All the Presidents' Bankers (97 page)

50
. Katrina Brooker, “Citi’s Creator, Alone with His Regrets,”
New York Times,
January 3, 2010.

51
. Fleming Stewart, “The Euro’s Big Bang,”
Institutional Investor
(international ed.), January 1, 1999.

52
. Joshua Ramo, “The Three Marketeers,”
Time,
February 15, 1999.

53
. George A. Akerlof and Robert J. Shiller, “Why Do Central Bankers Have Power?” in
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
(Princeton, NJ: Princeton University Press, 2009), 84–85.

54
. Robert E. Rubin, “Text as Prepared for Delivery,” Committee on Financial Services press release,” February 12, 1999, at
http://democrats.financialservices.house.gov/banking/21299rub.shtml
.

55
. Ibid.

56
. Ramo, “The Three Marketeers.”

57
. Klaus C. Engelen, “American Arrogance,”
The International Economy
13, no. 5 (September/October 1999): 10–13.

58
. Copy of Robert Rubin’s testimony before the Senate Banking Committee, Policy Development, Lisa Green OA/ID 20587, Box 3 of 19, CRA (Folder 1), February 24, 1999, Clinton Library. Rubin added that “foreign bank subsidiaries hold $450 billion in assets and Edge Act subsidiaries hold about $250 billion in assets.”

59
. Letter to Phil Gramm, March 2, 1999, Policy Development, Lisa Green, OA/ID 20587, Box 4 of 19, CRA (Folder 2), Clinton Library.

60
. Ibid.

61
. “Chairman Gramm Releases Draft of Financial Services Legislation, Committee Mark-Up Set for March 4,” Capitol Hill Press Releases, March 1, 1999.

62
. Dean Anason, “Clinton to Gramm: Change Reform Bill or Face a Veto,”
American Banker,
March 4, 1999.

63
. “Sampled History,” Dow Jones Industrial Average, at
www.fedprimerate.com/dow-jones-industrial-average-history-djia.htm
.

64
. “S. 900 (106th): Gramm-Leach-Bliley Act,”
GovTrack.us
, April 28, 1999, at
www.govtrack.us/congress/bills/106/s900
.

65
. Clinton,
My Life,
857.

66
. “Treasury Secretary Rubin Resigns: Clinton Losing Trusted Friend, Adviser,” CNN, May 12, 1999.

67
. Joseph Kahn and Alessandra Stanley, “Enron’s Many Strands: Dual Role: Rubin Relishes Role of Banker as Public Man,”
New York Times,
February 11, 2002.

68
. John Schmid and Philip Segal, “Deregulation to Unleash New Competition: Giant Banks Prepare for a U.S. Onslaught,”
New York Times,
October 5, 1999, at
www.nytimes.com/1999/10/25/news/25iht-banks.2.t_1.html
.

69
. Stephen Labaton, “Congress Passes Wide-Ranging Bill Easing Bank Laws,”
New York Times,
November 5, 1999.

70
. Ibid.

71
. Ibid.

72
. Ibid.

73
. Joseph Kahn, “Consumer Groups Seek Ethics Inquiry on Rubin’s New Job,”
New York Times,
November 18, 1999.

74
. Ibid.

75
. Bob Ivry, “Reed Says ‘I’m Sorry’ for Role in Creating Citigroup,”
Bloomberg,
November 6, 2009.

76
. Secretary of Labor Robert Reich resignation remarks, Council on Excellence in Government, US Department of Labor, January 9, 1997, at
www.dol.gov/oasam/programs/history/reich/speeches/sp970109.htm
.

77
. Luke Schaefer and Kathryn Edin, “Extreme Poverty in the United States, 1996 to 2001,” Policy Brief 28, February 2012, National Poverty Center, University of Michigan.

78
. Emmanuel Saez with Thomas Piketty, “Income Inequality in the United States, 1913–1998,”
Quarterly Journal of Economics
118, no. 1 (2003): 1–39.

Chapter 19. The 2000s: Multiple Crises, the New Big Six, and Global Catastrophe

1
. JPMorgan Chase 2013 Investor Day, JPMorgan Chase & Co., February 26, 2013. Dimon was responding to a question from Credit Lyonnais Securities Asia bank analyst Michael Mayo.

2
. Louis Jacobson, “Bernie Sanders Says Six Bank Companies Have Assets Equaling 60 Percent of U.S. GDP,” PolitiFact 2012, at
www.politifact.com/truth-o-meter/statements/2011/oct/06/bernie-s/bernie-sanders-says-six-bank-companies-have-assets/
.

3
. Robert Lenzner, “Banking Concentration Still a Systemic Risk,”
Forbes,
April 7, 2011, at
www.forbes.com/sites/robertlenzner/2011/04/07/banking-concentration-still-a-systemic-risk/
.

4
. “Prepared Testimony of Mr. Henry M. Paulson,” hearing on the Financial Marketplace of the Future, Senate Banking Committee, February 29, 2000, at
www.banking.senate.gov/00_02hrg/022900/paulson.htm
.

5
. “Approval of Application and Notice of Chase Manhattan,” Board of Governors of the Federal Reserve press release, December 11, 2000. See also “Chase and J. P. Morgan Shareholders Approve Merger,” J. P. Morgan press release, December 22, 2000.

6
. Patrick McGeehan and Saul Hansell, “Chase Hopes Deal for Morgan Will Bring It Prestige,”
New York Times,
September 14, 2000.

7
. Liz Moyer, “JPM-Chase, Fleet Feel Pain of Slow Markets,”
American Banker,
July 19, 2001.

8
. David Smith, “Into the Belly of the Beast, Part II (Goldman Sachs and the European Crisis),”
Economy Watch,
February 2, 2012, at
www.economywatch.com/economy-business-and-finance-news/into-the-belly-of-the-beast-part-two.02–02.html
. In 2002, Greece was advised by Goldman Sachs on how to legally hide its debt using complex derivatives deals that optically reduced the size of government debt below the limit of 60 percent of the economy. Greek debt was issued in dollars and yen, then swapped for euro debt for a period and swapped back later, for a “secret” credit of about $1 billion.

9
. Author’s note: In September 2001, I was working at Goldman Sachs and ran the credit derivatives strategies group. Some of our research had been posted on Enron’s website for informational purposes. Enron and Goldman were trading partners, as well as competitors for credit derivatives business.

10
. Author’s experience as a staff member at Goldman Sachs.

11
. “Remarks by the President Upon Arrival,” White House press release, September 16, 2001, at
georgewbush-whitehouse.archives.gov/news/releases/2001/09/20010916–2.html
.

12
. “SEC Biography: Chairman Harvey L. Pitt,” US Securities and Exchange Commission, at
www.sec.gov/about/commissioner/pitt.htm
. See also “Bush Expected to Nominate Harvey Pitt as SEC Chief,”
CFO,
May 7, 2001, at
www.cfo.com/article.cfm/2994814
. Prior to being appointed SEC chairman on August 3, 2001, Pitt had defended several clients in fraud cases, most notably Ivan Boesky, who paid a record $100 million to settle his civil fraud case in 1986.

13
. “Timeline of Enron’s Collapse,”
Washington Post,
September 30, 2004.

14
. Alex Berenson and Richard A. Oppel Jr., “Once-Mighty Enron Strains Under Scrutiny,”
New York Times,
October 28, 2001.

15
. Robin Sidel and Rebecca Smith, “Dynegy Holds Talks to Buy Enron, Inject $1.5 Billion to Shore Up Firm,”
Wall Street Journal,
November 8, 2001.

16
. “Rating the Raters: Enron and the Credit Rating Agencies,” hearing before the Senate Governmental Affairs Committee, 107th Congress, S. Hrg. 107-471, March 20, 2002.

17
. “Lay Offered Rubin Job on Enron Board,”
CNN.com
, February 21, 2002.

18
. “Rating the Raters.”

19
. US Congress Senate Committee, “Enron’s Credit Rating: Enron’s Bankers’ Contacts with Moody’s and Government Officials,” Staff Report, January 3, 2003.

20
. Ibid.

21
. “Dynegy Scraps Enron Deal,” CNNMoney, November 28, 2001.

22
. Enron Creditors Recovery Corporation, “The Springfield Case Fact Sheet,” at
www.enron.com/index_option_com_content_task_view_id_96_Itemid_35.htm
. See also Bob Lyke and Mark Jickling,
WorldCom: The Accounting Scandal,
CRS Report for Congress, August 29, 2002.

23
. Dan Ackman, “Enron Files Chap. 11,”
Forbes,
December 3, 2001.

24
. George W. Bush, “Statement on Signing the Department of Defense and Emergency Supplemental Appropriations for Recovery from and Response to Terrorist Attacks on the United States Act, 2002,” American Presidency Project, January 10, 2002 at
www.presidency.ucsb.edu/ws/?pid=73224#axzz2hO8LW54t
.

25
. George W. Bush, “Address Before a Joint Session of the Congress on the State of the Union,” American Presidency Project, January 29, 2002.

26
. American Bankruptcy Institute, Annual Business and Non-business Filings by Year (1980–2012), at
www.abiworld.org/AM/AMTemplate.cfm?Section=Home&CONTENTID=66471&TEMPLATE=/CM/ContentDisplay.cfm
.

27
. “Paulson Backs SEC’s Demand for More Cash,”
Financial News,
June 6, 2002.

28
. US District Court, “Judge’s Opinion and Order,” Securities and Exchange Commission, July 7, 2003.

29
. US District Court, “Complaint: SEC v. Bernard J. Ebbers,” Securities and Exchange Commission. See also “WorldCom Bankruptcy Plan Wins Judge’s Approval (Update 2),”
Bloomberg,
October 31, 2003; and Dan Arnall, “Worldcom at a Glance,” ABC News, March 15, 2005.

30
. “On 1st Anniversary of WorldCom Fraud Scandal: Web-Based Countdown Clock Shows U.S. Taxpayer Dollars Being Used to ‘Bailout’ Scandal-Ridden Company,” PR Newswire, June 25, 2003.

31
. “The Honorable Jed Rakoff Approves Settlement of SEC’s Claim for a Civil Penalty Against WorldCom,” Securities and Exchange Commission press release, July 7, 2003.

32
. George W. Bush, “Fact Sheet: Corporate Responsibility,” American Presidency Project, July 9, 2002, at
www.presidency.ucsb.edu/ws/?pid=79680
.

33
. US Senate, “Oversight of Investment Banks’ Response to the Lessons of Enron,” Hearing before the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs, December 11, 2002, Second Session, vols. 1 and 2.

34
. Kellogg Insight, “Lobbyists Speak in Numbers—Based on the Research of Yael Hochberg, Paola Sapienza, and Annette Vissing-Jørgensen,” Northwestern University, May 1, 2008.

35
. Paul Starr, “The Great Telecom Implosion,”
The American Prospect,
September 8, 2002.

36
. “Clambering Back Up: Corporate Reform,”
The Economist,
July 23, 2002.

37
. “U.S. Launches Cruise Missiles at Saddam,” CNN World, March 20, 2003.

38
. “Goldman Faces Battle at Shareholders’ Meeting,”
Financial News,
March 30, 2003.

39
. Mark Gimein, “Eliot Spitzer: The Enforcer,”
Fortune,
September 16, 2002.

40
. “Ten of Nation’s Top Investment Firms Settle Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking,” Securities and Exchange Commission press release, April 28, 2003. See also “SEC Charges Merrill Lynch, Four Merrill Lynch Executives with Aiding and Abetting Enron Accounting Fraud,” Securities and Exchange Commission press release, March 17, 2003. Separately, in July 2003, JPMorgan Chase agreed to pay $135 million and Citigroup agreed to pay $120 million to settle SEC allegations that it helped Enron (and Dynegy) commit fraud. Merrill Lynch had already agreed to pay $80 million to settle investigations into its Enron relationship.

41
. Wolters Kluwer, “Global Settlement with Investment Banks Announced,” at
http://business.cch.com/securitieslaw/news/4–30–03.asp
.

42
. In my 2004 book,
Other People’s Money,
I specifically called this settlement out as not altering Wall Street’s behavior and warned that without more rigorous, real reforms, a worse crisis would occur. In 2008, it did.

43
. Board of Governors of the Federal Reserve, “Appointment of Timothy F. Geithner as President,” press release, October 15, 2003.

44
. Martin Crutsinger, “Former Clinton Administration Official Tapped to Head New York Fed,” AP Worldstream, October 15, 2003. Geithner first joined George H. W. Bush’s Treasury Department in 1988, following three years at Kissinger Associates.

45
. Testimony Before the House Committee on the Budget, “Fannie Mae, Freddie Mac, and FHA: Taxpayer Exposure in the Housing Market,” hearing, June 2, 2011.

46
. Michelle Heller, “Investment Banks Top Bush Donor List,”
American Banker,
October 24, 2003.

47
. Ben White, “Wall Street Bankers, Reelection Backers; New York’s Financial Titans Support Bush in a Big Way,”
Washington Post,
January 24, 2004.