AMY GOODMAN: Federal agents have raided the offices of three major hedge funds amidst news of a sweeping probe of insider trading at Wall Street firms. On Monday, the FBI seized documents at the offices of Level Global Investors, Diamondback Capital Management and Loch Capital Management in New York, Connecticut and Massachusetts. Collectively, the three firms manage nearly $10 billion in assets.

The raids come days after news broke that federal authorities are conducting what could be the largest insider trading investigation in U.S. history. According to the Wall Street Journal, federal prosecutors in New York, the FBI and Securities and Exchange Commission are probing a network of alleged insider trading rings involving some three dozen companies.

The probes could lead to charges against Wall Street executives and traders but are unlikely to affect record payouts and soaring profits. According to the Journal, executive pay is set to break a record high for the second consecutive year. The top 35 financial firms are on pace to hand out $144 billion in compensation and benefits this year, a four percent increase from 2009.

Well, a new book has just been published that tries to explain the history of the financial crisis and how most of the underlying structures and key players behind it have emerged relatively unscathed. It’s called All the Devils Are Here: The Hidden History of the Financial Crisis.

I’m joined now by one of the book’s two co-authors, Joe Nocera, business columnist for the New York Times, a contributor to NPR’s Weekend Edition, former executive editor at Fortune magazine. He co-wrote the book with Vanity Fair contributing editor Bethany McLean. Joe Nocera joins us in the studio.

The Hidden History of the Financial Crisis — in the moments we have, explain it, what caused it, and how they’ve come out on this side, what most people don’t understand.

JOE NOCERA: Well, our key point is that it took a lot of disparate things to make this happen. If you had only Wall Street’s venality and greed, you would have had a problem, but not a crisis. If you had only had the predatory lending practices of the subprime companies, you would have had a problem, but not a crisis. And if you had only had Washington’s — though this kind of enabled everything — Washington’s deregulatory emphasis under both Democrats and Republicans, let’s be clear here, you would have had a problem. But when you combine the three of them and then you watch them interact with each other, you watch the way Wall Street gets the subprime people to make their loans worse and worse and worse, and you watch the way the subprime people take advantage of Wall Street to sell their loans upstream, and then you watch the way Wall Street takes advantage of investors to sell them these crappy loans, what’s supposedly AAA, and you watch the government look the other way — when you put it all together, you have a really toxic stew. And so, I think most people have looked at this as the sins of Wall Street, and it’s absolutely the sins of Wall Street, but it required an awful lot more: an almost societal-wide delusion about home prices and value and, you know, what home ownership actually meant.

AMY GOODMAN: Who were the main culprits? Name them.

JOE NOCERA: OK. In terms of institutions, we think the single worst culprit are the rating agencies, because they had to really consciously sell their soul and debase themselves, debase their integrity. And they knew they were doing it as they were doing it, in order to give all these securities AAA. And the thing about it is, if you don’t have a AAA rating, all these large institutions are not allowed to buy your securities. You had to have a AAA for this to be a widespread product. So institutionally, we think it’s the rating agencies. Personally, we think it’s Alan Greenspan.

AMY GOODMAN: OK, go further into that.

JOE NOCERA: Sure. The Fed has two jobs: monetary policy and oversight over bank holding companies and other regulatory responsibilities. Alan Greenspan, as a devotee of Ayn Rand and as a libertarian, goes into office saying, “I don’t believe in regulation,” and saying, “I’m going to turn my back on that part of my job and let others do it.” But he’s so powerful and he’s so influential that his deregulatory emphasis becomes everybody’s deregulatory emphasis. And when we get to the point in the mid-’90s when a very brave woman named Brooksley Born wants to at least look at the possibility of regulating derivatives, he leads the charge to beat her back, and does so quite easily.

AMY GOODMAN: Talk about Greenspan’s famous admission before Congress.

JOE NOCERA: Well, I mean, you know, he really didn’t say, “I was wrong,” so as much as he said, “People won Nobel Prizes for this research that led me to this belief system in the apparatus that was built up.” He — pressed by Henry Waxman, he apologized for, you know, what he had done, what had gone on on his watch. But actually, you know, it was a halfhearted apology.

And quite recently, he’s taken to the convenient Republican line, which is to blame everything on Fannie and Freddie. And as we point out in the book, Fannie and Freddie, which guaranteed mortgages, which plays a hugely important role in home ownership in America and mortgages in America, was — yes, they did a lot of dumb things, but the truth is, they did not lead the charge into subprime, they followed into subprime. And it’s basically a convenient excuse to blame it all on Fannie and Freddie. And then they do it because the Republicans are completely unwilling to say that the marketplace made mistakes, too.

AMY GOODMAN: What about Obama’s record now? Where are we today?

JOE NOCERA: Ehhhhh….ugh. You know, it’s —

AMY GOODMAN: Any different than Bush?

JOE NOCERA: Oh, yeah, yeah. No, no, no. On the —- first of all, the creation of the Consumer Protection Bureau is a big deal. And on the margins, these regulations will help, that came out of the Dodd-Frank bill. The problem is that if you compare it to what happened in the 1930s, in the 1930s, they forced the banks to split in two, and they created the SEC. And we had pretty much 50 years of no crises before financial innovation started to poke holes in the regulations and eventually rendered them moot. So here we have a situation where nobody is willing to sort of take on Wall Street head-on and say, you know, we can’t allow certain practices to go on. So, in fact, they’ve tried to deal with these practices on the margin. But their general -—

AMY GOODMAN: And won’t it get worse? With the elections coming up, the Democrats and Republicans want the money from these big moneyed interests.

JOE NOCERA: What’s really going to happen — right, what’s really going to happen over the next two years with the Republicans now in charge of the House is that — many of the regulations have not been written that will enforce this new law. In fact, the law itself is kind of a punt to the regulators. And that’s where the battle line is. And the Republicans are going to do their best to make sure that these regulations are as minimal as possible, and the Democrats are going to try to make them tougher.

AMY GOODMAN: What surprised you most in your research for this book?

JOE NOCERA: Here’s what surprised me most: the extent to which Wall Street was dictating to the subprime companies about their lending practices and the extent to which Wall Street knew exactly how bad these loans were and yet encouraged them to make worse and worse loans.

I mean, I’ll give you one example. We actually have an email or a memo in the book, where, you know, a Wall Street guy goes to visit one of the big subprime companies, and he says, you know, “You stop lending — you won’t lend below a 620 FICO score.” You know, that’s a credit score for a person who wants to buy a house. “Your competitor down the street, they’re lending at 580 FICO scores. We want you to drop your standards 40 more points to be as bad as them.”

AMY GOODMAN: These federal agents who have raided the offices of three major hedge funds amidst the news of a sweeping probe of insider trading —

JOE NOCERA: Right.

AMY GOODMAN: — how significant is this?

JOE NOCERA: It really looks like the biggie, the big enchilada. The problem with the FCC insider trading cases over the past 10 or —

AMY GOODMAN: Goldman also looks like it’s involved?

JOE NOCERA: Potentially. Although they’re really — the truth is, what they’re really trying to get is some of the really big hedge funds. They think that this is really widespread in the hedge fund community. And if they go after Goldman, it would be probably, my guess would be, Goldman’s hedge funds. I don’t know that for a fact. There’s a lot of things we don’t know. But the SEC insider trading stuff has been so on the margins for so long, going after small fry, who are meaningless small fry. At least they’re going after big targets now.

AMY GOODMAN: Finally, the title, All the Devils Are Here. Are there any good guys?

JOE NOCERA: Yes. Not a lot, but there — one of the things we did was we found a lot of people who were skeptical at the time. We found a lot of community activists, who in places like Cleveland, who were screaming to the federal government, saying, “Stop this! Stop this! Stop this!” We also found a lot of state legislators that actually passed laws to try and get rid of some of the worst practices, and the federal government basically came in and preempted those laws. And, you know, that’s one of the real tragedies of this whole thing. People on the ground saw it happening; nobody in Washington would listen.

AMY GOODMAN: Joe Nocera, thanks so much for coming in. All the Devils Are Here: The Hidden History of the Financial Crisis is his book, wrote it along with Bethany McLean.