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

by Nomi Prins

  21 Riley McDermid, “B. of A. Says Merger on despite Countrywide Woes,” Marketwatch, March 5, 2008, http://www.marketwatch.com/news/story/bank-america-says-mergerdespite/story.aspx?guid={5F8BC85D-902E-4C85-9ADB-BB8DE35EF7B8}.

  22 Arkansas Teacher Retirement System, Fire & Police Pension Association of Colorado, and Louisiana Municipal Police Employees’ Retirement System v. Angelo R Mozilo, et al. and Countrywide Financial (9th Cir., 2007).

  23 “Countrywide Sued Over ‘Excessive’ Fees on Defaults,” Reuters, February 28, 2008, http://www.reuters.com/article/bondsNews/idUSN2749535120080228.

  24 Office of the New York State Comptroller, “DiNapoli, Thompson to Lead Securities Fraud Suit,” press release, November 30, 2008, http://www.osc.state.ny.us/press/releases/nov07/113007.htm.

  25 California Office of the Attorney General, “Brown Sues Countrywide for Mortgage Deception,” press release, June 25, 2008, http://ag.ca.gov/newsalerts/release.php?id=1582&year=2008&month=6.

  26 Illinois Attorney General, “Illinois Attorney General Madigan Leads $8.7 Billion Groundbreaking Settlement of Lawsuit against Mortgage Giant Countrywide,” press release, October 6, 2008, http://www.illinoisattorneygeneral.gov/pressroom/2008_10/20081006.html.

  27 Dina ElBoghdady, “Bank of America to Modify Mortgages from Countrywide,” Washington Post, October 7, 2008.

  28 Greenwich Financial Services Distressed Mortgage Fund 3 LLC et al. v. Country Financial Corporation et al. (2nd Cir., 2008).

  29 United States Securities and Exchange Commission, “SEC Files Securities Fraud Charges Against Former Countrywide Executives,” press release, June 4, 2009, http://www.sec.gov/litigation/litreleases/2009/lr21068.htm.

  30 House Committee on Oversight and Government Reform, CEO Pay and the Mortgage Crisis, p. 242.

  31 Dan Wilchins, “Citigroup Gives ex-CEO Prince $40 Million Severance Package,” International Business Times, November 10, 2007, http://in.ibtimes.com/articles/20071110/citigroup-charles-prince-robert-rubin-merrill-lynch-subprime-crisis-mortgage.htm.

  32 David Ellis, “Citigroup to Cut More Than 50,000 Jobs,” CNN Money, November 17, 2008, http://money.cnn.com/2008/11/17/news/companies/citigroup/index.htm.

  33 Citigroup, Citigroup Fourth Quarter 2008 Earnings Report, January 16, 2008, http://www.citi.com/citi/fin/qer.htm.

  34 Google Finance, “Citigroup,” http://www.google.com/finance?q=NYSE%3AC.

  35 Jeremy Smerd, “Citi Caps Severance Pay of Longtime Employees,” Financial Week, December 3, 2008, http://www.financialweek.com/apps/pbcs.dll/article?AID=/20081203/REG/812039979/1028.

  36 Citigroup, “Citi Reports First Quarter Revenues of $24.8 Billion,” press release, April 17, 2009, http://www.citi.com/citi/press/2009/090417a.htm.

  37 “Executive Incentives,” Wall Street Journal, November 20, 2008, http://online.wsj.com/public/resources/documents/st_ceos_20081111.html.

  38 Chris Palmeri, comment on “Bloodbath at Countrywide,” Hot Property, comment posted September 7, 2007, http://www.businessweek.com/the_thread/hotproperty/archives/2007/09/bloodbath_at_co.html.

  39 “Mozilo to Trim Retirement Package,” Los Angeles Times, January 28, 2008, http://articles.latimes.com/2008/jan/28/business/fi-mozilo28.

  40 Merrill Lynch, “Stan O’Neal Retires from Merrill Lynch; Alberto Cribiore to Serve as Interim Non Executive Chairman and Chair Search Committee,” press release, October 30, 2007, http://www.ml.com/index.asp?id=7695_7696_8149_74412_82725_84472.

  41 “O’Neal’s Exit Package Stirs Reaction: Senate May Revisit Say on Pay,” Directorship, December 1, 2007, www.directorship.com/contentmgr/showdetails.php/id/10055.

  42 Merrill Lynch, “Merrill Lynch Reports Third-Quarter 2007 Net Loss from Continuing Operations of $2.85 per Diluted Share,” press release, October 24, 2007, http://ml.com/index.asp?id=7695_7696_8149_74412_82725_84064.

  43 Merrill Lynch, “Merrill Lynch Reports Second Quarter 2008 Net Loss from Continuing Operations of $4.6 Billion,” press release, July 17, 2008, http://www.ml.com/index.asp?id=7695_7696_8149_88278_101366_102140; Edgar Online, “Merrill Lynch & Co. (10K),” United States Securities and Exchange Commission, for the fiscal year ended December 26, 2008, http://www.sec.gov/Archives/edgar/data/65100/000095012309003322/y74695e10vk.htm.

  44 House Committee on Oversight and Government Reform, Corporate Accountability, Committee Holds Hearing on the Causes and Effects of the AIG Bailout, October 7, 2008, http://oversight.house.gov/story.asp?ID=2211.

  45 House Committee on Oversight and Government Reform, Corporate Accountability, Committee Holds Hearing on the Causes and Effects of the AIG Bailout: Chairman Waxman’s Opening Statement, October 7, 2008, http://oversight.house.gov/story.asp?ID=2214.

  46 Ibid.

  47 Karina, comment on “Rep. Elijah Cummings: They Were Getting Manicures, Facials, Pedicures and Massages While American People Were Footing the Bill,” The Gavel, comment posted October 7, 2008, http://www.speaker.gov/blog/?p=1539.

  48 New York State Insurance Department, “About Us,” http://www.ins.state.ny.us/hp97wel.htm.

  49 Matthew Karnitschnig, Deborah Solomon, Liam Pleven, and Jon E. Hilsenrath, “U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash as Credit Dries Up,” Wall Street Journal, September 16, 2008.

  50 CEO Pay, “Edward M. Liddy,” Forbes, http://www.forbes.com/lists/2006/12/G0YE.html.

  51 House Committee on Financial Services, “American International Group’s Impact on the Global Economy: Before, during and after Federal Intervention,” press release, March 18, 2009, http://www.house.gov/apps/list/hearing/financialsvcs_dem/press031809.shtml.

  52 Edgar Online, “Letter from Robert B. Willumstad: Exhibit 10.2,” United States Securities and Exchange Commission, http://www.sec.gov/Archives/edgar/data/5272/000095012308014821/y72212exv10w2.htm.

  53 Edgar Online, “Letter Agreement: Exhibit 10.1,” United States Securities and Exchange Commission, December 26, 2008, http://www.sec.gov/Archives/edgar/data/5272/000095012308018575/y73613exv10w1.htm.

  54 Daniel Golden, “Countrywide’s Many ‘Friends,’ ” Portfolio, June 12, 2008, http://www.portfolio.com/news-markets/top-5/2008/06/12/Countrywide-Loan-Scandal.

  55 Glenn R. Simpson, “Countrywide Made Home Loans to Gorelick, Mudd,” Wall Street Journal, September 25, 2008.

  56 Alex Viega, Associated Press, “Countrywide’s Mozilo Forgoing $37.5M,” San Francisco Chronicle, January 27, 2008, http://www.sfgate.com/cgi-bin/article/article?f=/n/a/2008/01/27/financial/f211557S93.DTL.

  57 Gretchen Morgenson, “After Huge Losses, a Move to Reclaim Executives’ Pay,” New York Times, February 21, 2009.

  58 Senator Olympia J. Snow, “Snowe Wyden Amendment to Recover Wall Street Bonuses Is Added to Economic Recovery Package,” press release, February 9, 2009, http://snowe.senate.gov/public/index.cfm?FuseAction=PressRoom.PressReleases&ContentRecord_id=5bd29e96-802a-23ad-4a2c-3ef8f45e5168; American Recovery and Reinvestment Act of 2009: Subtitle C—Excessive Bonuses (Senate Amendment), 111th Cong., 1st sess.

  59 American Recovery and Reinvestment Act of 2009: Subtitle C—Excessive Bonuses, Public Law 111 5, 111th Cong., 1st sess, February 17, 2009.

  60 Matthew Daly, Associated Press, “Congress Kills Plan to Recover Wall Street Bonuses,” ABC News, February 12, 2009, http://abcnews.go.com/Politics/WireStory?id=6866705&page=1.

  61 Edmund L. Andrews and Peter Baker, “A.I.G. Planning Huge Bonuses after $170 Billion Bailout,” New York Times, March 14, 2009.

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

  63 Steve Turnham and Kathleen Johnston, “Analysis: Who Didn’t Know about AIG Bonuses and Why Not?” CNN Politics, March 20, 2009, http://www.cnn.com/2009/POLITICS/03/20/aig.bonuses/index.html.

  64 Ed Hornick, Ted Barrett, and Kristi Keck, “Dodd: Administration Pushed for Language Protecting Bonuses,” CNN Politics, March 19, 2009, http://www.cnn.com/2009/POLITICS/03/18/aig.bonuses.congress/index.html.

  65 Hel
ene Cooper, “Obama Orders Treasury Chief to Try to Block A.I.G. bonuses,” New York Times, March 16, 2009; House Committee on Financial Services, Oversight of the Federal Government’s Intervention at American International Group, Statement by Timothy F. Geithner, 111th Cong., 1st sess., 2009.

  66 Carl Hulse and David M. Herszenhorn, “House Approves 90% Tax on Bonuses after Bailouts,” New York Times, March 19, 2009.

  67 Govtrack, Legislation, H.R. 1586: To Impose an Additional Tax on Bonuses Received from Certain TARP Recipients, http://www.govtrack.us/congress/bill.xpd?bill=h111-1586.

  68 House Committee on Oversight and Government Reform, The Causes and Effects of the Lehman Brothers Bankruptcy, Statement of Richard S. Fuld, Jr., 110th Cong., 2nd sess., 2008, p. 3.

  69 Executive Profile, “Richard S. Fuld Jr.,” Businessweek, http://investing.businessweek.com/research/stocks/people/person.asp?personId=548100&symbol=LEHMQ.PK; House Committee on Oversight and Government Reform, The Causes and Effects of the Lehman Brothers Bankruptcy, Statement of Richard S. Fuld, Jr., p. 3.

  70 Executive Profile, “Richard S. Fuld Jr., Businessweek, http://investing.businessweek.com/research/stocks/people/person.asp?personId=548100&symbol=LEHMQ.PK.

  71 House Committee on Oversight and Government Reform, The Causes and Effects of the Lehman Brothers Bankruptcy, Statement of Richard S. Fuld, Jr., p. 3.

  72 Andrew Ross Sorkin, “Lehman Files for Bankruptcy; Merrill Is Sold,” New York Times, September 14, 2008.

  73 House Committee on Oversight and Government Reform, The Causes and Effects of the Lehman Brothers Bankruptcy, 110th Cong., 2nd sess., 2008, p. 188.

  74 Ibid., p. 187.

  75 Luigi Zingales, “Curriculum Vitae,” University of Chicago Booth School of Business, http://faculty.chicagobooth.edu/luigi.zingales/vita.

  76 House Committee on Oversight and Government Reform, The Causes and Effects of the Lehman Brothers Bankruptcy, Statement of Richard S. Fuld Jr., p. 62.

  77 Louise Story and Ben White, “The Road to Lehman’s Failure Was Littered with Lost Chances,” New York Times, October 5, 2008.

  78 Office of the New York State Comptroller, “DiNapoli: Wall Street Bonuses Fell 44% in 2008,” press release, January 28, 2009, http://osc.state.ny.us/press/releases/jan09/012809.htm.

  79 Jane Sasseen and Phil Mintz, “Obama Calls for Executive Pay Limits,” Businessweek, February 4, 2009, http://www.businessweek.com/bwdaily/dnflash/content/feb2009/db2009024_052387.htm?chan=top+news_top+news+index+-+temp_top+story.

  80 United States Department of the Treasury “Secretary Geithner Introduces Financial Stability Plan,” press release, February 10, 2009, http://www.treas.gov/press/releases/tg18.htm.

  81 Tomoeh Murakami Tse, “Congress Trumps Obama by Cuffing Bonuses for CEOs,” Washington Post, February 14, 2009.

  82 Office of the New York State Comptroller, “DiNapoli: Wall Street Bonuses Fell 44% in 2008.”

  83 Rob Cox and Richard Beales, Breakingviews.com, “Getting Around Smaller Bonuses,” New York Times, May 25, 2009.

  84 Sam Stein, comment on “Bailed Out Firms Distributing Cash Rewards: ‘Please Do Not Call It A Bonus,’ ” Huffington Post, comment posted February 11, 2009, http://www.huffingtonpost.com/2009/02/11/bailout-recipients-giving_n_165624.html.

  85 Brian Wingfield and Josh Zumbrun, “Cautiously Capping Executive Pay,” Forbes, February 4, 2009, http://www.forbes.com/2009/02/04/obama-geithner-tarp-biz-wash-0204_compensation.html.

  86 Joe Bel Bruno, Associated Press, “Morgan Stanley, Merrill Chiefs Give Up Bonuses,” USA Today, December 8, 2008, http://www.usatoday.com/money/companies/management/2008-12-08-wall-street-bonuses_N.htm.

  87 Edgar Online, “The Goldman Sachs Group, Inc. (Schedule 14A) 2006,” United States Security and Exchange Commission, http://www.sec.gov/Archives/edgar/data/886982/000119312506039420/ddef14a.htm.

  88 Timothy Curry and Lynn Shibut, “The Cost of the Savings and Loan Crisis: Truth and Consequences,” FDIC Banking Review 13, no. 2 (2002), http://www.fdic.gov/bank/analytical/banking/2000dec/brv13n2_2.pdf; Richard W. Stevenson, “G.A.O. Puts Cost of S.&L. Bailout at Half a Trillion Dollars,” New York Times, July 13, 1996.

  89 Office of the New York State Deputy Comptroller, “New York City Securities Industry Bonuses,” press release, January 28, 2009, http://www.osc.state.ny.us/press/releases/jan08/bonus.pdf.

  90 Frank Bass and Rita Beamish, Associated Press, “Study: $1.6B of Bailout Funds Given to Bank Execs,” Finalcallnews.com, January 5, 2009, http://www.finalcall.com/artman/publish/article_5524.shtml.

  91 Christine Harper, “Goldman Sachs’s Tax Rate Drops to 1%, or $14 Million,” Bloomberg, December 16, 2008, http://www.bloomberg.com/apps/news?pid=20601103&sid=a6bQVsZS2_18&refer=news.

  92 Associated Press, “Citigroup Plans to Raise Employees’ Base Pay,” June 24, 2009.

  93 Phillip Inman, “Goldman to Make Record Bonus Payout,” June 21, 2009, The Guardian; Andrew Clark “Goldman Sachs Staff Set for Bumper Bonus as Bank Earns $39M per Day,” The Guardian, July 14, 2009.

  94 United States House of Representatives Committee on Financial Services, Opening Statement of Congressman Paul E. Kanjorski, 111th Cong., 1st sess., 2009.

  95 Lloyd Blankfein, “Do Not Destroy the Essential Catalyst of Risk,” Financial Times, February 8, 2009.

  96 Goldman Sachs, About Us, “The Goldman Sachs Business Principles,” http://www2.goldmansachs.com/our-firm/about-us/business-principles.html.

  97 “CEO Compensation: Kenneth D. Lewis,” Forbes, April 30, 2008, http://www.forbes.com/lists/2008/12/lead_bestbosses08_Kenneth-D-Lewis_PAU6.html.

  98 “Under New Ownership: Bank of America,” CBS News, October 19, 2008, http://www.cbsnews.com/stories/2008/10/19/60minutes/main4531244.shtml.

  99 House Committee on Financial Services, Oversight of the Federal Government’s Intervention at American International Group, Statement by Timothy F. Geithner.

  100 House Committee on Financial Services, Oversight of the Federal Government’s Intervention at American International Group, Statement by Ben S. Bernanke, Chairman, Federal Reserve Board of Governors, 111th Cong., 1st sess., 2009.

  101 Todd Harrison, comment on “Surprise: AIG Bonuses More Than First Reported,” Top Stocks, comment posted May 6, 2009, http://blogs.moneycentral.msn.com/top-stocks/archive/2009/05/06/surprise-aig-bonuses-more-than-first-reported.aspx.

  Chapter 8. Big Banks Mean Trouble

  1 Robert Andrews, The Concise Columbia Dictionary of Quotations (New York: Columbia University Press, 1989), p. 27.

  2 Data compiled by Nomi Prins and Clark Merrefield from the Federal Reserve Board of Governors, www.federalreserve.gov.

  3 Elmus Wicker, “Banking Panics in the US: 1873-1933,” EH.Net Encyclopedia, edited by Robert Whaples, September 4, 2001, http://eh.net/encyclopedia/article/wicker.banking.panics.us.

  4 Jennifer 8. Lee, comment on “New York and the Panic of 1873,” City Room, comment posted October 14, 2008, http://cityroom.blogs.nytimes.com/2008/10/14/learning-lessons-from-the-panic-of-1873.

  5 Sherman Anti-Trust Act (1890), “Approved July 2, 1890, the Sherman Anti Trust Act was the first Federal act that outlawed monopolistic business practices,” Our Documents, http://www.ourdocuments.gov/doc.php?flash=true&doc=51.

  6 Eliot Jones, The Trust Problem in the United States (New York: Macmillan, 1921), pp. 20-21.

  7 Sherman Anti-Trust Act (1890).

  8 U.S. Constitution, art. 1, sec. 8.

  9 Bernard Shull and Gerald A. Hanweck, Bank Mergers in a Deregulated Environment (Westport, CT: Quorum Books, 2001), p. 66.

  10 Ibid., p. 80.

  11 Bank of America, “CEO to Retire in April,” press release, January 24, 2001, http://newsroom.bankofamerica.com/index.php?s=43&item=5581.

  12 Ross Yockey, McColl: The Man with America’s Money (Marietta, GA: Longstreet Press, 1999), pp. 472-74.

  13 “Bigger Footprints,” The Economist (U.S. Edition), April 17, 2004.

  14 “Goodbye to All That,” Daily Deal, Octob
er 24, 2005.

  15 Gary Dymski, The Bank Merger Wave: The Economic Causes and Social Consequences of Financial Consolidation (Armonk, NY: M. E. Sharpe, 1999), p. 69.

  16 Saul Hansell, “Biggest Southeast Bank Buying Florida Giant for $15.5 Billion,” New York Times, August 30, 1997.

  17 Duke University, “North Carolina Case Study: Bank of America,” North Carolina in the Global Economy, Fall 2004, http://www.soc.duke.edu/NC_GlobalEconomy/pdfs/banks/BankingCS_BankofAmerica.pdf.

  18 Charles M. Becker, “The Post Merger Financial Position of NationsBank Corporation/ BankAmerica Corporation,” Southwestern Economic Review (Spring 2002): 85-96.