It Takes a Pillage: An Epic Tale of Power, Deceit, and Untold Trillions

by Nomi Prins

  129 Associated Press, “Bailout Tally Approaches $7 Trillion,” Boston Herald, November 25, 2008, http://www.bostonherald.com/business/general/view/2008_11_25_Bailout_tally_approaches__7_trillion/srvc=home&position=recent.

  130 Nomi Prins and Krisztina Ugrin, “Bailout Tally,” June 2009, http://www.nomiprins.com/bailout.html.

  131 Ibid.

  132 Paul Kasriel, phone conversation with the author, November 24, 2008.

  133 U.S. Department of the Treasury, “Joint Statement of Henry M. Paulson, Jr., Secretary of the Treasury, and Jim Nussle, Director of the Office of Management and Budget, on Budget Results for Fiscal Year 2008,” press release: HP 1213, October 14, 2008, http://www.treasury.gov/press/releases/hp1213.htm.

  134 Department of the Treasury Financial Management Service, Monthly Treasury Statement of Receipts and Outlays of the United States Government, February 2009, p. 3, http://www.fms.treas.gov/mts/mts0209.pdf.

  135 Blythe McGarvie, phone conversation with the author, November 24, 2008.

  Chapter 6. Everyone Saw This Coming

  1 Howard Fine, “When the Markets Melt Down, Regulations Soon Follow,” Los Angeles Business Journal, May 2, 2005.

  2 Events, “Stock Market Crash of 1929,” Ohio History Central, July 1, 2005, http://www.ohiohistorycentral.org/entry.php?rec=559.

  3 Encyclopedia Britannica Online 2009, “Great Depression,” Encyclopedia Britannica, http://www.britannica.com/EBchecked/topic/243118/Great-Depression/234442/Stock-market-crash.

  4 United States Federal Deposit Insurance Corporation, “The 1920’s,” United States Federal Deposit Insurance Corporation Learning Bank, May 2, 2006, http://www.fdic.gov/about/learn/learning/when/1920s.html.

  5 Microsoft Encarta Online Encyclopedia 2009, “Great Depression in the United States,” Microsoft Network, http://encarta.msn.com/encyclopedia_761584403/great_depression_in_the_united_states.html.

  6 “Does the Great Depression Hold the Answers for the Current Mortgage Distress?” Federal Reserve Bank of St. Louis press release, May 2, 2008, http://www.stlouisfed.org/news/releases/2008/05_02_08.html.

  7 Andrew Jakabovics, “STATEMENT: Foreclosure Stats Say It’s 1930 Again,” Center for American Progress press release, August 14, 2008, http://www.americanprogress.org/pressroom/statements/2008/08/foreclosures.html.

  8 “The Long Demise of Glass-Steagall,” PBS Frontline, May 8, 2003, http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html.

  9 David C. Wheelock, “Regulation, Market Structure, and the Bank Failures of the Great Depression,” Federal Reserve Bank of St. Louis Review (March-April 1995): 27-38.

  10 Realtytrac, “Foreclosure Activity Increases 81 Percent in 2008,” press release, January 15, 2009, http://www.realtytrac.com//ContentManagement/PressRelease.aspx?channelid=9&ItemID=5681.

  11 Realtytrac, “Foreclosure Activity Increases 9 Percent in First Quarter,” press release, April 16, 2009, http://www.realtytrac.com//ContentManagement/PressRelease.aspx?channelid=9&ItemID=6180.

  12 Conrad Black, Franklin Delano Roosevelt: Champion of Freedom (New York: Public Affairs, 2003), p. 250.

  13 The American Presidency Project, “Franklin D. Roosevelt: Inaugural Address,” University of California Santa Barbara, http://www.presidency.ucsb.edu/ws/index.php?pid=14473.

  14 Jean Edward Smith, FDR (New York: Random House, 2007; 2008). Citation is to the paperback edition.

  15 United States Department of the Treasury, History of the Treasury: Secretaries of the Treasury, “William H. Woodin,” www.ustreas.gov/education/history/secretaries/whwoodin.shtml.

  16 United States Department of the Treasury, History of the Treasury, Secretaries of the Treasury, http://www.ustreas.gov/education/history/secretaries/.

  17 American President: An Online Reference Resource, “William H. Woodin (1933-1933): Secretary of the Treasury,” University of Virginia Miller Center of Public Affairs, http://millercenter.org/academic/americanpresident/fdroosevelt/essays/cabinet/524.

  18 David J. Lynch, Sue Kirchhoff, and Barbara Hagenbaugh, “Obama to Tap Geithner for Treasury,” USA Today, January 24, 2008, http://www.usatoday.com/money/economy/2008-11-24-money-geithner_N.htm.

  19 Smith, FDR, pp. 325-26.

  20 Biographical Directory of the United States Congress, Biography, “Glass, Carter (1858- 1946),” http://bioguide.congress.gov/scripts/biodisplay.pl?index=G000232; Biographical Directory of the United States Congress, Biography, “Steagall, Henry Bascom (1873-1943),” http://bioguide.congress.gov/scripts/biodisplay.pl?index=S000820.

  21 Rob Chernow, “Where Is Our Ferdinand Pecora?” New York Times, January 5, 2009.

  22 Senate Historical Office, Major Senate Investigations: A Selected List, May 2004, www.senate.gov/artandhistory/history/resources/pdf/Investigations.pdf.

  23 Federal Reserve Archival System for Economic Research, Publications, Stock Exchange Practices. Hearings before the Committee on Banking and Currency Pursuant to S.Res. 84 and S.Res. 56 and S.Res. 97, http://fraser.stlouisfed.org/publications/sensep.

  24 Investment Trusts: “An investment company that offers a fixed, unmanaged portfolio, generally of stocks and bonds, as redeemable ‘units’ to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income.” Investopedia, “Unit Investment Trust,” Forbes Digital, http://www.investopedia.com/terms/u/uit.asp.

  25 Ron Chernow, “Where Is Our Ferdinand Pecora?”

  26 Securities Exchange Act of 1934, US Code 15 (1934), § 4.

  27 Public debt: Money raised to pay for the functioning of the federal government. Bureau of the Public Debt, “Who We Are,” United States Department of the Treasury, http://www.publicdebt.treas.gov/whoweare/who_we_are.htm.

  28 Securities Exchange Act of 1934, US Code 15 (1934); also see http://www.sec.gov/about/whatwedo.shtml#create.

  29 Securities Exchange Act of 1934, US Code 15 (1934), 140.

  30 Ferdinand Pecora, Wall Street under Oath: The Story of Our Modern Money Changers (New York: Simon and Schuster, 1939).

  31 Testimony of Walter E. Sachs, New York City, Member of the Firm of Goldman, Sachs & Co., to the Senate Committee on Banking and Currency Investigation of Wall Street, 72nd Cong., 1st sess., 1932, part 2, 566.

  32 Commercial Paper: “Short term promissory notes issued primarily by corporations. Maturities range up to 270 days but average about 30 days. Many companies use commercial paper to raise cash needed for current transactions, and many find it to be a lower cost alternative to bank loans”; United States Federal Reserve Banks, Commercial Paper, “About Commercial Paper,” November 9, 2006, http://www.federalreserve.gov/releases/CP/about.htm.

  33 “Cash & Comeback,” Time, November 9, 1936, http://www.time.com/time/agazine/article/0,9171,770464-2,00.html.

  34 Charles D. Ellis, The Partnership: The Making of Goldman Sachs (New York: Penguin Press, 2008).

  35 “Insignificant,” Time, June 9, 1930, http://www.time.com/time/magazine/article/0,9171,739487,00.html?promoid=googlep.

  36 United States Federal Deposit Insurance Corporation, Research & Analysis, “The First Fifty Years,” July 24, 2006, http://www.fdic.gov/bank/analytical/firstfifty/chapter3.html.

  37 C. W Calomiris, “Runs on Banks and the Lessons of the Great Depression,” The Cato Institute, Regulation (1999): 4-7.

  38 “Roosevelt ‘Won’ to Bank Insurance; Republicans Publish Letter He Wrote in 1932 Opposing Such Legislation,” New York Times, October 27, 1936.

  39 United States Federal Deposit Insurance Corporation, Research & Analysis, “The First Fifty Years,” United States Federal Deposit Insurance Corporation, July 24, 2006, http://www.fdic.gov/bank/analytical/firstfifty/chapter3.html.

  40 United States Federal Deposit Insurance Corporation, History of the Treasury: Chronology of Events, “The 1930’s,” United States Federal Deposit Insurance Corporation Learning Bank, May 2, 2006, http://www.fdic.gov/about/learn/learning/when/1930s.html.

  41 United States Federal Deposit
Insurance Corporation, “Speeches and Testimony,” “Remarks by Ricki Helfer, Chairman, Federal Deposit Insurance Corporation, Before the Group of Thirty Conference on International Insolvency in the Financial Sector,” United States Federal Deposit Insurance Corporation, May 14, 1997, http://www.fdic.gov/news/news/speeches/archives/1997/sp14may97.html.

  42 United States Federal Deposit Insurance Corporation, “The 1980’s,” United States Federal Deposit Insurance Corporation Learning Bank, May 2, 2006, http://www.fdic.gov/about/learn/learning/when/1980s.html.

  43 Federal Deposit Insurance Reform Act of 2005, Public Law 109-173, 109th Cong., 2nd sess. (February 15, 2006).

  44 Federal Deposit Insurance Corporation, “Congress Extends $250,000 Insurance Coverage through 2013,” press release, May 19, 2009.

  45 United States Department of the Treasury, History of the Treasury: Chronology of Events, “1930-1939,” http://www.ustreas.gov/education/history/events/1900-present.shtml#4.

  46 United States Department of the Treasury, History of the Treasury: Secretaries of the Treasury, “Robert E. Rubin,” http://www.treas.gov/education/history/secretaries/rerubin.shtml.

  47 “Rubin Calls for Modernization through Reform of Glass Steagall Act,” Journal of Accountancy (May 1, 1995), http://www.thefreelibrary.com/Rubin+calls+for+modernization+through+reform+of+Glass-Steagall+Act-a016955462.

  48 United States Department of the Treasury, “Treasury Secretary Robert E. Rubin Testimony before the Senate Banking Committee,” press release, February 24, 1999, www.treas.gov/press/releases/rr2973.htm.

  49 United States Senator Byron Dorgan (D-ND), “Dorgan Says Wall Street Bailout Plan Is ‘Stampede in Wrong Direction,’ ” press release, September 22, 2008, http://dorgan.senate.gov/newsroom/record.cfm?id=303365.

  50 Financial Services Modernization Act of 1999, 106th Cong., 1st sess., Congressional Record—Senate (May 4, 1999): S 4632.

  51 The White House, “Remarks by the President at Financial Modernization Bill Signing,” press release, November 12, 1999, http://clinton4.nara.gov/WH/New/html/19991112_1.html.

  52 United States Senate Committee on Banking, Housing and Urban Development, “Gramm’s Statement at Signing Ceremony for Gramm Leach-Bliley Act,” press release, November 12, 1999, http://banking.senate.gov/prel99/1112gbl.htm.

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

  54 Walter Alarkon, “Clinton Rejects Blame for Financial Crisis,” The Hill, September 25, 2008, http://thehill.com/leading-the-news/clinton-rejects-blame-for-financial-crisis-2008-09-25.html.

  55 Nomi Prins and Krisztina Ugrin, “Bailout Tally,” June 2009, http://www.nomiprins.com/bailout.html; Karey Wutkowski and Jonathan Stempel, “Bank of America to Need $34 Billion in Capital: Source,” Reuters, May 6, 2009, http://www.reuters.com/article/newsOne/idUSTRE5450C120090506.

  56 The American Presidency Project, “William J. Clinton: Statement on Signing Legislation to Reform the Financial System,” University of California Santa Barbara, http://www.presidency.ucsb.edu/ws/index.php?pid=56922.

  57 Ibid.

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

  59 Broker-dealer: person or company engaged in securities transactions either for his/ her/itself or on behalf of others; United States Securities and Exchange Commission, Guide to Broker Dealer Registration, May 9, 2008, http://www.sec.gov/divisions/marketreg/bdguide.htm#II.

  60 United States Senate Committee on Banking, Housing and Urban Development, Prepared Testimony of Mr. Henry M. Paulson, Chairman and CEO, Goldman Sachs & Company: Hearing on the “Financial Marketplace of the Future,” 106th Cong., 2nd sess., 2000.

  61 Stephen Labaton, “Agency’s ’04 Rule Let Banks Pile Up New Debt,” New York Times, October 2, 2008.

  62 Julie Satow, “Ex-SEC Official Blames Agency for Blow Up of Broker Dealers,” New York Sun, September 18, 2008, http://www.nysun.com/business/ex-sec-officialblames-agency-for-blow-up/86130.

  63 Andrew Ross Sorkin, ed., comment on “As Goldman and Morgan Shift, a Wall St. Era Ends,” Dealbook, comment posted September 21, 2008, http://dealbook.blogs.nytimes.com/2008/09/21/goldman-morgan-to-become-bank-holding-companies.

  64 Structured Investment Vehicle: “A pool of investment assets that attempts to profit from credit spreads between short term debt and long term structured finance products such as asset backed securities,” Investopedia, “Structured Investment Vehicle,” Forbes Digital, http://www.investopedia.com/terms/s/structured-investment-vehicle.asp; Sorkin, comment on “As Goldman and Morgan Shift, a Wall St. Era Ends.”

  65 Satow, “Ex-SEC Official Blames Agency for Blow Up of Broker Dealers,” New York Sun, September 18, 2008.

  66 Barry Ritholtz, “How SEC Regulatory Exemptions Helped Lead to Collapse,” RGE Monitor, September 25, 2008, http://www.rgemonitor.com/financemarkets-monitor/253642/how_sec_regulatory_exemptions_helped_lead_to_collapse.

  67 “Glass-Steagall Act,” American Law Encyclopedia, Vol. 5, http://law.jrank.org/pages/7165/Glass-Steagall-Act.html.

  68 Bernard Shull and Gerald A. Hanweck, Bank Mergers in a Deregulated Environment (Westport, CT: Quorum Books, 2001), p. 9.

  69 Lynn S. Fox, chair, Publications Committee, et al., “The Federal Reserve System: Purposes & Functions,” Board of Governors of the Federal Reserve System, June 2005.

  70 Shull and Hanweck, Bank Mergers in a Deregulated Environment, p. 84.

  71 Data from the Federal Reserve Board of Governors, compiled by the author and Clark Merrefield, http://www.federalreserve.gov.

  72 Shull and Hanweck, Bank Mergers in a Deregulated Environment, p. 83.

  73 Gary A. Dymski, “The Global Bank Merger Wave: Implications for Developing Countries,” The Developing Economies (December 2002): 442.

  74 Ibid., 446.

  Chapter 7. Bonus Bonanza

  1 Will Rogers Today Weekly Comments Archive, “Archived Issues,” Will Rogers Today, http://www.willrogerstoday.com/weekly_comments/archive_issue.cfm?newsletterID=341.

  2 House Committee on Oversight and Government Reform, CEO Pay and the Mortgage Crisis, Hearing before the Committee on Oversight and Government Reform, House of Representatives, 110th Cong., 2nd sess., March 7, 2008, serial no. 110-81, transcript, title page.

  3 House Committee on Oversight and Government Reform, Memorandum, March 6, 2008, p. 1, http://www.shareholderforum.com/op/Library/20080306_House-memo.pdf.

  4 House Committee on Oversight and Government Reform, CEO Pay and the Mortgage Crisis, title page.

  5 Ibid., p. 2.

  6 About Member of Congress Salaries, “History of Annual Salaries—Members of Congress and Leadership,” Legistorm, http://www.legistorm.com/member_of_congress_salaries.html.

  7 Bank of America, “Bank of America Agrees to Purchase Countrywide Financial Corp,” press release, January 11, 2008, http://newsroom.bankofamerica.com/index.php?s=press_releases&item=7956.

  8 House Committee on Oversight and Government Reform, CEO Pay and the Mortgage Crisis, p. 200.

  9 Ibid., p. 268.

  10 Charles E. Schumer letter to Ronald A. Rosenfeld, November 26, 2007, http://schumer.senate.gov/new_website/record.cfm?id=287914.

  11 House Committee on Oversight and Government Reform, CEO Pay and the Mortgage Crisis, p. 234.

  12 Ibid., p. 233.

  13 Ibid., p. 265.

  14 Ibid., p. 266.

  15 E. Scott Reckard, “Countrywide Financial Chairman Angelo Mozilo’s E-Mail Sets off a Furor,” Los Angeles Times, May 21, 2008, http://articles.latimes.com/2008/may/21/business/fi-mozilo21.

  16 News: Deals: Reports, “Countrywide Financial Corp. & Bank of America Corp.,” CNN Money, January 23, 2009, http://money.cnn.tv/news/deals/mergers/reports/1142146020.html.

  17 Bank of America “Bank of America Agrees to Purchase Countrywide Financial Corp.,” press release, January 11, 2008, http://newsroom.bankofamerica.com/index.php?s=press_relea
ses&item=7956.

  18 Dina ElBoghdady, “Countrywide Loses $422 Million,” Washington Post, January 30, 2008.

  19 Philip van Doorn, “Countrywide Could Bring BofA Misery,” The Street, July 1, 2008, http://www.thestreet.com/story/10424195/1/countrywide-could-bring-bofa-misery.html?puc=newshome.

  20 Board of Governors of the Federal Reserve System, “Treasury, Federal Reserve, and the FDIC Provide Assistance to Bank of America,” press release, January 16, 2009, http://www.federalreserve.gov/newsevents/press/bcreg/20090116a.htm; Eye on the Bailout, “Bailout Recipients,” ProPublica, May 8, 2009, http://www.propublica.org/special/show-me-the-tarp-money; Google Finance, “Bank of America Corporation,” http://www.google.com/finance?q=NYSE%3ABAC.