by Sheila Bair
as bank borrowing, 29
raising limit for, 109–10
seamless transfer of, 275–76
for small businesses, 109–10
in UK, 110
see also deposit insurance
interest-only loans, 79
interest rates, fixing of, 361–62
Internal Revenue Service (IRS), 151
Internet, 307–8
investment advisers, for troubled banks, 87, 90
investment banking, 107, 328
investment banks, 4, 6, 74, 115, 217, 227, 366n
Basel II capital standards and, 36, 39, 40
capital requirements for, 36
culture of, 122
FDIC and, 112
leverage and downfall of, 36–37, 40, 185
leverage taken on by, 185, 338, 356
securitization and, 51–53, 56
short-term lending and, 114
investments, income taxes on, 350–51
investors, 162, 329, 330, 332
in bad assets, 156–57
economic incentives of, 61
foreclosures favored by, 133, 136
institutional, 51
and loan restructuring programs, 132–34, 139
in mortgage-backed securities, 132, 135, 139, 256
private-equity, 77–78
protection of, 185
public-private partnerships between, 156–57
risk-averse, 73–74
in securitization, 51–52, 53, 61, 63–64, 70–71, 149
Iron Lady, The, 309
Isaac, William, 318
Issa, Darrell, 284
Istanbul, 262
Italy, 257, 265, 268, 352
Ivie, Stan, 245
Japan, 114, 201, 260, 263, 266, 271
banking crisis of 1990s in, 156, 162
investments from, 3
Jarrett, Valerie, 318
J.C. Flowers & Co., 279
Jiampietro, Joe, 164, 294
job losses, 71
Johansson, Scarlett, 310
John F. Kennedy Presidential Library, Profiles in Courage Award of, 308
Johns Hopkins University, 317
Johnson, Simon, 327
JPMorgan Chase, 2–3, 5, 114, 173, 188, 192, 238, 270, 287, 331, 366n, 369n
Bear Stearns bought by, 74–75, 90
charter switched from New York State to national by, 51
complex credit default swap instruments problem of, 361, 364
foreclosure moratorium of, 244
resolution authority supported by, 188
WaMu’s potential sale to, 76–78, 86–87, 90–94
Justice Department (DOJ), 244, 251, 362
Kalamazoo County State Bank, 315
Kansas, 7, 315
Kansas, University of, 312
Kansas City, Mo., 162–63, 311–12
Kansas City Federal Reserve Bank, 188
Kashkari, Neel, 131
Kea, Arleas Upton, 19
Keating, Frank, 312, 316
Kelly, Ned, 171, 173
Kelly, Robert, 3–4
Kennedy, Caroline, 308
Kennedy, Edward M., 224
Killinger, Kerry, 38, 76–78, 85–88
King, Mervyn, 262–64, 269, 271
Kirk, Mark, 284
Knot, Klaas, 36
Kohlberg Kravis Roberts, 278
Kohn, Donald, 86, 88–89, 91, 97, 105, 117, 168–69, 203–4
Kovacevich, Richard, 1–2, 4, 5–6, 96–98, 101, 103–4
Krimminger, Michael, 58, 62, 68, 148, 149, 164, 190, 195, 240
Kroszner, Randy, 39–40, 67, 137–38
mortgage regulation and, 46–47
Krugman, Paul, 162, 325
Kudlow, Larry, 314
Lacker, Jeff, 188
laissez-faire, 135
Lane, John, 96
large financial institutions, 81, 120, 134, 147, 148, 177, 214, 364
assessment of, 176–77, 215, 217, 218–19, 226, 233, 301, 312, 315, 335–36, 353
complex structure of, 329
DIF and, 102–3
European, 257, 260
excessive risk-taking by, 8, 17
international operations of, 330
living wills for, 240–42
proposed breakup of, 327, 328–31
risk-taking and profits at, 362–63
share values of, 331
simplification of, 328–31
large national banks, 197, 210, 213, 225, 237–38, 303, 339, 345
bailouts of, see bailouts
capital levels for, 27, 32, 219–21, 237–38, 271, 312, 356, 364
complex structures of, 240–41
credit ratings of, 328
CRE regulation and, 41–43
FDIC as monitor of, 232
functions of, 94
leveling playing field between small banks and, 218–19
leverage by, 220
loan balances of, 371n
loan servicing by, 60–61, 243–45
mismanagement of, 73–75
mortgage-related losses of, 73
mortgage-servicing operations of, 369n
as principle TARP beneficiaries, 4–5, 6, 115–16, 131–32, 134, 141, 153
proposed size limits on, 385n
protection from failure of, 185
regulation of, 236
short-term funding of, 114
stress tests on, 155–61, 165, 201, 202
subprime mortgages by, 45, 56
TCE for, 259
warehouse loans by, 53, 56
large systemic institutions, 197
Leadership Conference on Civil and Human Rights, Hubert H. Humphrey Award of, 309
Leahy, Patrick, 141
LeDuc, Mark, 220
Lehman Brothers, 36–37, 90, 107–8, 114, 118, 124–25, 194–95, 199, 326
as shadow bank, 186, 330
lending, 328, 329
risks in, 329
lending standards, 293
leverage, 3, 193, 218, 325–26, 366n, 367n
downfall of investment banks and, 36–37, 40, 185
of European banks, 33, 40, 220, 226, 356
excess, 221, 323
international ratio for, 33–36, 259, 264–67, 270–72, 356
by large banks, 220, 238
profitability and, 29–30
by securities firms, 193
taxes and, 349–50
leveraged loans, 121
Levin, Carl, 222, 270
Lewis, Kenneth, 2, 5, 126–27, 204
Lewis, Pattie, 320–21
Libby, Scooter, 208
liberals, 162
TARP and, 131
Liberia, 308
Lieberman, Joseph, 344
Lindsey, Larry, 110, 135
liquidity, 170–71
liquidity failure, 84–85
liquidity obligations, 89
Litton, Larry, 64, 70
Litton Loan Servicing, 64, 70
Liu Mingkang, 280
Livingston, N.J., 178
Lizza, Ryan, 305–6
Lo, Andrew, 366n–67n
loan-loss reserves, 366n
loan modification, see loan restructuring
loan portfolios, of failing banks, 275
loan quality, 79
loan volume vs., 56
for mortgages, 43, 53
loan restructuring, 7, 116, 125, 234, 245, 248–49, 253–54, 303, 319, 332, 334, 355–56, 369n, 372n
by banks and servicers, 152
for commercial real estate, 59–60
denials of, 247, 254
for distressed mortgages, 131–39, 305
documentation requirements for, 151
economic incentives for, 134
FDIC-Treasury battle over, 128
IndyMac, 144–45
Obama administration and, 147–53, 155
of subprime mortgages, 61–71
super mods, 250–51
see also Home Affordable Mortgage Program (
HAMP)
loans, 277, 328, 330
automotive, 176
default rates for, 296
high-risk, 84, 178, 218
industrial, 43
interest-only, 79
pick-a-pay, 43, 339–40
toxic, 162, 165, 339–40
see also mortgages
loan servicers, loan servicing, 60–61, 70, 243–56, 332
lobbying, lobbyists, 24, 50, 278–79, 312, 316, 342, 347, 357, 393–94
Dodd-Frank and, 231, 233
from nonbank mortgage lenders, 45–46
Lockhart, James, 135
Logue, Ronald, 3–4
London Interbank Offer Rate (Libor), 343, 361–62, 363, 364
long-term debt, 336
Los Angeles, Calif., 69
loss mitigation, 135
loss-share support, 290
loss sharing, 277
Ludwig, Eugene, 285, 287
McCain, John, 141, 385n
McConnell, Mitch, 216, 219
McCullough, Rickey, 299
McInerney, Roberta, 224, 232
Mack, John, 2–3, 6
McKinsey & Company, 37
MacPhee, James, 315
McQuade, Gene, 173
macroeconomics, 70
Maine, 219
Main Street bank depositors, 100
market destabilization, 99
market distress, 31
market forces:
as ideology, 41, 48, 66, 231
regulations and, 323
market making, 328
markets, 8, 328
self-correcting, 135, 304, 360
market uncertainty, 107
Massachusetts, 224
Massachusetts, University of (UMass), 12, 32, 288, 339
Maughan, Deryck, 278
Maximum Efficiency, Risk-Focused, Institution Targeted (MERIT) examinations, 18–19, 20
MB Financial, 298–99
Medicare, 351, 353
megabanks, see large financial institutions; large national banks
mergers, tax considerations and, 104
Mérida, 33–36
Merkel, Angela, 309
Merkley, Jeffrey, 222, 270
Merrill Lynch, 5, 107, 109, 178
insolvency of, 3, 37, 113, 118
sale to BofA of, 6, 110, 116, 119, 126–28, 160
as shadow banks, 186
Mexico, 33–36
Miller, Bradley, 198
Miller, George, 64
Miller, Harvey, 194, 218
Miller, Tom, 251–52
Minneapolis Federal Reserve Bank, 188
Minnesota, 288
Minsheng bank, 280
MIT, 327
Mitsubishi Bank, 3, 114, 201
money market mutual funds, 73, 108–9
Montague Bookmill, 300
Moody’s Analytics, 65
Moore, Ann, 305
Moore, Dennis, 198
moral hazard, 28, 377n
Morgan Stanley, 2–3, 5, 6, 107, 114, 122, 175, 176, 201
Morning Joe, 163
Morris, Henry, 175
mortgage-backed securities (MBSs), 51–52, 108, 233–34, 245, 334, 347–48
AIG’s insurance against, 181
of Citi, 73
complex, 333
investors in, 132, 135, 139, 256
subprime, 56, 63, 64
toxic, 350
see also securitization
Mortgage Bankers Association, 249
mortgage brokers, 53, 80, 184
mortgage lenders, 324
mortgage-lending standards, 7, 43–48, 231, 338, 364
mortgages, 210, 276, 304, 333, 347, 361
abusive practices in, 198, 231, 313
adjustable rate, see adjustable rate mortgages (ARMs); hybrid ARMs
affordable, 324
Alt-A, 121
bank, 49
best practices for, 51
capital equity for, 30
delinquency and defaults on, 31, 37, 44, 46–47, 52, 61, 73–74, 246–47, 250–51
of failed banks, 245
fixed-rate, 50, 62, 67, 77, 209, 349
foreclosures on, see foreclosures
government in, 347–48
high-risk, 84, 95, 101
history of performance of, 31
lending standards for, 356
losses on, 333
payment shock, 336
qualified residential, 234–35, 236, 237
rates of, 325
restructuring of, 7, 125
risk in, 31
securitization of, see securitization
servicing of, 248, 340, 385n
stated income (low-doc), 77
subprime, see subprime mortgages
super mods for, 250–51
toxic, 2, 3, 54, 56, 57, 77, 79, 80, 90, 95, 99, 116, 127, 156, 274, 279, 349
unaffordable, 4, 133, 332
underwater, 133, 149
mortgage securities, toxic, 199
Mother Jones, 8
Murton, Arthur, 23, 101, 113, 157, 160, 233, 293
mutual funds, 51, 108
naked capitalism blog, 237
Nash, Paul, 195, 197, 220, 226
Nason, David, 68, 109
National Association of Home Builders, 237
National City Bank (NatCity), 75, 78
National Commission on Fiscal Responsibility and Reform, 353
national debt, 351–53
National Economic Council, 142
National Press Club, 271, 316–17
National Rifle Association, 365n
National Treasury Employees Union (NTEU), 18
negative amortization, 43–44, 50
Netherlands, 260
central bank of, 33, 36
net present value (NPV) test, 133–34, 136
Nevada, 53
Newbury, Christopher, 49
New Century, 47, 53
New Deal, 55
New York, N.Y., 65–66, 83, 108, 143, 178, 267, 295, 298, 307, 311, 351
banks in, 2
Barclays trading desk in, 362
New Yorker, 305–6
New York Federal Reserve Bank (NY Fed), 2, 3, 31, 142, 147, 186, 318, 364, 366n
Barclays regulated by, 362
in Bear Stearns sale, 74–75, 90
Citi and, 121–22, 124–26, 168–69, 171–73, 205–6
Colleen’s tour of, 143–44
Geithner’s role at, 158
JPMorgan Chase regulated by, 361
stress tests proposed by, 155
Wachovia and, 96–99, 101–2
New York Post, 304–5
New York State, 37, 51, 174
New York State attorney general, 175
New York State Common Retirement Fund, 175
New York State Comptroller, 175
New York Stock Exchange (NYSE), 12, 108
New York Times, 8, 14, 67, 138, 162–63, 181, 193, 207–8, 271, 304, 305
Nielsen, Bob, 237
Nocera, Joe, 305
Nomura Securities, 63
nonbank financial institutions, 100, 186, 197, 329, 341
resolutions for, 226–27
see also shadow banks
nonbank mortgage lenders, 45–48, 53, 56–57, 217, 356
in “push marketing” mortgages, 49–50
nontraditional mortgages (NTMs), 41, 42, 43–48, 53, 56
delinquencies on, 44
fully indexed rate for, 44, 46
professional investors and speculators and, 67
North Carolina, 2, 232
Northern Rock, 110, 274
Nouy, Danièle, 35
Novak, Robert, 208
O, the Oprah Magazine, 307
Obama, Barack, 141, 197, 216–17, 236, 244, 256, 283, 353
on AIG bonuses, 181–82
appointments of, 142–43, 345
on Bair’s foreclosure prevention efforts, 144, 147, 148
Bair supported by, 150, 180, 318
Dodd-Frank bill signed by, 228–29, 231
on financial reform, 189, 190–91
HAMP announcement made by, 149–50
Obama, Michelle, 306
Obama administration, 124, 134, 139, 155, 189, 195, 216, 256, 278, 283, 288, 305, 351, 353, 372n
“Ode to Sheila Bair,” 320–21
Office of Complex Financial Institutions (CFI), 232
Office of Personnel Management, 20
Office of the Comptroller of the Currency (OCC), 13, 21, 25, 73, 113, 116, 128, 147, 151, 184, 192, 213, 237–40, 255–56, 258, 261, 263, 271–72, 337, 345, 357, 366n, 369n, 372n
bank charters and, 277
Basel II supported by, 31–32, 38–40, 47, 357
BofA regulated by, 100
Citi regulated by, 90, 100, 121–22, 124–26, 168, 171–72, 174, 339
consumer protection record of, 223–24
dividends and, 246
Dugan’s replacement at, 235–36
“field preemption” against state anti-lending laws by, 50–51, 368n
FIRA as new incarnation of, 213–14
on foreclosures, 243–48, 251–56
funding of, 340
JPMorgan Chase regulated by, 361
large banks favored by, 41–42, 45, 79, 157–60, 224, 339–41
proposed abolition of, 339–41
redefault rate report of, 137–38, 145, 148
stress tests and, 157–58, 160, 340
subprime mortgages and, 45, 49, 67
TARP repayment and, 201, 203, 205, 207
Wachovia regulated by, 84, 95–102, 339
Wells regulated by, 100
Office of Thrift Supervision (OTS), 13, 21, 25, 128, 137, 192, 236, 339
abolition of, 48, 365n
bank charters and, 277
Basel II and, 32–33
“field preemption” against state anti-lending laws by, 50, 368n
holding companies and, 117–18
IndyMac failure and, 80–81
larger institutions favored by, 41, 79
NTM regulation and, 42, 43, 47–48
subprime lending and, 49, 69
WaMu regulated by, 76–78, 86, 88–90
offshore tax havens, 277
Old Lane Partners, 122
OMB, 138, 279
O’Neill, Michael, 171–72, 174
On the Brink (Paulson), 319
Operation Happy, 298
Operation Hope, 309
option ARMs, 43–45, 67, 77, 79–80
Option One, 53
Oriental Bank and Trust, 282
Orlando, Fla., 215
Orman, Suze, 83
OTS, see Office of Thrift Supervision
overcollateralization, 52, 54, 61
overdraft fees, 312, 314, 336
Overhaul (Rattner), 177
over-the-counter (OTC) derivatives, 198, 304, 344, 363, 364
Padilla, Alfred, 282
Paletta, Damian, 92, 224–25
Pandit, Vikram, 1–2, 4, 5, 104–5, 122, 166, 170–74, 205, 228, 270, 374n
Paris, 37
Parkinson, Patrick, 187–89, 261–62
Park National Bank, 286