Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (58 page)

J
J. P. Morgan (
see also
J.P. Morgan Chase) 6, 73, 83, 93, 100, 101, 182, 185, 275
Jackson, Alphonso, 272
Jayhawk Acceptance
Corporation, 165
James, Clive, 337
Jenrette, Richard, 33
Johnson, Edward C., II, 1
Johnson, Hugh, 329
Johnson, Jim, 275
Johnson, Lyndon, 27, 29, 39
Jones, Edward N., 278
Jones, Paul Tudor, II, 324
Jordan, Jerry, 170, 171, 175, 176, 193
JP Morgan Chase (
see also
J.P. Morgan), 274, 346
Juilliard School, 10
Junk bonds, 72, 80–81, 89, 93
Just-in-time inventory
management, 159

K
Kaufman, Henry, 220–221
Kavesh, Robert, 11, 59
Keating, Charles, 6–7,

85–93, 117
Keating Five scandal (
see
Lincoln
Savings and Loan Association) Kelley, Edward, 199
Kennedy, John, 26
Kennedy, Robert, 320
Kennedy, Ted, 5, 67–68
Keon, Ed, 318
Keynes, John Maynard, 26
Keynesian economics, 26, 39 King, Mervyn, 331
Kissinger, Henry, 56, 69, 70, 74 Kissinger, Nancy, 74
Koch, Ed, 74
KKR (
see
Kohlberg Kravis
Roberts & Co.)
Koffler, Stephen, 196
Kohlberg Kravis Roberts & Co.
(KKR), 79–80, 116–117, 317,
321, 322
Kohn, Donald L., 189
Kosinski, Jerzy, 75, 119
Kraft, Joseph, 55, 56
Kravis, Henry, 317, 321, 357 Kroszner, Randall, 334

L
LaWare, John, 136
LBOs (
see
Leveraged buyouts)
Leasco, 35, 351
Le Figaro
(France), 341
Lehman Brothers, 272, 274, 275,

301, 310, 315, 317, 321,
347
n
.48, 354
Leland, Hayne, 110
Leland O’Brien Rubinstein Associates (LOR), 110–112
Leuthold, Steve, 150
Leverage:
in 2006, 313
in 2007, 303
in housing market, 272–273
and LTCM failure, 185–186
and recovery from 1990s recession,
124–126
Leveraged buyouts (LBOs, leveragedbuyout firms), (
see also
privateequity firms), 80, 116–117,
317–319
Levitt, Arthur, 223
Lewis, Ken, 333
“Liar’s loans,” 330
Lidsky, Betti, 295
Lidsky, Carlos, 295
Liman, Arthur, 90
Lincoln Savings and Loan
Association (Irvine, California),
6–7, 85–93, 100, 165, 274
Lindley, David, 109
Lindner, Carl, 80, 87–90,
Lindsey, Lawrence “Larry,” 128–129, 161–162, 166, 238–240, 251–257, 259, 266, 365
warns Greenspan about ’irrational exuberance’, 240
warns Greenspan about consumer debt and longterm social cost, 258
warns Greenspan about actions not matching words, 162
Ling, James Joseph, 35, 351
Ling-Temco-Vought, 35
Liquidity, 116–117, 302, 325, 331, 363 Lockhart, James, 270
LongTerm Capital Management (LTCM), 181–187, 190
Longterm investment, 350–351 LOR (Leland O’Brien Rubinstein Associates), 110–112
LTCM (
see
LongTerm Capital Management)
Los Angeles, California, 36, 117, 291, 319, 320
Los Angeles Times
: “L.A. Land
blog,” 347
Lucent, 207
Luckman, Charles, 23

M
Madrick, Jeff, 59–60
Maestro
(Bob Woodward), 171, 236 Mahar, Maggie, 210
Mailer, Norman, 74
Maisel, Sherman, 40
Malle, Louis, 75
Major, John, 323
Mankiw, Greg, 147–148
Manufacturing:

1980s decline in, 78
from 1998 to 2003, 291
from 2000 to 2004, 307–308 in mid-century, 23
overseas plants for, 44
profits from, 2–3
Margin calls, 128
Margin requirements, 104, 105, 161,

175, 219–220, 223, 230
Maricopa, Arizona, 357
Markey, Ed, 223
Martin, Justin, 17, 195–196
Martin, Steve, 353
Martin, William McChesney, Jr., 4,

20–21, 23–24, 26, 27, 32
n
.6,
33–34, 39–41, 44, 65, 66, 115,
126, 201, 287, 300, 305, 350,
351, 362
Mayer, Martin, 4, 21, 88, 90
McCabe, Thomas B., 20
n
.5
McCain, John, 85, 215
McCulley, Paul, 245
McDonough, William, 186, 187, 247 McNamara, Robert, 29, 75
McTeer, Robert, 206, 247
Meany, George, 43–44
Measuring Business Cycles
(Arthur Burns), 12
Media, stock market and, 248–249 Meeker, Mary, 233, 244
Mercury Finance Corporation, 165 Meriwether, John, 183, 187
Merrill, Dina, 74
Merrill Lynch, 116, 131, 144, 232–233,
272, 332, 333, 347
n
.48, 358 Merton, Robert, 183, 187
Mexico, bailout of, 135–136
Meyer, Laurence, 138, 139
Miami, Florida, 89, 295
Michaelcheck, William, 125
Micron Technology, 207
Microsoft Corporation, 177, 207, 216 Middle class, 252–253, 355
Milken, Michael, 7, 80, 81, 86, 87, 89,
90, 117
Miller, G. William, 66
n
.25
Mills, Susan, 57
Minehan, Cathy, 141, 175, 192, 193 Mishkin, Frederic, 333
Mitchell, Andrea, 57
Mitchell, Joan, 13
Mitchell, Margaret, 315
Models, economists and, 39, 40, 81, 112, 130, 132, 174, 182, 183, 184, 190, 207, 263, 270–271, 332 Modigliani, Franco, 81
Modigliani-Miller theorem, 81 Monetarism, 68, 299, 354
Money:
and gold standard, 1 (
See also
Gold standard)
inflation of, 1–2 (
See also
Inflation) Money market funds, 127
Money supply, 4, 351, 352, 362 Morgan Guaranty Trust
Company, 101
Morgan, J. P. (John Pierpont), 81 Morgan Stanley, 112, 116, 233, 244, 272, 321, 347
n
.48
Mortgage lenders, 328
Mortgagebacked securities, 266–268, 270–272, 313
Mortgages, 22, 265–280
in 1995, 254
in 2002, 262
in 2004–2005, 293–294
40-year loans, 298
adjustable-rate, 107, 292–293, 328–329, 344
and broker leverage, 272–273 bubble in, 331
collateralized mortgage obligations (CMOs), 130
and Fannie Mae/Freddie Mac, 266–272
FHA (Federal Housing Authority), 273, 277
fixed-rate, 292
FLEX-ARM, 288
held by banks, 312
HELOCs (home equity line of credit), 298
and inflation of 1970s, 44, 63 “Liar’s loans,” 328
negative-amortization
mortgages, 107
novel products, 298–299
option ARMs, 298
subprime, 296, 329–333, 340 “2 and 28,” 325
Piggyback mortgages, 298
underwriting systems for, 278–280 Wall Street participation in,
273–277
(
See also
Home equity loans) Moskow, Michael, 194, 196
Motorola, 207
Mozilo, Angelo, 275, 279
M3, 135
Mullins, David, 137
Mutual funds:
in the 1960s, 33
of junk bonds, 80
in late 1990s, 142
and recession of early 1990s, 127

N
Nasdaq:
in 1995, 139
in 1997, 166
in 1998, 188, 191
in 1999, 191, 215–216
in 2000, 215–216, 219
in 2002, 284
in late 1990s, 145
technology stocks on, 216
Nasdaq 100, 177
Nasdaq Composite Index:
in 1999, 188
in 2000, 224, 225, 235
in 2001, 237, 238, 246
in late 1990s, 177
National Association of Realtors, 316
National Commission on Social Security Reform, 83–84
National debt, 305
National Industrial Conference Board, 13
National policy, economists and, 361 National Public Radio, 343
NationsBank, 130
NBCi, 174
Negative-amortization mortgages, 107 Nehemiah Corporation of America, 273, 291
NetGravity, 174
Netscape, 141
New Century Financial Corporation, 165, 278–279, 328, 330
New Economics, 26–27, 39, 121, 350 New Economy, 196
New Economy conference (2000), 222
New Republic,
353
New York City, 2, 36, 352–357
1920s real estate speculation in, 352–353
1970s migration from, 51–52 and early 1990s recession, 114 as leading economic indicator, 22–23
poverty in, 78
New York Federal Reserve Bank, 66
New York Mercantile Exchange, 220
New York Stock Exchange, 19, 33
New York Post
, 347
New York Times,
3, 5, 6, 19, 22, 25, 32, 33, 35, 42, 43, 48, 52, 55, 56, 59, 61, 63, 64, 65, 67, 68, 71, 73–76, 82, 83, 84, 86, 90, 92–93, 117, 118, 133, 134, 141–142, 164, 204–205, 212, 217, 221, 223, 236, 239, 245, 278, 279, 283, 294, 299–300, 327, 337–338, 340, 342, 346, 364
New York University, 11, 59
New York University School of Commerce, Accounts and Finance, 11
New Yorker,
53
New York
(magazine), 342
Newsweek,
5, 57, 97
Ney, Robert, 277–278
Nikkei index, 216, 246
Nixon, Richard, 4–5, 32, 36, 41, 44 Nobel Prize in economic
sciences, 26, 81, 112, 143, 183–184, 187,
Nock, Albert Jay, 24
Nonbank banks, 99

O
Objectivism, 3, 13–15, 27, 32
Office of Federal Housing Enterprise

Oversight (OFHEO), 269
Okun, Arthur, 39, 42, 61
Old Economy, 196
O’Neal, Stanley, 333
O’Neil, C. Roderick “Rory,” 98
OPEC (Organization of Petroleum

Exporting Countries), 49
Opening Minds
(Royal Society for
the Arts), 200
Open-mouth policy, 104
Oracle Corporation, 207, 216
Orange County, California, 131 Organic growth, 77
Organization of Petroleum Exporting
Countries (OPEC), 49
“Overexuberance,” 16

P

Pakistan Telecommunication Corporation, 164

Palm Beach Post
, 342
Pandit, Vikram, 353
Parker, Sandy, 13
Paternot, Stephan, 191–192 Patman, Wright, 65
Patrick, Kenneth, 45
Paul, Ron, 224, 286
Paulson, Hank, 79, 272, 334–335 Paulson, John, 302, 345
PCE (
see
Personal consumption

expenditures)
Penthouse
magazine, 57
People
magazine, 55–56, 287

Personal consumption expenditures (PCE):
home equity financing of, 290 and housing values, 259
installment debt financing of,

253–254
and rising asset values, 258
Philadelphia Internet index, 235

Philadelphia semiconductor
index, 207
Phillips, Susan, 175
Phoenix, Arizona, 357–359
Pimco, 302, 345
Piper Jaffrey Institutional Government Income Portfolio, 130
Playboy
magazine, 295
Poole, William, 288
Portfolio insurance, 110–112
Prell, Michael, 159, 169, 175, 177– 178, 193, 197, 211, 218, 225, 253
Presley, Elvis, 60
Price inflation, 350–351
Price stability, 287–289, 297–299
Price targets, by Wall Street
analysts, 198
Prime lending, 329
n.
14
Princeton University, 12, 43,
137–138, 263
Privateequity firms (
see also
leveraged buyouts), x, 79, 80,
101, 303, 305, 312, 317, 318, 321–323, 329, 351
Privateequity investments, 79–80, 318, 322
Productivity, 106, 152–155
1998 slowdown in, 230–231 BLS definition of, 152
calculation of, 153
and calculation of CPI, 147–152 corporate profits as measure of, 197
Greenspan’s claims for, 157–160, 166–167, 171–173, 194
in mortgage banking, 259
Property, meaning of, 364
Proxmire, William, 6, 52, 95–102, 318–321

R
Raines, Franklin, 269–270
Rand, Ayn, 3, 9, 13–15, 27, 32, 53, 54,

55, 94, 102, 300, 339
Rattner, Steven, 318–319
Reagan, Ronald, 3, 5, 68–70, 83, 95–96
Real estate loans, 249
in 1920s, 352
in 1980s, 105
in 1990, in New York City, 114 (
See also
Mortgages)
Recessions:
of 2006, 304–305
of early 1990s, 104–105, 117–119, 121–131
of early 2000s, 308
forecasting, 234, 241–242
Greenspan’s 2007 comments on, 327–329
measurement of, 234–235
Recovery Ahead!
(Herbert Greenspan), 9–10
Reed, John, 114–115
Rees, Albert, 42
Regan, Donald, 79, 82, 92
Resolution Trust Corporation (RTC), 89
Restructuring of debt, 291
Reuss, Henry, 65
Riegle, Donald, 85
Risk management, by banks, 184–186 Rivlin, Alice, 348
RJR Nabisco, 116–117
Roach, Stephen, 49–50
Robertson, Julian, 223, 228–229 Rockefeller, Happy, 74
Rockefeller, Laurence, 75
Rohatyn, Felix, 75, 138
Röpke, Wilhelm, 145
Rosenberg, David, 358
Rostenkowski, Dan, 110
Roth, Emory, 352
Rowan, Hobart, 67
Royal Society for the Arts, 200 RTC (Resolution Trust
Corporation), 89
Rubin, Robert, 136, 143, 276, 277, 300, 322–323, 354
Rubinstein, Mark, 103–104, 109, 110
Russell, Richard, 345–347
Russia, 172
Rutgers University, 37

S
Salinger, Pierre, 75
Salmon, Jean, 45
Salomon Brothers, 183
Salomon Smith Barney, 233
Salon.com, 342
Samuelson, Paul, 26
San Remo apartments (New York

City), 352–353, 356
Santomero, Anthony, 259
Sarkozy, Nicolas, 341
Sasser, Jim, 98–99
Savings, personal, 364

in 1999, 258
Bernanke’s perspective on, 310 in early 1990s, 253
proposed tax on, 288
and recession of 1990s, 126

Savings and loans (S&Ls), 86, 88–93 (
See also
Lincoln Savings and Loan Association)

Scholes, Myron, 183, 187
Schoolsnet.com, 221
Schultz, George, 42
Schultze, Charles, 61, 66, 230
n.
11 Schumer, Chuck, 219
Schwartz, Anna, 344
Schwartzman, Stephen, 311–312,

320–322
Sears, Roebuck and Company, 99, 100 SEC (Securities and Exchange

Commission), 87
Securities and Exchange Commission
(SEC), 87
Seiders, David, 280
Seidman, L. William, 55, 55
n
.33, 85,
88–91
Semiconductors, 207, 242
September 11, 2001, terrorist attacks,
245–249
740 Park Avenue, 322, 357
Shanghai Stock Exchange, 327
Sharkey, Thomas F., 91
Shulman, David, 133
Shultz, George, 42
Sichel, Daniel, 159
Silk, Leonard, 61–62
Simon, William, 56
Skadden Arps, Slate, Meagher &
Flom, 116
Slichter, Sumner, 24
S&Ls (
see
Savings and loans)
Smith, Greg, 248
Soccernet, 222
Social security, 84, 147, 149, 154 Social Security Commission, 146 Solow, Robert, 137
Soros, George, 131
S&P 500 Index, 169
and 1987 stock market crash,
111–112
in 1991, 128
in 1995, 139, 141
in 1996, 141
in 1997, 141, 278
in 1998, 188, 278
futures contract on, 110
n..
5,
111–112
Spielberg, Steven, 353
Sprinkel, Beryl, 42, 60
Stagflation, 52
Standards of living, investment and,
350–352
Statistical espionage, 4
Statisticalitis, 40
Stein, Herbert, 61, 227
n.
1
Steinberg, Jonathan, 322
Steinberg, Saul, 35, 88–90, 117, 322 Steinhardt, Michael, 38
Stempel, Robert, 127
Stern, Gary, 194
Stern, Robert A.M., 356
Stevenson, Richard W., 164
Stiglitz, Joseph, 143, 342
Stock market:
1950 to 1966 rise in, 4
in 1970s, 43
1987 crash, 103–104, 110–115 1990s bubble in, 145, 155, 160–164, 169–178, 191–210, 285–287 and 1990s recession, 127
in 1995, 133
in 1998, 187–188
in 2000, 215–216, 219, 221,
224–225, 229
in 2001, 237–238, 246, 248
as driver of the economy, 175 Greenspan’s predictions about, 105–106
and “irrational exuberance,” 105 (
See also
Nasdaq; S&P 500 Index) Stock market analysts (
see also
Wall
Street analysts under “Alan
Greenspan”), 177–178, 193, 195,
198–204, 209, 218, 232, 239,
243–244, 284
Stock options, 318
Stock-option cashout plans, 72 Strauss-Kahn, Dominique, 341 Subprime
lending
market, 1990s,
164–166, 274
Subprime mortgages, 296, 328–331,
340, 357
Summers, Lawrence “Larry,” 143,
276–277, 323, 361
Sun Microsystems, 207
Sunny Isles Beach, Florida, 295 Supply-side economics, 68–69, 96 “Sweeping” assets from retail
checking accounts, 134–135 Swope, Gerard, 364–365
Sulzberger, Arthur Ochs, 74
Sunday Times
(London), 342
Sydney Morning Herald
(Australia), 347 Synthetic CDOs, 313