Episode 511: Rule Breakers : Planet Money On today's show: Three stories about people who, intentionally or not, found themselves breaking the rules.

Episode 511: Rule Breakers

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LAURYN HILL: (Vocalizing).

NAS: (Rapping) Life...


Hello, and welcome to PLANET MONEY. I'm Caitlin Kenney.


And I'm Zoe Chace. Today on the show...


HILL: (Singing) If I ruled the world.

NAS: (Rapping) Imagine that.

KENNEY: Imagine that.

CHACE: (Singing) I'd free all my...

KENNEY: (Laughter).

CHACE: OK, sorry. OK, today on the show, stories for you about rule breakers. So we have kids in the middle of a traffic jam in Indonesia. We have U.S. cotton farmers and small-town bankers.

KENNEY: That's all coming up on today's show.


HILL: (Singing) I love 'em, love 'em baby, black diamonds and pearls.

NAS: (Rapping) Could it be, if you could be mine we'd both shine.

HILL: (Singing) If I ruled the world.

KENNEY: First up - the kids. When Robert Smith went to Indonesia to do some reporting for our T-shirt project, he ran into this little problem. Well, actually, it's not so little, but he found out about it right away. Traffic in Indonesia is a huge issue. He and our producer Jess Jiang, they have this problem where every time they would go to an interview or need to get around Jakarta, they had to leave an hour early because they just don't know what traffic was going to be like. And of course, where there is a problem, there is often someone selling a solution to the problem. And even if that solution is against the rules and even if they want to charge a lot of money for it, the people who are facing that problem, if they're desperate, they will pay. And that's what Robert found when he was stuck in traffic.


ROBERT SMITH, BYLINE: I am standing in the middle of a Jakarta traffic jam. And I'm not the only one here without a car. Over on the left, there's a guy pushing his chicken cart into traffic clanging his pots. And then right down the center lane there are these guys carrying stacks and stacks of nuts and treats and crackers as big as your head. And they're all trying to get the attention of the drivers.

There is a whole world of commerce inside a Jakarta traffic jam, and the shrewdest businessmen that I met were the teenage boys. You see them at the intersection standing in sandals and T-shirts, and they are directing traffic for price. If you want to merge or, say, turn across three lanes of cars, you signal to the boys, and then they go out into traffic and make room for you.

It's amazing because they're such skinny, little teenagers that they sometimes fit in between trucks that are maybe a foot apart. And this guy brought his own whistle.


SMITH: When you're through, you toss them a few coins - five cents, 10 cents. I managed to get close enough to one of them. He's 12 years old, Amir, and I asked him...

How much money can you make?

AMIR: (Foreign language spoken).

UNIDENTIFIED MAN #1: Yeah, about $7.

SMITH: Seven dollars a day - that's an enormous sum for a kid in Indonesia. Now, the government of Jakarta knows that it looks bad when some of its traffic cops are really 12-year-olds working for tips. So the city is working on some traffic solutions. They've built carpool lanes in the center of the city - hasn't actually done much to ease traffic, but it has created a whole new kind of business. I met a woman. Her name is E-Eis (ph), 23 years old, and she stands on the road just before the carpool lanes holding up this adorable toddler.

E-EIS: (Foreign language spoken).

UNIDENTIFIED WOMAN: This is my daughter, Selfe (ph). She's 2 years old.

SMITH: And the kid is a clever bit of marketing. The mom explains to me that if a driver pays her $2, she and the kid will get in the passenger seat. Three people gets you into the carpool lane. And she tells me the baby counts.

E-EIS: (Foreign language spoken, laughter).

SMITH: On some stretches of road, you can see a dozen women all in a row, all carrying babies, waving three fingers - that's the sign - at all the single drivers they see. Now, all these entrepreneurs make traffic more bearable, but only one businessman out there can actually get me out of this traffic jam. That's the ojek driver. An ojek is a guy with a motorcycle waiting on the side of the road. For a dollar or so, you can hop on the back of the motorcycle and the guy will speed his ojek through the tiny spaces in between the cars.

UNIDENTIFIED MAN #2: This ojek is very quickly.

SMITH: Very fast.


SMITH: All right. Let's do this thing. Let's go.

There is no helmet offered. You just hold on tight, and it is terrifying, but I got to say, fastest we've moved all day. At the traffic-clogged streets of Jakarta, I'm Robert Smith, NPR News.


HILL: (Singing) Then we'll walk right up to the sun, hand in hand. We'll walk right up to the sun. We won't land.

CHACE: Our next rule breaker is the U.S. cotton farmer. So we've talked a lot on this show about the special privileges that the cotton industry gets here in the United States. It gets a lot of love from the U.S. government, but you might not have heard that we also pay off cotton farmers in other countries, specifically Brazil. The U.S. sends cotton producers in Brazil $150 million a year - or at least we used to until this past October. The U.S. abruptly shut off these payments because the dysfunction of the U.S. Congress touches everyone, including the Brazilian cotton farmer, and our own Hanna Joffe-Walt has the story.

CHANA JOFFE-WALT, BYLINE: The whole thing started with an energetic Brazilian with a bushy black mustache named Pedro Camargo. In 2002, Pedro had a job with the Ministry of Agriculture and, like any project you or I take on at work one day, Pedro did not know this was the one that would end up sticking to him and haunting him, defining his career. Back then, it was just something that annoyed him. The United States, depending on the year, pays half a billion to $4 billion to American cotton farmers. Brazil, Pedro notes, also has cotton farmers, and they like to make money, too.

PEDRO CAMARGO: We want to compete farmer against farmer and not Brazilian farmer and the American farmer with the help of the United States government. That's - not only it's not fair. It's not following the rules.

JOFFE-WALT: The World Trade Organization rules, a set of agreements that govern global trade. Back in 2002, Pedro went to the WTO with his complaint, argued the U.S. was illegally subsidizing cotton, and Pedro won. But the U.S. appealed the decision. The U.S. lost, appealed again, lost again.

CAMARGO: We would win appeal, win appeal and still - and the United States would ignore, completely ignore.

JOFFE-WALT: Brazil threatened to retaliate with trade sanctions if the U.S. didn't stop subsidizing cotton. And finally in 2010, U.S. representatives made Brazil an unusual offer. They said, look, it's up to Congress to get rid of subsidies. And at the moment, that's not going to happen - maybe in the next farm bill. How about until then, until the next farm bill passes, we pay you guys, give you some money?

CAMARGO: I said, well, I don't want the - how do you say - I don't want a tip. No tips. I want a solution.

JOFFE-WALT: But then, the Americans offered a number - $147 million a year, and this changed things for Pedro.

CAMARGO: A hundred and fifty million dollars is not a tip - maybe it's a bribe. But it's not a tip. It's a lot of money. For Brazilian farmers, it's a lot of money.

JOFFE-WALT: Pedro wanted the cotton subsidies gone. But back in 2010, he was sounding pretty upbeat.

CAMARGO: We didn't win, but we got compensated to wait because we still expect to win. I think maybe we'll win, and we're waiting with $150 million in the pocket. It helps.

JOFFE-WALT: OK. Just to review up to this point - the U.S. was found to be illegally subsidizing U.S. cotton farmers. The U.S. is still subsidizing American cotton farmers. In addition, for more than three years, the U.S. has also been subsidizing Brazilian cotton farmers. Every month at the end of the month, the U.S. sends money to a man named Haroldo Cunha, president of the now 3-year-old Brazilian Cotton Institute.

HAROLDO CUNHA: Yes. (Unintelligible) normal. The amount transferred was $12,275,000.

JOFFE-WALT: But then last October...

CUNHA: Nobody called. We just looked at the bank account, and we realized that no payment was done.


CUNHA: This October - zero, yes. October, November, December - we are already three months with no transfers.

TOM VILSACK: Well, that's not quite accurate (laughter).

JOFFE-WALT: That as U.S. Secretary of Agriculture Tom Vilsack, the man who for the last three years has overseen the transfer of nearly half a billion dollars to the Brazilian Cotton Institute. And Vilsack says he did warn the Brazilians last summer that come fall, he would no longer have funds to send every month.

VILSACK: Basically what happened was it was previously included in president's budgets for a couple of years. It wasn't included in this president's budget because Congress had indicated a desire and belief that they were going to get a farm bill passed.

JOFFE-WALT: But Congress did not get a farm bill passed in October or November or December. And, unfortunately, for the Brazilians, people in the United States who want the farm bill to pass find it helpful to have a bunch of angry Brazilians threatening trade retaliation unless Congress gets the farm bill passed. For Pedro Camargo, this is no longer his battle, but he can't stop checking the news on his computer.

CAMARGO: Why are we still talking about cotton? It's a long time - 11 years. I have five grandchildren. I don't want to talk about cotton anymore. It's just too much time.

JOFFE-WALT: Eventually, a farm bill will pass. The Brazilians were paid to wait for this farm bill with the promise that it would finally deal with their complaint and U.S. cotton subsidies. But, actually, a lot of Brazilian trade representatives who have looked at current versions of the bill say the subsidies are still in there, just disguised under a different name. If they still feel that way when the bill passes, they're going to take the whole thing back to the WTO, start the entire process all over again. Chana Joffe-Walt, NPR News.

KENNEY: The farm bill still up in the air.

CHACE: Still not yet passed.

KENNEY: Well, our next group of rule breakers - they know exactly what this is like. They know what it's like to be subject to rules that are constantly changing, constantly evolving. One minute what you're doing is totally fine, and the next minute it's illegal. I'm talking, of course, about the banks.

CHACE: The banks.

KENNEY: We've seen a lot of huge changes to the rules around banks this year. But, of course, some of the banks say, hey, these new rules aren't fair, specifically the little banks. They say, hey, the big guys are the ones who screwed up and got us all in trouble. Why are we being punished for what they did? Zoe, this next story comes from you.

CHACE: Lots of big banks have been getting into trouble lately as lawsuits multiply over stuff that went on at the too-big-to-fail banks during the financial crisis. According to analysis from S&L Financial JP Morgan's paid out more than $26 billion, Bank of America - $44 billion. And now there's Tioga State Bank.

RICHARD FISHER: Tioga State Bank - we're a community bank in upstate New York. Our headquarters is in the village of Spencer, New York which is - has about 800 people in the village of Spencer.

CHACE: Are you one of those banks that's like too big to fail would you say? Are you a systemic risk to the economy?

FISHER: People might say I'm systemic in the village of Spencer, but no. For the economy, no.

CHACE: Richard Fisher (ph) is the bank president. He got caught up in footnote 1,861 of this thing called the Volcker Rule. The Volcker Rule is supposed to limit a potentially risky behavior that banks engage in called proprietary trading. Big banks have entire floors of traders using the bank's own money to speculate in the markets. Maybe you've heard of the London Whale, a trader who cost JP Morgan over $6 billion. He worked in the European headquarters of the investment bank. A 30-odd floor skyscraper in London's financial district makes Tioga State Bank look kind of shrimpy.

FISHER: It's kind of a single-story building.

CHACE: So where's your big proprietary trading floor?

FISHER: (Laughter) We don't have a proprietary trading floor. We take deposits. We make loans.

CHACE: So what is Fisher's bank doing wrong, according to footnote 1,861? Well, it turns out banks like Fisher's have money left over that they haven't lent out to the area for businesses or for new homes or whatever, and they use some of that money to buy a popular investment. It's called a trust preferred security. You don't need to remember the name. The point is the footnote makes this investment against the rules. So Fisher's possibly going to have to sell these off and take a hit.

FISHER: It's 25 percent of my annual income, so it's a big deal.

CHACE: It's a big deal and ridiculous, according to Fisher, that a bank like his that had nothing to do with the financial crisis shouldn't be allowed to hold on to an investment that had nothing to do with the financial crisis. Nathan Stovall who covers the banking industry for SNL Financial says the regulators just don't want banks investing in something that could even just smell a little risky.

NATHAN STOVALL: What it's trying to do is say we want you to be a lender - period. And since you're investing some of those deposits and bonds, we wanted to be in very vanilla stuff.

CHACE: The American Bankers Association does not consider these particular investments risky and is challenging the rule, saying some community banks could have to close their doors over this footnote. So the regulators are reconsidering. It turns out it's kind of hard to write the rules over what could pose a risk to the taxpayers and what won't. The new rules that govern the banks - they are currently 6,910 pages long and counting. Zoe Chace, NPR News.

So there's an update on this story which is that the little banks actually got the rules changed. They can hold onto these securities if they are truly little enough banks. Basically, if they have less than $15 billion dollars in assets which in banking terms is nothing. Actually, it's a lot of banks, but not the really big ones. And in a final update since this piece ran on the radio, the number of pages of the rules that now govern the banking system has jumped from 6,000 and changed to - if you just pull it up right now I can see - it is 7,569 pages of new rules and counting.


HILL: (Singing) If I ruled the world.

NAS: Imagine that.

HILL: (Singing) If I ruled, I'd free all my sons. If I ruled, if I ruled...

KENNEY: As always, we want to know what you thought of today's show. You can email us planetmoney@npr.org. You can also find us on Facebook, Twitter, Spotify. I'm Caitlin Kenney.

CHACE: I'm Zoe Chace. Thanks for listening.


NAS: (Rapping) Last days and times.

HILL: (Singing) If I ruled the world. If I ruled, if I ruled, I'd free all my sons. I love them, love them, baby. Black diamonds and pearls. If I ruled, if I ruled the world, if I ruled the world. I love them, love them baby.

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