by Prins, Nomi
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 al
so “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.
48. Center for Responsive Politics, “George W. Bush: Top Contributors,” at www.opensecrets.org/pres04/contrib.php?cycle=2004&cid=N00008072.
49. Lucas Kawa, “Why the Bush Dynasty Is America’s First Family of Finance,” Business Insider, November 27, 2012.
50. Caren Chesler, “The Bush Juggernaut,” Investment Dealers’ Digest, February 4, 2004.
51. Texans for Public Justice, Bush Donor Profile, December 11, 2004, at http://info.tpj.org/docs/pioneers/pioneers_view.jsp?id=832.
52. Securities and Exchange Commission, “SEC Open Meeting Agenda,” April 28, 2004, at www.sec.gov/news/speech/spch042804whd.htm.
53. Stephen Labaton, “Agency’s ’04 Rule Let Banks Pile Up New Debt,” New York Times, October 2, 2008.
54. Sam Zuckerman and Zachary Coile, “Wall Street Figure Tapped to Head SEC/Donaldson’s ‘Mission’ to Police Corporations,” San Francisco Chronicle, December 11, 2002.
55. The rule published in the Federal Register as a final rule on June 21, 2004 (Fed. Reg. 34428). The final rule establishes a voluntary alternative method for computing net capital for certain broker-dealers. Under the rule, a broker-dealer that maintains certain minimum levels for tentative net capital and net capital may apply for a conditional exemption from the application of the standard net capital calculation. As a condition to granting the exemption, the broker-dealer’s ultimate holding company must consent to group-wide commission supervision related to the financial stability of the broker-dealer. US General Accounting Office, B-294184, June 25, 2004.
56. US Securities and Exchange Commission, “Final Rule: Alternative Net Capital Requirements for Broker-Dealers That Are Part of Consolidated Supervised Entities,” Release No. 34-49830, File No. S7–21–03, June 9, 2004.
57. Kevin Drawbaugh, “US SEC Clears New Net-Capital Rules for Brokerages,” Reuters, April 28, 2004.
58. Sebnem Kalemli-Ozcan, Bent E. Sorensen, and Sevcan Yesiltas, “Leverage Across Firms, Banks, and Countries,” presentation at the Dallas Fed Conference on Financial Frictions and Monetary Policy in an Open Economy, March 2012.
59. “$58B Bank Deal Set,” CNN Money, January 15, 2004. See also JPMorgan Chase, “Bank One Complete Merger,” press release, July 1, 2004.
60. Congressional Record, Senate, S 6969, June 17, 2004.
61. “Government by Goldman,” US Banker, May 1, 2004. See also US Commodity Futures Trading Commission, Former Commissioners, Chairman Reuben Jeffery III, at www.cftc.gov/About/Commissioners/FormerCommissioners/rjefferyiii; Center for Strategic and International Studies (CSIS), “Reuben Jeffery III, Former Under Secretary of State for Economic, Energy, and Agricultural Affairs Joins CSIS as Senior Adviser,” press release, April 27, 2009.
62. Federal Reserve Bank of New York, “Are Home Prices the Next ‘Bubble’?” Economic Policy Review 10, no. 3 (December 2004).
63. Prins, It Takes a Pillage, 44–45.
64. Edmund L. Andrews, “Bush Nominates Bernanke to Succeed Greenspan as Fed Chief,” New York Times, October 24, 2005.
65. US Senate, “Nomination of Ben S. Bernanke,” Hearing before the Committee on Banking, Housing, and Urban Affairs, First Session, November 15, 2005, vols. 22–23.
66. Board of Governors of the Federal Reserve System, “Board Members: Ben S. Bernanke,” April 4, 2013 (last update).
67. George W. Bush, Decision Points (New York, NY: Crown Publishers, 2010), 449.
68. Edmund L. Andrews and Jim Rutenberg, “Bush Nominates Wall Street Chief for Treasury Job,” New York Times, May 31, 2006.
69. Prins, It Takes a Pillage, 44–45.
70. Nomi Prins, “As the World Crumbles: The ECB spins, FED smirks, and US Banks Pillage,” www.nomiprins.com (blog), November 21, 2011.
71. US Department of the Treasury, “Schedule for Treasury Conference on US Capital Markets Competitiveness,” press release, March 9, 2007.
72. Nomi Prins, “Paulson’s Deregulation Mission,” The American Prospect, April 1, 2007.
73. RealtyTrac, “More Than 1.2 Million Foreclosure Filings Reported in 2006,” press release, January 25, 2007. See also US Department of the Treasury, “Secretary Paulson Speaks at Committee of 100 16th Annual Conference in New York,” press release, April 20, 2007; Greg Robb, “Paulson Says U.S. Housing Sector ‘At or Near Bottom,’ MarketWatch, April 20, 2007.
74. Timothy Geithner, “Liquidity Risk and the Global Economy,” Federal Reserve Bank of New York, May 15, 2007.
75. “Geithner’s Calendar at the New York Fed: January 2007 to January 2009,” New York Times, at http://documents.nytimes.com/geithner-schedule-new-york-fed.
76. Michiyo Nakamoto and David Wighton, “Citigroup Chief Stays Bullish on Buyouts,” Financial Times, July 9, 2007.
77. Securities and Exchange Commission, “SEC Charges Two Former Bear Stearns Hedge Fund Managers with Fraud,” press release, June 19, 2008, at www.sec.gov/litigation/litreleases/2008/lr20625.htm. A year after the funds failed, the SEC charged the managers with fraud for misleading investors by not informing them of the downward spiral. They were indicted by the Department of Justice but were eventually acquitted.
78. Claire Suddath, “Biggest Golden Parachutes,” Time, October 8, 2008.
79. “Statement from Citigroup on the Resignation of C.E.O. Charles O. Prince III,” New York Times, November 5, 2007.
80. Robin Sidel, Monica Langley, and Gregory Zuckerman, “Citigroup CEO Plans to Resign as Losses Grow,” Wall Street Journal, November 3, 2007.
81. Maria Bartiromo, “John Thain on His New Job as CEO of Merrill Lynch,” Bloomberg Businessweek, November 25, 2007.
82. “Geithner’s Calendar at the New York Fed: January 2007 to January 2009,” New York Times, at http://documents.nytimes.com/geithner-schedule-new-york-fed.
83. Jo Becker and Gretchen Morgenson, “Geithner, Member and Overseer of Finance Club,” New York Times, April 26, 2009.
84. Ibid.
85. Permanent Subcommittee on Investigations, “Exhibits: PSI Hearing on Wall Street and the Financial Crisis: The Role of Investment Banks,” April 27, 2010.
86. David Ellis, “Bad News at Bear Stearns,” CNNMoney, December 20, 2007.
87. Matt Ackermann and Matthias Rieker, “People: Across the Pond,” American Banker, January 11, 2008. See also “Tony Blair Appointed Senior Advisor to JPMorgan Chase,” PR Newswire, January 10, 2008.
88. “Northern Rock to be Nationalised,”
BBC News, February 17, 2008. See also Bank of England, “Liquidity Support Facility for Northern Rock plc,” news release, September 14, 2007.
89. Bush, Decision Points, 453.
90. Federal Reserve Bank of New York, “Statement on Financing Arrangement of JPMorgan Chase’s Acquisition of Bear Stearns,” March 24, 2008, at www.newyorkfed.org/newsevents/news/markets/2008/rp080324.html.
91. US Senate, “Turmoil in U.S. Credit Markets: Examining the Recent Actions of Federal Financial Regulators,” Hearing before the Committee on Banking, Housing, and Urban Affairs, April 3, 2008, Second Session, at www.banking.senate.gov/public/_files/OpgStmtDimonJPMorganChase040308.pdf.
92. Katherine Burton and Edgar Ortega, “Bear Acquisition Brings JPMorgan a Prime Broker for Hedge Funds,” Bloomberg, March 18, 2008.
93. “Treasury Chief: Banking System Safe,” Associated Press via San Francisco Gate, July 21, 2008.
94. Bush, Decision Points, 456.
95. Julie Creswell and Ben White, “The Guys from ‘Government Sachs,’” New York Times, October 17, 2008.
96. Lehman Brothers, “Lehman Brothers Holdings Inc. Announces It Intends to File Chapter 11 Bankruptcy Petition,” press release, September 15, 2008.
97. Board of Governors of the Federal Reserve System, “Order Approving Formation of Bank Holding Companies,” September 21, 2008. See also Board of Governors of the Federal Reserve System, “Order Approving Formation of Bank Holding Companies and Notice to Engage in Certain Nonbanking Activities,” September 21, 2008.
98. Federal Reserve Bank of New York, “Advisory Groups,” Annual Report 2010.
99. “Goldman, Morgan Stanley Enter New Era,” The Bond Buyer, September 23, 2008.
100. “Executive Profile: Kenneth D. Lewis,” Bloomberg Businessweek, at http://investing.businessweek.com/research/stocks/people/person.asp?personId=592192&ticker=BAC.
101. Prins, It Takes a Pillage.
102. Ibid.
103. Board of Governors of the Federal Reserve System, “Approval of Proposal by Bank of America,” press release, June 5, 2008.
104. Bank of America, “Bank of America Buys Merrill Lynch, Creating Unique Financial Services Firm,” press release, September 15, 2008.
