13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (55 page)

69.
Roger W. Ferguson, Jr., Philipp Hartmann, Fabio Panetta, and Richard Portes,
International Financial Stability
(London: Centre for Economic Policy Research, 2007), 93–94. However, the jury remains out on whether there are significant economies of scale in U.S. banking. See David C. Wheelock and Paul W. Wilson, “Are U.S. Banks Too Large?” (Federal Reserve Bank of St. Louis Working Paper 2009–054A, October 2009), available at
http://research.stlouisfed.org/wp/more/
2009–054/
.

70.
Edward J. Kane, “Extracting Nontransparent Safety Net Subsidies by Strategically Expanding and Contracting a Financial Institution’s Accounting Balance Sheet,”
Journal of Financial Services Research
36 (2009): 161–68.

71.
Kevin J. Stiroh, “How Did Bank Holding Companies Prosper in the 1990s?,”
Journal of Banking and Finance
24 (2000): 1703–45.

72.
See, e.g., Kevin J. Stiroh, “Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say?,”
American Economic Review
92 (2002): 1559–76.

73.
Goldman Sachs, 1999 Annual Report, available at
http://www2.goldmansachs.com/our-firm/investors/financials/archived/annual-reports/attachments/1999-annual-report.pdf
; Goldman Sachs, 2008 Annual Report, available at
http://www2.goldmansachs.com/our-firm/investors/financials/
current/annual-reports/2008-annual-report.html
.

74.
Morgan Stanley Dean Witter, 1998 Annual Report, available at
http://www.morganstanley.com/about/ir/annual/1998/html/index.html
; Morgan Stanley, 2008 Annual Report (Form 10-K), available at
http://www.morganstanley.com/about/ir/shareholder/10k2007/
10k11302007.pdf
.

75.
“Amendment to the Committee Print of October 29, 2009 Offered by Mr. Kanjorski of Pennsylvania,” available at
http://www.house.gov/apps/list
/speech/financialsvcs_dem/kanjorski_amendment_002_xml.pdf
.

76.
Committee Print of the Restoring American Financial Stability Act, available at
http://banking.senate.gov//files/01/20/85/f012085/public/index.cfm?FuseAction=Files.View&FileStore_id=943242e1-ca66–411c-89e2–8954eb3fc085
.

77.
David Cho, “Banks ‘Too Big to Fail’ Have Grown Even Bigger: Behemoths Born of the Bailout Reduce Consumer Choice, Tempt Corporate Moral Hazard,”
The Washington Post,
August 28, 2009, available at
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/27/AR2009082704193.html
.

78.
Bear Stearns, 2007 Annual Report (Form 10-K), available at
http://www.bearstearns.com/includes/pdfs/investor_relations/proxy/
10k2007.pdf
.

79.
Company annual reports. See also
Figure 7-1
in this book.

80.
Thomas Philippon, “The Evolution of the U.S. Financial Industry from 1860 to 2007: Theory and Evidence” (working paper, November 2008), Table 3, available at
http://pages.stern.nyu.edu/~tphilipp/papers/finsize.pdf
.

81.
Company annual and quarterly reports; GDP data from Bureau of Economic Analysis,
National Income and Product Accounts,
Table 1.1.5, available at
http://www.bea.gov/national/nipaweb/Index.asp
. Figures are as of September 2009.

82.
“Officials Fear Systemic Risks of Bailout,”
Marketplace,
October 21, 2009, available at
http://marketplace.publicradio.org/display/web/2009/10/21/pm-systemtic-risk/
.

83.
The origins of the Sherman Act of 1890 are unclear and remain controversial. See Robert H. Bork, “Legislative Intent and the Policy of the Sherman Act,”
Journal of Law and Economics
9 (1966): 7–48; and George J. Stigler, “The Origins of the Sherman Act,”
Journal of Legal Studies
14 (1985): 1–12. Thomas Hazlett argues it was a political compromise designed to provide Republican legislators “with a cosmetic defense on the trust question, in anticipation of the upcoming consumer-to-industry transfers in the McKinley Tariff,” and “it was not thought to do more than codify and federalize the common law.” Thomas W. Hazlett, “The Legislative History of the Sherman Act Re-examined,”
Economic Inquiry
30 (1992): 263–76.

84.
Richard Hofstadter, “What Happened to the Antitrust Movement?” in Richard Hofstadter,
The Paranoid Style in American Politics and Other Essays
(New York: Vintage, 2008), 188–237.

EPILOGUE

1.
Paul E. Kanjorski, “Explanation of Vote on the Conference Report for the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173),” June 30, 2010.

2.
The Dodd-Frank Act is Public Law 111-203, available at
http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.4173
:.

3.
Barack Obama, “Remarks by the President at Signing of Dodd-Frank Wall Street Reform and Consumer Protection Act,” July 21, 2010, available at
http://www.whitehouse.gov/the-press-office/remarks-president-signing-dodd-frank-wall-street-reform-and-consumer-protection-act
.

4.
John Cassidy, “The Volcker Rule,”
The New Yorker,
July 26, 2010.

5.
John Heilemann, “Obama Is from Mars, Wall Street Is from Venus,”
New York,
May 22, 2010, available at
http://nymag.com/news/politics/66188/
.

6.
“JPMorgan Chief Warns of Overregulation—Report,” Reuters, April 18, 2010, available at
http://www.reuters.com/article/idUSLDE63H0E420100418
.

7.
Shahien Nasiripour, “JPMorgan Chase Memo Sneers at ‘Ignorant’ Senators, ‘Time for the Grown-ups to Step In,’ ”
The Huffington Post,
May 4, 2010, available at
http://www.huffingtonpost.com/2010/05/04/jpmorgan-chase-memo-goldman_n_562459.html
.

8.
“Lehman Brothers Holdings Inc. Chapter 11 Proceedings Examiner’s Report,” available at
http://lehmanreport.jenner.com/
.

9.
Press Release, SEC, “SEC Charges Goldman Sachs with Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages,” April 16, 2010, available at
http://www.sec.gov/news/press/2010/2010-59.htm
. Synthetic CDOs are discussed in chapter 5 of this book.

10.
Complaint,
Securities and Exchange Commission v. Goldman Sachs & Co. and Fabrice Tourre,
available at
http://www.sec.gov/litigation/complaints/2010/comp-pr2010-59.pdf
.

11.
Jesse Eisinger and Jake Bernstein, “The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going,”
ProPublica,
April 9, 2010, available at
http://www.propublica.org/article/the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble-going
. Magnetar was also discussed in Yves Smith,
ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism
(New York: Palgrave Macmillan, 2010).

12.
“Inside Job,”
This American Life,
first broadcast on April 9, 2010.

13.
Eisinger and Bernstein, “The Magnetar Trade,”
supra
note 11.

14.
David M. Herszenhorn, “Senate Liberals Push for Strict Financial Rules,”
The New York Times,
May 5, 2010, available at
http://www.nytimes.com/2010/05/06/business/economy/06dems.html
.

15.
See, for example, Shahien Nasiripour and Ryan Grim, “Obama’s Treasury Dept. Working to Defeat Derivatives Proposal ‘Of Utmost Importance’ to Reforming Wall Street,”
The Huffington Post,
June 14, 2010, available at
http://www.huffingtonpost.com/2010/06/14/obamas-treasury-dept-work_n_611205.html
.

16.
Davis Polk, “Summary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Enacted into Law on July 21, 2010,” July 21, 2010, available at
http://www.davispolk.com/files/Publication/efb94428-9911-4472-b5dd-006e9c6185bb/Presentation/PublicationAttachment/efd835f6-2014-
4a48-832d-00aa2a4e3fdd/070910_Financial_Reform_Summary.pdf
.

17.
Eric Lichtblau, “Ex-Regulators Get Set to Lobby on New Financial Rules,”
The New York Times,
July 27, 2010, available at
http://www.nytimes.com/2010/07/28/business/28lobby.html
.

18.
Cassidy, “The Volcker Rule,”
supra
note 4.

19.
David M. Herszenhorn, “House-Senate Talks Drop New Credit-Rating Rules,”
The New York Times,
June 15, 2010, available at
http://www.nytimes.com/2010/06/16/business/16regulate.html
.

20.
Heilemann, “Obama Is from Mars, Wall Street Is from Venus,”
supra
note 5.

21.
Yalman Onaran, “Volcker Said to Be Disappointed with Final Version of His Rule,” Bloomberg, June 30, 2010, available at
http://www.bloomberg.com/news/2010-06-30/volcker-said-to-be-disappointed-with-final-version-of-rule-named-after-him.html
.

22.
Volcker wrote, “I am fully in support of the Merkley-Levin amendment,” in a letter obtained by
The Huffington Post,
available at
http://big.assets.huffingtonpost.com/VolckerMay192010.pdf
.

23.
Cassidy, “The Volcker Rule,”
supra
note 4.

24.
See Heilemann, “Obama Is from Mars, Wall Street Is from Venus,”
supra
note 5.

25.
Press Release, SEC, “Goldman Sachs to Pay Record $550 Million to Settle SEC Charges Related to Subprime Mortgage CDO,” July 15, 2010, available at
http://www.sec.gov/news/press/2010/2010-123.htm
.

26.
Press Release, Goldman Sachs, “Goldman, Sachs & Co. Agrees to Settlement with SEC,” July 15, 2010, available at
http://www2.goldmansachs.com/our-firm/press/press-releases/current/settlement.html
.

Further Reading

Tens of millions of words have been written about the recent global financial crisis, its causes, and the lessons one might draw from it. We are probably responsible for a few hundred thousand of them on our blog,
The Baseline Scenario
(
http://baselinescenario.com
). The specific sources we drew on are detailed in the Notes to this book. This section is intended only to provide a starting point for readers who would like to learn more about the financial crisis and the issues discussed in this book; we have chosen to include only books and blogs (not academic papers), as they are most likely to be useful for a general audience. The lists below are necessarily incomplete and arbitrary, but we hope that at least some readers will find them useful.

BOOKS

Detailed Accounts of the Financial Crisis

Cohan, William D.
House of Cards: A Tale of Hubris and Wretched Excess on Wall Street.
New York: Doubleday, 2009.

Kelly, Kate.
Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street.
New York: Portfolio, 2009.

Lewis, Michael.
The Big Short: Inside the Doomsday Machine.
New York: W. W. Norton, 2010.