All the Presidents' Bankers
Page 65
62. Ibid., December 3, 1980.
63. Ibid., December 13, 1980.
64. Ibid., Declarations of Algiers.
65. Ibid.
66. Ibid.
67. Ibid.
68. Ibid.
69. Ibid.
70. Ibid.
71. Presidential Papers, Plains File, Subject File: Iran 10/80 through 1/21/81, Box 2, Folder 1/21/1981, Declarations of Algiers, Carter Library.
Chapter 15. The Early to Mid-1980s: Free-Market Rules, Bankers Compete
1. Donald Regan, For the Record: From Wall Street to Washington (New York, NY: Harcourt, Brace, Jovanovich, 1988), 123.
2. Author conversation with Paul Craig Roberts, via email, July 23, 2013. Roberts had been opposed to the national banking initiatives that came in after he left his post, which deregulated the banking industry and caused the larger, more powerful banks to become more so.
3. “The 1982 Recession, Reagan, WGBH,” American Experience (PBS) website, at www.pbs.org/wgbh/americanexperience/features/general-article/reagan-recession/.
4. The kitchen cabinet included Bloomingdale’s heir Alfred Bloomingdale; Earl Brian, combat surgeon for the CIA’s Vietnam War–period Phoenix Program (in 1995 he was convicted on ten counts of fraud and sentenced to four years in prison); Justin Whitlock Dart, son of prominent industrialist Justin Dart, “godfather” of the Americans with Disabilities Act of 1990; William French Smith, US attorney general from 1981 to 1985; Charles Wick, head of the United States Information Agency from 1981 to 1989; Los Angeles businessman William A. Wilson; auto dealer Holmes Tuttle; steel magnate Earle Jorgensen; and beer mogul Joseph Coors, who funded several think tanks at the time, including the Heritage Foundation.
5. Regan, For the Record, 123.
6. Ronald Reagan, nomination speech for Donald T. Regan to be Secretary of the Treasury, January 20, 1981, Press Secretary, Press Releases and Briefings, Box 1, Series 1: Press Releases, Item 10, Ronald Reagan Presidential Library. “In 1946, Mr. Regan joined Merrill Lynch. . . . [He was] named Chairman and Chief Executive Officer of Merrill Lynch, Pierce, Fenner & Smith in January 1971. He relinquished those titles in January 1980 and continues as a Director and member of the Executive Committee of the Company . . . is a member of the Policy Committee of the Business Roundtable . . . a trustee of the Committee for Economic Development, [and] a member of the Council on Foreign Relations.”
7. Regan, For the Record, 139.
8. Ibid., 140.
9. Executive Order No. 12288, January 29, 1981, Termination of the Wage and Price regulatory program, WHORM, BE: Business-Economics BE002 R0008655, Reagan Library.
10. Ronald Reagan, Inaugural Address, January 20, 1981, Public Papers of the President, Reagan Library, at www.reagan.utexas.edu/archives/speeches/1981/12881b.htm.
11. Regulatory Reform Initiative, Fact Sheet, WHORM, Files: Cribb, Kenneth, Box 28, Folder: Deregulation, The White House, Office of the Press Secretary, Reagan Library.
12. Ibid.
13. Memo from Elizabeth Dole to Richard Darman regarding Wall Street meeting, September 11, 1981, WHORM, Business Economics, BE 003 (026000-041399), 041197SS, Reagan Library.
14. Ibid.
15. Remarks of the Vice President at the Economy Recovery Program Media Briefing, April 15, 1981, Press Releases and Briefings, Box 7, 515, Series 1, Reagan Library.
16. Zweig, Wriston, 721.
17. Call to Wriston, June 10, 1981, WHORM, PSF: Calls Box 001, Folder 003, 027931 PR007-02, Reagan Library. Reagan’s cabinet provided him with the contacts, background, and even language to insert in various personal calls.
18. Phillip H. Wiggins, “Inflation’s Impact on Companies,” New York Times, April 16, 1980.
19. Press Briefing by James Baker III, Edwin Meese III, Donald Regan, August 1, 1981, WHORM, Press Releases, Box 12, 1045, Reagan Library.
20. Diary, October 23, 1980, Carter Library, at www.jimmycarterlibrary.gov/documents/diary/1980/d102380t.pdf.
21. Martin Meyer, “The Humbling of BankAmerica,” New York Times Magazine, May 3, 1987, at www.nytimes.com/1987/05/03/magazine/the-humbling-of-bankamerica.html?pagewanted=all&src=pm.
22. Letter from Samuel Armacost, March 25, 1983, WHORM, Alpha File, Folder: Armacost, Samuel, Reagan Library.
23. Author’s Note: I began my career in international banking in the late 1980s, joining Chase as a junior programmer-analyst, when Butcher was the CEO. On Black Monday, October 19, 1987, the department in which I worked was frantically trying to hedge the bank’s short position, a bet taken through a new product that linked CDs with the stock market index. Years later, I realized this product circumvented Glass-Steagall.
24. Ronald Reagan, “Appointment of the Chairman, Executive Director, and Membership of the President’s Commission on Executive Exchange,” September 14, 1981, American Presidency Project, at www.presidency.ucsb.edu/ws/?pid=44250.
25. In a July 10, 1986, letter sent to Rockefeller, following a weekend spent at the Rockefeller estate, Reagan wrote, “The Reagans, the Davises and all our staff people want you to know how grateful we are for the warm hospitality and many kindnesses bestowed on us by the Rockefellers. . . . Nancy joins me in heartfelt thanks to all of you for a weekend we shall always remember.”
26. Letter from David Rockefeller, December 18, 1981, Canzeri, Joseph Files, Series III, Subject File, Box 010, Caribbean Project, Reagan Library. Several months later, in remarks on the Caribbean Basin Initiative at a White House briefing for American CEOs, Reagan said, “I conceived the idea of doing something for Jamaica when Seaga won the election and took that country back from Communist rule. . . . And I turned to the private sector and asked—and asked David Rockefeller to be chairman of a group—[and] go and see how we could use private enterprise to help restore the economy.” As Rockefeller wrote in his Memoirs, “I rallied the American business community to support the newly elected conservative government of Edward Seaga in Jamaica.”
27. Ronald Reagan, “Remarks at a White House Briefing for Members of the Council of the Americas,” May 12, 1987, American Presidency Project, at www.presidency.ucsb.edu/ws/?pid=34270.
28. “Chase Lowers Drysdale Write-off,” New York Times, June 15, 1982, at www.nytimes.com/1982/06/15/business/chase-lowers-drysdale-write-off.html?n=Top%2FReference%2FTimes%20Topics%2FSubjects%2FT%2FTaxes
29. Minutes, Meeting of the Federal Reserve FOMC, May 18, 1982, 1–2.
30. “The Chase Manhattan Corporation,” International Directory of Company Histories.
31. Douglas Martin, “Chase Is Suing F.D.I.C. on Penn Square Moves,” New York Times, July 20, 1982.
32. Telegram to President Elect Reagan from Willard Butcher, November 8, 1980, WHORM, Alpha File, Folder: Butcher, Willard C., Reagan Library.
33. “About John C. Whitehead ’43,” Haverford College, at www.haverford.edu/campuscenter/about.php.
34. Telephone call to Walter Wriston, August 16, 1982, WHORM, PHF: Calls, Box 003, Folder 039, 081348 PR007-02, Reagan Library. The press release stated, “He is a director of six corporations, and a member of several business and civic organizations. He is Chairman of the Business Council, Director of the Economic Council of New York, a member of the Advisory Committee on Reform of the International Monetary Systems, and a trustee of the American Enterprise Institution.”
35. Letter to Walter Wriston from Edwin Meese, November 8, 1982, WHORM, Alpha File, Folder: Wriston, Walter, Reagan Library.
36. Ibid.
37. Jonathan Fuerbringer, “The Fed vs. the White House: A Collision Is Brewing over the Course of Recovery,” New York Times, January 10, 1982.
38. “U.S. Merger Policy Stated,” Reuters (New York Times), October 27, 1981.
39. Letter to Byron Dorgan, March 23, 1982, WHORM, BE 001 (047000–047699), Case No. 047101, Reagan Library.
40. Letter from Ralph Nader, April 26, 1982, WHORM, BE 001, Box 5 (075000–078899), Reagan Library.
41. Ibid. Ominously, Nader also pointed out that Richard
Pratt, chairman of the Federal Home Loan Bank Board, had stripped away virtually all consumer safeguards on the adjustable rate mortgage and authorized the use of balloon mortgages, which were one of the principal causes of widespread foreclosures in the Depression. Elizabeth Dole was worried about the message this might send the public on the back of “Consumer Awareness Week.” She believed “we would be safer taking the ‘high road’ in this response. [Because] we must assume that this letter will end up in the newspapers.” In Dole’s response, she recounted Reagan’s earlier words: “By preserving the rights and responsibilities of consumers, we can assure the vitality of the marketplace and obtain a more desirable balance of competitive and regulatory forces in our society,” Reagan Library.
42. Ibid.
43. “World Bank Loan Plan,” New York Times, January 13, 1983.
44. Ibid. See also FDIC, History of the Eighties—Lessons for the Future, Volume I: An Examination of the Banking Crises of the 1980s and Early 1990s, Chapter 5, at www.fdic.gov/bank/historical/history/191_210.pdf.
45. Ibid.
46. Andrew Albert, “Regan Aims to Calm Fears on Argentina,” American Banker, May 29, 1984.
47. Ibid.
48. Ibid.
49. Joint statement by the participants at the Williamsburg Economic Summit, May 30, 1983, WHORM, Press Releases, Box 058, 4465, Reagan Library.
50. Ronald Reagan, The Reagan Diaries (New York, NY: HarperCollins, 2007), 160.
51. “Volcker Plan to Curb Bank Mergers,” AP (New York Times), June 24, 1983, at www.nytimes.com/1983/06/24/business/volcker-plan-to-curb-bank-mergers.html.
52. Senior Staff Meeting Action Items, July 6, 1983, WHORM, FG 006–01, Subject File, Box 49, Case No. 152218 (4 of 9), Financial Institutions Deregulation Bill, Reagan Library.
53. Ibid., July 7, 1983, Case No. 3152220 (9 of 9).
54. Ibid., July 8, 1983, Box 50, Case No. 154077 (8 of 10).
55. Memorandum for Edwin L. Harper from Thomas J. Healey, July 18, 1983, WHORM, FG 012, Box 2, Case No. 157912; enclosed, a copy of the testimony of Honorable Donald T. Regan, Secretary of the Treasury before the Senate Committee on Banking, Housing, and Urban Affairs, Reagan Library.
56. “Volcker Plan to Curb Bank Mergers,” New York Times, June 24, 1983, at www.nytimes.com/1983/06/24/business/volcker-plan-to-curb-bank-mergers.html. Memorandum for Edwin L. Harper from Thomas J. Healey, July 18, 1983.
57. Ibid.
58. Cabinet Council on Economic Affairs Agenda, 1. Report of the Working Group on Financial Institution Reform (CM#149), 2. Report of the Working Group on Financial Institutions Deregulation Act (FIDA) (CM #385), November 23, 1983, WHORM, Federal Government Organizations, 010-02, Box 43, Case No. 168834CS, Reagan Library.
59. Memo from Thomas J. Healey, November 18, 1983, WHORM, Federal Government Organizations, 010-02, Box 43, Case No. 168834CS, Reagan Library.
60. Memo for R. T. McNamara, November 8, 1983, WHORM, Federal Government Organizations, 010-02 Box 43, Case No. 168834CS, Reagan Library.
61. Ibid.
62. Ibid.
63. Ibid.
64. Cabinet Council on Economic Affairs, November 29, 1983, WHORM, FG010-02, Box 44, Case No. 168838, Reagan Library.
65. Fraust, “NY Fed Chief: Merit in View of Agency Lag; Solomon Concedes Delays on New Powers,” American Banker, January 27, 1984.
66. Testimony of the Honorable Donald T. Regan, Secretary of the Treasury, before the Senate Committee on Banking, Housing and Urban Affairs, March 28, 1984, WHORM, FG 012, Box 2, Case No. 219399, Reagan Library.
67. Fraust, “NY Fed Chief.” Solomon was a director of S.G. Warburg in London from 1985 until 1991 and Chairman of S.G. Warburg USA from 1985 until 1989.
68. Ibid.
69. “Is a Texas Thrift the Next Course for Hungry Citicorp? Analysts Say State’s Economy, Thriving Institutions Could Lure New York Holding Company,” American Banker, January 9, 1984.
70. Laura Gross and John Forde, “Reed Wins Banking’s Big One—The ‘CitiSweeps’; Appointment of Retail Banker as Wriston’s Successor Is Seen as Setting Precedent for Other Institutions,” American Banker, June 21, 1984.
71. Zweig, Wriston, 827.
72. Ronald Reagan, “Remarks at the Annual Republican Senate/House Fund-raising Dinner,” May 21, 1986, American Presidency Project, at www.presidency.ucsb.edu/ws/?pid=37320.
73. “Bush Task Group Statement,” American Banker, February 2, 1984.
74. Ibid.
75. Wilson, The Chase, 342.
76. Robert M. Garsson, “Digesting the Convention’s Issues—and Shrimp; Executives Head Home from ABA Gathering, End 5-Day Immersion in Industry Topics,” American Banker, October 26, 1984.
77. Wilson, The Chase, 343.
78. Bob Woodward, Maestro (New York, NY: Simon & Schuster, 2000), 17.
79. David Warsh, “How Volcker Acted When Chips Were Down,” Boston Globe, January 31, 1988.
80. Memo for the Cabinet Council of Economic Advisers from Roger B. Porter, October 5, 1984, WHORM, FG 010-02, Box 54, Case No. 169082, Reagan Library. See also Andrew Albert, “Bush Group Urges Reallocation of Powers; Fed Wins Expanded State Supervisory Role,” American Banker, February 1, 1984.
81. Andrew Albert and Jay Rosenstein, “Baker Appointment Seen as Plus for Regional Banks, Though Not as Harbinger of Any Change in Philosophy,” American Banker, January 9, 1985. See also Ronald Reagan, “Remarks Announcing the Nomination of James A. Baker III to Be Secretary of the Treasury and the Appointment of Donald T. Regan as Assistant to the President and Chief of Staff,” January 8, 1985, American Presidency Project, at www.presidency.ucsb.edu/ws/?pid=38244.
82. Albert and Rosenstein, “Baker Appointment Seen as Plus.”
83. Jonathan Friedland, “Baker Urges $20 Billion Boost in Bank Lending to 3d World: Treasury Secretary Proposes Global Compact on Debt Crisis,” American Banker, October 9, 1985.
84. A. W. Clausen, Address to the Board of Governors, October 8, 1985, WHORM, Bledsoe, Ralph C. Files (DPC), Box 157, Reagan Library.
85. Peter T. Kilbom, “Washington Watch; Administration and Clausen,” New York Times, October 21, 1985, at www.nytimes.com/1985/10/21/business/washington-watch-administration-and-clausen.html.
86. Ibid.
Chapter 16. The Late 1980s: Third World Staggers, S&Ls Implode
1. George Bentson study presented to Congress, October 12, 1985, WHORM, FG (federal government): Organizations, Box 21, Case File 341076, Reagan Library. The study found that “Deregulation is responsible for the failures of the 1980s only in allowing risk-prone managers to obtain funds. Direct investments, however, do not appear to be among the risks taken.”
2. Ibid.
3. Elizabeth E. Bailey, “Airline Deregulation: Confronting the Paradoxes,” Regulation Magazine (Cato Institute), Summer 1992, at http://www.cato.org/sites/cato.org/files/serials/files/regulation/1992/7/v15n3–6.pdf, 1.
4. Martin Mayer, The Greatest-Ever Bank Robbery: The Collapse of the Savings and Loan Industry (New York, NY: C. Scribner’s Sons, 1990).
5. Repurchase (or repo) agreements are a way to borrow money short-term, where deposits or government securities are sold or lent to another party in exchange for cash and returned (usually) the following day.
6. Kingsford Capital Management, Kingsford Capital: The First 100 Years (San Francisco, CA: Bentrovato Books, 2011), 76.
7. James Sterngold, “Boesky Sentenced to 3 Years in Jail in Insider Scandal,” New York Times, December 19, 1987.
8. Scot J. Paltrow, “Sobbing Milken Pleads Guilty to Six Felonies,” Los Angeles Times, April 25, 1990. See also Myles Meserve, “Here’s How You Make a Comeback on Wall Street—The Michael Milken Story,” Business Insider, August 16, 2012.
9. Bartlett Naylor, “Executives Call US Securities Laws a Hindrance in World Capital Markets,” American Banker, February 28, 1986.
10. Gary Hector, “Botching up a Great Bank Under Tom Clausen,” Fortune, June 6, 1988. Excerpted from Breaking the Ba
nk: The Decline of BankAmerica (New York, NY: Little, Brown & Co., 1988).
11. Mike Carroll, “Will Armacost’s Luck Hold at Bank of America?,” American Banker, February 28, 1986.
12. Hector, “Botching Up a Great Bank.”
13. “BankAmerica Picks Clausen to Replace Armacost as Chair, CEO,” Chicago Sun-Times, October 12, 1986.
14. John M. Broder, “Armacost Quits at BofA; Clausen May Get Post,” Los Angeles Times, October 11, 1986, at http://articles.latimes.com/1986-10-11/news/mn-2772_1_world-bank.
15. “Alden Winship (‘Tom’) Clausen,” World Bank Archives, at http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/EXTARCHIVES/0,,contentMDK:20487071~pagePK:36726~piPK:437378~theSitePK:29506,00.html.
16. John M. Broder, “Hike in Bad-Loan Reserve Nets $1 Billion B of A Loss,” Los Angeles Times, June 9, 1987, at http://articles.latimes.com/1987-06-09/news/mn-6019_1_net-loss.
17. “Mexico, Venezuela Falling Behind on Loans,” Associated Press via Chicago Sun-Times, March 28, 1986.
18. Meyer, “The Humbling of Bank America.”
19. “The History of JPMorgan Chase & Co.: 200 Years of Leadership in Banking,” JPMorgan Chase, 2008, at www.jpmorganchase.com/corporate/About-JPMC/document/shorthistory.pdf.
20. Ibid. See also “J. P. Morgan to Underwrite Corporate Debt,” Los Angeles Times, June 20, 1989, at http://articles.latimes.com/1989–06–20/business/fi-2479_1_chase-manhattan-corp-fed-s-decision-debt-securities.
21. Eric Dash, “Dennis Weatherstone, Banking Sage, Dies at 77,” New York Times, June 18, 2008, at www.nytimes.com/2008/06/18/business/18weatherstone.html.
22. “Citicorp Bad-Loan Action Lauded Firm Sets Up $3b Fund as Shield on Losses,” Albany Times Union (Albany, NY), May 21, 1987.
23. Robert A. Bennett, “Citicorp’s Defiant Leader: John Shepard Reed,” New York Times, May 21, 1987, at www.nytimes.com/1987/05/21/business/man-in-the-news-citicorp-s-defiant-leader-john-shepard-reed.html?pagewanted=all&src=pm.
24. Tom Redburn, “Banks Led Way in Easing Crisis on Mexico Debt,” Los Angeles Times, January 10, 1988, at http://articles.latimes.com/1988-01-10/business/fi-34708_1_commercial-bank.
25. “2-Bank Rivalry Key to Mexico Breakthrough,” Chicago Sun-Times, February 16, 1988.