Diana Henriques Podcast

You're listening to Bloomberg Business Week with Karl Messer and Tim Steneveek on Bloomberg Radio. Well, her next guest is an author of many books, including the New York Times bestseller The Wizard of Lies, Bernie Madoff, and the Death of Trust. That book made into an HBO film. It starred Robert de Niro and Michelle Pfeiffer. She also spent more than twenty years at The New York Times, where she was a finalist for the Pulitzer per Can I tell you?

Robert de Niro for years leading up to with Tribeca kept asking him when are you going to do Madoff?

When are you going to do Maida?

And then he did it, and then he did it.

Anyway, go ahead.

She got him to do Madoff.

She did.

Her most recent book is Taming the Street, The Old Guard, The New Deal, and FDR's Fight to regulate Capitalism. It came out last week. It's an exploration of financial regulation during the New Deal, a period of time that included the creation of the SEC. The Financial Times called the book quote riveting and timely, and I've got to agree, we're very pleased to have with us. Diana B. Henriquez

It's good to see you towards.

You can I just say thank you to You've turned out pretty well.

I think my judgment was pretty great.

Well, thanks so much so, Carolyn. I were talking about this just because in the last three hours, basically like everything we see today reminds us of the Roaring twenties and what was happening.

Isn't it remarkable?

It is remarkable dejaboo all over again, as catle joke does. But you know, these are our roaring twenties and the press to deregulate, to reduce the fetters on unfedtered capitalism. Some of the arguments that I see in the press today were lifted from Calvin Coolidge, almost.

Word for word, Comma for comma.

It's amazing how the arguments, the defenses against regulation that emerged in the twenties and thirties are have resurfaced today.

But it's not just the arguments against regulation, it's also the concentration of wealth that we're seeing.

That's what I thought.

Was concentration of wealth, the disparity of wealth, the amount of income growth, it is going to the top one percent, the stagnation of average and ordinary workers' incomes. All of that is straight out of the nineteen twenties. We're seeing technologies disrupting major industry.

Same in the nineteen twenties.

Major changes in manufacturing wiped out three million jobs at the beginning of the twenties, and a million of them never came back.

So, Dana, does it make you because it's interesting because we just talked a lot about AI today and the disruption there again. I mean, it's kind of a constant narrative. But does it make you say, listen, the world, the economy, the market, business, it's cyclical, we go through these changes, or does it know?

How do you think about it?

I think the market is always going to be a very sensitive barometer of a disruptive change, and whether that disruptive change is radio as it was in the nineteen twenties, which was you know, changeanging the way newspapers operated, changing the whole landscape of mass communication, whether it's AI arriving

I detail in that.

That's the stretch of time I cover in Taming the Street nineteen twenty nine to nineteen thirty nine, The world turned upside down?

Can I ask how you got there? Like, how did you say? You obviously could write about probably anything and everything. So what is it that said I gotta do this?

Oh? You know, I fell in love with the story of Richard Whitney, the fall of the great New York Stock Exchange President, when I first started covering Wall Street, you know, back in the Pleistocene era.

Stopped and I said, gosh, what a tale.

And it had been included in a kind of episodic anecdotal book called Once in Gauconda by John Brooks, which I loved, and I ducked it away, tucked it away, and always thought that that period of creation of market regulation would have been fascinating to live through. But what really peaked my interest, Caroline, was the two thousand and eight meltdown. You know, I was going to work at the New York Times every day in the fall of two thousand and eight after Lehman Brothers closed, wondering if

Of the country.

And I said, you know, people going through nineteen twenty nine felt this way, what an incredible experience they had. So but that kind of began to crystallize what I wanted to do. Then, of course, Bernie Madeoff happened in two thousand and eight, and my life went off in a different path. And then the thirtieth anniversary of the nineteen eighty seven crash came, well, that got me closer to twenty nine, because, of course the eighty seven crash

Of nineteen twenty nine. And finally, when that.

Book was done, I said, I think it's time. So I started work on this book about five years ago, when no one ever mentioned the New Deal, when it was as if Roosevelt had never existed.

But I'm digging in, the digging into the.

Story and seeing more and more parallels. And then as the last five years have unfolded, it is as if the puzzle pieces that matched the nineteen twenties and thirties just dropped into place.

That's pretty So it was amazing.

Well, let's talk about the political environment here in which FDR came into office, because you note in the book that it's quote alarming political discontent erupting from the extreme left and the radical right. I thought to myself when I read that sounds familiar. Are you talking about twenty twenty one? Are you talking about twenty twenty.

No, I'm talking about nineteen twenty eight, twenty nine, thirty thirty one, thirty two. The right, the suffering in this country. First, we can't even take it in today, but twenty five percent of the workforce was out of work in those days.

That was thirteen million people.

But imagine that one out of every four people you know doesn't have a job. Many of them haven't had a job in years. People are living in caves in Central Park, there are scavenging landfills fields. The degree of suffering in the country is reaching such a point that it's a powder keg waiting to explode.

From the left, you have.

Increasingly militant communist interests that are eager to harness this worker anger and outrage to make gains in the political system, and that, of course alarms the industrialists and captains of capitalism on the right, who were fearful of labor uniting with communists. And they start looking longingly at Italy and Germany, which have been under fascist control in Italy's case for more than a decade, and they say, hmm, they've got some pretty good ideas over there. Look how they're getting

Relieve this suffering and give people hope.

And that's what carried him into office.

The ties between capitalism democracy. Oh, it's tortured, it's important.

It's actually so simple as FDR saw it. And I didn't see it this way until I read speeches of his. When he signed the bill creating the SEC he said.

Wait it again, the bill creating the SEC An institution we take for granted.

Yeah, well, and we take the FDIC for granted.

That didn't exist before.

So we have lived our entire lives.

Yes, right.

So he saw that a healthy democracy required well regulated markets that seemed fair. He believed that if the average American didn't feel he could get a fair shake in the economy, he would not support the democracy. And so to him, the two were completely wetted. And so if I say, a lot of people are saying it with democracies on the ballot in twenty twenty four, I'm saying, yeah, financial regulation is on the ballot in twenty twenty four

It's perhaps apocryphal, but I love it anyway.

A visitor to the White House right after Roosevelt was sworn in at the depths of the depression, said well, you know, if you can cure this depression, mister president, you'll be our greatest president. But if you fail, you'll be our worst president. And Roosevelt corrected and me said, no, if I fail, I'll be our last president. To the perspective of the people at the time, it was.

That desperate, Diana. You devote an entire chapter in this book to the deregulation or regulation, I should say, of private power companies. And if we're still thinking about the parallels between the nineteen twenties and nineteen thirties and now, who are the private power companies of today?

Silicon Valley, the giant technology companies are the equivalent, the exact equivalent. The people who controlled electric power in the nineteen teens and nineteen twenties controlled the future. They determined where industry could flourish because cheap power would be there where industry couldn't.

They determined whether a farmer.

Could flick a switch and turn on a light or had to light an oil lamp. They had total control over the electrification.

Of the American economy.

FDR saw how much power they had and he said, too much, too much. This power was becoming concentrated in a handful of giant holding companies that owned everything that were these byzantine constructions extremely fragile and after the twenty nine crash, extremely.

Hazardous to investors. And he was determined.

Even as Governor of New York, he targeted utility companies as an area that needed to be regulated in the public interest, and when he came into the White House, he said, it's time. If we are going to have the electric century, if we are going to have this incredibly transformative technology reach across our country, it's going to have to be with government oversight, government supervision.

And he spent a.

Great deal of political capital to pass the Public Utility Holding Company Act, one of the most transformative pieces of legislation he enacted, but he felt it was worth it, and the results were that the American power system was far less oligarchic than developed nations in Europe and in.

The Far East.

Consumers pay lower prices, they got service where they hadn't been able to get service before. It would be an interesting thought experiment to dial back and say, ah, too bad. Roosevelt didn't get the Public Utility Holding Company Act passed. Congress was able to hold him back on the utility industry fought him tooth and nail, fought it all the

Where it wasn't profitable.

And so that would have been the world that we would have had today. So they were today's equivalent are the technology companies, those controlling artificial intelligence.

So do we need a lot more oversight of all of them?

I think we do.

But I think more than just saying we need more oversight, we need to modernize our regulatory system for the day we have today. Just as Roosevelt designed his regulatory ideal for the market that he had then, our regulatory system over the years has become fragmented, you know, uh balkanized.

It's it's week, it's it's weak.

It's rusty, it's underfunded, it's under respected, and it needs an overhaul. A top to bottom overhaul to give it the the resources and the brain power to tackle what needs to.

Be regulated today.

And like we can start with cryptocurrency and move all the way through to AI the idea that that business can just be unleashed to pursue its profit and somehow the rest of us will benefit.

There's I want to forgive ye.

There's so much money that shapes policy or regulation or lack thereof today. How does that have to go way before we make some progress in this area.

Well, I hope not.

It's certainly people who look back at the Depression, and there are some economic historians who say, look, that was an exceptional period.

We'll never have that again.

The devastation of the Depression made it possible for Roosevelt to do things that no future American president will ever be able to do. I'm not a pessimist about that. I don't think we have to have twenty five percent of our workforce out of work before people wake up to the fact that the way capitalism is operating today isn't benefiting the average American in the ways that it should.

But I mean, like money in politics that shapes parts.

There was money in politics in the nineteen twenties.

Actually, there was a not quite a.

Popical story that businessmen knew how much it cost to buy a US senator. I mean that prices were passed around. Money has dominated politics for a long long time, but a charismatic leader who can go over the heads of the money and talk to the people can effect an extraordinary change.

Is Donald trumpet Well, both of.

Them have.

A gift for communicating the simplicity of their ideas. Trump has made it clear that he is opposed to regulation. He bragged in his State of the Union in twenty eighteen that his administration had eliminated more regulations than any administration in history. Well, even allowing for Trumpian hyperbole, that was close to true. He has made it clear that if he is in office again, we will continue to see the dismantling of the regulatory regime that we've all kind of taken for granted.

I wish I could could see Joe.

Biden more outspokenly defending that regulatory machinery and laying out a plan for modernizing it and making it more responsive to today's crushing issues. But he's certainly got the right policies in the place.

Regulation though in this day and age is a bad word first for politicians. Just have a minute left, I.

Know, but you know, deregulating finances like deregulating traffic. Take down all the stop signs, take down all the speed limits, eliminate all the insurance requirements. And who's going to be left on the street. The tanks, the tanks of the Giant, the haymoths, and the reckless little hot rods are whipping around. There's no room on that street for you and me, So don't deregulate markets.

I feel like I want another hour with you. Democracy, capitalism, they can survive together. Just got about twenty five seconds.

Yes, I think they can.

In fact, I think democratic capitalism has been proven to be the best way to improve the quality of life for ordinary people. But it won't do it without smart oversight by the people who lead us.

And we have to elect those people. Come back.

Diana Bienriquez, the author of Taming the Street, The Old Guard, The New Deal, and FDR's Fight to Regulate American Capitalism. Of the book is out now in This is Bloomberg BusinessWeek,