"Our global franchise and brand have never been stronger, and our record results for the year reflect the continued diversified growth of our businesses."-Lehman Brothers CEO Dick Fuld, ten months prior to Lehman Brothers filing for Chapter 11 bankruptcy in the largest default in history. Under Fuld's leadership, Lehman continued to underwrite mortgage-backed securities in the face of the growing housing crisis, accumulating an $85 billion portfolio, almost four times the $22.5 billion of shareholder equity Lehman possessed as a buffer against losses. (Bloomberg, Sept. 15, 2008)
"You don’t understand. Dysfunction is good on Wall Street."- Stanley O'Neal, CEO, Merrill Lynch. O'Neal stated in July 2007 that "[The subprime problem is] reasonably well contained. There have been no clear signs it's spilling over into other subsets of the bond market, the fixed-income market, and the credit market." Within four months of this statement, Merrill Lynch had lost over $50 billion on mortgage-backed securities and subprime loans, while O'Neal had left the company. O'Neal "squeezed in 20 rounds of golf, including three rounds on three different courses in a single day, as his company was racking up the largest quarterly loss in its 93-year history.....In October, O'Neal announced his "retirement," walking away with a compensation package valued at $161.5 million...."[Vanity Fair, The Blundering Herd]
"Countrywide is a great American story. Countrywide was one of the greatest companies in the history of this country, and probably made more difference to society, to the integrity of our society, than any company in the history of America.”
- Angelo Mozilo, CEO, Countrywide Financial, viewed as single greatest contributor to the subprime mortgage crisis. (“In terms of being unresponsive to what was happening, to sticking it out the longest, and continuing to justify the garbage they were selling, Countrywide was the worst lender,” said Ira Rheingold, executive director of the National Association of Consumer Advocates. “And anytime states tried to pass responsible lending laws, Countrywide was fighting it tooth and nail.”)
"Countries don't go out of business."
- Walter Wriston, First National City / Citibank, early pioneer of the banking industry pursuing credit card business. Also noted, "Capital goes where it's welcome and stays where it's well treated."
"At some point, the disruptive event will be so significant that instead of liquidity filling in, the liquidity will go the other way. I don’t think we’re at that point. When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing."
- Charles Prince, former CEO, Citigroup, July 2007. Four months later, he abruptly retired from the company following massive CDO and MBS-related losses, collecting a $38 million pay package. [naked capitalism, July 2007]
"The Great Depression, like most other periods of severe unemployment, was produced by government management rather than by inherent instability of the private economy."
- famed economist Milton Friedman, 1962, taking a stand against regulatory measures.
"The parties to these kinds of contracts are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies. To date there has been no clear evidence of a need for additional regulation of the institutional OTC derivatives market, and we would submit that proponents of such regulation must bear the burden of demonstrating that need."
- Larry Summers, Secretary of the Treasury (1999-2001), Director of the White House National Economic Council, in remarks during testifying before Congress in July 1998 regarding debate within the Commodity Futures Trading Commission on how to "maintain adequate regulatory safeguards without impairing the ability of the OTC derivatives market to grow". Upon the 1999 removal of the separation between investment and commercial banks via the Gramm-Leach-Billey Act, Summers noted, "With this bill, the American financial system takes a major step forward towards the 20th century".
"....Apologists for the financial industry talk of rational actors pursuing their interests in ways that may have been greedy but never veered into illegal or unethical behavior. After all, many executives, such as Dick Fuld, of Lehman Brothers, who believed in profit-making instruments like collateralized debt obligations and credit-default swaps, wound up losing their jobs and their companies. Doesn’t that prove their good faith? [Charles] Ferguson will have none of it. He uses interviews and historical information to suggest that many of the transactions weren’t rational at all. They may have been profitable in the short term, but they were destructive to the companies the executives worked for, and he demonstrates that anyone with common sense and a skeptical view of unregulated financial markets could have seen the dangers coming. None of the senior public officials with an ideological commitment to deregulation, like Alan Greenspan, Hank Paulson, and Ben Bernanke, and none of the investment-bank executives who made hundreds of millions from the C.D.O. boom were willing to speak to Ferguson on camera. So he brings forth the savants who warned of the impending crisis early on: Nouriel Roubini, of New York University, whose musical Persian-Israeli-Turkish-accented English is delightful; and Raghuram Rajan, now of the University of Chicago, who, in 2005, while serving as the chief economist of the International Monetary Fund, delivered a paper warning of the disaster to come in front of an audience that included Alan Greenspan and Larry Summers, and was ignored or criticized for his efforts. Roubini and Rajan, awed by the size of the crisis they were unable to prevent, are now sombre models of contained ego and radiant pride.
Nothing like the same could be said of the academic economists, including Glenn Hubbard and Frederic Mishkin, of Columbia Business School, and Martin Feldstein and John Campbell, of Harvard, who hem and haw and evade the simplest questions about conflict of interest or bad advice. Ferguson, interviewing them from behind the camera (Matt Damon narrates the film), questions them with increasing exasperation, and, one after another, the academics disgrace themselves. Ferguson finds a hero in none other than Eliot Spitzer, who prosecuted fraud in the financial industry in 2002. Five years ago, expensive evenings with hookers and drugs were part of the exhilarated Manhattan madness of the investment-banking life. The underlings who procured such services—hiding the costs in phony expense chits—could now be flipped and forced to testify against their bosses, who may be guilty of much more consequential malfeasance. With perfect tact, Spitzer says that he might not be the most appropriate person to suggest such a course for prosecutors. But he suggests it nonetheless...."
- David Denby, "Hearing Things," review of Charles Ferguson's Inside Job, The New Yorker, October 2010