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CNN: SPECIAL INVESTIGATIONS UNIT

Fall of the Fat Cats

Aired October 18, 2008 - 20:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


UNIDENTIFIED MALE: All the good things in life. Caviar. We have a lot of caviar.
RICK SANCHEZ, CNN ANCHOR: They lived the high life.

UNIDENTIFIED MALE: These guys were spending more than 250 billion dollars a year.

SANCHEZ: Now, it's come crashing down.

UNIDENTIFIED MALE: It's like fiddling. Nero fiddled while Rome burned. We are smoking cigars while we're losing our shirts, literally.

SANCHEZ: Where did all that money go?

UNIDENTIFIED FEMALE: This unit is going for approximately 11 million dollars. What you are getting is the million dollar view.

SANCHEZ: How they earned it.

UNIDENTIFIED MALE: Is anybody worth more than 10 million dollars?

SANCHEZ: How some have been caught.

UNIDENTIFIED MALE: I was a crook.

SANCHEZ: And what may be next.

UNIDENTIFIED MALE: The party is over on Wall Street until it comes back again.

SANCHEZ: A new hour long special from the CNN Special Investigations Unit. Fall of the Fat Cats.

Hello again, everybody. I'm Rick Sanchez her in the World Headquarters of CNN. Here's something you need to think about: when our parents and our grandparents were growing up, the difference between what a CEO made and what an average American worker made was about 25 to one. You know what is these days, it's about 500 to one. That's the disparity. That's what we are going to be talking about during this show, the Fall of the Fat Cats.

We are going to be talking with you on Twitter, MySpace and Facebook. As a matter of fact, Roger, let's go ahead and get the shot over there. And you can see that some of the messages are already coming in from people who have certainly plenty to say. We are also going to be joined by our correspondent Abbie Boudreau, who has put this remarkable story together that you are going to see in four parts, from beginning to end.

That's our panel, people just like you. Someone who lost his job; he is on the right. We have Magda in the middle. She's a realtor. And we have Brandon who was an intern for Lehman Brothers. Now, let's get to the very first part of this, because I want you to watch this story than Abbie has put together for us. I guess, if we have a working title for this first part you are going watch, I guess it would be When is Enough Enough?

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: She is so sophisticated, so sophisticated.

ABBIE BOUDREAU, CNN SPECIAL INVESTIGATION UNIT (voice-over): It's early evening in Manhattan.

UNIDENTIFIED MALE: You're welcome. Thank you.

BOUDREAU: The cigar smoke is billowing, drinks are flowing.

UNIDENTIFIED MALE: All the good things in life. Caviar. We have a lot of caviar.

BOUDREAU: And if the guests at this party, hosted by a magazine called "The Cigar Report," are a little tone deaf about how this kind of event might be perceived, they don't seem to be especially concerned.

(on camera): It looks like you guys are just all having a good time. People are getting their hair cut, manicures.

ADAM MARSH, EMPIRE CAPITAL PARTNERS: Manicures, haircuts. It's a great time. I think for at least a couple of hours in an evening, we can sit back and have a few drinks, forget what's facing us out on the street tomorrow.

BOUDREAU (voice-over): These are among some of the faces of Wall Street, traders, mid-level executives, the men and women who rely on bonuses that can reach into the hundreds of thousands to keep their lifestyles afloat.

UNIDENTIFIED MALE: You play hard, you work hard. You work hard, you play hard.

BOUDREAU: If they earned that much, the money their bosses took in before the crisis hit was, well, stratospheric.

ROBERT FRANK, AUTHOR: They were spending 250 billion dollars a year. They bought mansions in Greenwich and Palm Beach. They bought art for 100 million dollars a painting. The waiting list for Ferraris is more than a year long.

BOUDREAU: Robert Frank is the author of the book "Richistan." He says the enormous amount of money earned by Wall Street elite makes them practically a nation unto themselves.

FRANK: They just looked at the guy with the bigger house, the nicer Ferrari, the better artwork, and it was all competitive spending.

BOUDREAU (on camera): We're going to spend much of the next hour examining the money made here on Wall Street, just how it was made and how it's been spent. We will also try to peek into the future and see what's ahead, at least in terms of the conspicuous consumption that has been very much the rule around here.

MICHAEL DOUGLAS, ACTOR: Greed, for lack of a better word, is good.

BOUDREAU: Even the man who wrote that phrase, greed is good, can barely believe what has happened. It's been 21 years since the movie "Wall Street." Its principal character was an unprincipled stock broker.

OLIVER STONE, DIRECTOR: I never thought this would go to this level. I thought the Gordon Gekko's would die out, but they got worse.

BOUDREAU: Take a look at the total take home compensation packages in 2007 for only a few of the wall street CEOs. These numbers, according to Ecular (ph), an executive composition research firm. Richard Fuld, CEO of Lehman Brothers, 45,441,496 dollars. Stanley O'Neil, former CEO of Merrill Lynch, 11,326,880 dollars. Charles Prince, former CEO of Citigroup, 12,306,870 dollars.

Each one owns multi-million dollar apartments on New York City's Park Avenue.

NAOMI KLEIN, AUTHOR: Last year, while the disaster that we are bailing them out from was being created, 39 billion dollars in bonuses were handed out.

BOUDREAU: Richard Fuld of Lehman Brothers appeared before Congress to defend not only himself, but his company. Before he was sworn in, I caught up with him in the hallway. He was not very talkative.

RICHARD FULD, FMR. CEO LEHMAN BROTHERS: Sorry, I'm on my way --

BOUDREAU: Some critics have said you had a chance to save your company and you haven't. Is it greed? Do you have anything to say to the people that are watching this right now, that are wondering why this happening? You have nothing to say?

FULD: Are you going to be in the testimony?

BOUDREAU: Absolutely.

FULD: Good.

BOUDREAU: Once inside, he faced some pointed questioning from California Congressman Henry Waxman. His committee said Fuld had earned nearly 500 million dollars from 2000 through 2007.

REP. HENRY WAXMAN (D), CALIFORNIA: My question is, a lot of people ask, is that fair for the CEO of a company that is now bankrupt to have made that kind of money?

FULD: I believe my cash compensation was close to 60 million, which you have indicated here. 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.

REP. DENNIS KUCINICH (D), OHIO: Did you mislead investors? And I remind you, sir, you are under oath.

FULD: No, sir. We did not mislead our investors.

BOUDREAU: Fuld told Congress that the failure of Lehman Brothers centered around what he called inaction on the part of the government, and a loss of confidence in the financial markets. Finally, at the end of the hearing, Fuld said --

FULD: At the time I made those decisions, I made those decisions with the information I had. Having said all that, I can look right at you and say this is a pain that will stay with me for the rest of my life.

BOUDREAU: But what exactly did the CEOs of Wall Street and the other traders do to earn all of that money?

FRANK: What they really did was to figure out new and clever ways of investing, of creating financial products that very few of us could understand.

ANDY SERWER, "FORTUNE MAGAZINE": If the firm is creating a financial product that it can sell for five million dollars, the person who sells it will get two million.

BOUDREAU: Repeated requests for interviews with the Wall Street CEOs cited in our reporting were turned down. As for what did happen on Wall Street --

SERWER: The whole thing was predicated on the fact that the economy would continue to grow and we could continue to borrow more and more and more. Eventually, that game has got to end.

(END VIDEOTAPE)

SANCHEZ: That's an amazing report. Abbie Boudreau is with me now. As you watch that, he looked like he was bothered by your questioning. Was he?

BOUDREAU: I don't know if he was bothered by it, but I don't know if he is necessarily used to being approached with those types of questions. We just really wanted to know whether or not he thought it was fair that he was making that much money when his own company was in bankruptcy. He just wouldn't answer the question. SANCHEZ: She such a powerful man. He is probably not used to being asked questions so directly. To our panel, we are talking about a gentleman, Dick Fuld in this case, CEO of Lehman, some would say former CEO, made almost a half billion dollars during his tenure. Can you put your mind around a half billion dollars?

MAGDA GOMEZ, REALTOR: Never.

BRANDON LAWRENCE, COLLEGE STUDENT: I can barely put it around 25.

SANCHEZ: As an average American, you look at somebody like this, what do you think? What do you say? You lost your job.

JOEY HYNSON, FORMER PLANT MANAGER: Yes, complete over excess. He is way over the top. To me, a half billion dollars, why should he make that kind of money?

SANCHEZ: Let me show you what some of the folks have been writing to us. Let's go right to our Twitter board, if we possibly can. This one -- this came in while they were watching the report: "Mad? No, Rick, the word would be furious." Another one says, "if this is what it takes to be a fat cat," she writes, "you know, then I really must be one of the many alley cats."

This is interesting from Dock Marty, who is also writing to us as he's watching us on the air right now on Twitter.com/RickSanchezCNN, "proof that the more money you have, the more you spend on things that you don't need, but believe you deserve." That's an interesting point. We are going to be picking up on that in just a little bit with one of the other reports you have.

By the way, when we come back, we will be talking about a real Wall Street party. You actually take us into one of those. Right?

BOUDREAU: A rare glimpse.

SANCHEZ: I guess you would say, we get to see how they live.

BOUDREAU: This is all about lifestyle. We wanted to see how these people live before and after the fall, the economic crisis that we're going through right now.

SANCHEZ: This is a unique glimpse and we are getting to it right now. As a matter of fact, let's take a break. We will have that for you. I guess we could call this fat cats in their element when we come back.

(COMMERCIAL BREAK)

BOUDREAU: Welcome back. I'm Rick Sanchez, here in the world headquarters of CNN. The topic is the Fall of the Fat Cat. What Americans are puzzled by, if not angry about, downright angry about. We are about to take you to a place that you normally wouldn't be able to go, see things you normally wouldn't be able to see. You know what an 11 million dollar mansion looks like? How about the planes and the people who own those planes? And in this particular case, the place where they come together. Abbie Boudreau takes you inside.

(BEGIN VIDEOTAPE)

PAMELA LIEBMAN, CEO, THE CORCORAN GROUP: This unit is going for approximately 11 million dollars. And what you are getting here is the million dollar view. In New York City, there is nothing is better than a central park view.

BOUDREAU (voice-over): Actually, this two bedroom condominium in what was once New York City's Plaza Hotel is going for nearly 11.5 million dollars. For many Wall Street executives, that really wasn't a lot of money.

LIEBMAN: It wasn't unusual in the past two years to sell apartments 20, 30, even 40 million dollars or more.

THOMAS GRAFF, VP, NORTHMARQ CAPITAL: It's like fiddling. Nero fiddled while Rome burned. We're smoking cigars while we're losing our shirts, literally.

BOUDREAU: This is the kind of party that many Wall Streeters used to pour themselves into. And at this, thrown by a magazine called "The Cigar Report," many still do, despite a horrible day of trading that saw the market drop 508 points.

(on camera): People are having a great time tonight. They're getting cigars. They're getting manicures. They're getting their haircut. You would have no idea that there is actually a crisis on Wall Street right now.

(voice-over): Does it bother you when people blame Wall Street for everything that's happening right now?

VIDAK RADONJIC, BERYL CONSULTING: Absolutely. When things are great, everyone is happy to see the 401(k). When everything is not good, people are blaming Wall Street. I don't think that's the right thing to do.

BOUDREAU: The motto here, according to nearly everyone with whom we spoke, work hard, play hard.

AARON SIGMOND, PUBLISHER, "THE CIGAR REPORT": I think they take their jobs amazingly seriously, but I think everybody is allowed to have a good time. I don't think there is any law against that. It may look a little different to middle America, but the reality is this is where things happen these days.

BOUDREAU (on camera): It's not just the titans of Wall Street who cashed in. According to public records, the investment bank from Goldman Sachs gave away more than 16 billion dollars in bonus payments in 2006. That's an average of 620,000 dollars per employee.

FRANK: You had even entry-level associate, who were 24 or 25 years old, getting a black town car back from work, getting the helicopter to the Hamptons on the weekend, the two or three houses, the rented Ferrari, or maybe they bought one. BOUDREAU: Want a for instance? Richard Fuld, the CEO of Lehman Brothers, purchased this compound on Jupiter Island, Florida for nearly 14 million dollars in 2004. Public records show its current value is just a little under that. He has also got this home in Greenwich, Connecticut. Value, according to property records, 12.5 million dollars. Of course, that Park Avenue apartment, which cost him 21 million.

I asked him about his real estate holdings.

(on camera): How do you rationalize that when the rest of the country is in turmoil.

FRANK: The top half of Americans spent, in one year, more than the entire population of Italy. These guys were spending more than 250 billion dollars a year.

SERWER: It's never enough are. You have to keep up with the Jones', buy a big house, buy another boat, buy a jet, keep going, buy another summer house.

BOUDREAU: Back at that party in Manhattan, there was still a great deal of action.

SIGMOND: All right, guys. Follow me. This is Big James. We're going into the VIP lounge. Can I have some caviar, please? Thank you so much. That is delicious. Thank you so much.

BOUDREAU: Even here, the blame for the bad times had to go someplace. First, to the biggest bosses.

(on camera): What do you think about these big CEOs and the huge amounts of money that they are bringing in?

UNIDENTIFIED MALE: It's an outrage. It's an outrage.

UNIDENTIFIED MALE: Those days are coming to an end. With the banks merging with the broker funds, the days of huge bonuses are over.

BOUDREAU (voice-over): They also took shots at a more familiar target.

UNIDENTIFIED MALE: The fact is that the media has distorted and blown this out of proportion, because the media and the politicians are playing into people's fears for their own self-serving purposes.

BOUDREAU: But still the party went on into the night. Cigars, imported beer.

SIGMOND: A true story. That beer was flown in straight from the Dominican Republic for me for this event.

BOUDREAU: There were manicures, shoe shines and "Playboy" playmates, with only a little time for reflection. MARSH: Are you going to have job security? Ultimately, if you have job security, what kind of pay are you going to ultimately get? That's the tough thing to deal with right now. I don't know how long the party will continue.

(END VIDEOTAPE)

SANCHEZ: It's an amazing statistic to hear that they spent more than the population of Italy. I have to ask you, because I think some people at home are wondering about this party; how did you get in?

BOUDREAU: We just asked. We knew that they were having a party. We said we were working on a story at CNN about the lifestyles of the people that work on Wall Street before and after the economic crisis, and they said come on in.

SANCHEZ: Come on in. It's interesting. Is it really about a lack of fear? When there is not enough fear and the greed exceeds that fear, don't we know we will get into trouble? Weren't we taught this by our grandparents? Magda?

GOMEZ: Yes, definitely. I think the same thing as in real estate, a long time ago seeing those loans with 100 percent financing, and the ARMs coming around and no payment. Eventually, it's going to catch up and it has caught up to us.

SANCHEZ: It's probably, Joey, not just those guys on Wall Street. We went out and got the two or three plasmas on credit that we knew we couldn't afford, right?

HYNSON: Yes, not me personally. I have the fourth child that, unfortunately, has been tough to afford now.

SANCHEZ: Me too, by the way. So do you think it's a matter of responsibility? If you talk about Wall Street, right, experts will say and have written that there was a lack of oversight and there was a lack of regulation. When there's no oversight and no regulation, there's nobody looking over you. When there's nobody looking over you, you have nothing to fear. That's when greed gets you in trouble. Is that right? Brandon?

LAWRENCE: I think because I interned at Merrill Lynch this past summer and Lehman Brothers before, being around the culture that is in the actual investment banking, you are advising CEOs, these big media moguls, these huge Dick Fuld type characters on a regular basis. They are calling your cell phone. They're trying to get you to advise them on how to close this billion dollar deal. You want a piece of that, and that's the type of culture that is generated on Wall Street.

SANCHEZ: Yet, there are two different responses. Let's go over to our board. Let's go to our social boards, if we can. Let's start with Twitter. On Twitter, you will see that somebody said, again, "I am infuriated. Doesn't make any sense for him to have so much money while others are suffering at this time."

Then we go to the other side, and I think this is Facebook who is writing to us, and somebody said to us, you know, "are we going to go after the Hollywood stars for making too much money? What's too much money? I thought that these CEO salaries were given to them by their own board members."

We are in a capitalistic system. This is the way it's supposed to work. Joey?

HYNSON: Me personally, the way I see it, is if there is no oversight -- if you have an open checkbook to write yourself a check for any amount, you are going to write yourself the highest check possible. There should be some oversight. For a company that is failing, for a corporate boss or CEO to make 250 million dollars, just that shouldn't be.

SANCHEZ: When is enough enough?

HYNSON: Exactly.

SANCHEZ: Let's do this. We are going to go to a break, but when we come back, Abbie has another piece for us. This one -- You talked or heard us talk, common people I guess compared to those we are seeing -- but what is it like to be one of them, to be one of these insider, to have that plane, to have that huge mansion. His story, the man you are looking at right now, when we come back.

(COMMERCIAL BREAK)

SANCHEZ: We welcome you back. I'm Rick Sanchez. People all over the country are watching with amazement, as are we, by the way. Some of them are commenting to us. Let's go to that real quick. It looks like we have someone coming in now. "Aren't these the same people" -- I'm not sure what somebody is doing there on the board. All right, I think we are back now.

Let's go to Robo. He says, "it's nice. One thing is that if a CEO has misled the share holders, they should be accountable. But other than that, those CEOs got the position because of hard work and determination."

Now let's go to the one under it. Let's go to the one that says Rick Young on it. It says, "the arrogance of those people is amazing. They spend as much in a week as many of us earn in a year. It doesn't bother them a bit."

That's interesting. Who are these people that make that much money? You are about to meet one right here. This is an interesting story. This is the story of Jordan Belfort, as told by Abbie Boudreau. Here it is.

(BEGIN VIDEOTAPE)

JORDAN BELFORT, : I party like a rock star and I live like a king. I live to tell about it, barely.

BOUDREAU (voice-over): He calls himself the wolf of Wall Street, Jordan Belfort, a self-proclaimed master of the universe, living what he calls the life.

BELFORT: Wall Street is all about the money. Servants at your houses, parties where there is Dom Perignon flowing, helicopters landing on the heli-pad, pigs roasting on a spit outside, with a live band playing reggae music on the beach, dancing girls, jugglers, clowns. The whole thing, the life.

UNIDENTIFIED FEMALE: Jordan Belfort, this is your life.

BOUDREAU: A lifestyle hard to imagine for most. This is home video taken during one of Belfort's lavish vacations, a get away on his 167-foot yacht, named after his wife, Nadine, a former beer commercial model.

BELFORT: I started going hog wild. To me, it was like monopoly money. It's like anything you want, you can buy.

BOUDREAU: He said he paid 2.5 million dollars for an estate on Long Island and 5.5 million dollars for a mansion in the Hamptons.

UNIDENTIFIED FEMALE: What a great life, huh?

BOUDREAU: His net worth rose to 100 million dollars. That was in the '90s, when he was one of the kings of Wall Street, become chairman of a brokerage firm called Straton Ulchmat (ph) in Long Island, making, he said, a million dollars a week. He says he lived his life as if he were a character in a movie. Even in private, he played the role of his most envied characters, not wanting to disappoint what he calls his invisible audience.

DOUGLAS: Greed works.

BOUDREAU: Identifying with Gordon Gekko from the movie "Wall Street."

BELFORT: He was so super cool and super smooth and just on top of it, and nobody is fooling the ultimate shark. It's sort of like every average kid from the street's dream is to be a Gordon Gekko.

DOUGLAS: Impressed?

BOUDREAU: Admiring and emulating the character Richard Gear played in "Pretty Woman."

RICHARD GEAR, ACTOR: It's the best.

DON JOHNSON, ACTOR: You can't count to 74, Marino.

BOUDREAU: Then there was the character Sunny Crockett from the television series "Miami Vice," who epitomized the life in the 1980s.

BELFORT: When I first started making money, I went out and bought a white Ferrari Testerosa. You know why? Because it was the car that Don Johnson drove in "Miami Vice."

BOUDREAU: Jordan Belfort grew up just outside of New York in a middle class family. He had dreams of making big money, so where better to start than Wall Street? He says his first day as a stock broker was the same day as the 1987 stock market crash. He eventually oversaw a place that sounded more like a fraternity than a brokerage firm.

BELFORT: It was like ancient Rome. You're like, this is like the Coliseum. Acts of depravity. There was midget tossing. People's heads were being shaved. Goldfish were being eaten live. People were hooking themselves up to car batteries. It was almost like adult Disneyland for dysfunctional people.

BOUDREAU: In fact, he says he was addicted to cocaine and quaaludes and abused about 20 other prescription drugs.

All present he says at parties like this one. This is video from one of Strattons infamous (INAUDIBLE) in the Hampton.

UNIDENTIFIED MALE: If you'll base it on Wall Street, that's all go. All right?

BOUDREAU: But eventually, Jordan Belfort's party would be over.

(on camera): So, this is all you have left of your former life?

BELFORT: This is it. Everything else is old new in my new life.

BOUDREAU (voice-over): It was all a fraught. In 1998, Belfort was indicted on federal charges of securities fraud and money laundering. He admits he knew the whole time that much of what he was doing was illegal. Pumping up the value of stocks and concealing the profits. He also really cooperated with the FBI as seen in this surveillance tape.

UNIDENTIFIED MALE: I had this money be going. I want to get it offshore.

BOUDREAU: To help build criminal cases against others. A judge ordered Belfort to pay back $110 million owed to victims with half of his income going towards that amount.

BELFORT: I was a crook.

BOUDREAU: He served 22 months at this California prison, got out in 2005, relocating here to this pristine beachfront community of Manhattan Beach just south of Los Angeles. Now he said he is off drugs and he's had a lot of time to reflect.

BELFORT: Why do I smile when I talk about the old days? I don't smile because I'm proud of it. I smile because I'm embarrassed about it.

BOUDREAU (on camera): What do you have to say to all the victims?

BELFORT: I'll just say, you know, I'm sorry for what happened and I wish it wouldn't have happened. BOUDREAU: Do you think people trust that you're telling the truth when you say that?

BELFORT: No. People -- everyone thinks I have tens of millions of dollars hidden all over the world and I don't.

BOUDREAU: Why should anyone trust you? You've lied for years and years?

BELFORT: Again, I can't make people trust me?

BOUDREAU: Why should they?

BELFORT: Because of how I live my life today.

BOUDREAU (voice-over): Today he says he lives a modest life. Still with a spectacular ocean view where he rents this duplex. He's an author writing about his life as the wolf of Wall Street. He no longer identifies with fictional characters like Gordon Gekko and Sunny Crockett. Instead, he's cast himself in a much different role. The one Tom Cruise played in the movie Jerry McGuire. A sports agent redeemed after a career collapse.

Since getting out of prison, Belfort said he's paid back a little more than a million of what he owes to victims. Another 12 million was paid before he was locked up.

BOUDREAU (on camera): And you were called the wolf of Wall Street?

BELFORT: The wolf of Wall Street among other things. But that was the -- that was the one that I, you know, it was -- you know, the original wolf of Wall Street was Thurston Howell III from Gilligan's Island. That was his nickname. So, it was like a funny nickname. The wolf of the wolf, you know.

BOUDREAU: And what are you now?

BELFORT: Just Jordan Belford.

(END VIDEOTAPE)

RICK SANCHEZ, CNN ANCHOR: Where did you find out about this Jordan Belfort.

BOUDREAU: Well, we did talked to the FBI agent who investigated the case for eight years and he said that his story is true. I mean, he did live this lavish, extravagant lifestyle until of course it all came crashing down.

SANCHEZ: He said I was a crook.

BOUDREAU: I was a crook. He admits it.

SANCHEZ: Wow. Almost Nixonian in the way he said it. You know, what's interesting about this -- these hedge-funders, these whiz kids as some people called them, created these private equity firms. In some cases they were taxed only 15 percent on capital gain if you can believe that, as opposed to the 35 percent that other are. And Warren Buffett, that old funny-daddy that some might call him, he said and I have the quote here, he said "This situation that they have set up," -- he said this while we were in the middle of this. He called "Weapons of financial mass destruction." Of course, nobody listened to him. Does it make you mad?

BRANDON LAWRENCE, COLLEGE STUDENT: Oh, yes. Honestly for me being someone, from a student perspective, coming into the industry of financial services.

SANCHEZ: You want to be like these guys?

LAWRENCE: Honestly, I don't want to be like them, I want to learn how to make the change and going forward. I believe that it is necessary, some aspects of the financial --

SANCHEZ: How would you be different?

LAWRENCE: I believe I would be difference because I will learn how to apply these different tactics that people have failed at and learn how to move around and maneuver them by learning and networking with the right people. You can see the type of attitudes from a daily basis on Wall Street.

SANCHEZ: Is it the system, Magda, or is it the person?

MAGDA GOMEZ, REALTOR: I'm not sure about the system or the person, but I just don't want this to happen again. What's happening in real estate right now, in 20 years, I don't want to go back to this again. We have to make it goes.

SANCHEZ: Well, it's an interesting point that you raise because we're going to be looking at that. Can it happen again? Is the party really over? But when we come back, we're going to be doing something very special for you. That Jordan Belfort that you just saw, there he is. He is joining us live. He's going to be taking your questions so send them to us right now on Twitter, on Facebook, on MySpace and our panel is going to be asking questions as well. Stay with us. This gets good. We'll be right back.

(COMMERCIAL BREAK)

SANCHEZ: Let's go live now to Jordan Belfort. He's good enough to join us to take us through his story.

Jordan, thanks so much for being with us. We certainly appreciate it.

BELFORT: My pleasure.

SANCHEZ: We got people who really want to know your story. As a matter of fact, let's go to our Twitter board. I'm going to take the very first question from there. I'm going to let them ask you the questions they are thinking about. Here's one that comes in somewhat interesting. He says "Did you think about how to solve poverty locally, globally?" I mean, they seem to want to know about the personal side of you. They seem to think that perhaps you got caught up in this.

BELFORT: Yes, I mean, you know, when I look back at it, all the money that I made, more importantly all the money that I blew, I could have done so many great things with it. I did some good things, but not nearly enough. And you know when I wrote -- you know, I'm an author. When I wrote the book "The Wolf of Wall Street" what I really tried to explain is how people that work on Wall Street can do the things -- I did terrible things, making amount of money that we make and rationalize it, every day get up and look at ourselves in the mirror and think that, you know, our lives make sense.

And you know, you will see some people on Wall Street like a Warren Buffett, they do great things with their money, but that's really the exception to the rule. And what you see right now, you know, all these so called - these huge bonuses that people took out over the years were really based on fraud. They weren't making the sorts of money that they claimed. And now evaporation of wealth and money should be going towards social programs and doing things that can help the world and the economy and so on and so forth. Right now we have to bail out the banks.

SANCHEZ: Let me ask you.

(CROSSTALK)

UNIDENTIFIED MALE: That's a good question.

(CROSSTALK)

SANCHEZ: Let me ask you a question that came in moments ago as well. This one is coming to us just as we were watching that piece that was put together (INAUDIBLE). Let's go to the Twitter board, if we can. It says "How did you justify your worth? And did you ever notice the harm before it caught up to you at eye level." Interesting question. Interesting use of words, eye level.

BELFORT: I think they're referring the honk to other people.

SANCHEZ: Yes.

BELFORT: Or to myself. Well, the answer is I was using a tremendous amount of drugs, which you know, I'm certain now in retrospect, I was using to the kind of, you know, quiet the critics, the guilt, those terrible things that I really should have been feeling if I wasn't drug out at the time.

SANCHEZ: Is it common? Is it common among folks like you and people in that profession to have those kinds of problems and use drugs?

BELFORT: Oh, clearly. I mean, you know, drug use is so prevalent on Wall Street. Cocaine, Quaaludes -- you know, all sorts of -- you know, Valium, Xanax, anti-anxiety drugs. So you know the environment on Wall Street is conducive to that sort of type A personality. SANCHEZ: That's amazing what you're telling.

Joey, you have a question for him. Go ahead.

Joey, just lost his job, lives in Peach Tree City, Georgia, by the way, Jordan. Go ahead, Joey.

BELFORT: OK.

JOEY HYNSON, FORMER PLANT MANAGER: Jordan, I wanted to find out what are you doing to pay this money back. You talked about paying a million of it back already. What kind of work are you doing to pay this back?

BELFORT: I'm a full time author. I wrote a book when I came out of jail. I wrote a book "The Wolf of Wall Street," which was a bestseller. And I paid back half of the money that I made from writing that book, "The Wolf of Wall Street." Now, I just finished the second book called, "Catching the Wolf of Wall Street," which is the sequel to the first book. And again half that money goes back to people. And I'm really just looking to write full time now for the rest of my life.

SANCHEZ: Mansions gone, planes gone? All that stuff is gone?

BELFORT: Oh, yes. I struggle financially because there's better ways to make money in the world than being an author. It's you know, it takes a year to write a book, more time to market it. And you know, when I wrote "The Wolf of Wall Street," it was painful to have to look back at what I had done. So you know -- and again, not just to the people that -- stranger that lost money. That's terrible enough as it is -- but to the people that I loved, closest to me -- my wife, my ex-wife now, my children. And if I can go back, of course, I would change that. I would never have done the things I have done. But now the best I can do --

SANCHEZ: Magda --

BELFORT: Right, Magda?

SANCHEZ: Magda has a question for you.

GOMEZ: You have a very nice tone and I appreciate that you're having a great time. But I want to know if by any chance, you can go ahead and you can learn from what you have done wrong before and educate those people that are on Wall Street right now so they don't fall in the same way. Those people are playing with our money. And we want to correct it.

BELFORT: Absolutely. Absolutely. And again, if anybody probably knows what greed can do, it's probably me. You know, the dark side of Wall Street. How it can get the best of people. And that's why, you know in my book I said, this is a cautionary tale because there's some -- you know, you can look at the life that I led and take away from it. It always great and wonderful and there was nothing -- we're looking at a helicopter and a yacht. But I'm very clear in the book, this is a cautionary tale. "The Wolf of Wall Street" is not the sort of life that you want to lead. It's not a life that you can be proud of after it's over. That your children can be proud of. That the people you love can be proud of. It's not a life full of dignity and pride. It's about false pride and hubris.

SANCHEZ: That's interesting. Yes.

BELFORT: These are the things that people on Wall Street hold so dear. But you know, now that I had it all taken away, I'm rebuilding my life now in an honest way as an author, I can look back. I'm happier now without money than I ever was with money. I'm sober. I have a great relationship with the family. I have a great relationship with --

SANCHEZ: We're down to about 60 seconds in this box. And Brandon wants to ask you a question as well before he goes.

BELFORT: Sure.

SANCHEZ: By the way, Brandon, intern at Lehman Brother and he wants to go into your profession. Take it away, Brandon.

LAWRENCE: Well, Jordan, thanks again for your time. And my question is, coming into this arena of Wall Street and there are a lot of people who do have that opportunity as well, what type of advice would you give students who are coming into this arena so they will not get that type of mind frame. Because your mind set coming in as a starry-eyed rookie is different than it was to the point when you're making that money. What type of advice would you give?

BELFORT: The best advice I could give is that you will make more money over the long-term if you do the right thing by your clients and you don't break the law. It's all about instinct gratification. If you delay the gratification and you work hard for a long period of time, you will make a fortune on Wall Street honestly and ethically.

My problem was I wanted it all now. I wanted it yesterday. Instant gratification and that is really the downfall of many of these people on Wall Street. They just -- you know, they want it quick, they want it now and Wall Street is a place that you can get that. If you delay that gratification and you work hard, you do the right thing, you're honest with your clients, you'll become a multimillionaire and you'll be able to live a life with dignity and the good sort of pride.

SANCHEZ: That's interesting. Hey, Jordan Belfort, thanks so much for...

BELFORT: My pleasure.

SANCHEZ: ...for sharing your story with us. We certainly appreciate it. By the way, there is something else. This comment just came in moments ago. This is on MySpace. "Rick, what is a reasonable solution to this? Can you actually impose a ceiling on what someone can earn? Will there be a national maximum wage?"

I guess what we're looking at is what happens now? How do we get out of this? What's in the future? Where are we going? That's next. Stay with us.

(COMMERCIAL BREAK)

SANCHEZ: We welcome you back to this CNN SIU's SPECIAL: THE FALL OF THE FAT CATS. I'm Rick Sanchez.

This situation that we just experienced, what we've seen on Wall Street, It's not the kind of thing that could happen again, right? Watch.

(BEGIN VIDEOTAPE)

BOUDREAU (voice-over): While it lasted, the good times on Wall Street not only made the traders and executives happy, millions of Americans were happy as well.

ANDY SWERWER, FORTUNE MAGAZINE: No one complained about it when the stock market was going up. We were all making money. They were making a lot more than we were, but we weren't complaining because our 401(k)s were going up, our stock portfolios were appreciating so who cares.

BOUDREAU: But the financial devastation of the past week and months has raised one paramount question. Is the party over? Some feel, yes. But perhaps not for everyone on Wall Street. Naomi Klein is an author with liberal views.

NAOMI KLEIN, AUTHOR, "THE SHOCK DOCTRINE": I feel like the whole image we have of the American financer is somehow backwards. That in fact they are the least risk-taking people in the culture. That the average person working at Wal-Mart has far more risk in their life than the average person working on Wall Street.

BOUDREAU: But that's not how 25-year-old Win Hornig sees things.

WIN HORNIG, BANKERGONEBROKE.COM: It's interesting because the people that lost the most were also the biggest believers. You know, a lot of people were paid in stock. If they really were knew what they were doing and really had malicious intent, I think most people would have tried to sell us many stocks. You know, as many -- as much of their stock as they could before a catastrophe hit.

BOUDREAU: Hornig is a former Wall Streeter from Minnesota. He is young, ambitious and wanted to make money. He said at one point, working between 80 and 105 hours a week. But now he's out of work after jobs at Bear Sterns and JPMorgan. And he's writing a blog about it, bankergonebroke.com.

HORNIG: Just a place for us to kind of discuss what we're going through in these times, you know, financial crisis. Our day to day issues that pop up and how we are getting by. BOUDREAU: His blog focuses on how to survive on a shoe-string budget, something he is not used to, considering his firm used to pay for most of his cab fares and dinners.

HORNIG: You know, we found Trader Joe's which is pretty close to my apartment, absolutely I love it. Absolute, I love it.

BOUDREAU (on camera): Yes, good deals there.

HORNIG: Great deals.

BOUDREAU: And good food. I love that you feel like you have found Trader Joe's.

HORNIG: Right. It's true.

BOUDREAU (voice-over): Also true is this. Over the past decade, executive salaries on Wall Street skyrocketed. The man who literally wrote the book on how much to pay these men and women said salaries are the problem.

BRUCE ELLIG, COMPENSATION EXPERT: Is anybody worth more than $10 million?

BOUDREAU: Bruce Ellig's book has been used by hundreds of companies worldwide. Salaries, he said, not bonuses. Salary should be capped at $10 million a year for everyone. No exceptions. Because of one simple reason.

ELLIG: With the issue, there has to be downside. You cannot put these big parachutes out there, these golden boots and allow individuals to get -- have absolutely no opportunity -- reason to be concerned about failure.

BOUDREAU: Unrealistic? Maybe. But one thing seems fairly certain.

ROBERT FRANK, AUTHOR, "RICHISTAN": We're going to see probably a glut of jet. A lot of Ferraris and Porsches on the market. And a lot of mansions in places like Palm Beach and Greenwich and The Hamptons up for sale with no buyers.

BOUDREAU: And it's already happening. The former president of Lehman Brothers, Joseph Gregory is selling his estate in Bridge Hampton, New York for $32.5 million. Anthony Piszel, a former chief financial officer of Freddie Mac is putting his vacation home in Maryland on the market too and asking nearly $5 million. That's at the top end.

Sarah Westlake still has her job as a nanny for a wealthy couple whose main income is from Wall Street.

SARAH WESTLAKE, NANNY: And I e-mailed my boss and you know, just asked and threw it out there. Am I -- do I need to start looking for another job or am I OK?

BOUDREAU: OK for now was the answer.

WESTLAKE: What are you going to do, you know? It's all about you have your ups and downs and you're made stronger throughout the tough times.

BOUDREAU: Tough times are the order of the day for Wall Street as well. But experts say stay tuned.

ANDY SERWER, FORTUNE MAGAZINE: The party is over on Wall Street until it comes back again. It may take three, five years, but I have been around long enough to see that we have these cycles, the guys get their cigars and their champagne, they have a great time, the whole thing blows up but then they reemerge years later. This one is a really, really bad one, but I don't think Wall Street is dead.

(END VIDEOTAPE)

SANCHEZ: That is a great series of reports. When you talk to these Wall Street fat cats, do you get a sense that they feel bad that the system has apparently broken down given what we're going through now, or do they just feel bad because they weren't able to pull it through?

BOUDREAU: I don't think that they feel bad. I think that they feel like things will get better. They look at it as if they are living in the moment right now, they worry about tomorrow, tomorrow and they are optimistic. It might have slowed down the party a little bit, but the party on Wall Street, according to people that I talked to, is not over.

SANCHEZ: But that's interesting because doesn't it make you think, it's not their money, really. I mean, let me read to you this excerpt here from "Time" magazine.

"Didn't the folks on Wall Street, who are nothing if not smart, know that someday the music would end? Sure. But they couldn't help behaving the way they did because of Wall Street's classic business model, which works like a dream for Wall Street employees doing good times but can be a nightmare for their customers." It goes on to say, here's how it goes. "You bet big with somebody else's money. If you win you get a huge bonus based on profits. If you lose, you lose somebody else's money." I mean, think about that. Is that correct? You want to go into this?

Brandon?

LAWRENCE: That's really somewhat accurate approach. I think that when you are dealing with companies on a day-to-day basis and you are navigating their financials, I believe that you do have that potential to be eligible for a bonus, however, you are dealing with other people's money. And that does fall back on a moral standard.

SANCHEZ: But it's not your money, Joey? Where's the fear?

HYNSON: I would love to go to Vegas with somebody else's money and play it up. If we win, we win. If we lose, oh, well. SANCHEZ: And Magda as a realtor, you saw this across the board. It wasn't just the fat cat's, wasn't it? (INAUDIBLE).

GOMEZ: Well, the same buyers that were buying those houses for the past five years at those -- those loans that we talked about earlier. You know, now they are paying the consequences. So yes, they were using that money and those advantage to go ahead and pay for a house much more what they can afford.

SANCHEZ: Did you sell a house ever to somebody who you knew really couldn't afford to have that mortgage?

GOMEZ: Eventually yes. But it was not up to me to judge their finances. It was their loan officer and the people in the lending company to see those people at their documentation to actually say those people could buy the house or not.

SANCHEZ: But you are asking yourself, I can't believe there's a couple who wants to buy that house?

GOMEZ: They're getting ahead. And knowing that's going to adjust. And you better have the money to pay it up.

SANCHEZ: Do you think that we will experience something like this again or will we fix it and will be done with it? Just raise your hands. We will never see another mistake like this in the future. Raise your hands, we will see another mistake like this in the future. Interesting.

From you guys, there you have it. We thank you so much. You guys have been a wonderful panel. And Abbie, what a great report. We thank you so much for bringing it to us so we can share it with so many people who have been sharing their thoughts with us on Twitter, Facebook and MySpace. Again, I'm Rick Sanchez from all of us here at CNN, thanks so much for being with us.

(COMMERCIAL BREAK)

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