13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (48 page)

32.
Ibid. at 197–98.

33.
GDP data from Bureau of Economic Analysis,
supra
note 30, at Table 1.1.6; median income from U.S. Census Bureau,
Income, Poverty, and Health Insurance Coverage in the United States: 2008,
Table A-1, available at
http://www.census.gov/prod/2009pubs/p60–236.pdf
.

34.
Alan Greenspan,
The Age of Turbulence: Adventures in a New World
(New York: Penguin, 2007), 51–53, 208.

35.
Alan Greenspan (lecture, Annual Conference of the Association of Private Enterprise Education, April 12, 1997), available at
http://www.federalreserve.gov/boarddocs/speeches/1997/19970412.htm
.

36.
Alan Greenspan (lecture, American Enterprise Institute, December 5, 1996), available at
http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm
.

37.
Alan Greenspan,
Age of Turbulence, supra
note 34, at 52.

38.
Reported in Edsall, “Alan Greenspan,”
supra
note 1. See also Goodman, “Taking Hard New Look at a Greenspan Legacy,”
supra
note 1.

39.
Quoted in Manuel Roig-Franzia, “Credit Crisis Cassandra: Brooksley Born’s Unheeded Warning Is a Rueful Echo 10 Years On,”
The Washington Post,
May 26, 2009, available at
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/25/AR2009052502108.html
.

40.
Raghuram G. Rajan, “Has Financial Development Made the World Riskier?” (paper presented at a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, WY, August 27, 2005), available at
www.kc.frb.org/publicat/SYMPOS/2005/PDF/Rajan2005.pdf
.

41.
Justin Lahart, “Mr. Rajan Was Unpopular (But Prescient) at Greenspan Party,”
The Wall Street Journal,
January 2, 2009, available at
http://online.wsj.com/article/SB123086154114948151.html
.

42.
Donald Kohn (lecture, symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, WY, August 27, 2005), available at
http://www.federalreserve.gov/boarddocs/speeches/2005/20050827/
default.htm
.

43.
Quoted in Lahart, “Mr. Rajan Was Unpopular (But Prescient) at Greenspan Party,”
supra
note 41.

44.
Federal Deposit Insurance Corporation,
2003 Annual Report,
available at
http://www.fdic.gov/about/strategic/report/2003annualreport/intro_
insurance.html
. Thanks to Robert Waldmann (
http://rjwaldmann.blogspot.com/2008/03/banking-regulation-illustrated-paul.html
) and
Economics of Contempt
(
http://economicsofcontempt.blogspot.com/2008/03/cutting-through-red-tape-with-chainsaw.html
) for tracking down the photograph.

45.
Robert Merton, “Financial Innovation and the Management and Regulation of Financial Institutions,”
Journal of Banking and Finance
19 (1995): 461–81.

46.
Alan Greenspan, “Technological Change and the Design of Bank Supervisory Policies” (lecture, Conference on Bank Structure and Competition of the Federal Reserve Bank of Chicago, May 1, 1997), available at
http://www.federalreserve.gov/boarddocs/speeches/1997/19970501.htm
.

47.
Timothy F. Geithner, “Risk Management Challenges in the U.S. Financial System” (lecture, Global Association of Risk Professionals 7th Annual Risk Management Convention and Exhibition, New York), February 26, 2008, available at
http://www.ny.frb.org/newsevents/speeches/2006/gei060228.html
.

48.
Ben S. Bernanke, “Financial Innovation and Consumer Protection” (lecture, Federal Reserve System’s Sixth Biennial Community Affairs Research Conference, Washington, D.C., April 17, 2009), available at
http://www.federalreserve.gov/newsevents/speech/bernanke20090417a
.htm
.

49.
See Larry Light, “Reverse Converts: A Nest-Egg Slasher?”
The Wall Street Journal,
June 16, 2009, available at
http://online.wsj.com/article/SB124511060085417057.html
; Mike Konczal, “Consumer Protection: Re-verse Convertibles,”
Rortybomb,
June 18, 2009, available at
http://rortybomb.wordpress.com/2009/06/18/consumer-protection-reverse-convertibles/
.

50.
Quoted in Light, “Reverse Converts,”
supra
note 49.

51.
Warren Buffett, “Chairman’s Letter,”
Berkshire Hathaway 2002 Annual Report,
available at
http://www.berkshirehathaway.com/letters/2002pdf.pdf
.

52.
Nassim Nicholas Taleb,
Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life
(New York: Texere, 2001).

53.
Janet Tavakoli,
Structured Finance and Collateralized Debt Obligations: New Developments in Cash & Synthetic Securitization,
second edition (Hoboken, NJ: Wiley, 2008); originally published as
Collateralized Debt Obligations and Structured Finance
in 2003.

54.
See John Cassidy,
How Markets Fail: The Logic of Economic Calamities
(New York: Farrar, Straus and Giroux, 2009), 212.

55.
Brian Naylor, “Greenspan Admits Free Market Ideology Flawed,” NPR, October 24, 2008, available at
http://www.npr.org/templates/story/story.php?storyId=96070766
.

56.
See Adam Levitin, “Complex Pricing of Credit Cards Should Be Simplified,”
Chicago Tribune,
December 27, 2007, available at
http://archives.chicagotribune.com/2007/dec/27/opinion/chi-oped1227creditdec27
; Adam Levitin, “New Credit Card Tricks, Traps, and 79.9% APRs,”
Credit Slips,
December 18, 2009, available at
http://www.creditslips.org/creditslips/2009/12/new-credit-card-tricks-traps-and-799-aprs.html
.

57.
Quoted in 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
.

58.
U.S. Census Bureau,
Housing Vacancies and Homeownership,
Table 14, available at
http://www.census.gov/hhes/www/housing/hvs/historic/index.html
.

59.
Edward L. Glaeser and Jesse M. Shapiro, “The Benefits of the Home Mortgage Interest Deduction,”
Tax Policy and the Economy
17 (2003): 37–82, available at
http://www.jstor.org/stable/20140504
.

60.
Edward L. Glaeser, “Attack of the Home Buyers’ Tax Credit,” Economix Blog,
The New York Times,
November 10, 2009, available at
http://economix.blogs.nytimes.com/2009/11/10/attack-of-the-home-buyers-tax-credit/
. The paper he cites is Denise DiPasquale and Edward L. Glaeser, “Incentives and Social Capital: Are Homeowners Better Citizens?” (NBER Working Paper 6363, January 1998), available at
http://www.nber.org/papers/w6363.pdf
; compare Tables 2 and 4.

61.
William M. Rohe and Michael A. Stegman, “The Impact of Home Ownership on the Social and Political Involvement of Low-Income People,”
Urban Affairs Review
30 (1994): 152–72.

62.
Alyssa Katz,
Our Lot: How Real Estate Came to Own Us
(New York: Bloomsbury, 2009), 40.

63.
Ibid. at 19. Ranieri testified before the Subcommittee on Housing and Urban Affairs of the Committee on Banking, Housing, and Urban Affairs, September 21 and 22, 1983.

64.
Senate Rep. No. 98–293, November 2, 1983.

65.
Doris “Tanta” Dungey, “What Is Subprime?”
Calculated Risk,
November 25, 2007, available at
http://www.calculatedriskblog.com/2007/11/what-is-subprime.html
.

66.
Quoted in Katz,
Our Lot, supra
note 62, at 65.

67.
Ibid. at 29.

68.
Actual homeownership rates are from U.S. Census Bureau,
Housing Vacancies and Homeownership, supra
note 58, at Table 14.

69.
Wayne Barrett, “Andrew Cuomo and Fannie and Freddie: How the Youngest Housing and Urban Development Secretary in History Gave Birth to the Mortgage Crisis,”
The Village Voice,
August 5, 2008, available at
http://www.villagevoice.com/2008–08–05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/
.

70.
Housing prices are from the S&P/Case-Shiller Composite-10 Home Price Index, deflated by the CPI–All Urban Consumers; Bureau of Labor Statistics,
Consumer Price Index,
available at
http://www.bls.gov/cpi/data.htm
. Household income data are from U.S. Census Bureau,
Income, Poverty, and Health Insurance Coverage, supra
note 33, at Table A-1.

71.
Alan Greenspan, “Consumer Finance” (lecture, Federal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C., April 8, 2005), available at
http://www.federalreserve.gov/BoardDocs/speeches/2005/20050408/
default.htm
.

72.
Tom Wolfe,
The Bonfire of the Vanities
(New York: Farrar, Straus & Giroux, 1987), 9.

73.
Stanley Weiser, “Repeat After Me: Greed Is Not Good,”
Los Angeles Times,
October 5, 2008, available at
http://articles.latimes.com/2008/oct/05/entertainment/ca-wallstreet5
.

74.
Michael Lewis, “The End,”
Portfolio,
December 2008, available at
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom
.

75.
Candace Bushnell,
Sex and the City
(New York: Grand Central, 2006), 1.

76.
Data are from Bureau of Economic Analysis,
supra
note 30, at Tables 1.1.4, 6.3, and 6.5. We begin with the finance, insurance, and real estate sector and exclude insurance, real estate, and holding companies. Figures are converted to 2008 dollars using the GDP price index.

77.
Thomas Philippon and Ariell Reshef, “Wages and Human Capital in the U.S. Financial Industry: 1909–2006” (working paper, December 2008), Sections 3.4 and 3.5, available at
http://pages.stern.nyu.edu/~tphilipp/research.htm
. Note that the relative wage in Figure 4-2, which exceeds 1.7 at its peak, is
not
corrected for differences in education. The excess relative wage—the difference between average finance wages and what one would predict based on educational differences—reaches a peak of around 40 percentage points in the 2000s. See Figure 11 in ibid.

78.
Andrew Cuomo, “No Rhyme or Reason: The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture,” July 2009, available at “Cuomo Report Details Wall St. Bonuses,” DealBook Blog,
The New York Times,
available at
http://dealbook.blogs.nytimes.com/2009/07/30/cuomo-report-blasts-wall-street-bonus-culture/
.

79.
Claudia Goldin and Lawrence F. Katz, “Transitions: Career and Family Life Cycles of the Educational Elite,”
American Economic Review: Papers and Proceedings
98 (2008): 363–69.