1 00:00:28,000 --> 00:00:32,840 Wall Street was destined for where it is now, 2 00:00:32,840 --> 00:00:35,920 with or without Lehman going out of business. 3 00:00:37,720 --> 00:00:39,760 They were on a roller-coaster to nowhere. 4 00:00:45,480 --> 00:00:47,640 It was a bubble that had to burst and it did burst, 5 00:00:47,640 --> 00:00:49,400 and Lehman helped to burst. 6 00:00:52,320 --> 00:00:54,760 I don't tell people I used to work for Lehman Brothers. 7 00:00:54,760 --> 00:00:57,000 I don't tell people I was labelled 8 00:00:57,000 --> 00:00:59,520 the Lehman Brothers whistle-blower. 9 00:01:01,040 --> 00:01:04,280 I can't prove it, but I was blacklisted from Wall Street. 10 00:01:07,040 --> 00:01:11,000 Justice to me is a whole host of things all happening 11 00:01:11,000 --> 00:01:13,800 and I don't think they'll ever happen, 12 00:01:13,800 --> 00:01:17,000 which is why I'm on my bike around the world. 13 00:01:17,960 --> 00:01:20,000 To hell with everyone else. 14 00:01:45,160 --> 00:01:49,480 Lehman had a reputation on Wall Street as being cowboys. 15 00:01:51,240 --> 00:01:54,280 Their business practise was a bit aggressive. 16 00:01:57,280 --> 00:01:59,840 I quickly learned the culture is that you don't tell people 17 00:01:59,840 --> 00:02:01,800 what you're doing, you just make money. 18 00:02:19,560 --> 00:02:21,280 I joined Lehman in 1994. 19 00:02:21,280 --> 00:02:22,560 I was vice president. 20 00:02:27,240 --> 00:02:28,440 You were on your toes. 21 00:02:28,440 --> 00:02:30,440 You were watching your back. 22 00:02:32,280 --> 00:02:34,000 You had to do the best. 23 00:02:36,120 --> 00:02:39,560 There was just a certain vibrancy all the time. 24 00:02:42,840 --> 00:02:45,160 But I enjoyed that. 25 00:02:45,160 --> 00:02:49,000 It's difficult to describe an electric feeling, but... 26 00:02:50,160 --> 00:02:52,160 I'd never felt so... 27 00:02:53,920 --> 00:02:57,200 ..intense, all day, as I did at Lehman Brothers. 28 00:02:58,640 --> 00:03:01,240 It sounds crazy, but actually it was good. 29 00:03:01,240 --> 00:03:03,080 I guess it's like a drug. 30 00:03:04,520 --> 00:03:06,000 Another drug we were on. 31 00:03:09,360 --> 00:03:13,280 At the top level of the corporation from Lehman Brothers, 32 00:03:13,280 --> 00:03:16,360 people really believed in what they were doing. 33 00:03:16,360 --> 00:03:20,520 They thought they were going to hit the home run, hit the jackpot. 34 00:03:20,520 --> 00:03:22,560 Money was going to come flowing in. 35 00:03:22,560 --> 00:03:24,480 Below that level, at middle management, 36 00:03:24,480 --> 00:03:27,080 there were a number of people who were greatly concerned 37 00:03:27,080 --> 00:03:28,720 and believed that Lehman 38 00:03:28,720 --> 00:03:32,800 was putting itself at enormous risk, and that it could be a disaster. 39 00:03:35,000 --> 00:03:38,960 My responsibility is to simply find the facts, the truth, 40 00:03:38,960 --> 00:03:40,680 put them into a report 41 00:03:40,680 --> 00:03:44,800 and then let others decide the consequences of that. 42 00:03:44,800 --> 00:03:46,840 So the question was, what was it they were doing 43 00:03:46,840 --> 00:03:48,680 and how did they end up in bankruptcy? 44 00:03:48,680 --> 00:03:51,720 So we had to assemble a team with experts. 45 00:03:51,720 --> 00:03:53,840 But the case was so sophisticated 46 00:03:53,840 --> 00:03:58,480 that those experts ended up hiring professors and other experts 47 00:03:58,480 --> 00:04:01,360 who then advised them so they could advise us. 48 00:04:02,840 --> 00:04:06,760 I had no sense in the beginning of just how significant 49 00:04:06,760 --> 00:04:08,960 the issue of Lehman's failure was 50 00:04:08,960 --> 00:04:11,400 and how incredibly massive it was. 51 00:04:14,240 --> 00:04:20,200 Lehman's bankruptcy involved almost $700 billion worth of assets 52 00:04:20,200 --> 00:04:22,560 and the losses to the creditors, even today, 53 00:04:22,560 --> 00:04:24,440 are in the tens of billions of dollars. 54 00:04:24,440 --> 00:04:27,280 But it wasn't just the size of the bankruptcy - 55 00:04:27,280 --> 00:04:29,480 it was that Lehman's was involved 56 00:04:29,480 --> 00:04:33,680 in all aspects of the financial world across the entire globe. 57 00:04:33,680 --> 00:04:35,760 So, when Lehman went into bankruptcy, 58 00:04:35,760 --> 00:04:37,840 they took a lot of things with them. 59 00:04:37,840 --> 00:04:41,240 And to some extent, they stopped a large part of the financial economy, 60 00:04:41,240 --> 00:04:43,440 at least for a short period of time, 61 00:04:43,440 --> 00:04:48,040 and we're still living with the consequences of that bankruptcy. 62 00:04:56,440 --> 00:04:58,400 I started in late '97. 63 00:04:59,920 --> 00:05:03,760 I had another job as a lawyer at a Wall Street law firm 64 00:05:03,760 --> 00:05:05,800 and decided to leave there. 65 00:05:08,160 --> 00:05:10,920 And, before I knew it, I was a Lehman Brothers lawyer. 66 00:05:17,840 --> 00:05:20,560 They were known as this scrappy, newer bank. 67 00:05:20,560 --> 00:05:22,000 It did have a reputation 68 00:05:22,000 --> 00:05:25,320 as an exciting up-and-coming place to work. 69 00:05:25,320 --> 00:05:29,080 It was known as one of the premier Wall Street banks. 70 00:05:31,960 --> 00:05:34,760 The aim of Lehman Brothers was to make money 71 00:05:34,760 --> 00:05:36,280 any way that we could. 72 00:05:37,480 --> 00:05:40,000 You know, any way that could be done 73 00:05:40,000 --> 00:05:43,800 without an undue risk of being caught or penalised, 74 00:05:43,800 --> 00:05:45,280 we would do. 75 00:05:45,280 --> 00:05:47,040 It was not about right or wrong. 76 00:05:47,040 --> 00:05:49,200 It was about can we or can't we? 77 00:05:49,200 --> 00:05:50,920 And if we could, we did. 78 00:05:54,200 --> 00:05:56,800 Lehman began to get into the mortgage game early on. 79 00:05:59,200 --> 00:06:02,040 They'd wanted to be on that entire chain, 80 00:06:02,040 --> 00:06:04,920 to own an interest in that entire chain. 81 00:06:06,320 --> 00:06:09,200 We did have one of the best real estate teams 82 00:06:09,200 --> 00:06:12,880 and one of the best bond departments on Wall Street. 83 00:06:12,880 --> 00:06:14,160 It was sort of natural 84 00:06:14,160 --> 00:06:18,280 that Lehman would take a leadership role in that area and we did. 85 00:06:25,680 --> 00:06:31,360 I started working in the mortgage industry in 1981... 86 00:06:34,040 --> 00:06:35,440 ..as a receptionist. 87 00:06:38,520 --> 00:06:41,280 And I felt that it was really important to know more 88 00:06:41,280 --> 00:06:44,080 about the housing industry, 89 00:06:44,080 --> 00:06:49,320 because I know it's the biggest purchase in one's lifetime. 90 00:06:52,760 --> 00:06:56,520 Being in the mortgage industry is like an addiction - 91 00:06:56,520 --> 00:06:58,960 you never can really get out of it. 92 00:07:08,320 --> 00:07:12,320 My job was to help people to fulfil the American dream... 93 00:07:15,000 --> 00:07:19,080 ..to have a home where a family can be happy. 94 00:07:25,040 --> 00:07:27,320 Kids can lounge on the couch. 95 00:07:27,320 --> 00:07:29,720 Being able to travel with them. 96 00:07:31,600 --> 00:07:35,120 Being able to have outrageous birthday parties. 97 00:07:35,120 --> 00:07:37,040 Being able to have a place 98 00:07:37,040 --> 00:07:39,760 the parents could come to, and family. 99 00:07:41,880 --> 00:07:43,640 That's the American dream for me. 100 00:08:01,960 --> 00:08:04,440 So what I liked about the mortgage industry 101 00:08:04,440 --> 00:08:07,320 was the freedom that it offered. 102 00:08:07,320 --> 00:08:09,760 I was able to work the hours that I needed to 103 00:08:09,760 --> 00:08:12,000 to be with my children as well, 104 00:08:12,000 --> 00:08:15,560 so that was very, very important to me, and the income was amazing. 105 00:08:18,400 --> 00:08:20,160 What you put in, your efforts, 106 00:08:20,160 --> 00:08:22,760 you can make hundreds of thousand dollars a month. 107 00:08:22,760 --> 00:08:24,240 It's not a big deal. 108 00:08:31,440 --> 00:08:33,760 What can I do to make the same money 109 00:08:33,760 --> 00:08:37,000 that I'm making in mortgage in another industry? 110 00:08:40,240 --> 00:08:42,560 Where can I go without a degree? 111 00:08:44,040 --> 00:08:46,480 I started somewhere from the bottom and worked myself up, 112 00:08:46,480 --> 00:08:48,440 like I did in the mortgage industry. 113 00:08:48,440 --> 00:08:50,000 So, yes, it was very good money. 114 00:08:54,840 --> 00:08:57,960 I started at BNC in 2003. 115 00:08:59,800 --> 00:09:03,360 My job was to solicit new brokers, 116 00:09:03,360 --> 00:09:05,920 who solicit consumers 117 00:09:05,920 --> 00:09:08,400 and, essentially, we're selling them the money, 118 00:09:08,400 --> 00:09:10,320 and then we get paid from that. 119 00:09:12,600 --> 00:09:16,120 What I remember from BNC is doing my background on them 120 00:09:16,120 --> 00:09:18,360 because I needed to make sure they were stable 121 00:09:18,360 --> 00:09:21,560 and that they were reputable, and I did the research. 122 00:09:21,560 --> 00:09:24,280 I Googled them, of course, and they were owned 123 00:09:24,280 --> 00:09:26,680 by Lehman Brothers, which, at the time, 124 00:09:26,680 --> 00:09:30,600 was one of the largest financial institutions in the world 125 00:09:30,600 --> 00:09:34,400 and so I felt very confident about making the switch. 126 00:09:35,840 --> 00:09:38,440 Hi, my name is Dick Fuld. 127 00:09:38,440 --> 00:09:41,440 Now's a terrific time to be joining Lehman Brothers. 128 00:09:41,440 --> 00:09:44,920 I've been here 30 years and I can't think of a better time 129 00:09:44,920 --> 00:09:47,360 for you to take part in the changes and opportunities 130 00:09:47,360 --> 00:09:49,040 that are going on here. 131 00:09:49,040 --> 00:09:52,520 I can assure you that you'll get more experience, more responsibility 132 00:09:52,520 --> 00:09:54,680 and more opportunities here 133 00:09:54,680 --> 00:09:57,680 more quickly than anywhere on the street. 134 00:10:01,600 --> 00:10:06,360 This is Lehman Brothers and BNC, so I know this is a tight ship. 135 00:10:08,280 --> 00:10:11,640 I was so proud, so tickled. 136 00:10:11,640 --> 00:10:16,000 I worked on getting that job from November of 2003 137 00:10:16,000 --> 00:10:17,440 and I was an underwriter. 138 00:10:20,200 --> 00:10:22,080 When I got into the business, 139 00:10:22,080 --> 00:10:25,400 underwriter's job was to go 140 00:10:25,400 --> 00:10:29,720 into the file and either validate that they are lying 141 00:10:29,720 --> 00:10:32,640 or that they have totally told the truth. 142 00:10:40,560 --> 00:10:45,240 So an underwriter that never underwrites or approves a loan, 143 00:10:45,240 --> 00:10:47,240 no-one is getting paid, 144 00:10:47,240 --> 00:10:50,360 and that's what puts the target on our back. 145 00:10:50,360 --> 00:10:53,360 That's what puts the pressure on us, 146 00:10:53,360 --> 00:10:57,240 when there is a shop that are not 147 00:10:57,240 --> 00:11:00,160 doing all of their deals on top of the table. 148 00:11:00,160 --> 00:11:02,800 Last year was a record one for the housing market. 149 00:11:02,800 --> 00:11:05,680 Get on the fast track at Zoom Credit! 150 00:11:05,680 --> 00:11:08,600 We make the mortgage process easy and understandable. 151 00:11:08,600 --> 00:11:10,040 It's a strong market. 152 00:11:10,040 --> 00:11:11,760 People still need a place to live. 153 00:11:11,760 --> 00:11:13,320 Do you own a house? 154 00:11:13,320 --> 00:11:15,720 Are you looking for lower mortgage payments? 155 00:11:15,720 --> 00:11:18,360 Sales hit an all-time high of 5.3 million. 156 00:11:18,360 --> 00:11:19,960 At the speed of light, Zoom Credit 157 00:11:19,960 --> 00:11:23,520 will pre-approve you for a home loan, new house and new freedom. 158 00:11:23,520 --> 00:11:26,080 You know, when you're making the largest investment 159 00:11:26,080 --> 00:11:28,840 of your life, you're going to go with somebody that you trust. 160 00:11:28,840 --> 00:11:31,120 They're going to look around for a name they know. 161 00:11:31,120 --> 00:11:33,360 I bought my first home through Cal with no money down 162 00:11:33,360 --> 00:11:35,840 and my mortgage payment is cheaper than rent! 163 00:11:35,840 --> 00:11:39,280 And new home sales were a record 909,000. 164 00:11:39,280 --> 00:11:42,280 There is no widespread bubble in this country. 165 00:11:42,280 --> 00:11:45,280 Call Cal today and get a low-cal mortgage. 166 00:11:45,280 --> 00:11:47,320 You owe it to yourself. 167 00:11:48,560 --> 00:11:51,600 In '01, '02, there was this expansion and development 168 00:11:51,600 --> 00:11:53,400 of new forms of lending, 169 00:11:53,400 --> 00:11:55,000 subprime lending, 170 00:11:55,000 --> 00:11:56,360 and there was a realisation 171 00:11:56,360 --> 00:11:58,680 that this was a market that could really be pushed up, 172 00:11:58,680 --> 00:12:00,600 and Lehman was a big part of that wave. 173 00:12:13,400 --> 00:12:17,240 But coming into the subprime market, 174 00:12:17,240 --> 00:12:19,080 it was just a push, 175 00:12:19,080 --> 00:12:23,320 just to get the loans in, just to get them in. 176 00:12:23,320 --> 00:12:26,400 They targeted everybody who was ever gullible 177 00:12:26,400 --> 00:12:27,760 and sales is sales. 178 00:12:27,760 --> 00:12:30,240 You know, if you've got the gift of gab and you can talk real 179 00:12:30,240 --> 00:12:32,360 good and convince. 180 00:12:32,360 --> 00:12:36,400 Well, back in 2001, so-called subprime loans 181 00:12:36,400 --> 00:12:38,720 made up just 5% of the mortgage market. 182 00:12:38,720 --> 00:12:41,560 Five years later, it was up to 20%. 183 00:12:41,560 --> 00:12:44,880 Tammy has a mortgage for those with low credit or high debt. 184 00:12:44,880 --> 00:12:47,040 It's called a subprime mortgage. 185 00:12:47,040 --> 00:12:49,800 Many of these loans entice borrowers with no money down 186 00:12:49,800 --> 00:12:54,240 and low monthly payments, but can quickly adjust to far higher rates. 187 00:12:54,240 --> 00:12:59,120 The higher the interest rate that they were charging 188 00:12:59,120 --> 00:13:05,480 was more money for the broker to make 189 00:13:05,480 --> 00:13:08,120 and then they would charge an origination fee, 190 00:13:08,120 --> 00:13:09,480 like $2,000 or $3,000. 191 00:13:11,040 --> 00:13:13,920 And then on that back end, with an interest rate that the homeowner 192 00:13:13,920 --> 00:13:15,320 didn't know anything about, 193 00:13:15,320 --> 00:13:18,960 you know, they could make up to nine, ten, 11, $12,000 on a deal. 194 00:13:21,320 --> 00:13:23,280 And once the loan officers 195 00:13:23,280 --> 00:13:26,280 and all of the parties involved administratively, 196 00:13:26,280 --> 00:13:28,560 the company, once those cheques are cut 197 00:13:28,560 --> 00:13:32,200 and everybody gets paid, nothing happens to them. 198 00:13:32,200 --> 00:13:35,880 But you as a homeowner can't sustain your mortgage. 199 00:13:49,560 --> 00:13:52,720 The 2008 crash is still a big open book 200 00:13:52,720 --> 00:13:55,080 that people don't focus on. 201 00:14:02,280 --> 00:14:04,560 I focus on it all the time 202 00:14:04,560 --> 00:14:06,360 because I'm waiting for justice, 203 00:14:06,360 --> 00:14:08,160 which hasn't happened yet. 204 00:14:10,040 --> 00:14:15,480 Since 2008, nobody of importance has been convicted. 205 00:14:20,200 --> 00:14:22,240 How do you make as much money as possible? 206 00:14:22,240 --> 00:14:25,240 By going where no-one's gone before, 207 00:14:25,240 --> 00:14:28,040 and you have to dream up 208 00:14:28,040 --> 00:14:31,960 legal ways of making a lot of money 209 00:14:31,960 --> 00:14:36,400 that to a lot of people, who have ethical or moral standards, 210 00:14:36,400 --> 00:14:38,040 may seem quite illegal. 211 00:14:39,280 --> 00:14:41,680 But if there's no law, it's not illegal, 212 00:14:41,680 --> 00:14:44,120 so do it because you're going to make some money - 213 00:14:44,120 --> 00:14:48,440 and investment banks operate in that fashion. 214 00:14:59,440 --> 00:15:01,400 As that time went on, I kept having 215 00:15:01,400 --> 00:15:03,800 these sort of troubling moments of, 216 00:15:03,800 --> 00:15:06,000 "Wait a second. Is that really what I think it is?" 217 00:15:06,000 --> 00:15:08,560 "Are we really doing what that looks like we're doing?" 218 00:15:08,560 --> 00:15:11,280 And I started raising questions. 219 00:15:11,280 --> 00:15:12,880 One of my bosses just told me, 220 00:15:12,880 --> 00:15:15,800 "Look, these guys are here just to make money. 221 00:15:15,800 --> 00:15:17,160 "Stop being a Boy Scout. 222 00:15:17,160 --> 00:15:19,480 "Stop thinking they want to save the world 223 00:15:19,480 --> 00:15:21,440 "or they want to treat everybody with respect. 224 00:15:21,440 --> 00:15:23,120 "No, they're here to make money." 225 00:15:31,440 --> 00:15:35,120 This is the time when I worked at BNC - I was so cute. 226 00:15:35,120 --> 00:15:38,760 Some good times, till it got crazy. 227 00:15:43,080 --> 00:15:47,520 Management would give us this thing to hang from the wall to tell us 228 00:15:47,520 --> 00:15:51,480 what our office was to accomplish each month 229 00:15:51,480 --> 00:15:53,080 and the goal would go up. 230 00:15:53,080 --> 00:15:57,120 So let's start, like, two billion in volume, three billion. 231 00:16:00,280 --> 00:16:01,560 There's Linda. 232 00:16:01,560 --> 00:16:03,880 She had come out of her office for some loans. 233 00:16:06,680 --> 00:16:09,640 So there's loan files over here and loan files over there, 234 00:16:09,640 --> 00:16:13,720 loan files up here, loan files on her desk. 235 00:16:15,320 --> 00:16:18,800 Files she was working on and who knows what else. 236 00:16:20,960 --> 00:16:23,680 We had files everywhere on the floor. 237 00:16:24,880 --> 00:16:28,160 And in this cabinet, it was just full of loan files. 238 00:16:28,160 --> 00:16:29,600 So much to do. 239 00:16:30,960 --> 00:16:38,000 So the volume picked up and, in order for them to meet their quotas, 240 00:16:38,000 --> 00:16:40,880 they just started bringing in junk. 241 00:16:50,600 --> 00:16:54,120 I always consider myself like an FBI agent 242 00:16:54,120 --> 00:16:56,360 because I think it is my job 243 00:16:56,360 --> 00:16:57,800 to make sure, number one, 244 00:16:57,800 --> 00:17:00,880 that the information that they have indicated 245 00:17:00,880 --> 00:17:02,520 in their documentation, 246 00:17:02,520 --> 00:17:04,880 I verify that that is accurate. 247 00:17:09,000 --> 00:17:13,440 So, no matter what the loan officer may tell you, 248 00:17:13,440 --> 00:17:18,240 it's gotta pass the smell test for the underwriter. 249 00:17:18,240 --> 00:17:22,360 And, unfortunately, a lot of the BNC paperwork 250 00:17:22,360 --> 00:17:24,960 did not pass the smell test 251 00:17:24,960 --> 00:17:28,640 and that was an all-day, every day occurrence. 252 00:17:33,920 --> 00:17:35,360 BNC. 253 00:17:37,200 --> 00:17:38,920 Ooh, this is the loan. 254 00:17:42,480 --> 00:17:45,240 They've whited out the information here 255 00:17:45,240 --> 00:17:48,160 and hand written in what they want me to know, 256 00:17:48,160 --> 00:17:49,280 but they don't realise 257 00:17:49,280 --> 00:17:52,440 that the average balance does not even support it. 258 00:17:52,440 --> 00:17:55,600 If I gave this to Stevie Wonder, he'd pursue it. 259 00:18:01,240 --> 00:18:03,440 And during that time, 260 00:18:03,440 --> 00:18:11,000 it happened to be that I underwrote five files from the same broker. 261 00:18:13,120 --> 00:18:15,960 So I took the five files, I went into my office. 262 00:18:15,960 --> 00:18:18,280 When I got through the first one, 263 00:18:18,280 --> 00:18:21,600 I'm calculating, I'm retaining information, 264 00:18:21,600 --> 00:18:25,360 you know, and now I'm going to do the approval. 265 00:18:25,360 --> 00:18:29,040 So I did the approval, wrote up the conditions on the first one 266 00:18:29,040 --> 00:18:31,160 and then pull out the second one. 267 00:18:36,240 --> 00:18:41,000 And the second one, the W2, 268 00:18:41,000 --> 00:18:43,080 looked identical, 269 00:18:43,080 --> 00:18:47,160 with the exception of the name, the social 270 00:18:47,160 --> 00:18:50,520 and the party's name who it was to. 271 00:18:52,120 --> 00:18:54,440 So then I said, "Hmm, it looked familiar." 272 00:18:54,440 --> 00:18:57,880 So I picked up the file that I had already approved 273 00:18:57,880 --> 00:19:02,200 and I opened it up, and it was the same W2 with the changes. 274 00:19:03,240 --> 00:19:08,200 They didn't change the employer ID number, 275 00:19:08,200 --> 00:19:12,320 so it was a different company with the same ID numbers. 276 00:19:12,320 --> 00:19:15,760 So, now, really, all my senses are up now. 277 00:19:15,760 --> 00:19:18,920 Like, what else is a lie in this file? 278 00:19:21,880 --> 00:19:23,880 Then I picked up the third file. 279 00:19:23,880 --> 00:19:26,000 "I wonder what's wrong with this one?" 280 00:19:26,000 --> 00:19:27,520 Picked up the fourth file, 281 00:19:27,520 --> 00:19:29,080 picked up the fifth file, 282 00:19:29,080 --> 00:19:30,560 all from the same lender. 283 00:19:30,560 --> 00:19:32,440 Oh, my goodness. 284 00:19:32,440 --> 00:19:33,400 All fraud. 285 00:19:34,880 --> 00:19:36,200 It's disgusting. 286 00:19:38,440 --> 00:19:40,280 And I got a phone call from Linda Weekes, 287 00:19:40,280 --> 00:19:43,640 that I needed to come into the office immediately. 288 00:19:43,640 --> 00:19:47,400 So I come in, I sat at her desk and she shows me two files 289 00:19:47,400 --> 00:19:50,080 from my brokers, from my clients, and she says, 290 00:19:50,080 --> 00:19:52,320 "I want you to look through these files. 291 00:19:52,320 --> 00:19:55,200 "Take your time and tell me what you see." 292 00:19:59,920 --> 00:20:02,440 So I'm looking through it, and I go to the other file, 293 00:20:02,440 --> 00:20:05,280 and I flip through it and the tax numbers are the same, 294 00:20:05,280 --> 00:20:07,360 but the companies are different. 295 00:20:07,360 --> 00:20:09,120 My goodness. 296 00:20:09,120 --> 00:20:13,800 And so I said, "OK, that mortgage company is committing fraud." 297 00:20:16,880 --> 00:20:20,200 And so I got another file the following day 298 00:20:20,200 --> 00:20:22,320 from that same office. 299 00:20:22,320 --> 00:20:24,440 I was looking through it 300 00:20:24,440 --> 00:20:28,000 and there was a gentleman who they claim worked 301 00:20:28,000 --> 00:20:31,160 at Kentucky Fried Chicken, which he did, 302 00:20:31,160 --> 00:20:33,400 but that he was earning $7,000. 303 00:20:38,320 --> 00:20:41,200 And so I got in my car with that information, 304 00:20:41,200 --> 00:20:43,560 went to that Kentucky Fried Chicken, 305 00:20:43,560 --> 00:20:45,360 spoke to the owner and said, 306 00:20:45,360 --> 00:20:50,880 I would like to apply for the job that pays $7,000 a month in salary. 307 00:20:52,400 --> 00:20:54,720 And he looked at me from behind the counter, and he said, 308 00:20:54,720 --> 00:20:58,480 "I would like to have $7,000 a month from this business." 309 00:20:58,480 --> 00:21:00,080 It doesn't happen. 310 00:21:01,840 --> 00:21:06,800 What I did not know is that someone in our office had contacted them. 311 00:21:11,720 --> 00:21:14,320 At that time, I got an e-mail sent to me 312 00:21:14,320 --> 00:21:16,560 that was not supposed to come to me. 313 00:21:17,560 --> 00:21:19,760 And what the e-mail said 314 00:21:19,760 --> 00:21:22,960 is that we need to keep this company going, 315 00:21:22,960 --> 00:21:28,920 and so this was a corporate approval of them committing fraud. 316 00:21:34,880 --> 00:21:38,040 I realised that the entire corporation was corrupt... 317 00:21:40,600 --> 00:21:43,320 ..and they don't want me to know about it. 318 00:21:46,080 --> 00:21:47,320 Lie after lie after lie. 319 00:21:54,480 --> 00:21:57,200 If we get this right today, 320 00:21:57,200 --> 00:22:01,440 hopefully we'll squeeze some of those shorts. 321 00:22:03,240 --> 00:22:04,480 Squeeze them hard. 322 00:22:04,480 --> 00:22:05,520 AUDIENCE LAUGHS 323 00:22:07,600 --> 00:22:09,360 Not that I want to hurt. 324 00:22:11,080 --> 00:22:14,280 Don't get that, please, cos that's just not who I am. 325 00:22:14,280 --> 00:22:15,480 LAUGHTER 326 00:22:17,960 --> 00:22:21,360 Very few people ever saw Dick Fuld in the flesh. 327 00:22:22,600 --> 00:22:23,760 He was like Big Brother. 328 00:22:23,760 --> 00:22:26,320 Every quarter, he'd give us a speech 329 00:22:26,320 --> 00:22:29,120 and we'd tune in on our computer screens. 330 00:22:29,120 --> 00:22:30,760 And here was Big Brother saying, 331 00:22:30,760 --> 00:22:33,520 "You've done a great job, but it's not good enough. 332 00:22:33,520 --> 00:22:36,120 "Next quarter, we want more." 333 00:22:36,120 --> 00:22:37,480 I am soft, I'm lovable. 334 00:22:39,360 --> 00:22:41,480 But what I really want to do is, 335 00:22:41,480 --> 00:22:46,160 I want to reach in, rip out their heart and eat it before they die. 336 00:22:46,160 --> 00:22:48,560 LAUGHTER AND APPLAUSE 337 00:22:54,880 --> 00:22:57,360 Lehman Brothers was Dick Fuld's life... 338 00:22:58,720 --> 00:23:02,000 ..and he was considered one of the most brilliant men on Wall Street. 339 00:23:04,880 --> 00:23:06,680 He was the longest-serving executive 340 00:23:06,680 --> 00:23:08,880 in any investment house on Wall Street. 341 00:23:10,480 --> 00:23:12,640 In that year, he was named one of the top executives 342 00:23:12,640 --> 00:23:14,240 in the United States, 343 00:23:14,240 --> 00:23:16,880 the very same year of the bankruptcy. 344 00:23:16,880 --> 00:23:20,680 And he led Lehman Brothers to record years, record earnings, record 345 00:23:20,680 --> 00:23:23,640 bonuses for its executives. 346 00:23:23,640 --> 00:23:28,520 He was described to me by Secretary Paulson as the eternal optimist. 347 00:23:28,520 --> 00:23:31,840 He said, "If Dick Fuld was fishing and he had a nibble 348 00:23:31,840 --> 00:23:34,080 "on the line, he was already filleting the fish, 349 00:23:34,080 --> 00:23:36,880 "believing he'd already caught it." 350 00:23:36,880 --> 00:23:39,960 He had this reputation of being a ruthless guy, 351 00:23:39,960 --> 00:23:41,680 whatever that means. 352 00:23:41,680 --> 00:23:45,440 Does that mean willing to break the law wherever he would? Maybe. 353 00:23:45,440 --> 00:23:47,000 In my view, apparently. 354 00:23:47,000 --> 00:23:49,040 That's what it looked like to me. 355 00:23:49,040 --> 00:23:51,560 Or maybe it just meant he was very aggressive in trading 356 00:23:51,560 --> 00:23:54,320 and was very good at making money for his employer. 357 00:23:54,320 --> 00:23:57,400 That probably, too. He was known as The Gorilla 358 00:23:57,400 --> 00:23:59,760 and this ripping of the heart out thing 359 00:23:59,760 --> 00:24:02,640 is just another dimension of that reputation. 360 00:24:02,640 --> 00:24:05,360 I want to reach in, rip out their heart 361 00:24:05,360 --> 00:24:07,640 and eat it before they die. 362 00:24:07,640 --> 00:24:10,800 When I saw this video of Mr Fuld giving this speech 363 00:24:10,800 --> 00:24:15,120 about how if anybody gets in your way, anybody says anything, 364 00:24:15,120 --> 00:24:19,160 your job is to kill him, to get rid of them, 365 00:24:19,160 --> 00:24:23,120 the wave of reality that came over me was horrifying. 366 00:24:29,760 --> 00:24:33,600 He was famous for being reclusive, up on the 31st floor, in the end. 367 00:24:33,600 --> 00:24:36,040 He had his own elevator. 368 00:24:39,320 --> 00:24:44,000 And he'd walk in and he'd stand in the corner 369 00:24:44,000 --> 00:24:46,520 and not interact with anyone, 370 00:24:46,520 --> 00:24:48,160 just kind of glare. 371 00:24:48,160 --> 00:24:51,080 "I'm the chairman. Don't look at me. Don't talk to me." 372 00:24:51,080 --> 00:24:52,880 AUDIO OF FULD: And eat it before they die! 373 00:24:59,200 --> 00:25:01,320 See, when you're a public company, 374 00:25:01,320 --> 00:25:03,560 the top five executives of the firm 375 00:25:03,560 --> 00:25:07,320 have to show all of the compensation that they are paid 376 00:25:07,320 --> 00:25:10,600 and you have to disclose the numbers, the value. 377 00:25:10,600 --> 00:25:16,360 And we were basically hiding certain of those awards through a loophole, 378 00:25:16,360 --> 00:25:20,360 a technical interpretation of a law of the rules, 379 00:25:20,360 --> 00:25:24,160 and my bosses said this loophole covers us. 380 00:25:33,200 --> 00:25:35,360 So let's say for the CEO, Dick Fuld, 381 00:25:35,360 --> 00:25:37,560 we would disclose, a year later, 382 00:25:37,560 --> 00:25:40,760 30 million, and he really got 35 million. 383 00:25:40,760 --> 00:25:43,240 And it was just because they wanted more 384 00:25:43,240 --> 00:25:46,560 than they thought the shareholders would approve. 385 00:25:46,560 --> 00:25:48,960 The numbers kept getting bigger and bigger. 386 00:25:48,960 --> 00:25:50,680 It was a source of constant bother 387 00:25:50,680 --> 00:25:53,120 and finally, in 2006, I said, "Enough." 388 00:26:02,280 --> 00:26:03,560 I'd take pride in my job, 389 00:26:03,560 --> 00:26:06,560 so when I started looking at the documentation 390 00:26:06,560 --> 00:26:10,600 and noticing some discrepancies, I would question it. 391 00:26:10,600 --> 00:26:14,600 Then my manager started taking these particular accounts away from me 392 00:26:14,600 --> 00:26:18,480 and passing them on to another account manager. 393 00:26:19,640 --> 00:26:23,600 My volume decreased, slowly but surely. 394 00:26:27,360 --> 00:26:29,400 I started questioning myself 395 00:26:29,400 --> 00:26:31,400 because there was always something changing. 396 00:26:31,400 --> 00:26:33,040 You could just feel the tension, 397 00:26:33,040 --> 00:26:35,760 so it just got to the point 398 00:26:35,760 --> 00:26:37,000 I dreaded. 399 00:26:37,000 --> 00:26:41,440 I decided to call the senior vice president 400 00:26:41,440 --> 00:26:46,800 and it went from bad to unimaginably worse. 401 00:26:53,480 --> 00:26:56,080 One morning I went into the office and I said, 402 00:26:56,080 --> 00:26:58,440 "Hi, so-and-so, do you have my files?" 403 00:26:58,440 --> 00:27:00,840 "No. Haven't seen them. Don't know anything about them." 404 00:27:00,840 --> 00:27:04,160 Went to the next person - there were five processors. 405 00:27:04,160 --> 00:27:07,160 "No, I haven't seen them. Don't know anything about him." 406 00:27:09,160 --> 00:27:11,640 I'm like, "OK, am I losing my mind?" 407 00:27:13,240 --> 00:27:16,560 How is it possible that 30-plus million dollars 408 00:27:16,560 --> 00:27:19,240 in loans are disappeared? 409 00:27:19,240 --> 00:27:21,800 No, nobody's seen them. 410 00:27:21,800 --> 00:27:24,840 The manager of the office came up to me and he said, 411 00:27:24,840 --> 00:27:27,880 "Well, they're not here and you're responsible." 412 00:27:27,880 --> 00:27:31,360 And what they wanted to do to me was to destroy my credibility, 413 00:27:31,360 --> 00:27:35,400 so, if I went to a new job, a new employer, and told 414 00:27:35,400 --> 00:27:38,440 them what happened, there would be no basis 415 00:27:38,440 --> 00:27:41,120 because my credibility is tarnished, 416 00:27:41,120 --> 00:27:44,480 because I lost files, which is impossible to do. 417 00:27:49,680 --> 00:27:52,120 No more. I don't want to look at them. 418 00:28:07,680 --> 00:28:10,920 SYLVIA CRIES 419 00:28:19,480 --> 00:28:23,320 Then we had the new group of people coming into the office. 420 00:28:23,320 --> 00:28:27,240 New management comes in, things start changing. 421 00:28:28,880 --> 00:28:31,880 They walked in our office like the Mafia. 422 00:28:31,880 --> 00:28:35,240 They were like arm-to-arm, marching in, like, 423 00:28:35,240 --> 00:28:37,400 "We're taking over the world." 424 00:28:37,400 --> 00:28:40,840 And so the gentlemen that they brought into the office pool 425 00:28:40,840 --> 00:28:43,080 had no particular job title. 426 00:28:44,880 --> 00:28:50,680 He was a grimy guy, just not professionally dressed, 427 00:28:50,680 --> 00:28:53,800 hair messed up, not groomed. 428 00:28:55,000 --> 00:28:57,040 And he would just walk around the office, 429 00:28:57,040 --> 00:28:58,480 which was a small office. 430 00:28:58,480 --> 00:29:01,720 "Well, what is he doing? Well, what is his job?" 431 00:29:01,720 --> 00:29:06,280 I remember sitting at my desk and he had his chair, 432 00:29:06,280 --> 00:29:10,160 and he kind of had a leg here, close to mine. 433 00:29:10,160 --> 00:29:13,600 And then that's when he's kind of breathing, 434 00:29:13,600 --> 00:29:15,720 giving me the heavy breathing. 435 00:29:15,720 --> 00:29:17,640 I could hear. 436 00:29:17,640 --> 00:29:21,640 And then, again, he was talking about African-American women 437 00:29:21,640 --> 00:29:25,920 and what he heard that they're good about and was I like that? 438 00:29:25,920 --> 00:29:28,640 You know, just being very sexual, 439 00:29:28,640 --> 00:29:31,520 which was just totally out of place. 440 00:29:31,520 --> 00:29:32,720 And it's like, "Urgh!" 441 00:29:34,640 --> 00:29:35,640 You know? 442 00:29:44,640 --> 00:29:47,280 On the particular day I was leaving the office, 443 00:29:47,280 --> 00:29:51,480 I got to the person who would harass me and threaten my life. 444 00:29:52,760 --> 00:29:54,760 I shook hands with him and, when I went to leave, 445 00:29:54,760 --> 00:29:56,200 he wouldn't let go of my hand. 446 00:29:56,200 --> 00:29:58,760 He pulled me towards him and whispered in my ear, 447 00:29:58,760 --> 00:30:00,480 he said, "I know everything about you. 448 00:30:00,480 --> 00:30:02,200 "I know where your daughters go to school. 449 00:30:02,200 --> 00:30:03,720 "I know where they live. 450 00:30:03,720 --> 00:30:05,080 "I own you." 451 00:30:40,040 --> 00:30:46,440 People that are like them, who hire people to come in and do dirty work, 452 00:30:46,440 --> 00:30:49,560 that those people want to see you down. 453 00:30:49,560 --> 00:30:51,120 They're not going to shoot me. 454 00:30:51,120 --> 00:30:53,080 They're not going to run me off the road. 455 00:30:53,080 --> 00:30:55,280 They want to see me be afraid. 456 00:30:57,240 --> 00:31:01,000 I came home and plants were moved around on my porch, 457 00:31:01,000 --> 00:31:02,560 screens were torn. 458 00:31:03,640 --> 00:31:05,840 Things in the garage were moved out. 459 00:31:05,840 --> 00:31:09,760 So people were letting me know, "Hey, we've been at your house." 460 00:31:18,920 --> 00:31:21,160 It's a devastating way to live. 461 00:31:22,360 --> 00:31:23,960 And my children, they said, 462 00:31:23,960 --> 00:31:27,360 "We don't like this new you. We just want our mum back." 463 00:31:30,240 --> 00:31:34,160 My attorney, my trainer, all told me, 464 00:31:34,160 --> 00:31:37,040 "Change your ID and move away. 465 00:31:38,440 --> 00:31:40,120 "Move to another state." 466 00:31:42,800 --> 00:31:45,160 And I looked around and I said, 467 00:31:45,160 --> 00:31:48,480 "You know what? I'm not running from anybody." 468 00:31:52,120 --> 00:31:53,760 I am not going to run. 469 00:32:08,760 --> 00:32:10,720 I've never had a case anywhere near like this. 470 00:32:10,720 --> 00:32:14,200 I've been doing this for 50 years - never seen anything like that. 471 00:32:19,200 --> 00:32:23,440 What's interesting, these women did not know exactly 472 00:32:23,440 --> 00:32:25,960 what was happening to each of them. 473 00:32:25,960 --> 00:32:28,360 They had not sat together and planned this. 474 00:32:28,360 --> 00:32:32,280 All of a sudden, when they realised that the same harassment, 475 00:32:32,280 --> 00:32:33,680 the same problems, 476 00:32:33,680 --> 00:32:37,040 the same complaints about the mortgages were happening, 477 00:32:37,040 --> 00:32:40,120 they came together and said, "This is wrong." 478 00:32:42,920 --> 00:32:44,160 If you talk to these women, 479 00:32:44,160 --> 00:32:46,400 you know how serious this has been for them 480 00:32:46,400 --> 00:32:48,360 and what it's caused them. 481 00:32:54,480 --> 00:32:57,040 Our claims are currently worth $27 million. 482 00:32:57,040 --> 00:33:00,400 I think they're worth every dime of that 483 00:33:00,400 --> 00:33:04,640 because these women's lives have been ruined by this. 484 00:33:06,280 --> 00:33:10,760 And how much money is it worth to have your life ruined? 485 00:33:10,760 --> 00:33:14,680 To stand up for what you believe in and what's right? 486 00:33:29,480 --> 00:33:33,240 The first time that BNC came on my radar 487 00:33:33,240 --> 00:33:35,200 was when I read the papers 488 00:33:35,200 --> 00:33:38,960 about the alleged mortgage fraud in California. 489 00:33:38,960 --> 00:33:40,240 So, as soon as you heard that, 490 00:33:40,240 --> 00:33:42,600 I went to my boss saying, "Did you hear about this?" 491 00:33:42,600 --> 00:33:46,520 And the answer's "yes", and nothing's said. 492 00:33:46,520 --> 00:33:48,720 So you knew that the papers were right, 493 00:33:48,720 --> 00:33:50,520 and don't ask questions. 494 00:33:52,320 --> 00:33:54,840 The total assets of Lehman Brothers 495 00:33:54,840 --> 00:33:57,600 were about $1.5 trillion. 496 00:33:59,520 --> 00:34:01,360 But then they had derivatives, 497 00:34:01,360 --> 00:34:04,480 which work in what's called notional value, 498 00:34:04,480 --> 00:34:07,000 and they had even more trillions. 499 00:34:11,960 --> 00:34:17,320 Through 2005 into 2006, at Lehman, everything was fantastic. 500 00:34:20,960 --> 00:34:23,120 Everything was green, green, green. 501 00:34:26,120 --> 00:34:29,440 And then small things happened, 502 00:34:29,440 --> 00:34:31,360 not so much in Lehman Brothers, 503 00:34:31,360 --> 00:34:33,920 but you knew that the real estate market 504 00:34:33,920 --> 00:34:37,280 and mortgages were too good to be true. 505 00:34:40,480 --> 00:34:42,760 But a lot of homeowners in this country 506 00:34:42,760 --> 00:34:45,240 are under tremendous stress right now. 507 00:34:45,240 --> 00:34:50,560 Foreclosures across the country are up a staggering 87% 508 00:34:50,560 --> 00:34:53,760 over this very same time last year. 509 00:34:53,760 --> 00:34:56,600 Those falling home prices are like an infection 510 00:34:56,600 --> 00:34:58,920 now spreading throughout the US economy. 511 00:34:58,920 --> 00:35:00,240 It's a war out there. 512 00:35:00,240 --> 00:35:03,400 I mean, these people are losing homes every single day. 513 00:35:03,400 --> 00:35:05,680 There is one faucet for the entire camp 514 00:35:05,680 --> 00:35:08,160 of potable water, which is right here. 515 00:35:26,120 --> 00:35:27,320 OK. 516 00:35:34,960 --> 00:35:37,480 Do you run into a lot of traffic down there? 517 00:35:37,480 --> 00:35:39,440 No, well, I mean, not that much. 518 00:35:39,440 --> 00:35:42,600 Traffic, but not that much traffic, though. 519 00:35:43,680 --> 00:35:48,240 The pressure of work, it got to be a very heavy burden on me. 520 00:35:48,240 --> 00:35:50,280 So, when I went to the doctor, my blood pressure 521 00:35:50,280 --> 00:35:52,040 was up a little bit and stuff like that, 522 00:35:52,040 --> 00:35:53,880 and he goes, "I'm just taking you off work, 523 00:35:53,880 --> 00:35:55,840 "so you can just kind of breathe and relax." 524 00:35:57,760 --> 00:36:00,960 I had the opportunity of having an interview 525 00:36:00,960 --> 00:36:02,800 while I was out on break, 526 00:36:02,800 --> 00:36:06,600 which was a good thing, and was offered the position. 527 00:36:07,960 --> 00:36:10,120 And I was like, "Great, yeah" - you know? 528 00:36:12,680 --> 00:36:16,680 So when I came back to work after being off, 529 00:36:16,680 --> 00:36:18,600 I went to another account manager 530 00:36:18,600 --> 00:36:22,160 and as she told me, "Well, I was told not to give you any loans." 531 00:36:27,160 --> 00:36:28,800 It's about 11 o'clock. 532 00:36:28,800 --> 00:36:30,680 I report to work at 8:30. 533 00:36:30,680 --> 00:36:34,040 No work. I'm just sitting there. No phone calls, nothing to do. 534 00:36:34,040 --> 00:36:38,160 And then my regional manager said, "Cheryl, I need to talk to you." 535 00:36:38,160 --> 00:36:41,600 She says, "I have HR on the phone." 536 00:36:41,600 --> 00:36:43,760 I said, "Oh, really?" 537 00:36:43,760 --> 00:36:45,920 And I said, "Oh, great." 538 00:36:45,920 --> 00:36:48,960 And then I handed them my piece of paper. 539 00:36:48,960 --> 00:36:51,720 And so when my regional manager looked at it, she's like, 540 00:36:51,720 --> 00:36:53,080 "You quit?" 541 00:36:53,080 --> 00:36:54,920 "Yes, I quit." 542 00:36:54,920 --> 00:36:58,520 And she said, for some reason, she says, 543 00:36:58,520 --> 00:37:01,360 "I don't think this is it. This is over." 544 00:37:02,720 --> 00:37:05,080 Yes. 545 00:37:05,080 --> 00:37:07,200 The Lord is good, I need God in here. 546 00:37:12,480 --> 00:37:19,200 GOSPEL SINGING 547 00:37:49,720 --> 00:37:54,720 After I left BNC, I remember one day sitting on my couch, 548 00:37:54,720 --> 00:37:58,160 calling the new supervisor at the other job, 549 00:37:58,160 --> 00:38:02,280 trying to find out when I was going to start. 550 00:38:02,280 --> 00:38:04,720 And then they said, "This time we've changed our mind, 551 00:38:04,720 --> 00:38:06,360 "we're not going to hire you." 552 00:38:06,360 --> 00:38:07,800 I was in a panic. 553 00:38:09,000 --> 00:38:12,000 I was in a total panic, like, oh, my gosh. 554 00:38:15,160 --> 00:38:16,640 The bottom fell out. 555 00:38:18,680 --> 00:38:22,520 14.8 million American adults 556 00:38:22,520 --> 00:38:25,120 suffer with depressions. 557 00:38:26,200 --> 00:38:27,640 Right. Amen. 558 00:38:27,640 --> 00:38:30,280 And then I eventually lost my place. 559 00:38:33,120 --> 00:38:37,240 I got evicted because I couldn't pay the rent any more. 560 00:38:37,240 --> 00:38:38,640 I lost my car. 561 00:38:40,280 --> 00:38:43,080 I was four months to paying my car off... 562 00:38:44,240 --> 00:38:47,200 ..my very first car that I bought by myself. 563 00:38:47,200 --> 00:38:49,200 The car that repossessed. 564 00:38:54,280 --> 00:38:58,040 And I couldn't send Sean off to school. 565 00:38:58,040 --> 00:39:02,200 And, to this day, he'll say it didn't bother him, 566 00:39:02,200 --> 00:39:05,920 but I know it did because he kind of blamed me 567 00:39:05,920 --> 00:39:08,080 for not being able to pursue his career. 568 00:39:11,520 --> 00:39:12,520 Amen. Amen. 569 00:39:18,000 --> 00:39:22,400 And by 2007, you knew things were going downhill. 570 00:39:24,720 --> 00:39:30,200 And then our financial year was November 30th, 2007, 571 00:39:30,200 --> 00:39:33,480 and we had a record year, the best year ever at Lehman Brothers. 572 00:39:35,400 --> 00:39:37,760 And I couldn't believe it. 573 00:39:37,760 --> 00:39:38,920 I thought, um... 574 00:39:40,480 --> 00:39:42,040 ..things should be much worse. 575 00:39:55,880 --> 00:40:03,000 Lehman, in the spring of 2008, issued its very first losses 576 00:40:03,000 --> 00:40:05,360 that they'd ever incurred and they needed to have 577 00:40:05,360 --> 00:40:07,520 something positive to say to the market. 578 00:40:09,200 --> 00:40:14,360 The only way that Lehman could get rid of assets would be to sell them. 579 00:40:14,360 --> 00:40:18,760 The problem was that the assets they had no-one wanted to buy. 580 00:40:19,960 --> 00:40:24,080 So, what they did was they came up with a gimmick. 581 00:40:24,080 --> 00:40:26,640 It was called Repo 105. 582 00:40:30,640 --> 00:40:36,200 Repo 105 was a method of hiding how much you've borrowed 583 00:40:36,200 --> 00:40:39,480 because stockholders didn't want to see Lehman had borrowed 584 00:40:39,480 --> 00:40:42,680 as much as it had actually had, and rating agencies, 585 00:40:42,680 --> 00:40:46,720 for purpose of determining how much Lehman paid on its borrowings, 586 00:40:46,720 --> 00:40:49,760 didn't want to see that it had borrowed too much. 587 00:40:51,160 --> 00:40:54,800 It was a way of returning borrowed money for a few days 588 00:40:54,800 --> 00:40:56,680 and then taking it back again. 589 00:40:56,680 --> 00:40:59,280 It's saying, "We've reduced our balance sheet 590 00:40:59,280 --> 00:41:02,000 "because we sold all these bad mortgages." 591 00:41:02,000 --> 00:41:04,120 But, in fact, they'd sold nothing. 592 00:41:04,120 --> 00:41:05,880 And what it involved was 593 00:41:05,880 --> 00:41:10,440 transferring $50 billion worth of assets off of the balance sheet 594 00:41:10,440 --> 00:41:13,320 at the beginning or end of each quarter, 595 00:41:13,320 --> 00:41:16,160 just before the reporting would be made public, 596 00:41:16,160 --> 00:41:19,440 and, by doing so, reducing the balance sheet 597 00:41:19,440 --> 00:41:21,280 by taking $60 billion off it. 598 00:41:21,280 --> 00:41:26,600 Assets were transferred from the United States subsidiary 599 00:41:26,600 --> 00:41:31,280 to the British subsidiary, engaging in repo transactions there, 600 00:41:31,280 --> 00:41:34,160 where the repos could then be considered as sales 601 00:41:34,160 --> 00:41:39,400 rather than simply loans, as they were in the United States. 602 00:41:39,400 --> 00:41:42,760 And, a few days after the quarter, the moneys were simply reported, 603 00:41:42,760 --> 00:41:46,200 returned back to the United States and put back on a balance sheet. 604 00:41:50,920 --> 00:41:55,640 And every time they did it, commentators, TV personalities 605 00:41:55,640 --> 00:41:57,760 would say, "Well, Lehman is getting better, look. 606 00:41:57,760 --> 00:41:59,960 "They've got rid of all of this these assets" - 607 00:41:59,960 --> 00:42:02,000 and the answer is they never had. 608 00:42:02,000 --> 00:42:05,160 To me, that was illegal. I'm not a lawyer, but that was wrong. 609 00:42:05,160 --> 00:42:08,840 That was not a grey area - it was red, with bells ringing. 610 00:42:15,160 --> 00:42:17,720 Lehman were hiding all kinds of compensation, OK? 611 00:42:17,720 --> 00:42:19,960 Certain stock awards were being hidden 612 00:42:19,960 --> 00:42:22,400 and not being disclosed to the public 613 00:42:22,400 --> 00:42:25,080 because we had found this loophole then. 614 00:42:26,440 --> 00:42:27,880 But then the rules changed. 615 00:42:27,880 --> 00:42:32,160 At the end of 2006, the rules now made it very plain. 616 00:42:32,160 --> 00:42:34,160 All of it must be out there, in front... 617 00:42:35,320 --> 00:42:36,880 ..and I couldn't wait to see it. 618 00:42:38,600 --> 00:42:41,400 When finally the booklet, it's called a proxy statement, 619 00:42:41,400 --> 00:42:45,600 containing this compensation information, came out in March 2008, 620 00:42:45,600 --> 00:42:47,400 so I had already been away for two years. 621 00:42:47,400 --> 00:42:49,560 And I opened it up and I'm like, 622 00:42:49,560 --> 00:42:52,160 "Where is it? Where did it go? They didn't put it in there!" 623 00:42:52,160 --> 00:42:53,720 They didn't follow the new rules. 624 00:42:53,720 --> 00:42:55,920 It was stunning. It was amazing to me. 625 00:43:00,080 --> 00:43:04,800 He was holding 409 million and they disclosed 146 million. 626 00:43:04,800 --> 00:43:08,560 They hid $260 million worth of stock awards - 627 00:43:08,560 --> 00:43:10,080 that's how big it had gotten. 628 00:43:17,080 --> 00:43:21,360 And so I brought that to the SEC in April of 2008. 629 00:43:21,360 --> 00:43:25,520 The Securities and Exchange Commission is the regulator. 630 00:43:25,520 --> 00:43:27,840 It's like the police of Wall Street. 631 00:43:27,840 --> 00:43:30,920 So, I gave them all this information that said, "Hey, 632 00:43:30,920 --> 00:43:33,560 "the Lehman executives have been lying 633 00:43:33,560 --> 00:43:35,960 "about their compensation for years. 634 00:43:37,760 --> 00:43:40,840 "Here is the hidden stuff, here is the value today, 635 00:43:40,840 --> 00:43:42,960 "and they completely ignored me." 636 00:43:45,400 --> 00:43:46,640 Just silence. 637 00:43:48,720 --> 00:43:50,240 I'm still waiting. 638 00:43:59,040 --> 00:44:01,160 And I thought, "What can I do? What can I do?" 639 00:44:01,160 --> 00:44:04,960 I didn't really have much faith in the SEC 640 00:44:04,960 --> 00:44:08,320 and then I remembered this code of ethics. 641 00:44:10,480 --> 00:44:13,160 The code of ethics was telling me I've got to write it a letter 642 00:44:13,160 --> 00:44:15,880 because you know something and it is your duty. 643 00:44:15,880 --> 00:44:18,520 So, I sat down on Sunday afternoon with my computer 644 00:44:18,520 --> 00:44:20,360 and I wrote out the letter. 645 00:44:23,520 --> 00:44:27,640 "During my tenure with the firm, I've been a loyal and dedicated 646 00:44:27,640 --> 00:44:31,960 "employee and always have acted in the firm's best interests. 647 00:44:34,480 --> 00:44:38,120 "I have become aware of certain conduct and practises, however, 648 00:44:38,120 --> 00:44:41,640 "that I feel compelled to bring to your attention. 649 00:44:44,240 --> 00:44:48,160 "The firm has tens of billions of dollars of unsubstantiated balances, 650 00:44:48,160 --> 00:44:52,760 "which may or may not be bad or non-performing assets, 651 00:44:52,760 --> 00:44:54,160 "or real liabilities. 652 00:44:55,560 --> 00:44:58,040 "Very truly yours, Matthew Lee." 653 00:45:00,160 --> 00:45:05,760 We had this individual who wrote a letter complaining that, in fact, 654 00:45:05,760 --> 00:45:09,600 Lehman Brothers was making their books look better 655 00:45:09,600 --> 00:45:11,000 than what they were. 656 00:45:11,000 --> 00:45:14,640 So, I sent two young lawyers from general, very young lawyers, 657 00:45:14,640 --> 00:45:17,040 out to interview this person, and they came back 658 00:45:17,040 --> 00:45:19,160 and they said, "We think he's telling the truth." 659 00:45:19,160 --> 00:45:22,800 And I said, "I just don't... I can't believe Lehman would do something 660 00:45:22,800 --> 00:45:24,600 "like he's describing the letter." 661 00:45:24,600 --> 00:45:27,480 And then, finally, they came in with a series of e-mails, 662 00:45:27,480 --> 00:45:32,360 which involved some of the senior people describing this process as, 663 00:45:32,360 --> 00:45:35,400 you know, a gimmick, a drug we are on. 664 00:45:35,400 --> 00:45:37,200 You know, all those sort of things. 665 00:45:37,200 --> 00:45:40,200 And I realised that, in fact, what he had been saying was true. 666 00:45:55,840 --> 00:45:58,240 I was sitting in my office, I had a round table in my office, 667 00:45:58,240 --> 00:46:01,600 and there were about five people and we were on the phone to Brazil, 668 00:46:01,600 --> 00:46:05,720 and my phone went and I saw it was my boss. 669 00:46:05,720 --> 00:46:08,040 So, I swivel my chair and I picked up. 670 00:46:08,040 --> 00:46:11,200 I said, "Look, I'm in a meeting. We're discussing this." 671 00:46:11,200 --> 00:46:13,320 And he said, "Come right away." 672 00:46:13,320 --> 00:46:14,720 So, I had to get up. 673 00:46:14,720 --> 00:46:17,640 And I went down to his office and he just said, "You're fired." 674 00:46:22,720 --> 00:46:24,000 Good evening, everybody. 675 00:46:24,000 --> 00:46:27,680 The worst financial crisis in decades today sent 676 00:46:27,680 --> 00:46:30,280 political and economic shock waves throughout the country. 677 00:46:30,280 --> 00:46:33,480 Lehman Brothers, one of the oldest institutions of its kind, 678 00:46:33,480 --> 00:46:37,160 filed the largest bankruptcy in US history. 679 00:46:37,160 --> 00:46:41,240 New York investment bankers, once called the Masters of the Universe, 680 00:46:41,240 --> 00:46:43,280 were sent packing, humiliated. 681 00:46:46,400 --> 00:46:49,560 I never for a minute thought that Lehman would go bankrupt 682 00:46:49,560 --> 00:46:54,200 and, when it did, I was as amazed as anybody else was. 683 00:46:54,200 --> 00:46:57,160 They may not have been doing the loans like I was in operation, 684 00:46:57,160 --> 00:46:59,320 probably in another aspect of Lehman, 685 00:46:59,320 --> 00:47:04,280 but, because of their actions, these big people of Wall Street, 686 00:47:04,280 --> 00:47:07,920 their actions, you affected so many people's lives. 687 00:47:11,920 --> 00:47:14,880 And, as financial market convulsions raced around the world 688 00:47:14,880 --> 00:47:16,000 like a tsunami... 689 00:47:17,600 --> 00:47:20,240 Markets were sinking around the world, dramatically. 690 00:47:20,240 --> 00:47:21,600 Take a look at this. 691 00:47:21,600 --> 00:47:23,600 Nothing like this has ever happened before. 692 00:47:23,600 --> 00:47:25,640 The United States, Canada, the United Kingdom, 693 00:47:25,640 --> 00:47:28,640 Sweden, Switzerland, European Central Bank, even China. 694 00:47:28,640 --> 00:47:31,840 It made me feel like is that they're just running. 695 00:47:31,840 --> 00:47:34,560 They're just... They've taken all the money they want. 696 00:47:34,560 --> 00:47:37,280 They've drained everything they wanted to drain 697 00:47:37,280 --> 00:47:39,920 out of that company, a handful of people, 698 00:47:39,920 --> 00:47:43,200 and left all the other people there to figure out 699 00:47:43,200 --> 00:47:46,080 what they were going to do with the rest of their lives. 700 00:47:46,080 --> 00:47:50,240 Lehman Brothers' former CEO, Richard Fuld, is living pretty. 701 00:47:50,240 --> 00:47:52,920 A multi-million dollar estate in Florida. 702 00:47:52,920 --> 00:47:55,800 A $21 million apartment on Park Avenue. 703 00:47:55,800 --> 00:47:58,760 Another lavish estate in Greenwich, Connecticut. 704 00:47:58,760 --> 00:48:00,800 But now he's on the hot seat. 705 00:48:00,800 --> 00:48:03,600 If you haven't discovered your role, you're the villain today. 706 00:48:03,600 --> 00:48:08,000 Your company is now bankrupt, our economy is in a state of crisis, 707 00:48:08,000 --> 00:48:10,320 but you get to keep $480 million. 708 00:48:11,600 --> 00:48:14,800 I have a very basic question for you - is this fair? 709 00:48:19,520 --> 00:48:21,360 Did you mislead your investors? 710 00:48:21,360 --> 00:48:23,440 And I remind you, sir, you're under oath. 711 00:48:24,800 --> 00:48:28,480 No, sir, we did not mislead our investors. 712 00:48:34,520 --> 00:48:37,000 When we started interviewing the witnesses, 713 00:48:37,000 --> 00:48:39,640 what surprised me the most was everyone wanted to talk. 714 00:48:39,640 --> 00:48:41,640 And you know what they wanted to say? 715 00:48:41,640 --> 00:48:43,920 They wanted to say, "It wasn't me." 716 00:48:46,200 --> 00:48:51,800 I spoke with Dick Fuld for maybe up to 15, 18 hours 717 00:48:51,800 --> 00:48:55,760 and he answered every question I put to him and volunteered information 718 00:48:55,760 --> 00:48:57,480 every step along the way. 719 00:48:57,480 --> 00:49:00,360 And his position was the position of everybody else 720 00:49:00,360 --> 00:49:02,200 that we interviewed - it wasn't him. 721 00:49:02,200 --> 00:49:03,760 He did not cause the disaster. 722 00:49:08,040 --> 00:49:12,480 I asked him whether or not he was aware of the views 723 00:49:12,480 --> 00:49:15,240 of some individuals within the corporation 724 00:49:15,240 --> 00:49:17,280 that the risks were too concentrated 725 00:49:17,280 --> 00:49:19,480 and that they had exceeded risk limits - 726 00:49:19,480 --> 00:49:22,320 and he made clear he was. 727 00:49:22,320 --> 00:49:26,600 I asked him why he didn't rely on that in making his judgment 728 00:49:26,600 --> 00:49:29,200 and he said, "Do you think I'm foolish?" 729 00:49:30,400 --> 00:49:33,200 I mean, no living, breathing, human being lost more money 730 00:49:33,200 --> 00:49:35,560 than Dick Fuld lost. 731 00:49:35,560 --> 00:49:38,280 And he pointed out to me, quite accurately, 732 00:49:38,280 --> 00:49:42,640 none of those individuals had made billions trading stocks, bonds 733 00:49:42,640 --> 00:49:44,400 and other securities. 734 00:49:44,400 --> 00:49:48,120 None of them had headed major corporations in the financial area 735 00:49:48,120 --> 00:49:49,760 and brought them to the success 736 00:49:49,760 --> 00:49:51,760 that he had brought to Lehman Brothers. 737 00:49:53,480 --> 00:49:55,520 What led to the '08 crisis? 738 00:49:57,840 --> 00:50:02,680 First, was the build up of the US bull market mentality. 739 00:50:02,680 --> 00:50:07,000 Now, I'm going to try to run through these quickly. 740 00:50:07,000 --> 00:50:10,040 It's not just one single thing. 741 00:50:10,040 --> 00:50:11,960 It's all these things taken together. 742 00:50:13,560 --> 00:50:16,720 I refer to it as the perfect storm. 743 00:50:16,720 --> 00:50:19,000 But it starts with the government - 744 00:50:19,000 --> 00:50:21,600 pushed for non-qualified homeownership. 745 00:50:21,600 --> 00:50:25,760 The government clearly had the view they wanted everybody to be able 746 00:50:25,760 --> 00:50:29,240 to fulfil their view of the American dream. 747 00:50:31,680 --> 00:50:34,320 The actual documents we reviewed probably was in the range 748 00:50:34,320 --> 00:50:38,080 of 30 million documents during that period of time. 749 00:50:38,080 --> 00:50:42,360 What we found was that both the Securities and Exchange Commission 750 00:50:42,360 --> 00:50:46,040 and the Federal Reserve Bank had put personnel on premises 751 00:50:46,040 --> 00:50:47,600 with Lehman Brothers. 752 00:50:53,040 --> 00:50:55,680 Lehman Brothers provided every single document 753 00:50:55,680 --> 00:50:57,520 the regulators asked for. 754 00:51:02,160 --> 00:51:05,760 The SEC, as well as the Federal government, 755 00:51:05,760 --> 00:51:09,000 knew that risk exceedances were taking place 756 00:51:09,000 --> 00:51:10,800 as they were occurring. 757 00:51:10,800 --> 00:51:14,360 They saw the documents and the materials, which reflected that, 758 00:51:14,360 --> 00:51:16,240 and yet nothing was done. 759 00:51:16,240 --> 00:51:17,680 Why? 760 00:51:19,520 --> 00:51:22,360 The Securities and Exchange Commission did not understand 761 00:51:22,360 --> 00:51:23,600 what they were looking at. 762 00:51:23,600 --> 00:51:25,840 They did not understand the documents 763 00:51:25,840 --> 00:51:28,240 and the impact of these documents. 764 00:51:30,160 --> 00:51:33,520 And then the very day that one of the SEC lawyers finally looked 765 00:51:33,520 --> 00:51:37,640 at what they had and he wrote an e-mail, which was spectacular, 766 00:51:37,640 --> 00:51:39,880 because what it says is, in essence, 767 00:51:39,880 --> 00:51:42,720 "Oh, my God, look at this. This could be a problem." 768 00:51:42,720 --> 00:51:44,040 And, indeed, it was. 769 00:51:44,040 --> 00:51:46,520 24 hours later, they were in bankruptcy. 770 00:51:46,520 --> 00:51:49,560 The SEC does not work properly and it hasn't in a long time. 771 00:51:49,560 --> 00:51:53,240 The major problem is the top people are brought in 772 00:51:53,240 --> 00:51:54,960 with every new president. 773 00:51:54,960 --> 00:51:59,000 They are not people who have worked their whole lives in this area. 774 00:51:59,000 --> 00:52:01,040 They normally come from Wall Street. 775 00:52:01,040 --> 00:52:05,080 They are defending banks who are accused of bad behaviour one day, 776 00:52:05,080 --> 00:52:08,840 and then a new president is elected and the president picks two friends 777 00:52:08,840 --> 00:52:10,840 and he puts them into the SEC 778 00:52:10,840 --> 00:52:14,440 and other friends into the Department of Justice, 779 00:52:14,440 --> 00:52:17,680 and these become our top cops, the top police. 780 00:52:19,000 --> 00:52:23,280 Well, now, instead of prosperity trickling down, 781 00:52:23,280 --> 00:52:27,360 the pain has trickled up from the struggles of hardworking Americans 782 00:52:27,360 --> 00:52:31,720 on Main Street to the largest firms on Wall Street. 783 00:52:31,720 --> 00:52:33,640 This country cannot afford 784 00:52:33,640 --> 00:52:36,680 four more years of this failed philosophy. 785 00:52:38,760 --> 00:52:41,560 In the beginning of 2009, Obama was elected 786 00:52:41,560 --> 00:52:45,240 and so he brought in his new people at the SEC. 787 00:52:45,240 --> 00:52:48,600 You have a director, the boss, the top boss, 788 00:52:48,600 --> 00:52:50,520 the CEO of the SEC, if you will. 789 00:52:50,520 --> 00:52:53,240 And then there is something called the director of enforcement, 790 00:52:53,240 --> 00:52:55,800 and so he's in charge of doing the investigations. 791 00:52:59,120 --> 00:53:02,240 The guy that they put in was a lawyer from Deutsche Bank 792 00:53:02,240 --> 00:53:04,200 and Deutsche Bank is one of the biggest banks 793 00:53:04,200 --> 00:53:06,280 involved in the crisis, OK? 794 00:53:06,280 --> 00:53:09,080 And, furthermore, Deutsche Bank is one of the banks 795 00:53:09,080 --> 00:53:11,800 that was most involved with Lehman Brothers. 796 00:53:11,800 --> 00:53:15,080 And then we expect him, as the director of enforcement at the SEC, 797 00:53:15,080 --> 00:53:17,520 to now go and investigate Repo 105. 798 00:53:17,520 --> 00:53:20,080 This is never going to happen, never going to happen. 799 00:53:20,080 --> 00:53:22,120 And close the book. 800 00:53:22,120 --> 00:53:24,480 No charges on Repo 105 against Lehman. 801 00:53:24,480 --> 00:53:26,960 No charges on anything against Lehman Brothers. 802 00:53:32,240 --> 00:53:35,400 As time went on and we came out of the recession, 803 00:53:35,400 --> 00:53:39,240 they were beginning to have some money, and so we were contacted 804 00:53:39,240 --> 00:53:41,120 by the lawyers for Lehman Brothers 805 00:53:41,120 --> 00:53:43,320 and they said they wanted to settle our case. 806 00:53:47,080 --> 00:53:49,880 So, we had high expectations, finally, 807 00:53:49,880 --> 00:53:53,440 that we were going to get justice and get a fair settlement for them. 808 00:53:53,440 --> 00:53:55,440 It didn't turn out that way. 809 00:53:57,200 --> 00:53:59,880 We have been fighting this case in bankruptcy 810 00:53:59,880 --> 00:54:02,520 for all these years since 2008 811 00:54:02,520 --> 00:54:06,200 and Lehman keeps saying, "Well, there's another claim out there 812 00:54:06,200 --> 00:54:08,320 "that's going to eat up all your cases." 813 00:54:08,320 --> 00:54:11,360 Wells Fargo, USB and other banks that claimed that 814 00:54:11,360 --> 00:54:15,240 there was mortgage fraud by Lehman, which, of course, there was, 815 00:54:15,240 --> 00:54:19,280 and that they're talking about paying $2 billion 816 00:54:19,280 --> 00:54:22,600 to all these big banks who claim that they lost money 817 00:54:22,600 --> 00:54:24,320 on this mortgage fraud. 818 00:54:24,320 --> 00:54:27,000 They don't want to pay us because it's going to make news. 819 00:54:27,000 --> 00:54:31,240 And, if they are so willing to bale out the banks 820 00:54:31,240 --> 00:54:35,280 and protect all of the crooks that stole so many people, 821 00:54:35,280 --> 00:54:37,320 that they still haven't recovered. 822 00:54:37,320 --> 00:54:43,120 And I see it often that many homeowners were displaced. 823 00:54:43,120 --> 00:54:45,360 Their children were yanked out of the schools 824 00:54:45,360 --> 00:54:47,960 that they had grown accustomed to. 825 00:54:47,960 --> 00:54:50,840 They were in their car or in shelters 826 00:54:50,840 --> 00:54:54,400 while the biggies get their money, got bailed out, 827 00:54:54,400 --> 00:54:57,240 got parachutes, millions of dollars. 828 00:55:02,400 --> 00:55:05,400 What Lehman did here was they looked for an edge 829 00:55:05,400 --> 00:55:07,720 and there are people out there who are still doing that, 830 00:55:07,720 --> 00:55:09,640 and the question is, have we regulated them 831 00:55:09,640 --> 00:55:13,480 so that they're, you know, in their headlong search 832 00:55:13,480 --> 00:55:14,960 for that big profit, 833 00:55:14,960 --> 00:55:17,880 that they don't take the rest of the economy down with them? 834 00:55:26,520 --> 00:55:30,920 These guys, Lehman Brothers, it's right there. 835 00:55:30,920 --> 00:55:33,760 It's right there because they changed who I was. 836 00:55:33,760 --> 00:55:37,280 They didn't get my soul, but they changed who I was. 837 00:55:37,280 --> 00:55:40,960 There is no money that's going to compensate me, ever. 838 00:55:40,960 --> 00:55:43,400 What would compensate me, what would make me feel good, 839 00:55:43,400 --> 00:55:46,480 is if the people from the top were punished... 840 00:55:47,960 --> 00:55:49,640 ..and that's never going to happen. 841 00:56:08,480 --> 00:56:11,600 I have no regrets about writing that letter. 842 00:56:13,720 --> 00:56:15,200 Would I do the same thing? 843 00:56:15,200 --> 00:56:17,560 I wish I could have done more, 844 00:56:17,560 --> 00:56:19,240 but I did what I did. 845 00:56:28,760 --> 00:56:30,880 Whistle-blowers get crushed, swept under the rug. 846 00:56:30,880 --> 00:56:32,200 Forget about them. 847 00:56:33,200 --> 00:56:34,760 Let's move on. 848 00:56:39,840 --> 00:56:41,480 I'll never go back to New York. 849 00:56:43,840 --> 00:56:46,760 I'm going to keep going on my motorcycle... 850 00:56:47,920 --> 00:56:49,640 ..for as long as I can. 851 00:58:06,360 --> 00:58:10,280 We did not mislead our investors 852 00:58:10,280 --> 00:58:14,840 and, to the best of my ability, at the time, 853 00:58:14,840 --> 00:58:18,200 given the information that I had, 854 00:58:18,200 --> 00:58:22,840 we made disclosures that we fully believed were accurate. 855 00:58:22,840 --> 00:58:25,680 Live from the financial capital of the world... 856 00:58:51,880 --> 00:58:54,880 This is, truly, a great day for America 857 00:58:54,880 --> 00:58:58,560 and a great day for American workers and small businesses 858 00:58:58,560 --> 00:59:01,320 all throughout the nation. 859 00:59:01,320 --> 00:59:05,400 The legislation I'm signing today rolls back the crippling Dodd-Frank 860 00:59:05,400 --> 00:59:08,480 regulations that are crushing community banks 861 00:59:08,480 --> 00:59:10,560 and credit unions nationwide. 862 00:59:10,560 --> 00:59:12,160 They were in such trouble. 863 00:59:12,160 --> 00:59:15,000 They should be regulated the same way, 864 00:59:15,000 --> 00:59:17,960 with proviso for safety, 865 00:59:17,960 --> 00:59:21,160 as in the past, when they were vibrant and strong. 866 00:59:21,160 --> 00:59:24,480 By liberating small banks from excessive bureaucracy, 867 00:59:24,480 --> 00:59:27,560 we are unleashing the economic potential of our people.