—Bethany McLean<\/p>\n
(By Jack Bigelow) Bethany McLean is one of the foremost business journalists of our time. She uncovered the story of Enron, then covered it by writing (with Peter Elkind), The Smartest Guys in the Room<\/em>. She explores (with Joe Nocera) the greed and sleaze of the financial crisis in All The Devils Are Here<\/em>, and in her most recent book, On Shaky Ground<\/em>, she takes us behind the scenes in the sordid story of Fannie Mae and Freddie Mac. Ms. McLean is currently a Contributing Editor to Vanity Fair<\/em>; earlier she was a Contributing Editor and columnist at Fortune Magazine<\/em> and a contributor to Slate<\/em>. Her books are thoroughly researched, giving us engaging detail that verifies the integrity of her account of what happened and when. The Behavioral Forensics Group<\/em> was privileged to interview her, and will share that interview in this and a subsequent posting. BEHAVIORAL FORENSICS GROUP<\/span><\/b><\/p>\n \u00a0<\/span><\/b><\/p>\n The\u00a0Behavioral Forensics Group<\/i>\u00a0is a team of professionals with vast experience in detecting fraud, understanding why it occurs, and in recommending steps to mitigate fraud incidence within the corporate workplace, particularly within higher-level (and therefore more costly to the enterprise) executives.\u00a0\u00a0The fields of investigation, organizational psychiatry, accounting and behavioral forensics, and law enforcement are represented within the\u00a0Behavioral Forensics Group<\/i>.\u00a0\u00a0Acting in synergy to help organizations prevent, find, and\/or reduce fraud, BFG is a premier, pioneering practice in this field.<\/span><\/p>\n We are blogging at this blog site:\u00a0<\/span>http:\/\/www.bringingfreudtofraud.com<\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":" —Bethany McLean (By Jack Bigelow) Bethany McLean is one of the foremost business journalists of our time. She uncovered the story of Enron, then covered it by writing (with Peter Elkind), The Smartest Guys in the Room. She explores (with Joe Nocera) the greed and sleaze of the financial crisis in All The Devils Are … Continue reading \u201cAny Citizen Should Be Horrified By This\u201d<\/span>
\nYou\u2019ve said that you find implicit corruption more interesting than explicit. What do you mean by \u201cimplicit\u201d and \u201cexplicit\u201d and why do you find the implicit corruption more interesting<\/strong>?
\nExplicit corruption, I think of somebody slipping somebody a bag of cash because the briber wants them to do something. With implicit corruption, I think of people whose self-interest is all bound up in the same thing, and who think the same way without anybody having to bribe anybody else. So one example I might use would be regulation of big banks leading up to the financial crisis. The Federal Reserve and all the regulators thought like the banks—thought that the banks would never do things that were not in the banks\u2019 economic self-interest. They were smart, they were capable, they had good management systems in place. Maybe \u201ccorruption\u201d is too strong a word to use in that case, but I think of that as a sort of implicit corruption because it\u2019s not as if the banks were paying off the regulators. Everybody looks at the revolving door and think that\u2019s the problem. But it\u2019s not; the revolving door can actually be quite helpful. It\u2019s just that they all thought the same way.
\nWould you almost say that it\u2019s subconscious?<\/strong>
\nYes, I would also say that it\u2019s subconscious. It\u2019s just everybody\u2019s belief system is the same. Some people might point at the bailout in 2008 as corruption—the group of people who all thought like the banks, the banks had to be saved. I\u2019m not sure I would have it any other way—I\u2019m not sure that was the wrong outcome—but there were people who all thought the same way.
\nI noticed that in your books, you avoid expressing moral judgments.<\/strong>
\nI try to lay out the facts and let the people who read them make their own decisions.
\nAt the end of \u201cSmartest Guys,\u201d there was no moral conclusion, but there were certain areas in there where it was clear that you were totally stunned and astonished by what you had unearthed.<\/strong>
\nYes. And that\u2019s what I try to do, to lay things out. I like facts, and so I try to lay things out, but any narrative has implicit judgments, right? But I try to lay out facts and let people think for themselves.
\nThe U.S. government is taking the profits of Freddie Mac and Fannie Mae.<\/strong>
\nYes.
\nAnd it\u2019s not taking the losses.<\/strong>
\nYes.
\nShares were sold. Isn\u2019t that a type of fraud?<\/strong>
\nI think it is a fraud. It\u2019s interesting because most people can\u2019t get past the fact that hedge funds and wealthy investors stand to make money on this. So, they automatically side with the government without thinking through the issue. The government structured the bailout in a specific way with specific laws and then when they realized that a certain group of people were going to make money, they said, \u201cOh, no, no. We\u2019re going to change the rules.\u201d And maybe because they needed the profits from Freddie Mac and Fannie Mae too. But now, their documents have just come out, within the last month or so that show very clearly that the government lied, that they knew full well that these two companies were about to turn immensely profitable. They refer to them as the \u201cGolden Years of GSE (Government Sponsored Enterprises) profitability\u201d that were coming.
\nIt also bothers me quite a bit that the government lied about its reasons for changing the terms of the Fannie and Freddie bailout by saying that they were going into a death spiral, where they weren\u2019t going to be able to pay their dividends, that they had no idea that the two companies were going to be profitable—that is a lie. I think any citizen should be horrified by this. The Government\u2019s feet need to be held to the fire on this and I think it\u2019s an overwhelming hatred and ignorance of Fannie and Freddie that makes people not just up in arms about this. To me, it\u2019s just an enormous scandal. But people don\u2019t care.
\nWouldn\u2019t you say the government is actually violating its own SEC rules?<\/strong>
\nI guess maybe they are in the sense that Fannie and Freddie\u2019s SEC filings never warned that the Government would treat these two companies differently than other companies. That the government might suddenly change the rules on them. I suppose, in a way\u2026.
\nI guess what I\u2019m getting at is they are represented as companies that can make a profit\u2026<\/strong>
\nThat\u2019s true too\u2026.they can\u2019t—it\u2019s all being taken away. But if that\u2019s true, there should be a line that says [so].
\n(We will bring you the remainder of this interview in a subsequent posting.)<\/p>\n