13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (47 page)

71.
Monica Langley,
Tearing Down the Walls: How Sandy Weill Fought His Way to the Top of the Financial World … and Then Nearly Lost It All
(New York: Wall Street Journal Books, 2004), 270. Losses on mergers and acquisitions arbitrage also contributed to the decision to downsize the proprietary trading operation.

72.
Nassim Taleb, Foreword to Pablo Triana,
Lecturing Birds on Flying: Can Mathematical Theories Destroy the Financial Markets?
(Hoboken, NJ: Wiley, 2009), xiii.

73.
Semiannual OTC Derivatives Statistics, supra
note 15, at Table 19.

74.
Satyajit Das,
Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives
(Harlow, England: Prentice Hall, 2006), 47. For an explanation of a leveraged inverse floater, see ibid. at 45–50.

75.
On the transactions that created these losses, see Frank Partnoy,
F.I.A.S.C.O.: Blood in the Water on Wall Street
(New York: W. W. Norton, 2009), 90–93, 155–69; and Das,
Traders, Guns and Money, supra
note 74, at 101–4.

76.
Partnoy,
Infectious Greed, supra
note 21, at 117.

77.
See Gillian Tett,
Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe
(New York: Free Press, 2009), 41–56.

78.
Securities Industry Association v. Board of Governors of the Federal Reserve System,
468 U.S. 137 (1984);
Securities Industry Association v. Board of Governors of the Federal Reserve System,
807 F.2d 1052 (D.C. Cir. 1986). See Carnell et al.,
Law of Banking, supra
note 28, at 142–51.

79.
Geisst,
Undue Influence, supra
note 62, at 223, 245, 249.

80.
Simon Kwan, “Cracking the Glass-Steagall Barriers,”
Federal Reserve Bank of San Francisco Economic Letter
97-08 (March 21, 1997), available at
http://www.frbsf.org/econrsrch/wklyltr/el97-08.html
.

81.
Partnoy,
Infectious Greed, supra
note 21, at 132–33.

82.
Quoted in Weiner,
What Goes Up, supra
note 18, at 176.

83.
Asset data from
Federal Reserve Flow of Funds, supra
note 13, at Tables L.109, L.126, and L.129; GDP data from Bureau of Economic Analysis,
supra
note 8, at Table 1.1.5.

84.
Bureau of Economic Analysis,
supra
note 8 at Table 6.16.

85.
Kevin J. Stiroh and Jennifer P. Poole, “Explaining the Rising Concentration of Banking Assets in the 1990s,”
Federal Reserve Bank of New York Current Issues in Economics and Finance
6, no. 9 (August 2000), available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=722526
.

86.
Mitchell Martin, “Citicorp and Travelers Plan to Merge in Record $70 Billion Deal: A New No. 1: Financial Giants Unite,”
The New York Times,
April 7, 1998, available at
http://www.nytimes.com/1998/04/07/news/07iht-citi.t.html
.

87.
Bradley Keoun, “Citigroup’s $1.1 Trillion of Mysterious Assets Shadows Earnings,” Bloomberg, July 13, 2008, available at
http://www.bloomberg.com/apps/news?pid=20601109&sid=a1liVM3tG3aI
.

88.
Laura M. Holson, “Upheaval in Banking: The New BankAmerica; Hands in a Lot of Markets and a Foot on Each Coast,”
The New York Times,
April 14, 1998.

89.
Gary H. Stern and Ron J. Feldman,
Too Big to Fail: The Hazards of Bank Bailouts
(Washington: Brookings Institution Press, 2009), 64–65.

90.
Daniel K. Tarullo, “Confronting Too Big to Fail” (lecture, Exchequer Club, Washington, D.C., October 21, 2009), available at
http://www.federalreserve.gov/newsevents/speech/tarullo20091021a.htm
.

CHAPTER 4: “GREED IS GOOD”

1.
Reported in Thomas B. Edsall, “Alan Greenspan: The Oracle or the Master of Disaster?”
The Huffington Post,
February 19, 2009, available at
http://www.huffingtonpost.com/2009/02/19/alan-greenspan-the-oracle_n_168168.html
. A shorter version of the quotation was reported in Peter S. Goodman, “Taking Hard New Look at a Greenspan Legacy,”
The New York Times,
October 8, 2008, available at
http://www.nytimes.com/2008/10/09/business/economy/09greenspan
.html
.

2.
Federal Deposit Insurance Corporation, “Bank Failures and Assistance Transactions,”
Historical Statistics on Banking,
available at
http://www2.fdic.gov/hsob/SelectRpt.asp?EntryTyp=30
.

3.
Council of Economic Advisers,
Economic Report of the President,
February 1991, 173; Timothy Curry and Lynn Shibut, “The Cost of the Savings and Loan Crisis: Truth and Consequences,”
FDIC Banking Review
(December 2000): 26–35, available at
http://www.fdic.gov/bank/analytical/banking/2000dec/brv13n2_2.pdf
.

4.
The term “cultural capital” is from the French sociologist Pierre Bourdieu, but is used slightly differently here. For Bourdieu, cultural capital denoted (to simplify greatly) a set of understandings and judgments of the world that are accumulated by members of the upper class and that are used to distinguish them from other classes. See, e.g., Pierre Bourdieu,
Distinction: A Social Critique of the Judgment of Taste,
trans. Richard Nice (Cambridge: Harvard University Press, 1984).

5.
Figure for 1974 is from Robert G. Kaiser,
So Much Damn Money: The Triumph of Lobbying and the Corrosion of American Government
(New York: Alfred A. Knopf, 2009), inside jacket flap. All other aggregate campaign contribution statistics, unless otherwise cited, are from OpenSecrets.org, a project of the Center for Responsive Politics.

6.
Essential Information and Consumer Education Foundation,
Sold Out: How Wall Street and Washington Betrayed America,
March 2009, available at
http://www.wallstreetwatch.org
.

7.
Company rankings include contributions by individual employees and by political action committees.

8.
Dodd was a minor candidate for the Democratic presidential nomination. The only senators who received more from the industry were the much more significant presidential candidates Barack Obama, John McCain, and Hillary Clinton.

9.
Eric Lipton and Raymond Hernandez, “A Champion of Wall Street Reaps Benefits,”
The New York Times,
December 13, 2008, available at
http://www.nytimes.com/2008/12/14/business/14schumer.html
.

10.
Ibid.

11.
Interview with Ray Hanania,
Radio Chicagoland,
April 27, 2009, available at
http://rayhanania.libsyn.com/index.php?post_id=464814
; quotation transcribed by Adam Doster, “Durbin on Congress: The Banks ‘Own the Place,’ ”
Progress Illinois,
April 29, 2009, available at
http://progressillinois.com/2009/4/29/durbin-banks-own-the-place
.

12.
Securities and Exchange Commission, Commodity Futures Trading Commission, Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, and National Credit Union Administration.

13.
George Stigler, “The Theory of Economic Regulation,”
The Bell Journal of Economics and Management Science
2 (1971): 3–21, at 3, available at
http://www.jstor.org/stable/3003160
.

14.
Robert E. Rubin and Jacob Weisberg,
In an Uncertain World: Tough Choices from Wall Street to Washington
(New York: Random House, 2003), 39–103.

15.
Frank Partnoy,
Infectious Greed: How Deceit and Risk Corrupted the Financial Markets
(New York: Henry Holt, 2004), 153–54; Saul Hansell, “Bankers Trust Hires Former Treasury Deputy,”
The New York Times,
September 22, 1995, available at
http://www.nytimes.com/1995/09/22/business/bankers-trust-hires-former-treasury-deputy.html
; Andy Serwer, “Frank Newman Feels the Heat,”
Fortune,
October 26, 1998, available at
http://money.cnn.com/magazines/fortune/
fortune_archive/1998/10/26/249977/index.htm
.

16.
Who Runs Gov, “Lee Sachs,” available at
http://www.whorunsgov.com/Profiles/Lee_Sachs
.

17.
Partnoy,
Infectious Greed, supra
note 15, at 147.

18.
“Over-the-Counter Derivatives Markets and the Commodity Exchange Act,” Report of the President’s Working Group on Financial Markets, November 1999, available at
http://www.ustreas.gov/press/releases/reports/otcact.pdf
.

19.
Press Release, Chicago Board Options Exchange, Chicago Mercantile Exchange, and Chicago Board of Trade, “CBOE, CME, CBOT, Name William Rainer to Head Joint Venture on Single Stock Futures,” August 29, 2001, available at
http://www.onechicago.com/?p=438
.

20.
Binyamin Appelbaum and Ellen Nakashima, “Banking Regulator Played Advocate over Enforcer: Agency Let Lenders Grow Out of Control, Then Fail,”
The Washington Post,
November 23, 2008, available at
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/22/AR2008112202213.html
.

21.
Zach Carter, “A Master of Disaster,”
The Nation,
December 16, 2009, available at
http://www.thenation.com/doc/20100104/carter/
.

22.
Quoted in “The Watchmen,”
This American Life,
originally broadcast June 5, 2009, audio and transcript available at
http://thislife.org/Radio_Episode.aspx?sched=1301
.

23.
Appelbaum and Nakashima, “Banking Regulator Played Advocate,”
supra
note 20.

24.
Press Release, Office of Thrift Supervision, “OTS Approves Countrywide Application,” March 5, 2007, available at
http://files.ots.treas.gov/777014.html
.

25.
Rubin and Weisberg,
In an Uncertain World, supra
note 14, at 93–96.

26.
The phrase was actually only the second of three points written on a sign in Clinton’s campaign headquarters.
The War Room
(Cyclone Films, 1993).

27.
Rubin and Weisberg,
In an Uncertain World, supra
note 14, at 198–201.

28.
Ibid. at 118–26.

29.
Louis Uchitelle, “The Bondholders Are Winning; Why America Won’t Boom,”
The New York Times,
June 12, 1994, available at
http://www.nytimes.com/1994/06/12/weekinreview/ideas-trends-the-bondholders-are-winning-why-america-won-t-boom.html
.

30.
GDP data from Bureau of Economic Analysis,
National Income and Product Accounts,
Table 1.1.6, available at
http://www.bea.gov/national/nipaweb/SelectTable.asp
. Inflation based on GDP price indexes. Ibid. at Table 1.1.4.

31.
Rubin and Weisberg,
In an Uncertain World, supra
note 14, at 160–64.