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- It was July 1st, 2009.

I was living in Hamburg Germany at the time.

I was in my flat with my wife that I had just married.

Two men came to the door.

I did not recognize them, did not answer the door.

Minutes later, I left the building, walked to the car,

and two unidentified Deutsche police officers

showed up in front of me and in German

basically identified themselves and said they were there,

Interpol, FBI warrant, come with us.

- That was not at all what he was expecting obviously.

He looked at his wife and blew her a kiss

and was pretty sure he would never see her again.

- That's a feeling of total fear because you have

the total unknown of what the future holds.

- [David] Phil Baker was taken on a plane to Chicago

which is where he had been criminally charged

and entered the United States justice system

which is a really scary place to be.

- I was facing charges of absconding

with $460 million from the FBI, for fraud.

My name is Philip James Baker

and I'm the former managing partner

of a billion dollar investment fund

that collapsed during the financial crisis.

My story is a rise and fall to redemption story.

I've been rich, I've been on the top,

I've been behind bars.

I know what it is to be called a financial criminal.

I admit my guilt.

But now I'm free and I want to speak out

because of what I saw,

because I've been there.

I can tell that if we do nothing,

everything can happen again.

They had no consequence.

The titans of Wall Street basically faced nothing.

For my life, I went to prison.

Some people would say, you know what,

you did wrong, it's fair, it's just.

The argument could be I agree.

But what about the people and the titans of Wall Street?

I was born here in Toronto, Canada in August of 1965.

- Philip started in our home downstairs.

He didn't tell us a lot about it

other than there was a partnership

and they were, when he started to get investors etc., etc.

- The business started in the basement of my parents

and this company grew to be a billion dollar company.

Lake Shore was a hedge fund firm.

- Philip Baker set up a hedge fund

that was designed to trade in commodities.

So, prices of oil, coal, things like that.

He was a marketer, he was the client guy.

He was the one who would go out

to wealthy individuals or institutions

and get them to put their money with Lake Shore.

- Our clients were global investment

banks from around the world.

Goldman Sachs, Royal Bank of Canada,

Canadian Imperial Bank of Commerce,

HSBC, Bank of Nova Scotia, Credit Suisse, UBS.

So, that's quite a list.

We operated in close to 40

different countries around the world,

Brazil, Peru, Panama, Colombia, Japan, Taiwan,

Hong Kong, obviously throughout Europe.

- [David] He was for a time

a very successful hedge fund manager.

He set up offices in Switzerland and London,

in the United States and Canada.

- The marketing and business development

was based in London so I was based in Mayfair

which is the hedge fund capital of the world.

- He was living a very nice life for himself.

He was always trying to prove himself to people

who doubted that he had the capacity to succeed.

So, he built this life where he had a chauffeur-driven

luxury car that would take him all over London.

He had a beautiful apartment on

the banks of the River Thames.

- The life I lived was a life of luxury,

having a butler, not worried about expenses of anything,

everything I ever wanted I could have.

I sponsored an ocean racing team competing against

Hugo Boss, UBS, and that was just for fun.

- [David] He was not a sailor, so that meant he had

to basically pay his way onto these elite sailing crews

and would do these very competitive races

I believe from New Zealand to Australia.

- We were making millions per month,

offshore accounts, not paying taxes.

I was living the dream.

Weren't worried about anything but in my

particular instance I had something to worry about.

- All sorts of investors all over the world

were very eager to put their money with him

because he was generating very good returns

and that's what investors want.

He turned out to be doing something else

which was he was misappropriating the investors' money

and the investors thought they

were achieving these excellent returns.

In reality, they were not.

Philip Baker and his partners were

essentially making it up, they were lying.

(electronic music)

The second thing,

and in some ways the more damaging issue,

is that as they sought to recruit

additional investors, new investors,

which were essential because they needed

to paper over the money that they'd already lost,

they were in their prospectuses,

in the documents they provided to investors

to show investors how well they'd been doing,

they were lying there, too,

and they were saying instead of having

lost 50% of their assets in the first year,

they were saying, oh, look at us, we've got

this long track record of very impressive returns.

They were lying not only about the returns

but they were lying about the longevity of the fund.

So, they were saying they had, I believe,

a 14 year track record which just wasn't true,

that they had not been trading for 14 years.

- Trading results were falsely reported

and hence that was fraud, you can't do that.

One penny not reported properly is wrong.

- The victims were everyone who had invested with him.

Investors who lost their money initially,

investors who put their money

in after the initial fraud had occurred.

And so, there were hundreds of millions

of dollars that vanished as a result of this.

- I've been asked why did I break the law?

I wanted to protect what I had,

money, family, power.

Everybody does that, don't they?

- [Interviewer] What do you mean?

- How many people say no, I don't want the power,

I don't want the money and walk away?

- We had to accept that he had made a terrible mistake

and there's a penalty for making that mistake

and that'll be something he'll have

to live with the rest of his life.

- [Interviewer] Would you say that you

are a white collar criminal?

- Yes.

It's very interesting when you see your name,

Philip James Baker versus the United States of America.

It's overwhelming.

Then you face the Assistant U.S. Attorney

as he's looking you in the eye.

And when you go to that circumstance,

there are no words that really can describe

the depths of the loneliness you feel at that moment.

I ultimately completed a plea deal

with the United States government.

I was sentenced to 20 years for wire fraud.

There's no way to really describe

the process and the life of when you're

held in a maximum security pre-trial

federal institution in the United States.

You have gangs, you have gangs amongst the gangs,

you have violent offenders.

There's no separation between a white collar criminal

and very hardened criminals.

They're all put together,

there is no explanation for the world

that you are left to enter.

It's about survival.

The days just come and they go.

It becomes the routine of doing nothing.

You have no hope, you have absolutely no future.

And you have no reason to continue.

No reason to look forward.

- Philip Baker's a criminal.

Is he the type of financial mastermind

that caused the financial crisis?

Absolutely not.

This a guy who was not very sophisticated about his crime,

was not very malicious about his crime,

but he admitted that he committed a crime.

This is a classic example of where

the Justice Department takes a shortcut.

They want to generate publicity

for themselves as going after financial crooks

and everyone wants them to do that.

And yet time and time again,

the people that they're going

after are these little minnows.

They're not going after the big fish,

they're not going after the bankers for the most part,

they're certainly not going after the senior executives

at the banks or other big financial institutions.

They were the decision makers

leading up to the financial crisis.

- 10 years after the financial crisis, except Iceland,

how many white collar criminals are behind bars?

Kareem Serageldin from Credit Suisse.

He's the only banker of Wall Street

to go to jail related to the crisis.

He lost just a few million.

Not really a big fish, not a true Al Capone.

Could you tell me only one big bank, top executive name?

Here are the number of people convicted of crimes linked

to the crisis in the U.S. according to the Financial Times.

324 people from Main Street.

Zero Wall Street chief executives have been to prison.

Even though there is today absolutely no doubt

that Wall Street executives and politicians

were complicit in creating the crisis.

This is the story of how massive global

banks made billions by packaging

toxic mortgage loans and financial products

and sold them all around the world.

The American politicians pulled the trigger.

It all started with the political philosophical

grand ambition of allowing everyone to own a home.

- Our government is supporting homeownership

because it is good for America,

it is good for our families,

it is good for our economy.

- Part of the American dream that was pushed

by all sorts of presidents, Clinton, Bush,

whatever, for years, was homeownership.

- Authorities kept interest rates very low

in order to make money, very easy to borrow.

Wall Street and politicians had agreed to work together.

Wall Street with the pursuit of profits,

and politicians with the pursuit of government

interference on economic growth

which could be turned into election

victories for years to come.

This was the beginning of the housing bubble.

- When the bubble's expanding, everybody is a winner.

Everybody is a genius.

The lenders make money,

the real estate development companies make money,

the construction workers make money,

everybody loves a bubble.

- [Philip] But this was a devil's deal

between politicians and Wall Street.

The setting to a perfect storm.

- What happens in a boom is lenders take more and more risk

and borrowers take more and more risk

because they both think things

are safer than they appear to be.

And one of the ways they persuade themselves

to take more risk is through financial innovations.

- Wall Street created the risky loans called subprime

to Americans who could ill afford to pay

the bank loans that they had just applied for.

The public were given access to zero, low-income,

and even no job loans.

- So if you wanted the absolute craziness,

it would be the NINJA loan.

So, NINJA stands for no income, no job, and no assets.

The idea is that you would lend money

to people that gave you no information

about whether they had any income,

whether they had any job,

or whether they had any assets.

It will allow you to grow enormously

'cause now you can loan in the U.S. context to tens

of millions of people that can't repay the loan.

How many people out there are there who can't get a loan?

Tens of millions of people in the United States.

Tens of millions of people in France in these circumstances.

This goes under the general category of predation.

In the United States,

the people that were targeted for the worst loans

were overwhelmingly a combination

of four demographic factors,

Blacks, Latinos, the elderly, and females.

That is incredibly immoral.

This is why almost everywhere in

the world these things are crimes.

(gentle music)

- These toxic loans became a gold rush

for the whole U.S. banking and financial industry.

All the major actors of Wall Street

wanted a piece of the subprime party.

Goldman Sachs, Lehman Brothers,

Morgan Stanley, Merrill Lynch,

Bear Stearns, J.P. Morgan, Citigroup and so on.

The frenzy extended itself when loans

were sought by the public by falsifying their

own financial situation on loan applications.

Therefore the public and banks

were complicit in committing bank fraud.

(gentle music)

- My name is Richard Bowen, I was Senior Vice President

and Business Chief Underwriter for Citigroup.

At the time Citigroup was the largest bank in the world.

It was my responsibility to make sure

that the $90 billion a year that we

were purchasing in mortgage loans that were

originated by other banks and mortgage companies,

these met our policy standards.

In early 2006, I discovered that over 60%

of these mortgages did not meet our guidelines.

They were by definition defective.

When I discovered this, and this was June of 2006,

silly me, I thought it was my job.

I started issuing warnings because I was supposed

to make sure that these met our policy guidelines.

And I sent email, I put it in my weekly report,

I made committee presentations.

I'm not a shy guy, I cornered people in the hallways,

at the water fountain.

And everyone said, yeah, yeah,

we need to fix that but nothing would happen.

And through 2006 and 2007,

the volumes kept increasing

and the rate of defective mortgages

increased from 60 to an excess of 80%.

80% of these mortgages that we were in turn

selling and giving our representations and warranties

that met our policy guidelines

did not meet our policy guidelines.

- [Interviewer] This is misrepresentation.

- That is true.

As a matter of fact, it was fraud.

- I've seen plenty of loan documents

with my own eyes that were falsified

and the borrowers still signed them as if they were correct.

- People who were typically hairdressers, gardeners,

and such reporting incomes of over $100,000 a year.

Now their actual incomes would be

in the range of about $16,000.

In those cases, their income is inflated by six times.

- You would have waiters in restaurants

showing that they made $150,000 a year.

I mean that clearly is out of line but nonetheless,

the loan type permitted that to happen.

- Richard Bowen and his staff very carefully,

very professionally, are documenting that these loans,

their reps and warranties are false.

But Citi is overwhelmingly turning

around and reselling these loans.

Citigroup didn't want to know

because if it looked at these places,

it couldn't possibly continue to use them.

- It was all about generating the revenue.

The people who worked on Wall Street conceived

of the idea of securitizing mortgages,

packaging mortgages up into securities,

they actually arranged to buy the mortgages,

they would package them up into securities,

they would file documents with

the Security Exchange Commission that they

had to be able to call them securities

and then they would sell them to investors all around

the world and all along the way they were making money.

It was almost like it was a perfect product that

anybody who touched a mortgage made money off of it.

- November the 2nd of 2007,

sitting at my kitchen table I put together an email.

And I sent the email to Robert Rubin

who the next day on Sunday at

the board meeting was named Chairman of the Board.

I also sent it to the Chief Risk Officer,

the Chief Financial Officer,

and the Chief Auditor.

I said, "Urgent, read immediately, financial issues."

I put that in all capital letters.

I called for an outside investigation.

I said come in here from the outside

and investigate what is going on here

because everybody here already knows.

And no one contacted me.

Throughout November, throughout December,

there was no contact, no one said a word.

I will tell you that at that particular point in time,

before I would even get in my car,

I was doing what they do in the movies,

I was looking underneath my car

and opening the hood and looking.

It was a very frightening time.

February the 6th, I received,

there was an email that went out

with regard to reorganization.

And in that reorganization I was

stripped of all my underwriting responsibilities.

That next week I was put on administrative leave

and told I'm not to come back to the bank.

Greed was definitely the driver on all of this,

as it is on most fraud, I'm told.

- Citigroup was not the only one.

A comparable level of fraudulent mortgage loans have

been seen in all of the big Wall Street banks.

Ignoring the risk of bankruptcy,

banks began to borrow a massive amount of money

to buy more and more mortgage loans

and package them into derivatives.

The top underwriter in the peak years

of 2005 and 2006 was Lehman Brothers at $106 billion.

- Lehman was one of the largest makers and sellers

of the absolute most toxic loans in the entire world.

Lehman Brothers was one of the largest fraud

vectors in the history of the world.

- My name is Anton Velukas.

I go by the name Tony.

In the year 2009, about three months

after the Lehman bankruptcy,

I was appointed by the federal court

in New York to act as an examiner.

I was independent of any of the parties.

And among the responsibilities the court

charged me and my team with was to determine

how and why Lehman went into bankruptcy.

And when you're talking about the Lehman bankruptcy

you are talking about the largest single bankruptcy

in the history of financial institutions.

Total amount of the bankruptcy $693 billion.

So, we told the story of what happened.

- [Philip] Lehman Brothers were the fourth largest global

investment bank in the world led by famous CEO Dick Fuld.

- Hi, my name is Dick Fuld, I'm the Chairman

and Chief Executive Officer of Lehman Brothers.

Now's a terrific time to be joining Lehman Brothers.

I've been here 30 years and I can't think

of a better time for you to take part in

the changes and opportunities that are going on here.

- [Interviewer] If I tell you Dick Fuld,

what will be the first thing that cross your mind?

- A person who was viewed as a lion on Wall Street.

I believe that in the year 2008,

the very year of the bankruptcy,

he was named by Forbes as one of

the top 10 executives in the country.

- They called him the gorilla

and I think they called him that for a reason,

he was brusk, boorish, take no prisoners kind of guy,

you know run through a wall for Lehman Brothers,

hyper competitive, hyper narcissistic.

- Squeeze some of those shorts, squeeze 'em hard.

Not that I want to hurt 'em.

Don't get that please, 'cause that's just not who I am.

I am soft, I'm lovable,

but what I really want to do is I want to reach in,

rip out their heart, and eat it before they die.

- The man who lost Lehman Brothers,

the man who presided over its decline and fall,

the man who could have done something

about it but chose not to,

the man who refused to see the writing on the wall,

the man who, you know, kicked off in many ways

what became the Great Recession.

- My name is Oliver Budde

and I was an in-house lawyer

at Lehman Brothers for eight years.

I discovered many things that were

at least unethical if not illegal

and eventually I decided to quit.

I was earning a lot of money.

But it was not enough for me to turn a blind eye

to all that was happening around me.

The tone coming from the top, Dick Fuld,

the guys around him were go for it, push it,

go beyond the limits.

The key at Lehman was to evaluate the risk and the reward

and nevermind the law that might be in between there.

If the reward is high enough and the risk is low enough,

we will do it and we will sort it out later.

This was a culture of risk and this was all about money.

- Lehman Brothers risk analysis program

was considered a model on Wall Street.

I mean it was brilliantly conceived of.

The problem was it was simply ignored.

You have to understand, you're talking about Dick Fuld.

Dick Fuld made his fortune at Lehman Brothers.

He was a billionaire.

So, if you say, well, I think he had it wrong.

He'd ask you, are you a billionaire?

Have you made a billion dollars trading?

I have.

And he had.

- In the years leading up to the crisis,

everything, the financial health of Lehman Brothers

could not have been better, at least on paper.

- [Philip] They expanded the use

of their toxic derivatives.

And the ratio of lending expanded.

In 2008, Lehman's was massively leveraged.

- Lehman Brothers had one of the highest leverage

ratios in American financial institutions.

A leverage ratio is a ratio of your debt to your equity,

another word for equity is capital.

Its ratio depending on the exact time was 30 to 40 to one.

In other words, for every dollar of supposed capital it had,

it had $30 to $40 in debt.

- Lehman became the focus of worldwide attention

because they were perceived as the next weakest link.

They were the next domino to fall.

- So, Lehman engaged in a scheme,

an accounting scheme to make it look better.

And what they did was what was called Repo 105s.

- This was something that Lehman used every quarter

to hide some of the borrowed money.

You see, Lehman would borrow money and they would

pledge securities that they had as collateral.

At the end it was $50 billion each quarter.

They would borrow $50 billion.

And they would give $50 billion in collateral.

But they would actually say that this was a sale,

this was not a pledge for a loan

but this was a sale of those assets for $50 billion.

And they would treat the $50 billion

not as debt but as cash that they just got.

And by doing that and using that

cash to pay down still other debt,

they could materially, significantly

move that leverage ratio down.

Then as soon as the quarter was over

and they had published their number,

they would undo that transaction and presto,

they would give back the money, take back the securities,

and again be leveraged just as high as they were before.

They did this only to fool the public and no other reason.

- The effect of that was in June they were able to show

that their leverage had been dropped dramatically.

And the Street said, wow, Lehman's doing okay.

- Our firm is strong today and we will emerge

from this cycle even stronger.

We've done it before and we will do it again.

- [Interviewer] So, they fudged the number?

- Yes, in my opinion, they absolutely fudged the numbers.

They engaged in the trend.

Even within their own emails they refer

to it as a drug they were on, a sham,

an accounting gimmick to make themselves look better.

So, they knew what they were doing.

- [Interviewer] So, they were hiding

information to the public?

- Yes, that was the opinion we reached in the report.

- [Interviewer] Isn't it against the law?

- Well, if you file a misleading statement

and you knowingly file a misleading statement,

and a judge concludes that you have done so or a jury does,

that is against the law, yes.

There was a basis by which such

a claim could be made, yes we did.

- [Interviewer] Including against Dick Fuld, the CEO?

- Yes, yes.

- [Interviewer] But nobody was arrested or charged for this?

- No, there were no arrests, there were no charge,

there was no jury trial, there was no civil case brought

in which the jury heard the case and then decided the case.

None of those things took place, no.

- Let me start by saying that I have

absolutely no recollection whatsoever

of hearing anything about or seeing documents related

to Repo 105 transactions while I was the CEO of Lehman.

- [Interviewer] Do you think it's possible

that Dick Fuld didn't know?

- No, of course not, of course not.

There were senior executives at Lehman

who were interviewed by Mr. Valukas and others

who said that yes, he did know.

That emails were sent to him that showed

the Repo 105 portion of the financials,

to show the effect of this.

And then Dick Fuld's answer was, well, they might have sent

me emails but I don't know how to work a computer.

I don't know how to open an attachment

that would have a spreadsheet to show this

so I never saw it, I was never aware.

This was historic.

- One more time,

Wall Street misrepresented its financial condition.

At the same time, millions were

spent in bonuses for traders.

This was a jackpot.

- The place to make money and

the most money was Wall Street.

- Bonuses reached levels that had never

been even approximated in the world.

- Millions of dollars a year,

it's like the greatest job you could ever imagine

getting without putting any of your own capital at risk.

(upbeat music)

You name it, beautiful apartment on Park Avenue, 5th Avenue,

beautiful house in the Hamptons,

beautiful art collection.

- Buy the house you want, have a nice vacation house,

have two or three cars, have a boat,

have whatever you wanted.

I mean once you're in the millions, there are no limits.

- They had excessive lifestyles,

they were willing to take risks to support that lifestyle.

There's a great bit of narcissism

and antisocial personality disorders

and with this they might feel like

they have a sense of entitlement

or they're above the law

or they're too good to get caught.

- So, it's dominance, it's power, it's status.

I'm bigger, tougher, better endowed than you are.

I got a bigger swinging dick than you.

- They're thrill seekers,

they derive some sort of high from taking risks.

They do that in their careers

so naturally it spills into their personal lives.

Lots of drugs, lots of cocaine use,

even prostitution, indiscriminate sex.

People were spending a lot of money on sex.

People were spending a few hundred to a few thousand a week.

- This whole culture is all just swimming in a sea of greed

but the big thing is who's gonna

be dominant in this sea of greed?

That's the real thing.

Who's gonna have the power?

Who's gonna be able to face down the other guy?

- On Wall Street, these CEOs, they pull in,

some of them would pull in $100 million a year.

And Dick Fuld had several years where

it was $70, $80, $90, $100 million in one year.

He had a multimillion dollar home in Greenwich

and that's where he lived most of the time

but he also kept a very fancy

multimillion dollar apartment on Park Avenue.

He had another home down in Florida

also worth $10, $15 million.

Another place in Idaho, Sun Valley,

some sort of a cabin in the woods there,

but again multimillion dollar property.

- Since 2000, you have taken home more than $480 million.

That's almost half a billion dollars.

Your company's now bankrupt,

our economy is in a state of crisis,

but you get to keep $480 million.

I have a very basic question for you, is this fair?

- I would say to you the 500 number is not accurate

and I believe the amount that I took out

of the company over and above that was,

I believe, a little bit less than $250 million,

still a large number though.

- [Waxman] Still a large number.

- [Crowd] Greed, you're going to jail, greed.

- In fact, both numbers were wrong

and both numbers were low.

The true number was $530 million for 2000 to 2007

and Dick Fuld said, yeah, I only made $310.

That's over $200 million he took off his total,

under oath, I swear to tell the truth, the whole truth.

He did it on television to the world

and this stood up.

- You should go to jail right now.

- [Man] Take him away.

Take him away.

- I don't even think I could resist.

If you gave me the opportunity

to make $550 million and all I had to was

hurt six billion people, I would think about it.

The temptation is there.

- People are simple, they do what they're rewarded to do.

So, if you're rewarded to take big

risks with other people's money,

that's what you're going to do.

I believe it was Voltaire in Candide

who wrote about a British general who

lost a battle in France

and when he came back to England he was killed.

You know, Voltaire was a very smart guy, right?

That's human nature.

People do what they're rewarded to do.

- The real message is we don't care how you did it,

we don't care whether it's real,

we don't care whether it's honest, just do it,

'cause you'll be rich and I'll be rich.

In the financial context,

modern executive compensation didn't just

create the most criminogenic environment,

it created the biggest crimes in financial history

and there's nothing close.

- [Reporter] This is absolutely stunning,

Wall Street has seen very, very few days like this.

- [Philip] The inevitable happened.

The house of cards came falling down.

- [Reporter] Lehman Brothers, a 158 year old firm,

filed for bankruptcy.

Brought down by bad mortgage investments,

Lehman, which has 25,000 employees, will be liquidated.

- Someone said, you know, corporations die of cancer,

investment banks die of heart attacks.

- There was a time when these assets were completely toxic

and they're completely toxic,

anybody owns it has a terrible problem

and that's the situation Lehman found itself in.

People basically ran on it, ceased to lend to it

and the government didn't stand behind it, so it collapsed.

- [William] The 15th of September 2008,

Lehman Brothers goes bankrupt.

The New York Stock Exchange had its

biggest drop in a single day since 9/11.

Banks began to stop lending money to each other.

- [Reporter] The collapse of Lehman Brothers

triggered turmoil in markets around the globe.

Stocks tumbled in Taiwan and India then plummeted in Europe.

- [William] The 2008 financial crisis displayed what

the world now identifies as financial contagion.

- There was a worldwide recession.

The value of real estate plummeted.

People lost their homes.

You could go through southwest side of Chicago

and see foreclosure, foreclosure, foreclosure.

Home after home after home that were

going belly up as a result of that.

Numerous businesses went out of business.

- This is a fraud.

This is not random, it's not oops.

- [Anton] Everybody got hurt.

I mean the impact across the world

was measured in the trillions of dollars.

The value of what was lost during

that period of time is almost incalculable.

We had never seen anything like that since 1929.

- This crisis has changed our world

in many long lasting ways.

Without the crisis, Brexit would not have happened

and Donald Trump would not

be president of the United States.

This is a major turning point,

you never know what it will be.

But the '30s transformed the world because

of course it brought us the Second World War.

Hitler would certainly not have become

Chancellor of Germany without the Great Depressions.

So, it changes everything.

- None of the leading company executives

were ever brought to justice.

I lost everything.

All the money, everything I had,

my wife, my family, connections.

I lost everything.

I still owe money to the U.S. government.

I have 154 million reasons to know what I did wrong.

- [Interviewer] You owe how much?

- $154 million, plus interest.

I'm just a small fish and I was brought to justice.

They all went free.

The system is what it is.

And until the system changes,

the powerful continue to walk.

- You've seen that there were some

very large settlements that were made

but they never admitted that they did anything wrong.

(electronic music)

There was no admission of guilt,

there was no charge of any criminal activity.

And I have always represented that those payments

were nothing more than payments of extortion

to the Department of Justice to seal the evidence,

to lock up the evidence so the public would

never see how widespread and pervasive

the fraud was that was committed.

And I truly believe that.

- These crimes are so vastly larger

than any blue collar crimes.

It's just off the charts non-comparable

in terms of these things.

It's what Balzac actually said,

"Behind every fortune that you can't explain,

"lies not just a fraud but a fraud executed

"so well that it wasn't prosecuted."

- We're now in Midtown Manhattan on Park Avenue.

This is where Lehman was after 9/11.

And this building across the street

is where Dick Fuld, the CEO,

is working today in his new company Matrix Capital.

Nothing has changed,

he's in the same business he always was.

Some people may think of him as some

sort of guy that was banished forever,

but no, he's just fine.

The world's collapsed,

there were trillions of dollars of damage.

It didn't cost Dick Fuld a dollar.

The man put $550 million into his pocket.

He kept it all and presumably

he's probably grown that pile quite considerably.

Perhaps he has a billion by now.

The stock market has been doing very well since the crisis.

- [Interviewer] What is the difference

between a gangster who robs a bank and this banker?

- The gangster that robs a bank,

A, gets an average about $2,000

and B, is virtually always successfully prosecuted

and C, spends 20 years in prison,

and the CEO has none of those things happen

and is immensely wealthy and gets to keep his reputation.

- Prison was the beginning of the redemption.

The judge told me, do something good with your life.

And that's why I'm trying to make a difference

by speaking to the public about my failures

and how they can be aware of what the world is facing.

- Someone described it to me,

you drive down the street in a school zone

and you see a sign that says 30 kilometers an hour.

You see a police car, you slow down, right, you go slow.

Then you drive a little further.

You drive a little further.

Police car's in your back,

you forget about that police officer

and all of sudden you start to speed up

and start to speed up, and start to speed up, right.

That's what happens, it's human nature.

We forget the disaster and we keep moving forward like that.

So, do I think it can happen again,

do I think that's, I think that's, yes, I do.

- The seeds of the next financial crisis have

already been planted, they're growing,

we can't see them yet but there are plenty

of signs all around of trouble brewing.

- I think there is no doubt that

we're going into another crisis of

a greater severity than we have just been through.

I can't predict what the instruments are going to be,

I can't predict the specifics,

but I know it will be driven by greed

and misbehavior has no consequence.

We have shown that.

- We, the public and decision makers,

basically haven't learned because

we never much understood the crisis.

But the bankers have learned the lessons.

And the lesson was, this is sweet.

This is perfect.

This is a sure thing,

I will be fabulously wealthy,

and I will not pay any price for it.

Thank you, lord.