Midterms and Monopolies with David Dayen (Episode 56)

One journalist who has been working tirelessly to shine a light on injustice and corruption is my guest today, David Dayen. What I love about David’s work is that it isn’t just about bad actors, it’s about the underlying policies that allow the big and powerful to rig the economy and get away with it. With the election coming up, I was eager to get David on the show to see if he sees any signs of hope in what candidates are talking about on the campaign trail. I also want to ask him about being an investigative reporter, how he looks for stories and what makes a good story. David is the author of a really terrific book that if you haven’t read you should. It’s called Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud. It came out in 2016. And it’s the winner of the IDA and Studs Terkel prize. David is also a contributing writer to the Intercept and New Republic and he is the Goodman Fellow at In These Times. He lives in Los Angeles. David, welcome to Building Local Power.

This is just fundamental to what actually happened after the crisis. I felt like that part of it has always been sort of left to the side, we get these swashbuckling narratives about central bankers and regulatory officials and CEOs plotting together to save the financial system. It’s a nice story for Andrew Ross Sorkin but what about the millions of people who were really hit hard. And so, at In These Times, as part of my retrospective, I talked to one of the people that write me every day practically. Someone who’s still fighting to save their home after a very dubious attempt at foreclosure. This is something that is ongoing, the financial crisis hasn’t ended for many, many people who are still locked in battle with their banks, who are trying to take their homes away under somewhat dubious circumstances.

So, I don’t think you get a full picture without that. And if you add that in, I think you see the crisis as a truly tragic event. One that failed to stand by the millions of people who bore its front, it failed to allocate losses equitably. Banks ended up bouncing back very quickly. Homeowners and people who lost their jobs struggled for years and years and years in ways that we still see affecting our economy today. So, I think that the financial crisis is a cautionary tale about who really matters in a recession.

So after 2006, there were some mild reforms, mostly around disclosure of lobbying activities. Obviously it did not eradicate corruption in any meaningful way thereafter. This time around, there is what is known as a democracy reform task force that the House of Representatives has put together in a kind of a blueprint for the kinds of things that they want to do if put into power and there are some lobbying reforms. They’re kind of attacking it more broadly. They’re talking about voting rights within the context of that. They’re talking about money and politics within the context of it.

John Sarbanes who is sort of the leader on the house side of this effort has talked about things that I think might be interesting to you and your listeners around bringing local control and individual control back into politics. So they have this thing called, I think at some point they call it democracy bonds or things like that, which would be sort of $100 that you would get tax free. It would be sort of a refundable tax credit that you could give to any political candidate and it would be matched at the government level I think a six to one match. So, instead of having to go after Goldman Sachs or Amazon or some giant pack, you could string together thousands of people, get the hundred dollar democracy bond from them and get a government match on that and fund your campaigns that way, which would bring millions more people into the process, literally every American citizen would have an opportunity to donate, which today that’s reserved for, a very small number of people actually donate to elections.

So, I think that’s kind of an interesting concept to democratize election funding really in some way. Obviously, I don’t think Donald Trump’s going to sign that. But if you look at a change in the balance of power of a number of years, maybe that’s something that could break this kind of vicious cycle of corporate power begetting political power.

So, that’s a way to bring these issues to a very direct and immediate level. When you’re talking about family farm financing, when you’re talking about the systems by which seed monopolies or livestock monopolies make it difficult for the livelihoods of family farmers. That’s a way to really bring those messages into focus. So, that’s one example I can think of.

There are some other races around the country where you’re seeing this, but I will say that in general, there’s been kind of a nationalization under Trump of the political realm, and to the extent that a corruption message is playing or an anti-corporate message is playing, it’s filtered through Trump and the Trump Organization. At least on the Democratic side, that’s kind of where they’re looking to leverage the unpopularity of Trump and to play up the ways in which he’s personally enriched himself, how he’s enriched other corporate interests through policymaking, which I think is a realistic way for people to connect to these issues. But it is limited to that frame in most contexts, not all but in most contexts.

One of the things that really struck me as I was looking back through your reporting before this interview is it just, I kind of all of a sudden had this aha moment that you write a lot about law enforcement basically. You know, this sort of lack of law enforcement for so called white collar crime. I was thinking about, I heard an interview with Senator Elizabeth Warren recently and she has got just a really strong stance about corporate criminals. These folks on Wall Street or the CEOs and what they get away with and what kinds of punishments they really deserve, to be removed from their offices or to face other kinds of penalties for things that they do.

Rohit Chopra, who as you know is a member of the FTC, he’s an FTC Commissioner, there are five commissioners, he’s a fairly new Commissioner there, a Democrat. He did a memo back in May that’s all about the fact that government enforcement agencies including the FTC don’t really sufficiently enforce the law in the sense that they, if a company breaks the law the penalties are minor, and so minor that they often just go out and break the law again. We see this with things at the FTC, orders that they’ve given to Google and Facebook where the fines are so minuscule that it doesn’t really matter at all, it’s just spare change to these companies. We see it with Wells Fargo, I can’t even keep up with how, I mean, Wells Fargo just seems to break the law like on a grand scale and then turn around and break the law again. I mean, it just goes on and on.

And so, I’m just curious like, is this like law and order framework? Is this something that maybe the Democratic Party might pick up? Do you think that this is something, sort of corporate law and order that we ought to talk about more and ought to be a more central theme?

It’s something that policymakers must guard against by pursuing equal justice under the law. And if that means less time for lower level offenses and more time for those who create giant financial crises that affect millions, then so be it.

So, everyone who’s flown in the last 10 years recognizes that either they’ve gotten a lot bigger or the ability for them to fit into the seat is a lot or treacherous and the experience of flying has become one that was actually seen as luxurious in the 50s and 60s to where today, it’s an absolute sure and drudgery to get yourself onto an airplane, squeeze into that seat, be nickel and dime for everything, any kind of amenity that gets you out of the misery of flying, whether it’s a larger seat or ability to put your bags in the overhead bin. And also you’ve seen just non stop delays, cancellations of flight, little computer glitches that cost thousands of connections to be missed.

And that is a subset of the concentration in the industry. We went from eight major airlines to four in a relatively short period of time. Deregulation in the 1970s facilitated this concentration. And now we have this situation where there are four airlines that control 80% of the routes and they move together in terms of the amenities they provide, in terms of the fees that they charge. They are essentially one airline because they do not differentiate really on quality or price in any meaningful way.

That’s something that anyone who has tried to book a flight or take a flight can immediately book into. It’s very obvious what’s going on. I think those types of parallels, those types of ways to connect to people are available very broadly across sectors of the economy. When you talk about this in terms of the standard anti-trust law argument, of consumer welfare and whether there are efficiencies gained by mergers and things like that the eyes of your audience are going to glaze over but if you talk about it in terms of what people are experiencing, it becomes very clear, yes, my cable company is terrible because they don’t have to provide me with good service because they’re the only game in town. Yes, the experience of flying is pathetic. Yes, everywhere I go on the internet I’m stalked by targeted advertising that seems to be coming right out of the words and experiences that I provide on Facebook or my email every day, and that’s because my data is being sold to every advertiser under the sun.

Everyone has this experience. So if you can just sort of connect that to concentration, I think that’s the way that you build a critical mass.

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The cable companies are widely hated as are the airlines. And boy, gosh, I’m in a small city, which is really awful if you have to fly. My nephew a few weeks ago was getting on a flight from here to go home and his flight was oversold or canceled anyway, he didn’t have a seat and the next time they had a free seat for him was six days later, which is just astonishing. Those kinds of experience, I guess I’m, people feel the awfulness of Time Warner or American Airlines.

But what about monopolies or companies that have a lot of power that generally have a pretty enjoyable consumer experience. I’m thinking of Amazon, of course, which we do a lot of work on. How do you think we get there because and I think that’s a harder thing. I think partly because people are so in this consumer frame of mind, and I guess one of my strategies has been to remind people that they’re also producers of value and that their role in the marketplaces broader and that they’re also citizen that I’m not sure that’s a little bit maybe roundabout and harder to reach people with. Curious how you think about those, the friendly monopolies.

That’s something that I think anyone who is a worker of any kind can understand, like what if the thing that you did was being forced to be sold in one particular store, the thing that you produce or the service that you provided with the threat of undercutting your business and putting you essentially on the street if you didn’t comply. I think there are ideas like this out there that point to sort of a very American concept of fairness that we’ve gotten away from I think a little bit. But it is in some way, at the heart of this notion of American values, that if you work hard, play by the rules, that whole thing, that you should be able to make your way through. Companies like Amazon prevent that in fundamental ways. I think you have to make more of a values based argument but you can use the specific details specific examples and connecting on this concept of fairness and values I think that can bring it through.

That continues to be true today but the difference is that Live Nation is a concert promoter. Live Nation owns 200 venues and Live Nation manages about 500 or so artists. So, think of the vertical combination here. You have the company selling the tickets is the same company that owns the venues, the same company that owns the artists. What’s going to proceed from that? Well, it’s pretty obvious. The artists are only going to play at the venues owned by their management team. They’re only going to have their concerts promoted by that same company. They’re only going to sell those tickets exclusively with Ticketmaster instead of a competitor.

This lack of choice within the economy inevitably plays itself out in fees. I mean, anyone who’s ever bought a ticket knows that there’s a ridiculous amount of fees that Ticketmaster and Live Nation add to their concerts. There’s even more interesting stuff around the resale market. There was sort of a nominal competitor to Ticketmaster called StubHub which did a lot of resale through scalping essentially that is secondary market for tickets. And StubHub actually has about 50% of that market. But number two is an exchange called ticketsnow.com, which is owned by Ticketmaster. So now Ticketmaster is getting into the resale game. What you can see is that if you go to Ticketmaster looking for a ticket and it’s not available to concert sold out or whatever, they will steer you to TicketsNow without disclosing that they own TicketsNow.

There are other ways in which resellers kind of look like they’re coming directly from the original venue when in actuality they’re marked up resale seats that are done through the auspices of Ticketmaster. So, you see Ticketmaster sort of expanding into the secondary market now in addition to having total, near total control of the primary market for ticket sales.

There was a very interesting Government Accountability Office report that came out about all of this and more back in May. There are some members of Congress, Bill Pascrell being probably the biggest one, he’s a congressmen from New Jersey who has talked about really breaking up this ticket monopoly and making it obsolete.

So that’s interesting, right? Here’s someone that’s sacrifice their entire sort career path that they’ve laid out in a weird way for themselves because they’re whistleblowing essentially on a large company. So that’s an example obviously, whistleblowers are people I deal with on a semi-regular basis.

Obviously, there are groups out there that are doing great work that sometimes you just want to elevate, whether it’s the Institute for Local Self-Reliance which I’ve certainly partnered with on the numbers stories. I certainly get a lot of leads from people who are on the ground and doing that work. Sometimes things are just sort of lying in plain sight. I’ll give you an example. So now, Mick Mulvaney has taken over the Consumer Financial Protection Bureau. There hasn’t been a whole lot of enforcement in the year or so that Mulvaney has been in charge. He’s the head of the Office of Management and Budget under Trump. And since he’s taken over, CFPB has pretty much shut down the enforcement.

There were a number of enforcement actions that came out in somewhat rapid succession over a one or two month period. And in just reading those press releases, I noticed that they would give a top line number for the penalty and then say, for whatever circumstance the offending company wouldn’t be able to pay that. And so we’re going to allow them to pay a smaller amount. I saw this in the press releases over and over and over again. So I connected those things together and did a piece about what I called the Mulvaney Discount been given to these financial bad operators who, the claim was they couldn’t afford to pay these large fines.

Sometimes the story is right there in front of you and no one has picked up on it and it’s up to you to just run with it.

But around 2002, 2003, I heard about these things called blogs, political blogs, and became interested in them. After a year of sort of lurking and reading and maybe commenting decided that sounds like fun, I’ll start my own. And so I would go to work and edit some television and set something off to render, which is creating effects or something like that, and then go over to my laptop and start blogging a little bit and then back and forth and back and forth. If you were a political blogger in 2004 or 2003, you were part of a pretty small group in a way that is not certainly true today. There was a way to get noticed. There was a way to move forward at that time. It was sort of a moment in time. And that’s what I did. I wrote at some of the larger sites where you could post diaries, places like Daily Kos and got to know people through that community and in that world. Started writing group blogs and things like that.

Eventually took a job at a group called Fire Dog Lake, which is no longer with us, but at the time, was somewhat influential. And I ran their news desk for a few years. And when that was over, I decided to spin out and do freelance writing on my own. And because of the years of being involved in that community and people that I knew graduating up into traditional journalism had the contacts to be able to make that work. All through that time, I was still editing TV, right up until 2015 actually, I was still doing that. 2016 actually was the last bit of TV that I made. It was a circuitous route to say the least but one that has been rewarding.

The changes in the internet more generally played a role. Why go to a blog if you can go to social media and get 100 different opinions from virtually everybody on any topic. There’s been massive changes I would say in the ecosystem of journalism and independent journalism specifically. Whereas at the time that I sort of got interested and involved, there really was a pathway where you could go from being a blogger to being a journalist. I would say that that pathway is far more narrow if not closed today. I don’t know what a 22 year old wanting to break into journalism is supposed to do with this point. I don’t know that journalism school and given the struggles of traditional journalism is the typical internships or whatever, I don’t know that that’s the way to go. I certainly don’t think blogging is the way to go or building a social media presence. It can be very trying since there’s so much competition. I wonder about that and I wonder how young people are going to break into this industry.

It’s interesting that reviewers in the United States have picked up on a very narrow section of Crashed, this small portion where it talks about how the Federal Reserve used these large swap lines with other central banks to make sure that they had liquidity and dollars. It’s an episode that in some ways looks favorably upon what the Federal Reserve did and the rescue efforts. And all the US reviews talk about that almost exclusively. When in reality, if you read the whole book, it’s a very long book, it’s about 600 pages, it really savages elites both in the United States and around the world with allowing the crisis to occur, of failing to see the warning signs, of patching it up in such a way that restored the system rather than overhaul it and engendering the kind of populism that sort of came out of frustration with the way in which the bailouts and rescue of the financial system was conducted.

So Crashed a really, really great book. Set aside some time, it’s a long read, but it’s certainly worthwhile.