. Or way down the road. Why not use this thing that we actually have.
HEFFNER: So the OpEd piece …
NOCERA: My point is … is … my point is … you know, it has nothing to do with progressive-ism … it’s about what will work. Why is that so terrible?
HEFFNER: Nobody’s saying it’s so terrible. I’m trying to find out …
NOCERA: Well, the mail that you get, after you run …
HEFFNER: Like that?
NOCERA: … will say that I’m, I’m a bad guy.
HEFFNER: I didn’t think “a bad guy”, but I wondered … what have I got here now? Is this the Joe Nocera I used to read and I used to cry about the stories he told. About the injustices?
NOCERA: I, I think I … I, I think I will absolutely be writing a lot about injustices.
HEFFNER: But you can’t very well do that with the 800, 850 words can you … 820?
NOCERA: Ahemm, I … I’ve only been doing this three weeks …
NOCERA: … and I’m working some of that … those ideas out and it will take a while. I mean it’s way too early to know what kind of rhythm and what kind of themes that my column is going to come back to regularly. I don’t, I don’t have a good answer for that.
I am certainly going to write a lot about business because that’s my core strength and that’s what I understand better than anything else. But, I’m not going to be … I am going to branch out from time to time.
And in terms of the stories that make you cry … I’m hoping to be able to do that. But I’m kind of working that out in my mind. And, and, and on page.
HEFFNER: Does justice come in to this … the quest for justice? That’s the feeling I always had about you.
NOCERA: I, I am …
HEFFNER: That you were looking for justice.
NOCERA: I am a strong pro … yes … and I think that has … a theme that has emerged in my work over the last couple of years … with, with the financial crisis and in particular with the aftermath of the financial crisis where … you know, I, I was on some show … with some young whippersnapper from the FT and she said, “You know, there should be accountability … and that includes for the homeowners.”
And I looked at her and I said, “The homeowners? They’re the only ones who are held accountable. Because they’re the ones who get kicked out of their house if they can’t pay the mortgage. How is that not accountable?”
And they’re often kicked out, you know, in situations where, with a, with a tad more empathy the bank could work out a mortgage … a reasonable mortgage modification that would satisfy them.
They are sometimes thrown out when the bank actually doesn’t own the note and doesn’t really have the right to throw them out.
So, yeah, I am, I am … I believe in the quest for justice. On the other hand, I, I take some positions that … for instance, not all class action lawsuits brought by plaintiff’s lawyers are, in fact, a quest for justice … they are often a …
HEFFNER: Quest for money.
NOCERA: … quest for plaintiffs … for the lawyers to make money even if the plaintiffs themselves don’t make anything.
So, I, I … the quest for justice is not sort of a knee-jerk liberal “thing”, but something that I come to on a case by case basis as I look into things.
HEFFNER: Do you think we’ll see it more, rather than less … on that case by case basis?
NOCERA: I don’t know. You’re asking me something … if you have me on in a year … we can, we can … you can put my feet to the fire and tell me whether you think I achieved that or not.
HEFFNER: Joe Nocera … that’s fair enough. In a year I’ll get you to come back. And now I want to think you for joining me on The Open Mind.
NOCERA: Thank you very much.
HEFFNER: And thanks, too, to you in the audience. I hope you join us again next time. Meanwhile, as an old friend used to say, “Good night and good luck.”
N.B. Every effort has been made to ensure the accuracy of this transcript. It may not, however, be a verbatim copy of the program.