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We essentially us taxpayers have said will bail out the banks and today that guarantees even greater that's the issue isn't.
Ultimately it is because it easily -- moral hazard -- what it does is it just destroys the normal functions of free market.
This assumption of government ballot it -- massive subsidy -- so that's true even after the London whale incident JPMorgan Chase -- -- -- -- -- it's it's you know that things happen -- assuming that the -- this is really important remember.
Of course the banks are going to deny that you know why.
The unique billions and billions and billions of dollars.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- That they get from -- why.
Because the new normal -- in -- normal functioning market you may look at a bank that has.
That borrows -- too much money it takes on way too much risk and counterparty creditor people who lend it money.
Wouldn't do business with them or return them really high rates of interest because they be worried that oh my god what happens that this -- risk blow up in the banks now.
But because the presumption that the government is standing behind and will bail them out yet again.
They get to borrow money more cheaply and more favorable terms that they -- And even better than their competitors and that creates distortions in the market that encourage them to take more and more risk.
That's what we saw 2008.
And all you have to do is look at what the credit rating agencies do vis -- -- the arbiters of of what.
Though the reading which helps determines the rates at which they borrow money.
And it all built in an assumption about in giving them.
Higher credit ratings so they can go and get cheaper money.
Some banks can deny it but the simple facts and the facts are you can't really this debate these taxes that they -- given an advantage over others because of their size.
And because of that implicit guarantee.
-- advantage that a crooks.
It's not criminal.
That's not criminal to be too big to fail but being too big to fail does put you in some ways above the law.
And by that I mean there is a reluctance you know the United States Department of Justice is not going to.
Risk indicting and bringing down a JPMorgan Chase for Goldman Sachs because they know they do so.
They bring that institution down they're gonna risk bringing down the entire economy with it.
At DOJ knows that and much more dangerously.
The executives at these institutions know about it and when you see scandal after scandal involving too big to fail banks.
That's a manifestation.
Of that recognition.
That in some ways they are above the law and if you look at the complete absence a criminal cases since the financial crisis.
Against these top institutions -- -- lack of accountability.
That reinforces that message that encourages those executives to keep pushing the outlook trying to maximize profit in it -- 810.
In order to realize those returns secure in the knowledge that -- is risk blow up.
They're gonna get bailed out by the government and second that they're not going to be held accountable for the criminal justice system just recently Goldman Sachs is cleared.
In terms of I think is the abacus deal with John Paulson hedge fund.
Were you surprised by that.
No I have isn't surprised at all you know these are -- you know the Department of Justice we'll tell you that these are very complex and difficult cases.
And you'll part of my job was working with Department of Justice.
You went through our investigations really do little mini FBI for -- -- So we would go out and -- my my agents would go investigate fraud and we are doing with some pretty complex accounting -- we're looking at banks.
On that are trying to steal from the TARP funds but cooking their books and making themselves look more attractive than they than they otherwise where so part of that job was for -- -- -- -- -- -- I have to interact with department of justice and try to convince them to take my case and in charge my case as a talk about in the book.
At times it was extremely frustrating for me.
There was a timidity in department of justice and I often saw on the reluctance to charged cases even though we so felt that we had an overwhelming amount of evidence.
There was a lack of experience that I saw a lack the sophistication.
In their -- some of these cases so -- it right.
So doesn't surprise me that with respect to this -- Goldman Sachs that that once again me back -- -- moving forward charges.
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