>> From the Library of Congress in Washington, D.C. [ Silence ] >> Now it is my great pleasure to introduce Larry Doyle, a Wall Street veteran, a successful blogger and an author. Larry Doyle has worked on and around Wall Street for the last 30 years having embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for the First Boston Corporation. He served as Chair, of the Mortgage Trading Committee for the Public Securities Association. After subsequently working at Bear Stearns, Union Bank of Switzerland and Bank of America, Mr. Doyle culminated his close to 25 year career on the south side of Wall Street as the National Sales Manager for securitized products at J.P. Morgan. Currently he manages his own investment advisory practice. Shortly after the failure of Lehman Brothers in late 2008, Mr. Doyle launched his now widely read blog Sense on Cents, where he writes on the markets, global economy, Wall Street and Washington. Mr. Doyle's work is widely syndicated and referenced by major media outlets. He has received significant distinction for the emphasis in writing, emphasis his writing puts on issues related to investor education and protection. Mr. Doyle's blogging led to his writing his book, his first book, "In Bed with Wall Street: The Conspiracy Crippling Our Global Economy", which was published in January 2014 by Palgrave MacMillian. If you find this subject fascinating you can purchase a copy of the book, "In Bed with Wall Street" after the program and have it signed by the author. There are also copies of a short bibliography on the History of Wall Street for further research. Without further ado, I present to you, Larry Doyle. [ Applause ] >> Larry Doyle: Ghumara [assumed spelling] thank you very much. When I first reached out to-- and I also want to thank Ellen who gave us a fabulous tour of the Library of Congress earlier this morning, to say that I'm humbled and honored to be able to speak at our, at our nation's library has got to be the biggest understatement of all time. So I've had the good fortune to be able to speak at some nice venues, but dare I say this takes the cake. So, as with any writer and any author I want to extend thanks to, to a few people. I want to extend some thanks to, to my literary agent Cynthia Zigmund. She found me in early 2012 when I was blogging. I wasn't, I wasn't even thinking book. And after she found me she said, how come you haven't written a book yet? Because I had been writing, I had been blogging at that point for about three and half years. I want to thank my publisher, the folks at Palgrave MacMillian. I'm a first time author. I've learned a lot about the publishing business and I'm incredibly indebted to the folks at Palgrave MacMillian. I want to thank my family. Really it, I'm incredibly indebted to my kids and my wife and the level of support has just been enormous, so thank you. Twenty seven years of marital bliss tomorrow, so. We're living through some truly you know historic and challenging times. But to try and put some context into it and really what goes into this book, you know 25 years ago today, 25 years ago today for you know a lot of people in this room, you've got that indelible image, that fellow in the People's Republic of China standing in front of that line of tanks. Seventy years ago tomorrow, again we've got that irrepressible image of our you know, you know prior generations taking the beach at Normandy. And what do I think of when I think of those, those images, this concept of freedom. I mean freedom is perhaps, I mean that's the foundation of our country, that virtue of freedom. But freedom as they say it's trite, freedom isn't free. And dare I say, I personally believe that with freedom comes an obligation, the obligation that we leave, leave our society, leave our country in a better position than we found it. And right now you know what, I want to believe that we are truly being challenged. Because when you think of the current state of our economy, you know six years past the crisis of 2008 which could only be compared to the market crash of 1929, we've got labor participation rates at 35 year lows. We've got levels of poverty you know at generational highs. We've got income levels for the overwhelming percentage of our population you know basically stagnate. We've got a deficit that's projected to run upwards of 25 trillion dollars. What are we leaving for our kids? So it's against that backdrop that given my career on Wall Street that I started writing. You know shortly after, after Lehman Brothers failed in the fall of 2008 and I want to again express some thanks to a friend of a friend, a fellow by the name of Larry Johnson who works here in Washington and has a political website called No Quarter. He said he goes, could you write a commentary kind of explaining what just happened with the failure of Lehman Brothers and the implications for the economy and I did. And that initial commentary in I believe it was October of 2008 I got about 70 responses. And that was an indication to me write then and there how much the American Public wanted to understand, hey what's going on on Wall Street and what's the implications in the ripple effect for, for America as a whole. So it was like clearly the markets at that point in time were incredibly volatile and there was a lot of uncertainty, you know there was a lot of challenges. And in response to that first commentary he said, well that went pretty well. You know what else you want to write about? And so I wrote a second and then a third commentary and over the course of the next three months I wrote maybe I don't know, maybe six or eight different commentaries and I started developing a writing bug. It was a lot to write about and again, what was in my mind was I could be of public service that kind of explaining concepts that are largely arcane in nature, reducing them to a layman's narrative and it was all about the pursuit of the truth. I'm one of eight kids and I grew up in a middleclass section of Boston, Mass and you know education was always important. We were very competitive, a very competitive crowd. I've got six brothers out of-- so it's seven boys out of eight kids. So it was a very competitive crowd. I went to the College of the Holy Cross and we talk about this pursuit of the truth. So those, those, those elements play out in this book, that sense of you know intellectual curiosity, competitiveness, integrity, truth. And so you know fast forward I'm writing at Larry Johnson's blog No Quarter when I realized you know what I should-- I'm writing about business issues and he had a political blog. I should either go write for a business site or an even butter bunch, my own. So in January of 09 I'm in test mode on this blog called Sense on Cents. Give some credit to my then 16 year old son who came up with that, kind of that catchy name. I'm thinking fiscal courage and he's like dad, boring, boring. You know give us-- you get into the blogosphere you need something a little catches, you know catchy. So, he-- in about 30 seconds I'm saying you know I want to write a blog about the markets, the economy and dad, Sense on Cents. And now you know five and a half years the blog is, the blog is on going great. A key date though that went into this book was January 15, 2009. Again 2008 could only be compared to 1929. You know the meltdown of you know of these various Wall Street firms, the 2008 culminating and the greatest Ponzi scam ever perpetrated and the person of Bernie Madoff. Again, you don't need me to kind of remind you of some that. But what I wanted to really learn, and it was on January 15th, not what had happened or why it happened in terms of you know the what being all the excessive leverage, the why being the excessive greed, but how did this happen? How did this happen, meaning how did the industry engage if not circumvent those charged with protecting the public interest. And who were those, those were our financial regulators and the politicians, meaning you know Senate Banking, House Finance, Government Oversight and Reform. How did the industry, how did Wall Street engage these entities? That was what really intrigued me. So I set aside my afternoon on January 15, 2009 for the confirmation hearing of Mary Shapiro to be the-- to be you know the head of the SEC. And after about 90 minutes in which honestly they pretty much tarred and feathered Christopher Cox, but I felt like you know what, they didn't properly vet Ms. Shapiro. You know was she the right person to head the SEC that could bring about you know meaningful reform to Wall Street? And from my standpoint I didn't get that question answered. Two days prior to her confirmation hearing on the 13th the "Wall Street Journal" had done a scathing review of Ms. Shaprio's tenure at a self-regulatory organization known as the Financial Industry Regulatory Authority. Please come on. That's quite alright. And so I figured that okay, there was some great material there in the journal to address you know questioning for Ms. Shapiro in terms of the fact that why was it that the level of fines that imposed and cases that had been pursued at this organization known as FINRA had dropped pretty significantly during her tenure? They didn't even touch that. So I turned off my TV mid afternoon and I said, "You know, I'm going to go learn some stuff." And so I Googled this outfit FINRA and because when I worked on Wall Street, Wall Street's self-regulatory organization was known as the NASD, the National Association of Securities Dealers. And I was not aware that in 2007 the National Association of Securities Dealers had merged with the regulatory arm of the New York Stock Exchange to form this outfit FINRA. I just wasn't aware of it. So in short order I go back to FINRA's then most recent annual report, they're 2007 annual report and literally it's not, at this point in time it was, this was really the first time that I started to seriously think what are the implications and the ripple effects and the ramifications of a self-regulatory organization for an industry as you know, as large in scale and scope as Wall Street? And to-- and there I'm thinking to think that you know that Goldman Sachs and J.P. Morgan and Merrill Lynch and Bank of America could fund a regulatory outfit so that they would properly and aggressively oversee them. And I thought you know what, that's probably, you know that's somewhat problematic, if not filled with potentials of enormous conflicts of interest. So, on Wall Street how does Wall Street work? How do you manage risk, find information, connect the dots, follow the money? That's how the industry largely work so that you can you know try to understand risk. This book is all about exposing, you know exposing situations which bring about public risk because we're still on, all on the hook. So, I start doing a deep dive into FINRA's annual report. And I see okay, self-regulatory organizations, conflicts of-- potential conflicts of interest, let's get to their balance sheet. And I see that they've got about a three billon dollar balance sheet in that they talk about an internal investment portfolio. And I'm thinking that okay, any regulatory oversight of Wall Street one would think that an internal investment portfolio would have its cash parked in treasury bills to mitigate, if not totally eliminate the chances for a conflict of interest. And there on page 48 of their then 2007 annual report I see that this organization FINRA has money invested in the equity markets, in the bond markets, in hedge funds, in fund to funds, in private equity. And I'm like, are you kidding me? And I read in their defense that they've got internal investment committees to address the chance for any conflict of interest, but you know given, utilizing my trading instincts I'm like hmm okay, you know what, when there's no volatility in the market it doesn't get attention maybe. But what about, I mean here they are they're on-- you know the pulse of the market please come on in. The pulse of the markets, their access to information you know I seriously question you know how aggressive they would be because they make their own trading decisions. And as I say in the book, they left one cent in their investment portfolio, one clue with the scent of which was phenomenal. They actually because all these other holdings they're actually equity holdings they were non-descript. It wasn't like you know we've got money invested with Goldman Sachs or in General Electric, any of those it's all non-descript. But they left this one cent, this one clue. They had a-- a third of investment portfolio was invested in a sector of the market known as auction rate securities, which I don't know if anybody in the room is aware of what happened in the auction rate securities market. The auction rate securities market was a 330 billion dollar market, okay which totally failed. It was promoted as a cash surrogate or money market equivalent and that market totally failed and froze on Valentine's Day 2008. So I'm thinking that okay, what did FINRA know? Did they utilize information perhaps that they would have, could have accessed because obviously they're very closely in line with Wall Street, to liquidate their own holdings, to protect their own interest or did they share information as to what was going on and protect the public interest?. I brought that and here I am you know in mid January 2009 trying to understand again how did the industry engage the regulators and so was the public interest being protected? That was my motivation at that point in time, that remains my motivation at this point in time and that's the theme throughout this entire book. So I brought that information to those reporters from the "Wall Street Journal" who had written that scathing review two days prior. Called them up, I said, "You know been in the industry for 25 years. This is meaningful information and I personally think this a great lead. You just had a phenomenal article you know exposing you know Ms. Shapiro, calling her a kind of a weak regulator; here's a great follow up." We have great back and forth for the next two weeks. When they told me in late January you know what, we don't have the green light to pursue this leak. And I'm like are you kidding me? So here I'm thinking that is the regulator protecting the interests of the industry or protecting the public? And now I'm questioning, well wait a second, is you know a major periodical again perhaps protecting the regulator who's protecting the industry or are they protecting the public interest? And I'm telling you I'm getting the word from these reporters that they don't get the green light to pursue this lead. I'm like you know what, my adrenaline really started to kick in here at this point. February 4th, another key date in this book. So hold that thought on the auction rate securities. We're going to come back to that in a second. February 4, 2009 a fellow by the name of Harry Markopolos, some may know Harry. Harry was the whistle blower who had brought information to the SEC over a 10 year time period, 29 different red flags as to why Bernie Madoff was operating a Ponzi scam, okay and the SEC totally failed okay, totally failed. Harry Markopolos gets called to the Hill. Come on down Harry, tell us what you know. And so he lays out the whole thing and he defined the SEC as I think the term he used was keystone cops and deserving of an A plus in incompetence. And they asked them, they asked them the members of the committee asked Harry. They said, well Harry why didn't you bring the information to the folks at FINRA? And I'm watching this, much like I was watching Ms. Shapiro's confirmation hearing. And Harry Markopolos' who at this point is accepted as tremendous integrity, real you know really put himself at personal risk. He said, no I wouldn't have brought, I would not have brought this information to FINRA. And they said well why not Harry? And he said well, if the SEC is deserving of an A plus in incompetence the folks at FINRA are in bed with Wall Street and deserving of an A plus in corruption. I'm like wow. You know at this point the SEC is getting tarred and feathered in the newspapers for their failure to perform on the Madoff situation. I mean they are a daily punching bag, but all my focus is on trying to get even closer to Wall Street so I'm focused on this organization FINRA. And when I heard Markopolos say that, I figured okay, you know what this will be, this will be reason for meaningful attention on that organization you know by the folks on Capitol Hill; anything but. I continued to dig and I started about this you know auction rate securities and word travels very quickly through the blogosphere. And these auction rate securities investors you know became aware that the primary regulator overseeing that sector of the market had holdings and you know people like I have been you know soliciting that regulator now for a year, trying to gain my, you know get my cash back. Because the cash that was tied up in those auction rate securities was used to fund businesses, to pay for kids private educations, public education as well, any number of things, you know retirements. And people couldn't access their cash. This had a meaningful impact on the economy, a 330 billion dollar market, 300 billion dollar market. I mean that was close to half the size of the bailout and I'm blogging. And at this point in you know early February I've got, I've got my you know my siblings. So I've got about the eight of us reading it and then assorted family members and I'm like, hey we need some answers here and-- but then these auction rate securities people catch up on this and then they start like, are you kidding me? You know this regulator was you know involved in this sector of the market. So, you know I start chasing that down. I give credit to the folks at Bloomberg. I brought that information to the folks at Bloomberg in late February of 09. And to their credit they pursued that story and they exposed the fact that mere months before this market totally failed on February of 08, that FINRA did liquidate their holdings. And I maintained that okay, you know what, in my opinion that was I think you could make a compelling case that they engaged in, what you'd define as insider trading if not front-running the market. In that they failed to uphold their mandate to protect the public interest while they protected their own interests. And I called them on the carpet on that just a month ago. And I said, "You know what the American public deserves to see your trade tickets and we deserve some meaningful transparency there, because there are still about 50 billion dollars worth of those auction rate securities you know that remain outstanding, sold as a cash surrogate six years later. That's a problem." So, I'm chasing down that story when I see in the summer of 09 a legal brief that was filed on behalf of a minority broker dealer called Amerivet Securities from Moreno Valley, California. And this was, this was like wow. I start-- I read the legal brief and they start question-- and they're asking basically the same questions that I was asking. You know it goes to the straight thing, the governance of this regulatory organization FINRA, which again reported up through the SEC. So again in the back of my mind I'm like, we got a corrupt organization reporting up through an incompetent one. You know who the heck is looking out for the you know the American public. And so I called up the law firm and that law firm was right down the road, over on C Street I believe, a law firm by the name of Cuneo Gilbert & LaDuca. And I call them up and I said, "You know I'm interested in learning more about your case." I distinctly recall as if it were yesterday, the lawyer on the other end says you guy that writes that blog? And I said, "Yeah, indeed I am." They said you know we read your blog everyday. [laughter] And then he said, he goes you're looking at the same stuff we're looking at. And to me again, it was all about how do the-- this regulator they were questioning their basic governance. You know how did the regulator oversee the industry you know on any number of fronts that allowed practices to occur that ultimately brought our economy and our markets, our markets and our economy, if not our nation, to its knees? So I engaged those lawyers and they shared the-- again you know what, what lawyer bringing a case doesn't like getting some publicity right. So I'm writing about some of this stuff on my blog and it wasn't being widely covered by the major media, which again was just like, that to me was problematic because it's all about information. You know the public at that point in time and even still today deserves information, they do. So I'm chasing that case down and I go into the courts and I'm listening to the hearing and what was FINRA's defense? What was FINRA's defense? And this is, this is very interesting. Their defense in that case and subsequent cases was absolute immunity. This is a private organization, a private non-governmental organization that reports up through the SEC that is granted for their regulatory oversight the same privilege as government agency and that is absolute immunity. And so I'm thinking at that point in time, wait a second. They're not subject to the freedom of information act. They provide very little meaningful transparency, but they have the privilege of absolute immunity. You don't need to grow up you know in the city to think that if you got absolute immunity on one side and little to no transparency on the other you know what you have going on in the middle. To me that's nothing more than a license to steal. And so I maintained that you know what, the misappropriation of funds and the liquidation of auction rate securities you could probably put a dollar value on that of about 200 million bucks, given where the secondary market for those securities you know went then and remains today. Those were funds that belonged to you know mom and pop. That's wrong. So I engaged these lawyers and we start talking about that case and they said, well what do you know about this other case? And I said, "What other case?" And they said, this case Standard Investment Charter. They said this Amerivet case, it's a very interesting case. This other case is really where the rubber meats the road, because it's the true intersection of Wall Street and Washington. The Standard Investment Charter versus FINRA case dealt with the merger, the merger of the NASD with the regulatory arm of the New York Stock Exchange in 2007. And what these lawyers shared with me was the proxy statement utilized for that merger or proxy statement is a legal, is a legal document that is shared with members you know of the NASD at that point just like any shareholder of a private company would get a proxy statement if that company is going through a merger. That shares all the you know specific financial, financials of the merger. And what this lawyer shared with me was that that merger, well let me just read it to you. On page 105 of the book this is the attorney Richard Greenfield. "We were able to get discovery, that is document presentation from the NASD very early on. Many of these documents were produced under a confidentiality order. In other words, the NASD would not produce them unless they could be kept confidential, i.e., not in the public record. These documents showed unequivocally that the NASD defendants lied to the members of the NASD and there were 5100 members, member firms. Blatantly, unequivocally you can't put any coloration on it. You can't say they were negligent. They intentionally lied. The lies are repeated over and over in a proxy statement. They are repeated in road shows taken all around the country." All the dollar values of those lies that these lawyers again alleged, you know we're shared in the proxy statement. They put a dollar value on those lies of between 180 and 380 million dollars. So here I'm thinking like 200 million dollars in auction rate securities, another 180 to 380 here. Pretty soon we get to you know somewhere between 400 and 600 million dollars. And I'm thinking, you know what, Harry Markopolus was right. This crowd is in bed with the industry, because what was the payoff to the Wall Street firms, what was the payoff to the Wall Street firms? You end up with one, one regulator, lessened premiums okay, lessened premiums in terms of funding that regulator and now you know I'm thinking that okay, it appears to me that this regulator is pretty much, pretty much bought and sold. And again, let me just, let me just stop here for one second. You know I remain involved in Wall Street. I love Wall Street. I state that right in the book. America needs Wall Street. We need healthy capital markets but we need fair, effective, free and balanced markets. And I would maintain that right now we've got anything but. So this is-- what is this book all about? It's exposing you know regulators and public officials who to me kind of run the gamut from either being asleep, incompetent, captured, this term regulatory capture. And it's not just the financial services industry in which you have this regulatory capture in which the regulators end up protecting the interests of the industry instead of upholding their mandate to protect the public okay. So it goes from asleep, and again this is not to malign each and every individual in the regulators; it's not. That would be blatantly unfair. But the system as a whole has developed this way over time and what, what's behind all that? Huge money and huge power, okay huge money and huge power. So we've got these regulators and politicians who run the gamut from being asleep, incompetent, captured and let's be true. Let's be you know blatantly straightforward here. There's very real corruption that has occurred as well. In fact, what's interesting in today's "Wall Street Journal", the UK Prime Minister, David Cameron, what did he write? This is what he wrote just this morning. "Corruption is the arch enemy of democracy and development. The best way to fight corruption is through greater transparency and that's what this book is all about. It's all about transparency. So, you know at this point in time you know I'm running down these paths and I look at other situations that FINRA and the SEC are involved in. You know if you've got a dispute on Wall Street whether you're an investor or an employee you're not going to court. You're going through arbitration. That's an industry arbitrator and I start looking at the statistics for arbitration and I start questioning those aggressively. When I-- but then I also looked at some specific cases and I highlight one specific case of an individual, because really what I wanted to do with this book was make it a personal book. I wanted this to be an easy read. Take arcane documents, reduce them to a layman's narrative, all documented, plenty of personal stories so that everyday Americans can say you know what, I identify with these people. So I write about this one fellow who was, he was a banker at Morgan Stanley and he left there and he pursued an arbitration case based on a situation and he lost his arbitration case. You know what, half the people lose. If that was the extent of it, he would be in the book. But he wanted to appeal his case, you know. It was a hard hitting case. So in order to get an appeal FINRA is obligated to provide tape recordings you know of the hearings. You know 18 hours worth of testimony in this fellow's case. And so he said you know I want to appeal, so I need to get that testimony and they gave him 10 hours of testimony. So he went back and he says, I got 10 hours. There were 18, and it's not the first eight hours, the last eight hours, or any consecutive eight hours. He says, you're actually missing eight hours of testimony at 14 specific points in time. And it just so happens that at those points in time is when Morgan Stanley's lawyers were being questioned by my attorney and we were maintaining that what they were saying was a blatant misrepresentation. So this is like the guts of the case. So, you know what, my livelihood, my family's well being, my kids, my kid's education is all on the line here. You know what, how about giving me those tapes? And what was FINRA's response? Sorry, and you know what, you got no follow up. That's it, the story's over. So I defined that as a kangaroo court and they many not appreciate it, but you know what too bad. Because if it wasn't that one fellow, I mean do you ever hear the phrase you never find just one mouse, right? How many other individuals have been compromised through the arbitration process. And what's interesting is that you know just a-- just a couple weeks ago a representative of FINRA said you know inadvertently there are times where the you know the individual operating the recorder you know failed to perform. And I wrote on my blog that day, and I wrote on my blog that day, what are the chances that they fail to perform because again, eight hours of testimony over an 18 hour case. What are the chances that they failed to perform for 34 minutes and 18 seconds at an average point in time, you know just so happens when the Morgan Stanley lawyer was hearing. You couldn't get odds in Vegas on that sort of stuff. [laughter] But they pitch it, they pitch it to the American public as check the box, you know onto the next one. So again, they may not appreciate it, but America, the public interest deserves better. So I go down that case because to me auction rate securities that to me was front-running or insider trading; that's wrong. Again, the Amerivet case, failure to perform, lack of true governance. The Standard Investment Charter case, I maintain a misappropriation of funds. Arbitration, kangaroo courts, a lack of due process. I mean these are basic rights in what-- and they get to hide behind this veil of absolute immunity. Something wrong here folks and who is supposed to be held to account here? The SEC, the SEC oversees this organization FINRA. But the SEC, truth be told over the course of the last five years, has been you know swimming upstream because they are trying to recover themselves. So you know ultimately when I look at this, I'm like you know what Wall Street to a very large extent really reports to nobody but itself. That's a problem. That's a problem. And why is that a problem? Because what you have here is you've got a significant erosion in trust and confidence in the system. And trust and confidence, those are the cornerstones of our not only our economy but ultimately our nation. And this is where you know those who are charged with upholding the public interest need to be held to account. And so I hold them to account, because here we are, here we are you know six years after the-- until the crisis unfolded and within the last two months we've gotten these revelations from you know senior regulatory insiders. An attorney within the enforcement division of the SEC justifying the SEC, just within the last two months is little more than a tollbooth on the banksters turnpike. If that's not a problem I don't know what is. A commissioner of the CFTC, the CFTC is the regulatory outfit that oversees the derivatives market, okay. Just a month ago-- I do not believe that the CFTC's systems are adequate to oversee today's fast and complex derivatives markets. That's a problem. That derivatives market, a quadrillion in size, a quadrillion. That's a thousand trillion in size and they don't have the systems to monitor this and we're being told that oh, you know what, Wall Street's being reformed. I said, "Are you kidding me?" Sheila Bair, the former Chair of the FDIC, what did she say about the regulators? The regulators have you know have not had the fortitude to stand up to the forces imposed upon them by the industry and congress. And what are those forces? Huge money, huge power, huge money and huge power and so they don't have the fortitude to stand up to them. This is a problem, because again as the American public we remain on the hook. Alan Blinder, "Wall Street's mode of self-regulation was a mistake." So I see these things coming and I watch this stuff very closely and thinking you know who in Washington is listening to this? You know the folks right over there are supposed to not only be listening to this but doing something about it. Tim Geithner himself when asked about the too big to fail banking model a few weeks back, does it still exist? Yeah, of course, it does. We're all on the hook here. So again, this presumption of, of investor protection, that's really what it is. We presume that the regulators and the public officials are doing their job. We presume that going into the crisis and we continue to be fed that presumption coming out of the crisis. And what I'm saying is, you know what, please read my book because I think that they failed and that they continue to fail. And what is the failure here? Ultimately, this is a failure of leadership; it really is. It's a failure of leadership, a failure of the public officials on those congressional committees to say, you know what, stop it. Stop it! And what's-- because what's behind that? It's huge money. There's huge money. I mean from 1998 to 2008 Wall Street would send Washington about 500-- on an annualized basis about 500 million dollars. Okay, that goes to fund a lot of things, okay. Obviously since 2008 there's been a lot more on the line. The amount of money that has flowed from Wall Street to Washington, pretty much tripled. How is the public interest, you know how does the public interest get represented? And this an apolitical book and this is an apolitical issue. So, again, honestly I could talk for hours on this stuff. [laughter] So, one other case though, because a lot of people say how come people in the industry didn't speak up? The fact is there were people that were speaking up. There were whistle blowers. And what is the consistent experience of these whistle blowers? And I, again I profile about 10 whistle blowers. First they get ignored, just ignore them, don't listen to them and maybe they'll get the message, okay. For those people who continue to blow the whistle, and they get intimidated. Like you may not want to continue to do that because your job may be on the line. And ultimately what happens? They get fired. They get fired. And that's wrong. There was a-- I want to share one quick story and then we'll go into the questions. There was an attorney at the SEC, a fellow by the name of Gary Aguirre. If for no other reason to read my book, is to read the story of Gary Aguirre. Gary, a phenomenal, phenomenal individual, because what did we have coming out of the crash of 1929? We had a fellow who came to Washington by the name of Ferdinand Pecora. And Ferdinand Pecora was a tough New York City lawyer that basically came down and tarred and feathered and exposed you know the bad practices and the individuals you know who were engaged in those practices back in the 20s that brought upon the crash. A lot of people ask like where's our modern day Ferdinand Pecora? You know where he is, where is she, where is he? And so they end up saying well these issues ultimately are systemic. I would maintain that Gary Augirre could have been our Ferdinand Pecora because Gary Augirre worked at the SEC. And back in 2005 he was in the process of making an insider trading case against the largest hedge fund business at the time, an outfit called Pequot Capital. He saw some trades that were clearly problematic and he started pursuing, pursuing this case and the trail of evidence led to, led to the door of one of Wall Street's most powerful men, a fellow by the name of John Mack. And so he went to, he went to issue a subpoena to take Mack's testimony, when Morgan Stanley engaged a lawyer, a woman by the name of Mary Jo White, to intervene on their behalf. Mary Jo White just happens to be our current Chair of the SEC; to intervene on their behalf and what happened to Gary Augirre, who for the prior couple of years at the SEC had been graded as a star attorney, a star? He's like this is, this is the guy. Within the next two to three weeks Augirre pushed back and what happened to him? He got fired. Nine hundred 99 if not 900 you know out of a 1000 attorneys, if not 1000 out of a 1000 would say, I get it. You know what I just touched the third rail. You know the power of Washington, the money of, the money of Wall Street, I get it; Augirre is that one lawyer. He didn't take it sitting down. Augirre over the course of the next four to five years utilized the freedom of information act to go back into the SEC to get the necessary documentation to pursue that case and he made the case as a private citizen. And in 2010 that hedge fund paid a 28 million dollar fine and they were shut down. But in the process of making that case Augirre not only had to clear hurdles coming right out of that building right over there, but also you know hurdles at the SEC, people pushing back on him. And what did Augirre share with me? On page 144 of the book he shared the following with me, "By the time I was fired I pretty much figured out what was going on at the SEC. I saw how the Enforcement Division, from the top down, had acted to block the Mack investigation, despite the fact that the evidentiary trail led directly to his door. I saw how SEC management would create a fictional rationale for not pursuing the investigation against John Mack, which would be immediately replaced with a new one as the last one imploded. Somewhere between the third and fourth fictionalized account, I understood just how deeply the corruption was embedded in enforcement's management. By the time they fired me, my reaction was, do they really think they'll get away with it?" [laughter] And they didn't. Gary not only made the case, but he brought a whistle-- a wrongful termination suit against the SEC and he was the first individual to be paid, to be paid a whistle blower award in that pursuit to his credit. In my opinion, Gary Augirre is an American hero. So, what does it all mean? It's all about transparency folks. You know what, it's all about transparency. It's all about transparency is the great disinfectant. And why is that? Because all those economic headwinds that continue to come this way, which promote a central banking policy, which is nothing more than attacks on the savers in this country and that's really what it is, a zero percent Fed funds rate, may be appropriate to try to regenerate some strength in our economy, but it's attacks on savers, okay. So, much like this Harvard economist, because what, what have I seen and what I detail in this book? I believe a significant degradation of the rule of law, excessive cronyism in a violation of you know investor's property rights. Those, those, those are very real, you know those are very real situations. They have a negative impact or our economy, because in order to commit capital, the capital needs to be protected. And if capital is not protected people either don't commit it or it comes at a higher price. You know in order to generate organic growth in the economy, that's what we need. We need organic growth in order to bring about a resurrection of the American dream. Our kids deserve better; they do. And so Neil Ferguson, a Harvard economist, "When countries improve the rule of law, property rights and investor protections and when regulation becomes more transparent, more transparent and corruption reduced, there are major payoffs." The payoffs is organic growth, increase in trust and confidence, but what happens is in order to do that what do we have to have? You know what, the scandalous practices that people just accept as, that's just the way that it is. Well here I am, I'm stating we can do better. We shouldn't you know manage ourselves as hey, we're the best regulated markets in the world as if we're supposed to accept that you know what, there's going to be a degree of corruption. If that's the best that we can do, you know what, shame on us. And you know what I got a blog. I got a blog, I got a voice. I've now got a book and I'm willing to not only state those things, but chapter 12 in the book, because I'm not just going to, to expose situations. Chapter 12 is perhaps the chapter that has gotten the most attention in this book. And on the back of the page that I handed out, there's a representative sampling of my proposed reforms. Things that I believe should occur and what are those? Specific reforms for the industry all get to transparency and disclosure. FINRA should be subject to the [inaudible]. They should be subject to an outside audit, because what's the problem here? Michael Lewis just wrote a fabulous book called "Flash Boys", okay. What Lewis is talking about in "Flash Boys" I define as that's a symptom. You know these, these, this front-running in the equity markets, much like collusion that has occurred in the interest rate markets with [inaudible] in the currency and commodity markets, folks let's take a step back. All of these practices are symptoms. It's actually fairly rational. If we've got the cops kind of in our pocket, and we're only hit with fines, you know what, that at a little more than the cost of doing business, even if they're egregious. From a management standpoint you know what we've got on Wall Street right now is you know massive collusion in these markets and what is that? Those are symptoms, this is the cause. We need our public officials and our regulators to perform. So what we hear unfortunately coming out of Washington is you know this debate between more regulation versus less regulation. In my opinion, it's not a question of more or less. We need effective regulation with real regulators. So, and so I lay out these reforms, ultimately the public policy measures. We need campaign finance reform. I mean because again, the root of all this is the enormous money. So I encourage people to actually sign up with a grass roots organization out of Massachusetts called Represent Us. Represent Us is addressing this corruption, you know the excessive money. And they're going to look over you know the coming years to try to get on city and state ballots and ultimately on the ballot here in Washington so that public officials cannot accept money from firms or industries that they're regulating. And that would obviously change, but that issue polls at north of 80 percent. The American public, that's exactly what they want; that's exactly what they want. So, lastly and then we'll get to some questions, Washington is an oligopoly. We've got a handful of firms, enormous power, we need to reinstitute [inaudible]. I firmly believe that the elephant in the room in the form of these two big to fail banks, we're all on the hook. We're all on the hook. And in my opinion it's not a question of if, but when we have another crisis. And then what do we do? You know what, my kid deserves better; all our kids deserve better. So, again I've got a blog. I got a book and I'm happy to address these issues because this, this to me, this goes back to the obligation that we all have to try to leave this land a better place than what we found it. So to that end, I hope you'll read the book. Knowledge is power. I hope you share it with your friends and colleagues; honestly I hope you share it with your public officials as well. And lastly, I would encourage you to join that, that organization Represent Us and just share their work as well. So these are, these are you know, let it not be said that we're not trying to do you know what's best for future generations. I end the book with you know future generations deserve nothing less. So, on that note I thank you so much. [ Applause ] A question there in back. >> My question is so you say the book is [inaudible]. >> Larry Doyle: Yup. >> Is directly political. Then you have a Supreme Court that just says we can give unlimited money. >> Larry Doyle: Huge problem. >> To politicians. >> Larry Doyle: Yup. >> When we only recently had an oversight where members of the Congress and Senate, their families could use information that they, that they're sitting on-- >> Larry Doyle: Yup. >> To basically do insider trading. >> Larry Doyle: That's right. >> Without any type of repercussion or any type of punishment, that was an oversight. And now we have a situation where we have the most senators and congressman in history that are millionaires and multimillionaires. >> Larry Doyle: Yeah, public service has become a for-profit enterprise, right. >> These are-- and the people that they're supposed to be regulating, these are their friends. These are the people-- >> Larry Doyle: The system's broken. >> These are the people that they share dorms with, share their fraternities. How can we, how can we get our public officials to do the right thing against their friends? >> Larry Doyle: Well you know what, I mean aside from Represent Us I also want to-- I see Michael Smallberg here from Pogo. I-- you know people should track the work of the project on government oversight because their work to bring real transparency to these issues is, is off the charts. And you know what, people feel like you know what can I do? You know what, just keep hammering away at your public officials, just keep hammering away at them. Because you know through a collective voice you know and that's-- you know I don't want to say that that's all we can do, because that's a lot and so we have to. You know we have to continue to hammer away at them because you know a conspiracy and that's really what this is. It really is. This is a conspiracy. They're not representing the public interest. And so I just would say continue to hammer away at them. Tell them to read this book, answer to the book amongst other things. So, but you're right. So when I say it's apolitical, it's apolitical from the standpoint of you know there are people on both sides of the aisle that are feeding at the Wall Street trough; it's not one party or the other. You know they're all in it and they can talk and there's a lot of talk that goes on you know about transparency. But ultimately, you know, they follow the money, so. Why don't we go right here. >> We hear over and over again that corporations are people. >> Larry Doyle: Yeah, it's a problem. >> If I go in a jewelry store and pocket a diamond ring I'm going to jail. How come there are these people, the people who are committing these crimes, why don't they go to jail? >> Larry Doyle: Again, this is because we end up with public officials you know who aren't doing their job, you know. Let's boil it down, and again Wall Street is a great example. I mean come on. There was nobody on Wall Street. No individuals who were truly meaningfully held to account. And now you know you see the Department of Justice kind of you know doing the backstroke because they get the public outcry and so okay, we got to go get some guilty, you know some guilty pleas and you know maybe you end up potentially with a potential, you know trade conflict with France because instead of going after perhaps J.P. Morgan or Bank of American, I mean the fact is it's all these. It's just these are, these end up becoming basic business practices where you know corruption just gets so deeply embedded. And so yes, I mean the root of all the problems is money for-- you know public service has become a for-profit enterprise. So you know trying to get the incumbents out of this town, so yeah those again, these are huge problems and can we say okay, it is what it is and you end up with kind of a cynicism and people through their hands up. Unfortunately, that's what we get a lot of or we can fight back. >> But these are crimes of individuals ultimately? >> Larry Doyle: Sure it is, oh without a doubt. >> So, why are the, why are the stockholders the ones that pay? Why aren't the people-- >> Larry Doyle: Well again, private personal gain, social costs. That's kind of, that's the business model right, you know. We'll personally profit, well heads we win, tails they lose. That's a problem, enormous problem. All that stuff was what really motivated me to ultimately write this book. Okay let's go right here. >> It seems to me that what you're addressing is sort of symptomatic of what's happening irrespective of which party is in power. I mean-- >> Larry Doyle: That's right. >> Bush as well as Obama, you know they hand out ambassadorships to people who have never heard of the country just on the basis of fundraising and donating money to their party. If you look at who was in charge of FEMA just before Katrina, right if you look at the head of the FDA under Bush it was the lobbyists. >> Larry Doyle: Well you reduce this down it looks you know payoffs and kickbacks, right? >> Right, if you now look at FCC and internet neutrality issue, who is the FCC right, the lobbyists. >> Larry Doyle: Yup, yup. >> So irrespective of party it seems to be the model, indeed how Washington works. But sort of asking the question looking forward if it's just a matter of time then before the next cyclical downturn happens and another major recession happens. It's nothing really changed in terms of-- >> Larry Doyle: Yup. >> Wall Street regulations. How do you anticipate the American public will react in the context-- >> Larry Doyle: Well I will say this, the fact that is room is filled and every other venue that I go to is filled, the American public is in my opinion, really starting to get it. And because what's the you know-- what does Washington end up doing. They look to the Federal Reserve to effectively devalue the currency and that impacts our future quality of life. That's how they're-- that's how they're getting away with it, try to monetize the debt, okay. The risk that you run here, and again I'm not-- is the potential you take that to the nth degree, you end up with some degree of civil or social unrest, okay. And again, I'm not here to try to stimulate that. What I'm here to try to stimulate is gaining information. You know there's nothing better than an informed voter, okay and expressing opinions, strongly. The reason why I wrote this book in as forceful a fashion as I did was to get their attention. And but you're right, these are, to me what you just laid out there ultimately is a failure of leadership. >> [inaudible] Wall Street got people's attention as it spread out all over the country, but it didn't-- >> Larry Doyle: You didn't see real change. If two-- people say if that wasn't going to create the change what the heck is? >> Yeah. >> Larry Doyle: But that's the reality. That's the reality and in my opinion along with the bailout, because I think the only thing worse than bailing out would have been not bailing them out. But what they should have done was okay, we're bailing out and then guess what, we're changing management, we're changing management. And I-- guess what because it was a systemic. They were all going down and because of the interconnectedness of the derivatives market the entire, all these firms were tied together. You know they all worked. They were all going down. And you know what so I do think they did the right thing. But the problem is once they got that money Wall Street knew, we got you. We got you, and they've played that card ever since. You're beholden, and this is where that revolving door comes into play. You know what, you want to be on this side of the table and how did they end up in that position. You know what, kind of a failure to perform. So this to me is you know where are out leaders, the people who are saying you know what, I am going to actually work for the public interest and I'll take the, I'll take the heat. We're looking for those people, right. Back there. >> What's the future of things like Freddie Mac? >> Larry Doyle: It's socialized housing, right. And in my opinion, that's a problem. I mean this country wasn't built upon you know socialized housing finance. Because in my opinion socialized housing finance goes to mispriced credits. And again, private gain, socialized costs, and that's not the way that capital gets effectively and appropriately allocated. But that's where I see this thing going. Right here. >> If you look at the transparency international survey every year-- >> Larry Doyle: Yup. >> The United States still ranks very high in terms of perception of public sector corruption. It's actually considered to be on the low end. So how do you square that with what you do? >> Larry Doyle: You got to-- I mean it's the type of thing you know who are we judging ourselves against, you know. It's like okay, that guy's are really corrupt over there. No we're just a little bit corrupt. You know, as if to say oh, well that's okay then. You know it's a-- you know he's well Chicago, you know Chicago politics. Ah, they're really corrupt over there. So you know we'll just, we'll just take a little bit of money. So, but we should also be able to do better than that. And I think and actually I reference this World Justice project in the book and they're-- they look at relative countries you know relative to our overall income levels. We don't grade that. We don't grade that well. You know we're probably in the lower quartile of some of those countries. So I personally think that we should, we should start to look at the way that the banking system in Canada is run. We should look at some of the programs you know in Australia and some of the Baltic countries and utilize some of these things as a model. And I'm not saying that this, this is ultimately a pro markets, pro capitalism book to expose the corruption and the cronyism. And if we can start down that process, in my opinion, other good things will happen. So, but yeah I mean we're supposed to be able to do better than this. I don't know if that you know is a sufficient answer, but to me it all goes back to leadership, it really does. And the fact that you know what, I don't know that we're attracting the best and the brightest to Washington, because a lot of people are like well why would I want to work in that, you know where I'm surrounded by a cesspool? >> Okay let's take one last question. >> Larry Doyle: And then we'll go out and sign books, right here. >> Historically speaking has it always been like that? >> Larry Doyle: Well certainly to a, certainly to a degree there's always been-- I mean you can go back and look in time. There's always been I think corruption in politics, but you know 2008 there was only one year that that could be compared to and that was 1929. So, that was, that was a big one and we're still living with those effects. And it's global; it's global in nature. So yes, it is, there's always been problems. But I would also say there's I mean have we ever had a deficit that's headed towards 25 trillion, and that's on the balance sheet? No we haven't. All that is, what is that? That's a bill for future generations, so how do we generate organic growth? Again, let's get back to you know the preeminence of the rule of law, protecting property and investor rights and exposing corruption. You get that honestly, so you get a little bit of a title change you know in the system. In my opinion capital, you know increased capital will flow so that you know the Federal Reserve can get their interest rate back to you know two, three percent so that it's not a tax on savers. So, I hope that again, I thank you profusely for coming. I hope that you will read the book. I'm happy to sign books out there and let me share it. [ Applause ] And Ghumara, thank you very much, okay. >> This has been a presentation of the Library of Congress. Visit us at loc.gov.