I’m Jesse Eisinger, a Pulitzer-winning financial reporter. AMA about why only one person is in jail for the financial crisis.

Why is only one person in jail for the financial crisis?

There's a great story on this and I highly recommend it. The writer is really handsome, too: http://www.propublica.org/article/the-rise-of-corporate-impunity

This may be an unpopular post but here goes. We all agree the financial crisis was really bad, but were laws really broken or were people just exploiting known holes in the system? I'm talking about unethical vs illegal. Are we just angry and wanting to jail people over ethics or were actual laws broken?

I believe the financial crisis was caused not by fraud but recklessness, stupidity, exploitation of legal loopholes and inadequate regulation. That doesn't mean that crimes weren't committed. I believe there were many crimes -- and in fact, I've never spoken to a prosecutor or former prosecutor who did not agree. they simply say that they themselves didn't see any.

What one proposed law or legal change do you think would make the most significant difference?

I don't think enough attention has been paid to the fact that the white collar laws are inadequate, so there haven't been many proposed remedies. One thing the DoJ should use is the "willful blindness" or "conscious disregard" charge. As Judge Jed Rakoff wrote recently in the New York Review of Books: Such a charge "is a well-established basis on which federal prosecutors have asked juries to infer intent, including in cases involving complexities, such as accounting rules, at least as esoteric as those involved in the events leading up to the financial crisis. And while some federal courts have occasionally expressed qualifications about the use of the willful blindness approach to prove intent, the Supreme Court has consistently approved it."

What was the biggest threat you ever got from a major political/business figure?

Well, financial reporters got it pretty good. The worst that happens to us most of the time is that high-priced PR people yell at us on the phone. Once, in the late 1990s, two detectives from the Manhattan D.A.'s office were sicced on me by someone about a story I wrote on a Canadian billionaire pharmaceutical fraudster. I was so naive, I thought they were coming to feed me some information about their investigation of the guy. I didn't realize they were questioning ME until halfway through our meeting. Another time, my boss at the WSJ and current boss at ProPublica was summoned when he was on his honeymoon in Paris by Bernard Arnault, the French billionaire who owns LVMH, to complain about some of my columns. My columns stood up to the scrutiny and my boss backed me. I was deeply sorry my boss had to talk about accounting arcana on his honeymoon but very glad that I had pissed off Arnault that much.

What are your thoughts on Bitcoin and its potential to eliminate the socialization of risk by the taxpayer that corporations have taken advantage of?

Bitcoin is a mad, technoutopian fever dream that will end in tears, if it hasn't already.

Is the criminal behavior limited to theft/fraud, or are there specific types of financial transactions corporations engage in that are/should be outlawed?

Fraud writ large yes. There were many misrepresentations to the public that I think were worth deeper, more aggressive investigation. I write about the Lehman Brothers executives' representations of their liquidity in the weeks and months leading up to their collapse, which was clearly factually and materially inaccurate. Did they know it at the time? I don't believe the DoJ adequately investigated that question. And Lehman isn't alone.

I don't have a question, I just want to thank you for the work that you do.

Very nice to hear. Thank you.

What would it take to change the status quo?

A change in the culture of the DoJ, where the leaders were more ambitious, were less afraid to fail and devoted more resources to the most complex cases. Also, the DoJ needs to start thinking about statutory fixes to address its loss of tools over the last decade.

Mr. Eisinger,

I have a list of questions:

As a journalism student in college, what should i be doing to get a job as a reporter when I graduate?

Did you naturally gravitate towards covering wall street or was it an assignment?

What's it like to win a Pulitzer?

Do you think the seahawks can repeat for the title? and if not who do you think will win?

Thanks for doing the AMA!

1. Read as much journalism as you can, figure out what you like and who you like, cold call those reporters and try to meet and get a coffee. Study something that imparts real knowledge: science, statistics, economics, history etc. so you have some knowledge base and skill set. Look at all the start-ups: Vox, 538, Fusion, BuzzFeed (which is established, of course) and seek to get in on the groundfloor of those places.
2. I fell into it 20 odd years ago by luck. I honestly didn't know the difference btn a stock and a bond. But I liked it, soon realizing that is where the power structure of society lay. So to understand how the country works, you need to understand finance.
3. It was great and I felt very lucky. But soon I started to worry that it would be my professional peak and that scared the shit out of me.
4. Obviously not and it will be apparent on week one, when the Packers crush them in Seattle.

when the Packers crush them in Seattle

HERE IS YOUR HISTORY LESSON MR EISINGER

Obviously the wrong call.

If I'm ever In NYC i'll give you a ring! thank you!

as far as the NFL, I'm a Broncos fan. How you see their season shaping up?

Please do so. I think the Broncos are on the downswing. Peyton can't deny age three years in a row.

What was it like to portray Mark Zuckerberg in "The Facebook" Edit: And bang Emma Stone.

I made a vow never to talk about Emma.

Why should so many people in the financial sector be making absurd amounts of money? Does the value they add to society really justify their compensations?

They shouldn't and what they provide isn't worth it. Some well-placed taxes, like a Financial Transactions Tax, would help society.

Jesse, thanks for doing the AMA.

What would you consider the biggest mistake of your career?

I have made so many mistakes, I've given speeches about them. Fortunately, I've never made the kind of huge factual error that meant the story required retraction. Thank God.

One of my best stories was also one of my biggest mistakes. In Oct 2007, I wrote for Conde Nast Portfolio that the Wall Street investment banks were going to fail. I wrote that it would be Bear Stearns first, then Lehman Bros, and maybe even Merrill, Morgan Stanley and even Goldman. Pretty good, right? But I didn't follow up on it, probe deeper, write more. So I kind of blew the opportunity of a lifetime to really own the story of the biggest financial crisis since the Great Depression. Oh well.

Is part of the regulatory problem that technology (financial, corporate, communications etc) is evolving too fast for regulators to keep up?

Absolutely. They are outgunned technologically. The markets have become too complex for them. But that's not the only problem. A lot is will and leadership.

What about the argument that if bailouts, QE, and socialization of risk did not exist, these bad actors would not be able to grow so large and the market would dispense of fraudsters in short order (and also create means of ensuring transparency).

The financial markets would always need fairly heavy regulation. It is an obvious problem that our banks are so large and complex that they have become impossible to manage and impervious to legal sanction. So we should probably move to break them up. But that wouldn't solve the interconnectedness of our financial system, so we need other laws and regulations. The 2007-09 bailouts were too generous to the existing banks, but the authorities were right not to let the biggest banks simply fail on a massive scale.

Hi Mr. Eisinger,

Thanks for this opportunity. Are you familiar at all with the private corporation, "AFCC, Inc." currently operating some family courts? Local and federal authorities have ignored the AFCC, Inc. no-bid contracts and the collusion members, owners, directors etc. of the corporation say is not collusion, but "collaboration". In our state, a small cluster of co-owners of the corporation have monopolized cases for so long, even though legislators are referring to what they're doing in the courts as "racketeering", the system they've set up for themselves is now, like the other systems is now "too big to fail".

Is anyone in authority anywhere willing and able to draw the line so future cases aren't caught in their web?

One journalist took the time to document AFCC, Inc. activities in Connecticut, posted the information in several articles and nothing changed. Any insight as to why a private corporation was allowed into the judicial system in the first place and why it's allowed to stay?

http://www.scribd.com/doc/134247461/AFCC-CT-Judicial-Branch-Taxpayer-Funded-GAL-Training-Boon

I'm not familiar with it. Sorry.

Hi Jesse. Love reading your work in the NT Times and ProPublica. What do you think about Lawrence Lessig's approach? I'm assuming you are familiar with him. He seems to think not much will change unless campaign finance is addressed, and in ways that go beyond the Amendment propositions. The reason i wonder, is because it seems implausible that there will be a majority of Elizabeth Warrens in Congress, as long as big money can block challengers to other Wall Street sympathizers. Do you think the Warrens and Sanders can accomplish the job without massive campaign reform? Can they put enough heat on the regulators and AG to prosecute effectively?

I used to think that campaign finance reform was the great solution to our broken political system. Now, I'm less certain. What that wouldn't solve, for instance, is the level of special interest access. The access that banks and their proxies have to regulators utterly dwarfs that of financial reformers. It's not really a campaign finance question. The banks care about the details of rules; the public doesn't understand and cannot be easily mobilized. It leads to regulatory capture, which is something that campaign finance reform doesn't solve.

So my major question you may not be able to answer, but my question has always been this. What if we just didn't bail the banks out?

Any savings insured by the fdic etc gets covered but that's all. I'm hoping i just don't understand. The banks are forced to sell off the loans super cheap and that's it?

Why was it important for them to be kept afloat?

(also i miss those low gas prices when everything fell apart...)

The financial system is a lot more than deposits. Too reckless. But we could have structured the bailouts so that the taxpayer had more upside, the top officers were ousted and the shareholders and creditors took more pain.

You were great in The Social Network and Zombieland. You're like Michael Cera except more awkward, its awesome.

I know it. I was robbed of the Oscar for both of those roles. Cera is a punk.

Hello, Mr. Eisinger. If corporations are now considered to be "people" - could the corporation itself get the death penalty? In other words, could the gov. force it to disband or put all majority shareholders in prison?

In theory, yes. In practice, this is what prosecutors are afraid of. I think it's a legitimate fear. They should think about the consequences of their actions. But letting crime flourish because you are afraid of the collateral consequences has a terrible effect on society too.

So in your opinion, what would it take to properly sanction big business? Also is it fair or right that a corporation is considered a person with rights equal to an individual?

To properly sanction corporations, indictment has to be on the table. That includes seeking admissions of guilt and/or being willing to take corporations to trial. However, I think prosecutors are justified in being concerned about an indictment leading to a corporate death penalty. But doing justice may require it. A dangerous, recidivist company might deserve to be put out of business.

Also, they must go after individuals as well. One way to do this should be to try to design fines that hit individual executives, not shareholders. Another is to charge individuals.

Corporations have rights as individuals and responsibilities. This is a long established precedent and won't be overturned anytime soon. I don't think the principle is a problem; corporations can make contracts, be sued, etc.

Corporations have rights as individuals

Then why are criminal charges for board members and CEOs so rare, even when company policies break laws - for instance, Duke Energy dumping coal ash into rivers?

Can the corporate veil be reconfigured to promote less harmful, less fraudulent, and less illegal activity?

My piece is an attempt to explain why criminal charges for people at the top echelons of Corporate America are so rare. I hope you get a chance to read it.

Some prosecutors and prosecutions tend to stew and/or languish because of the enormity of the task involved. Complex financial crimes and frauds tend to require a great deal of focus, resources and expertise. To what extent and degree do you feel prosecutors at DOJ are simply overwhelmed by the task at hand?

I agree it's a difficult task. But that's no excuse. Lots of folks' jobs are hard. These are among the best and the brightest. They've got a hard job but they need to do it.

What do you foresee as the next bubble/crisis? What can be done now to stop it?

Always dangerous to predict the next bubble. But we have febrile debt markets now, with junk bonds yielding too little for the risks. We are starting to see M&A overheat. Tech and biotech stocks sported absurd valuations, esp earlier this year. Greek sovereign debt seems to have recovered way too much. We have bubbly pockets almost everywhere in the capital markets. I would worry about China and the European banks as the nexus of the next crisis.

How do you feel about Matt Taibbi and his new gig at First Look (I heard they just hired Alex Pareene too)? His writing seems to be the standard for popular financial writing.

Other than that, with the state of regulation and cronyism in the US being what it is (i.e awful), how likely do you think another financial crisis is in the coming years?

I admire Taibbi. I think he's a wonderful writer and underrated reporter. I recommend his book, The Divide. There's some overlap btn his book and my piece. We were fishing in some of the same waters. Pareene is witty, too, and had an all-time great appearance on CNBC last year.

How were you approached to be Lex Luther in the upcoming Superman movie?

What is Zack Snyder like?

Snyder wouldn't know how to shoot a YouTube video if it wasn't for me.

Should Barney Frank be sanctioned for his role in the housing crisis and subsequent financial meltdown? Imprisoned?

Also, who do you think is most likely to win the Super Bowl next season?

No. The idea that Barney Frank caused the housing bubble and/or financial crisis is a silly myth.

It's too painful a question to contemplate since the Packers are still in the second tier.

Hey, Jesse, thanks for doing this.

I'm a Finance/MIS student at a big state school in the south and start my first internship at Merrill Lynch in a month. Wealth management isn't where I saw myself, but I'm not one to miss a new adventure. What is your pro tip for discovering where you fit in in the financial sector? It's just too vast and interesting to decide.

Thanks!

Do what you are interested and let the money take care of itself. And stay ethical.

Is a Pulitzer Prize a medal, a statue, or a certificate? Can you wear it around your neck?

It's a certificate but they make a statue of you out of butter and put it on the lawn in the middle of the Columbia campus.

What are your thoughts on the revolving door between financial regulators and Wall Street? Do you consider this an important issue? If so, what steps can be taken to improve it?

It's a big problem. They need to pay regulators and prosecutors more and do more to elevate their status (how, I am not sure) in order to make them more prestigious careers.

So are we in a fascist system yet where an elite class of people rule over us through powerful corporations? Or is America still a constitutional republic practicing democracy?

Not fascist. But we are close to crony capitalism.

What's so great about football anyway?

Ah, good question. The heart wants what the heart wants. Baseball is too slow and basketball is only relevant in the second half of the fourth quarter. I've heard there are other sports out there but I wouldn't know about them.

Hi. While clearly the executives at big financial product houses haven't been held accountable for their behavior, I am concerned that one important industry has been somewhat ignored, specifically, the ratings houses like Moody's and Standard & Poor's. These companies fostered bad behavior by hiding the real investment risk with circumspect ratings. Do you have thoughts on this?

I completely agree. That the ratings agencies skated by with so little regulatory and legal fallout is simply mind-boggling.

Jesse, how close are we to going full Shadowrun and just giving corporations extraterritoriality and the ability to raise their own armies?

I will have to look up "Shadowrun." Sounds scary.

How much does wanting to get a job at these firms for big pay days affect the lack of prosecution of these executives? Should we restrict how easy is to go from the DoJ or the SEC to a financial firm?

This is a huge part of the problem. As a partner at a huge law firm, you can make ten times what you made as a prosecutor. If you are too aggressive or break the unwritten rules, that harms your future earnings. You go after easier cases to get wins and it helps if they are sexy cases (rather than boring, complex cases).

How will you approach the role of Lex Luthor?

With the understatement of late career Al Pacino.

How fair or accurate is Michael Lewis's book (Flash Boys) on High Frequency Trading? There was an awful lot of spluttering on television and online about it from Wall Street.

You know, I haven't read the book. Read the NYT excerpt and lots about it. I think Lewis has the story basically right: HFT is of little benefit to society and rife with manipulation. Joe Stiglitz's recent speech nailed it: http://www.frbatlanta.org/documents/news/conferences/14fmc/Stiglitz.pdf

It's an interesting read, although I was left at the end thinking, "So some i-banks are using speed to front run other i-banks and screwing those i-banks... do I really care if one i-bank gets screwed by another?"

Fair enough. The immediate victims are the wealthy hedge funds, not exactly the most sympathetic bunch. But I think HFT makes the markets more prone to crashes and volatility, which would hurt all of us.