July 23, 2016

Ministry of Plenty

Live Long and Prosper

What would become of business without a market of fools?

Chuang Tzu, 4th century BCE.

Alexander Hamilton (1756 – 1804):
Why has government been instituted at all?
Because the passions of men will not conform to the dictates of reason and justice without constraint.
(Federalist No 15 Papers, 17 September 1787)

P W Singer (1974):
For all the claims that “big government” can never match the private sector, [the Defence Advanced Research Projects Agency] is the ultimate rebuttal.
The Internet … e-mail, cell phones, computer graphics, weather satellites, fuel cells, lasers, night vision, and the Saturn V rockets [that first took man to the moon] all originated at DARPA. …
DARPA works by investing money in research ideas years before any other agency, university, or venture capitalists on Wall Street think they are fruitful enough to fund.
DARPA doesn’t focus on running its own secret labs, but instead spends 90% of its (official) budget of $3.1 billion on university and industry researchers …
(Wired for War, Penguin, 2009, p 140)

Niall Ferguson (1964):
The first era of financial globalization took at least a generation to achieve.
But it was blown apart in a matter of days.
And it would take more than two generations to repair the damage done by the guns of August 1914.
(The Ascent of Money, Penguin, 2008, p 304)

Andrew Carnegie (1835 – 1919):
  • Individualism,
  • Private Property,
  • the Law of Accumulation of Wealth, and
  • the Law of Competition
[are] the highest results of human experience [—] the best and most valuable of all that humanity has yet accomplished.

Peter Singer:
L Ron Hubbard [(1911 – 86),] the founder of the Church of Scientology, once wrote that the quickest way to make a million in America is to start a new religion.
(How Are We to Live?, 1993, p 94)

Arthur Pigou (1877 – 1959):
[All] the best business men want to get money, but many of them do not care about it much for its own sake; they want it chiefly as the most convincing proof to themselves and others that they have succeeded.
(Memorials of Alfred Marshall, 1956, p 282)

Simone Campbell (1945) [Catholic Nun]:
[We were] doing business roundtables [with] some entrepreneur, CEO types. …
A report had just come out that that the average CEO … got $10 million in salary a year, and [that] they were going for $11 million.
I got to ask them:
Is it that you're not getting by on $10 million that you need $11 million?
I don't get it.
And this one guy said: …
Oh, no Sister Simone. …
It's not about the money. …
It's that we want to win.
And money just happens to be the current measure of winning.
(Krista Tippett, Becoming Wise, Corsair, 2016, p 129)

PBS Frontline:
There was a phrase — "ripping someone's face off" — that was used on the trading floor to describe when you sold something to a client who didn't understand it and you were able to extract a massive fee because they didn't understand it.
[This was seen as] a good thing because [you were] making more money for the bank.
[That] sort of spirit, of [acting against the best interests of] your client … took on significant life on Wall Street.
(Money, Power and Wall Street, 2012)

Kid Power Conference, Disney World:
Kids love advertising: it's a gift — it's something they want.
There's something to said … about getting there first, and about branding children and owning them in that way. …
In boy's advertising, it is an aggressive pattern [—] antisocial behavior in pursuit of a product is a good thing.

Tim Hammonds [President & CEO, Food Marketing Institute]:
The interchange fee a supermarket pays when a customer pays with plastic is more than the money that flows to the retailer’s bottom line; it’s often double. …
The service provider using a computerized payment network is getting more dollars from the transaction than the net profit for the merchant who provides
  • the labor,
  • the land,
  • the fixtures,
  • the light and the heat, and
  • the store that stocks the products.
(FMI Midwinter Executive Conference, 14 January 2006)

Alexis de Tocqueville (1805 – 59):
The people may always be mentally divided into three distinct classes.
  • The first of these classes consists of the wealthy;
  • the second, of those who are in easy circumstances; and
  • the third is composed of those who have little or no property, and who subsist more especially by the work which they perform for the two superior orders.
(Democracy in America, 1835, Bantam, 2011, p 246)

Equality = Fairness = Justice

I know it makes you sick to think of that word ‘fairness’.
[Regrettably, the American public believe that] it’s right to help the vulnerable.

Arthur Brooks (1964) [President, American Enterprise Institute],
Conservative Political Action Conference, American Conservative Union, 16 March 2013.

One of the problems in this country is that we have this Judeo-Christian heritage of wanting to help those in need.
And this … sometimes causes people to promise more than they can deliver.

Nelson Rockefeller (1908 – 79) [41st Vice President of the United States, 1974–77],
Dallas, 12 September 1975.

Conscience is but a word that cowards use,
Devised at first to keep the strong in awe …

William Shakespeare (1564 – 1616), Richard III, Act 5, Scene 3, 1562.

(Alex Gibney, Park Avenue: Money, Power and the American Dream, Steps International, 2012)

Share of income paid as tax, including local and state tax, in 2009

(George Domhoff, Wealth, Income, and Power, September 2005)

Mean Wealth Holdings in the United States (2013)

(Adapted from Table 3: Edward Wolff, Household Wealth Trends in the United States, 1962-2013: What Happened Over the Great Recession?, National Bureau of Economic Research, 2014, p 51)
PercentileNet Worth

Income in the United States (1970)

(US Department of Commerce, Statistical Abstract of the United States, 1972, p 324)
Percentile% of Total Income
P50-100 (50%)77
P0-50 (50%)23

Income in the United States (2012)

Percentile# per 100,000 Taxpayers% of Total Income% of Total Income Tax
P99-100 (1%)1,00021.938.1
  P99.999-100 (0.001%)12.43.3
  P99.99-99.999 (0.009%)93.18.3
  P99.9-99.99 (0.09%)905.510.3
  P99-99.9 (0.9%)90010.919.5
P50-99 (49%)49,00067.059.1
P0-50 (50%)50,00011.12.8

Adrian Dungan

For 2012, the [US Adjusted Gross Income] threshold for:
  • [The] top 0.001% of tax returns [was] $62,068,187 or more [≈ $170,000 per day or 1,700 times the median income.]
    These taxpayers accounted for 2.4% of total AGI, and paid 3.3% of total income tax.
  • The top 0.01% of tax returns [was] $12,104,014 or more [≈ $33,000 per day or 330 times the median income.]
    These taxpayers accounted for 5.5% of total AGI, and paid 8.3% of total income tax.
  • [The top 0.1% of tax returns [was] $2,161,175 or more [≈ $6,000 per day or 60 times the median income.]
    These taxpayers accounted for 11% of total AGI, and paid 18.6% of total income tax.]
  • The top 1% of tax returns [was] $434,682 or more [≈ $1,200 per day or 12 times the median income.]
    These taxpayers accounted for 21.9% of total AGI and paid 38.1% of total income tax.
  • [The] top 50% of all tax returns was $36,055 for the year [≈ $100 per day = median income.]
    These taxpayers accounted for 88.9% of total AGI and paid 97.2% of total income tax.

(Individual Income Tax Shares, 2012, IRS Statistics of Income Bulletin, Spring 2015)


  • This is equivalent to the richest individual per hundred people being paid twice as much as the poorest 50 combined.
  • The richest 1/100,000 part of the population captured a 1/40 share of aggregate income.
  • Each of the richest 1 in 100,000 accrues the lifetime median income (~50 years) every 11 days.
  • Conversely, a person (and their descendants) on the median income would need to work for 17 centuries, ie 34 working lifetimes, to earn as much as the richest 1 in 100,000 get in a single year.
  • In 1970 the poorest half of US population took home less than 1/4 of the income pie (23%).
  • In 2012 the poorest half of US population took home 1/9 of the income pie (11.1%).
  • In 2005, 40% the global population (2.6 billion people) were living on less than $2 per day.

John Quiggin (1956)

Professor of Economics, Queensland University

Ron Haskins and Isabel Sawhill of the Brookings Institution looked at social mobility by looking at the economic life chances of men whose fathers were in the bottom fifth of the income distribution.
In a world of equal opportunity, we might expect that one fifth, or 20%, of those men, would end up in the same group as their fathers. …

Finland & Norway28%
United Kingdom30%
United States42%

Even in the Scandinavian countries, starting out poor is a disadvantage.
But in the United States, starting out poor doubles the risk of ending up poor.

(Zombie Economics, Princeton University Press, 2012, p 163)

Ha Joon Chang (1963)

Reader in Political Economy and Development, Cambridge University

[Nineteenth century 'classical' liberals rejected] the conservative view that tradition and social hierarchy should have priority over individual rights.
[On the other hand, they] believed that not everyone was worthy of such rights.
They thought women lacked full mental faculties and thus did not deserve the right to vote.
They also insisted that poor people should not be given the right to vote, since they [feared that] the poor would vote in politicians who would [redistribute wealth. …]

[Twentieth century neo-liberals, by contrast,] do not oppose democracy [in principle.]
[In practice, however, many would be prepared where necessary to] sacrifice democracy [in the defense of] private property and the free market.

(Economics: The User's Guide: A Pelican Introduction, 2014, emphasis added)


Alan Greenspan: The Wizard

The Golden Rule: He who has the gold rules

PBS American Experience: Slavery is Freedom

Simon Marginson: The New Gilded Age

Robert Putnam: Freedom And Justice For All

William Goetzmann: Debt and Deficit in the 18th Century

George Megalogenis: Tax Cuts of the Rich, Spending Cuts for the Poor

Adrian Dugan: The Anatomy of the Top 1%

Paul Krugman: The Great Divergence

David Stuckler: Life, Death and Austerity

Mark Blyth: No Bailouts

Michael Lewis: High Frequency Theft

Al Gore: The Robber Barons Ride Again

Robert Manne: After The (Neoliberal) Revolution

Paul Piff: Noblesse Oblige

Anne Manne: Producers vs Parasites

John Hewson: Budget of the Century

Alex Gibney: All I ask for is an unfair advantage

Choosing Inequality

Richard Wilkinson: Inequality and Progress

Robert Johnson: Heads I win — Tails you lose.

Satyajit Das: (LIBOR^2 x 1/LIBOR) – (LIBOR^4 x LIBOR^-3) = ?

A Culture of Greed

Paul Krugman: Gambling with Civilization

Mike Pottenger: Rich Man, Poor Man

The Economist: A True Progressivism

Michael Robinson: The Restoration of the Plutocracy

Charles Ferguson: Inside Job

Joseph Stiglitz: Financial Alchemy

Freedom is Slavery

  • Money Changes Everything: How Finance Made Civilization Possible, Princeton University Press, 2016.
    William Goetzmann: Edwin J Beinecke Professor of Finance and Management, Yale School of Management.


    In 1710, Robert Harley became chancellor of the Exchequer; [and effectively,] the prime minister of Great Britain.
    Among his biggest challenges was a [national debt of 9 million pounds —] the legacy of an extended war with France: the War of the Spanish Succession.
    (p 332)

    [The plan was to restructure the debt by creating a major financial firm, the South Sea Company,] under the control of Harley's Tory Party, which hitherto had been cut out of the directorships of the other major British financial giants of the day, the Bank of England and the East India Company. …
    The firm was approved by Parliament in May 1711 with Harley as the governor and a board largely composed of Tory directors.
    (p 333)

    In 1713, the Treaty of Utrecht concluded the costly War of the Spanish Succession, which pitted the Netherlands, Britain, and the Holy Roman Empire against efforts to unify France and Spain under a single monarch.
    As part of the settlement, the British, for the first time, received an asiento from Spain — permission to supply African slaves to Spanish America.
    This included:
    • limited rights of mercantile trade,
    • the requirement to supply 4,800 African slaves per year for thirty years to Spanish America (with the King of Spain receiving 10% of the profits on the slave trade), and
    • the right to establish [trading centers] in South America …

    The natural recipient for the asiento would have been the Royal African Company, which [had had a] monopoly on English trade with West Africa [for over 50 years.]
    The firm evidently branded its slaves with the initials of the firm (or those of the Duke of York, its governor), maintained a series of forts along the West African coast where it obtained prisoners, and traded actively in gold—hence the name for the English gold coin, the guinea. …

    [Nevertheless,] the asiento passed to the [newly formed] South Sea Company for a price of 7.5 million pounds.
    The Spanish King Philip V received an allocation of 28% of new South Sea shares, the purchase of which the company financed by means of a million pesos' loan.
    Queen Anne's cut was 21.5%.
    (p 334)

    The award of the asiento must have been particularly painful to Britain's Dutch allies in the war. …
    A significant part of the [Dutch West India] company's commerce was the slave trade.
    Now the British had a new company patterned on the Dutch model, and the right to take over the transatlantic trade in humanity. …

    What made the South Sea Company powerful was not its relative advantage in shipping and trade, but the degree to which it was an extension of the British government.
    It epitomized the opposite of the laissez-faire capitalist system that freed investors and entrepreneurs to buy and sell capital on a level playing field.
    [The] corporation became an instrument of political favoritism and international negotiation.
    It is perhaps telling that the politicians settled on exploiting the most odious of all trades.
    (p 335)

    [Thus 1711 saw] the beginning of the famous triangle trade that developed between Europe, Africa, and the Americas. …
    • Goods made in the factory towns of the industrial northwest of England were shipped to Africa in exchange for slaves;
    • Africans were brought over on the infamous middle passage to Caribbean islands for systematic subjugation and sale to the [American mainland; and]
    • [sugar,] molasses, and other commodities, bought with the profits of the slave trade, were shipped back to Europe. …

    [However,] Harley's political fortunes waned to the point that he was impeached as lord treasurer in 1714, and the following year he was locked up in the Tower of London for acts of treason.
    (p 336)

    Although absolved and released after a two-year confinement, he had to step down as governor of the South Sea Company.
    His place was taken by King George I. …
    By one calculation the South Sea Company shipped 64,000 slaves to Spanish America over its lifetime.
    (p 337)

  • The Secret Recordings of Carmen Segarra, Ep 536, This American Life, WBEZ, Chicago, September 26 2014.
  • NY Fed Fired Examiner Who Took on Goldman, ProPublica, 10 October 2013.
    Jake Bernstein (1946).

    In the spring of 2012, [Carmen Segarra,] a senior examiner [and risk specialist] with the Federal Reserve Bank of New York determined that Goldman Sachs had a problem.

    Under a Fed mandate, [Goldman] was expected to have a company-wide policy to address conflicts of interest in how its phalanxes of dealmakers handled clients.
    Although Goldman had a patchwork of policies, [Segarra] concluded that they fell short of the Fed’s requirements.

    That finding [had potentially] serious implications for Goldman, which was already under fire for … allegedly putting the bank’s own interests above those of its customers. …

    Before she could formalize her findings, Segarra said, the senior New York Fed official who oversees Goldman pressured her to change them.
    When she refused, Segarra said she was called to a meeting where her bosses told her they no longer trusted her judgment. …
    Carmen Segarra:
    They wanted me to falsify my findings … and when I wouldn’t, they fired me.
    Today, Segarra filed a wrongful termination lawsuit against the New York Fed in federal court in Manhattan seeking reinstatement and damages. …

    Goldman is known for having close ties with the New York Fed, its primary regulator.
    The current president of the New York Fed, William Dudley, is a former Goldman partner.
    One of his New York Fed predecessors, E Gerald Corrigan, is currently a top executive at Goldman.
    At the time of Segarra’s firing, Stephen Friedman, a former chairman of the New York Fed, was head of the risk committee for Goldman’s board of directors.

    Goldman's Controversial Plays

    Liz Day

    A sampling of deals that have posed conflicts of interest for Goldman Sachs:

    Kinder Morgan-El Paso

    The Deal:
    In 2011, gas pipeline operator Kinder Morgan agreed to buy pipeline operator El Paso Corp for $21.1 billion.
    Goldman advised El Paso on the deal.

    The Issue:
    Goldman owned 19% of Kinder Morgan and controlled two board seats.
    Goldman’s lead banker for El Paso failed to disclose owning $340,000 in Kinder Morgan stock.

    A Delaware judge declined to stop the deal but criticized Goldman and El Paso’s management for conflicts of interest.
    {At the New York Fed, Goldman told the regulators that its conflict-of-interest procedures had worked well on the deal.}


    The Deal:
    Abacus 2007-AC1 was a mortgage-backed security created by Goldman.
    Investors in the deal lost over $1 billion, contributing to the financial crisis.

    The Issue:
    Goldman failed to disclose that hedge fund manager John Paulson had helped pick assets for the security that he wanted to bet against.

    In 2010, Goldman settled with the SEC for $550 million; Goldman VP Fabrice Tourre was found liable of securities fraud earlier this year.

    Stephen Friedman

    The Deal:
    In the midst of the 2008 financial crisis, Goldman won approval from the Federal Reserve to convert to a bank holding company and later received federal bailout money.

    The Issue:
    Stephen Friedman, then chairman of the New York Federal Reserve, sat on Goldman’s board and bought 37,300 shares of Goldman while helping plan the Wall Street bailout.

    Friedman resigned from the Fed shortly after news of his stock purchases broke in 2009; last spring, he retired from the Goldman board.


    The Deal:
    Goldman was hired in 2008 by Solyndra, a California-based solar panel manufacturer, and secured Solyndra a $535 million loan guarantee from the US Department of Energy.

    The Issue:
    Goldman netted fees as an adviser but reportedly decided against investing its own money into Solyndra.

    In 2011, Solyndra filed for bankruptcy and laid off 1100 workers, spurring a government investigation into whether Solyndra misled officials about its finances.


    The Deal:
    In 2005, the New York Stock Exchange bought Archipelago Holdings, which ran a rival electronic trading network.

    The Issue:
    Goldman advised Archipelago and saw its stake in the company surge — as did value of Goldman’s seats on the NYSE, then headed by former Goldman President John Thain.

    The NYSE settled a member suit that claimed Goldman gave conflicted advice.

    Would you like to know more?

  • The Political Origins of Banking Crises, RSA, 27 February 2014.
    Charles Calomiris: Henry Kaufman Professor of Financial Institutions,Columbia Business School.
  • Swiss executive pay referendum nears, RN Drive, ABC Radio National, 22 November 2013.
    Florian Vock: International Secretary, Young Socialist Party, Switzerland.
  • Gambling with Civilization, New York Review of Books, 6 June 2013.
    Paul Krugman (1953): Professor Economics and International Affairs, Princeton University.
    Nobel Prize in Economics (2008).

    [In The Climate Casino, William Nordhaus emphasizes that:] when it comes to climate change uncertainty strengthens not weakens, the case for action now. …
    [His] best estimate of what we should be doing involves placing a substantial immediate tax on carbon, one that would sharply increase the current price of coal, and gradually raising that tax, more than doubling it by 2030. …

    Nordhaus draws a contrast between what he calls
    • “managed systems” — things like agriculture and public health, which are basically human activities affected by climate — and
    • “unmanageable systems,” like sea level, ocean acidification, and species loss.

    [He] is relatively sanguine about the [short-term] impact of rising temperatures on the managed systems. …
    The bigger costs, [he] argues, come from the unmanageable systems:
    • rising seas,
    • more powerful hurricanes,
    • loss of species diversity,
    • increasingly acidic oceans. …

    [He] concludes that there will be mounting costs as the temperature rise goes beyond 2°C [— a rise which already seems] almost impossible to avoid.

    [Compared to other 'negative externalities'] there are some unusual aspects to greenhouse gases:
    • the harm they do is global, not local,
    • the costs extend very far into the future rather than occurring contemporaneously with the emissions, and
    • there is at least some risk that emissions will lead not just to costs but to civilizational catastrophe. …

    [So why] is putting a price on carbon better than direct regulation of emissions?
    [The answer is:] efforts to reduce emissions can take place along many “margins,” and we should give people an incentive to exploit all of those margins.
    [For example:]
    • Should consumers try to use less energy themselves?
    • Should they shift their consumption toward products that use relatively less energy to produce?
    • Should we try to produce energy from low-emission sources (eg, natural gas) or non-emission sources (eg, wind)?
    • Should we try to remove CO2 after the carbon is burned, eg, by capture and sequestration at power plants?
    The answer is, all of the above.
    And putting a price on carbon [gives] people an incentive to do all of the above. …

    Nonetheless … direct action to regulate emissions from [coal-fired] electricity generation would be a surprisingly good substitute for carbon pricing [due to its disproportionate contribution to GHG emissions.]
    [In other words, the solution to] most of the emissions problem [might] be quite simple: stop burning coal to generate electricity. …

    [However, there is] real power behind the opposition to any kind of climate action — power that warps the debate both by denying climate science and by exaggerating the costs of pollution abatement.
    [And it] isn’t the kind of power that can be moved by calm, rational argument.

    [So why] are some powerful individuals and organizations so opposed to action on such a clear and present danger?
    Part of the answer is naked self-interest.
    Facing up to global warming would involve
    • virtually eliminating our use of coal except to the extent that CO2 can be recaptured after consumption; …
    • somewhat reducing our use of other fossil fuels; and …
    • substantially higher electricity prices.
    That would mean billions of dollars in losses for some businesses, and for the owners of these businesses subsidizing climate denial has so far been a highly profitable investment.

    Beyond that lies ideology.
    William Nordhaus (1941) [Sterling Professor of Economics, Yale University]:
    Markets alone will not solve this problem …
    There is no genuine ‘free-market solution’ to global warming.
    (The Climate Casino: Risk, Uncertainty, and Economics for a Warming World, YUP, 2013)
    This isn’t a radical statement, it’s just [basic economics.]
    Nonetheless, it’s anathema to free-market enthusiasts.
    If you like to imagine yourself as a character in an Ayn Rand novel, and someone tells you that the world isn’t like that, that it requires government intervention — no matter how market-friendly — your response may well be to reject the news and cling to your fantasies.
    And sad to say, a fair number of influential figures in American public life … believe they’re acting out Atlas Shrugged.

    Finally, there’s a strong streak in modern American conservatism that rejects not just climate science, but the scientific method in general.
    Polling suggests, for example, that a large majority of Republicans reject the theory of evolution.
    For people with this mind-set, laying out the extent of scientific consensus on an issue isn’t persuasive — if anything, it just gets their backs up, and feeds fantasies about vast egghead conspiracies. …

    Given the current state of American politics [this] combination of self-interest, ideology, and hostility to science constitutes a huge roadblock to action, and rational argumentation isn’t likely to help.
    Meanwhile, time is running out, as carbon concentrations keep rising. …
    William Nordhaus (1941):
    [The] last 7,000 years have been the most stable climatic period in more than 100,000 years.
    [This] era of stability coincides pretty much exactly with the rise of civilization, and that probably isn’t an accident.
    Now that period of stability is ending [— courtesy of the] mass burning of coal and other fossil fuels. …

    The Scientific Revolution that accompanied [Industrial Revolution has] given us far more knowledge about the world, including an understanding of what we ourselves are doing to the environment.
    But it seems that we have [unknowingly] made an immensely dangerous bet: namely, that we’ll be able to use the power and knowledge we’ve gained in the past couple of centuries to cope with the climate risks we’ve unleashed over the same period.
    Will we win that bet?
    [Only time] will tell.
    Unfortunately, if the bet goes bad, we won’t get another chance to play.

  • How the Case for Austerity Has Crumbled, New York Review of Books, 6 June 2013.
    Paul Krugman (1953).

    [The] turn away from fiscal and monetary stimulus [since 2010] can be interpreted … as giving creditors priority over workers.
    Inflation and low interest rates are bad for creditors even if they promote job creation; slashing government deficits in the face of mass unemployment may deepen a depression, but it increases the certainty of bondholders that they’ll be repaid in full. …

    [The] failure to anticipate the crisis was a relatively minor sin.
    Economies are complicated, ever-changing entities; it was understandable that few economists realized the extent to which short-term lending and securitization of assets such as subprime mortgages had recreated the old risks that deposit insurance and bank regulation were created to control.

    [But] what happened next — the way policymakers turned their back on practically everything economists had learned about how to deal with depressions, the way elite opinion seized on anything that could be used to justify austerity — was a much greater sin.
    The financial crisis of 2008 was a surprise, and happened very fast; but we’ve been stuck in a regime of slow growth and desperately high unemployment for [three] years now.
    And during all that time policymakers have been ignoring the lessons of theory and history. …

    [Immense suffering] has resulted from these policy errors.
    [Furthermore, recent economic history challenges the belief] that knowledge can make a positive difference in the world.
    To the extent that policymakers and elite opinion in general have made use of economic analysis at all, they have, as the saying goes, done so the way a drunkard uses a lamppost: for support, not illumination.
    Papers and economists who told the elite what it wanted to hear were celebrated, despite plenty of evidence that they were wrong; critics were ignored, no matter how often they got it right.
    [The] broader message of the past few years remains just how little good comes from understanding.

    Would you like to know more?

  • Park Avenue: Money, Power and the American Dream, Steps International, 2012.
    Alex Gibney: Writer & Director.
  • Client 9: The Rise and Fall of Eliot Spitzer, A&E IndieFilms, 2010.
    Alex Gibney: Writer and Director.

    Eddie Sterns hedge fund, Canary Capital, was producing spectacular results at a time when the stock market was tanking.
    The big profits … came from manipulating mutual funds.
    Noreen Harrington [Former Executive, Stern Asset Management]:
    They were doing … late trading. …
    In one case they went to a bank.
    And the bank put a computer back-office terminal into … Eddie Stern's fund.
    Eddie might enter 40 trades prior to [the 4 pm market close].
    Now let's say it's [10 pm.]
    They cancel the 30 that lost money and keep the 10 that made money.
    And so this was a bank, completely working with one client, to destroy the profits owed to all the people in those funds.
    The name of the bank, was Bank of America.
    Noreen Harrington:
    One of the questions I get asked a lot [is:]
    Did you believe you would never work again?
    And I think about that question a lot because, what you're saying, by asking that question, is by doing public service and helping 95 million people, stopping a crime, this industry wouldn't want you? …

    John Houldsworth [Former CEO, Gen Re — a company owned by Warren Buffet]:
    [American International Group (AIG) CEO] Hank Greenberg phoned up Ron Ferguson, and said
    Ron, I need your help.
    We want to borrow $500 million of reserves off you for a couple of years.
    To boost his stock price, Hank Greenberg wanted to make it look like AIG had $500 million more than it did. …
    A hand-written deal memo laid out the terms [with Gen Re:]

    1. Gen-Re would pretend to pay AIG $500 million (in two instalments) for a phoney insurance policy.

    2. There was no risk of paying a claim.

    3. For doing the phoney deal AIG would pay Gen Re a $5 million fee. …
      Maurice 'Hank' Greenberg:
      AIG was a big company.
      I didn't stay focussed on the Gen Re transaction.
      Hank Greenberg's initials 'MRG' were all over the document. …

    What was an 'unfair advantage' was seen as 'cooking the books' to AIG's accountants, Price Waterhouse Coopers.
    The firm refused to accept AIG's financial statements as long as Greenberg was the CEO. …
    [Threatened with indictment by New York State Attorney General, Eliot Spitzer] Greenberg's lawyers advised him to 'plead the 5th', despite AIG's policy to fire employees who didn't cooperate with regulators. …
    [For these two reasons, Greenberg's own board was forced to remove him in 2005.]
    Hank Greenberg (1925):
    When politicians involve themselves in who is running a company, and who is not — we're on dangerous ground in this country. …
    I didn't do anything improper …

    [During Greenberg's tenure AIG sold] billions of dollars of insurance to the world's biggest banks to hide their risky gambles on home mortgages.
    When housing prices collapsed [in 2008] AIG couldn't pay the claims.
    US taxpayers paid $183 billion in an effort to save the global economy from collapse. …

    Spitzer wanted to prosecute Greenberg for financial manipulation, but was called off the case by [George W Bush appointee and US Attorney for the Southern District of New York, Michael J Garcia on the understanding that federal authorities would deal with Greenberg]. …
    Michael Garcia never pursued charges against Greenberg.
    Instead, he would lead the prosecution that [led, indirectly,] to Spitzer's downfall.

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