Heart of Empire — March 20, 2014, 2:09 pm

Sins of the Fatcat

Bob Ivry’s guide for tracking down the live villains and unburied bodies of the 2008 crash
“Run on a Bank” (Harper's, February 1890)

“Run on a Bank” (Harper’s, February 1890)

Back in February, Congressman David Camp (R., Mich.), chairman of the tax-writing House Ways and Means Committee, unveiled a plan to reform the U.S. tax code, clarifying and simplifying its infinite and tortuous provisions. One of his proposals was to levy a tax of .035 percent on assets exceeding $500 billion held by U.S. megabanks and insurance companies. This, he explained, would offset the advantage big banks enjoy in borrowing costs thanks to their implicit government-bailout guarantee as too-big-to-fail institutions.

It was a laudable enough idea, in a modest kind of way. Coming from a House Republican it certainly had the merit of novelty. But no one among the massed ranks of financial-industry hirelings on K Street and Capitol Hill took it seriously enough to plan a vigorous counterattack. Camp is due to step down from his chairmanship soon, and everyone in Washington is well aware of the banks’ invulnerability to attempts at prizing away even a sliver of their hoards. “Dead on arrival” was the common verdict.

That wasn’t the way JPMorgan Chase CEO Jamie Dimon, Wall Street’s capo di tutti frutti, saw things, though. “He was calling everyone, from the Speaker on down,” one lobbyist reported to me in amazement. “He was frantic about the threat of Camp, as if anything was ever going to come out of that.”

The only interpretation the D.C. financial lobbying community could make of Dimon’s hysterical behavior was that they had done their work too well. “The banks have gotten absolutely everything they wanted, post-crash,” my lobbyist friend explained. The 2010 SAFE bill, through which Senators Sherrod Brown and Ted Kaufman attempted to break up the too-big-to-fails? Crushed like a bug in the Senate, 60–31.  The Volcker Rule restricting banks from trading on their own account? Riddled with more loopholes than a yard of chicken wire. The Lincoln Amendment barring institutions from gambling with taxpayer-insured money? On its way out the door. “There really are no outstanding issues left for them to fight over,” my friend said, “so now even the semblance of defiance from any quarter is taken as a personal affront, and they move to crush it.”

Nevertheless, in obeisance to Dimon’s fevered response, lobbyists are armoring up for an all-out offensive. In the fighting words of Cam Fine, chief of the Community Bankers Association of America: “We’re going to beat this like a rented mule.”

In a vague sort of way, most people are aware that Wall Street crashed the economy and rode out of town scot-free, collecting unimaginably huge bonuses along the way. But vagueness breeds passivity. Fortunately, we now have Bob Ivry’s Seven Sins of Wall Street (Public Affairs) as an indispensable guide for tracking down live villains and unburied bodies. By the time you reach the end, all the sheer fury anyone with the merest flutter of a moral pulse felt back in 2008 and 2009 at the sight of bankers and their apologists blaming the cratering of the global economy on “people buying houses they couldn’t afford” wells up again, white hot.

There are by now shelves full of histories of the bubble era, some of which even manage to be kind and understanding about the Gucci-clad perps who blew it up. (I’m thinking of Andrew Ross-Sorkin’s Too Big to Fail, in particular.) Ivry’s contribution is to explain in limpid prose just what they have been up to since the third week of September 2008, when, as he reports, “more than one high-placed man in American finance made a phone call to his wife, telling her to go to the ATM and withdraw as much cash as she could, because it looked like the ATMs might run dry.”

It’s not a pretty picture. Among the victims Ivry describes is Rebecca Black, a nurse in Memphis who lost her “dream house” to foreclosure in 2010 when she could no longer afford the upwardly adjusting rate of her usurious 2/28 mortgage (low interest for two years, remorselessly increasing thereafter). But EMC Mortgage, the JPMorgan subsidiary that owned the note, never actually took possession, so she was still liable for the property tax, plus the $520 the city charged her for boarding up her by-then-snake-infested house and mowing her lawn. Meanwhile, the total assets of JPMorgan, whose overnight borrowing from the Federal Reserve peaked on October 1, 2008, at $68.6 billion, have shot up 78 percent to $2.39 trillion since the crash. As Ivry writes, “The grass keeps growing and the snakes have come back.”

Just to take one snake in particular, let’s look at Citigroup. Sired by Sandy Weill and Jamie Dimon out of Commercial Credit, a Baltimore loansharking operation they bought in 1986 that offered credit at 40 percent interest to semiliterate Mississippi farmers, Citi is the behemoth that needed $99.5 billion from the Fed in a hurry on January 20, 2009. Even President Barack Obama thought it should be broken up and sold off, until National Economic Council director Larry Summers and Treasury Secretary Timothy Geithner stomped on the idea. Instead, Citigroup carried straight on doing what came naturally: buying up fraudulent mortgages and selling them on.

Before 2008, many of their customers had been private investors, but that market vaporized in the crash. So, as Ivry pithily explains, Wall Street opted for a comfortable and profitable life on public welfare: “In the months and years after the financial crisis, the top people in Wall Street and Washington had engineered a closed loop that ensured their feet never touched the dirty ground. Wall Street would originate the mortgages, and Washington would buy them. (The government was involved in nine out of ten home loans in 2013.) The Treasury would sell debt, and Wall Street would buy it, then sell it back to the Federal Reserve. (This was called ‘quantitative easing.’)”

Naturally, fraud was involved, certainly in the case of Citigroup and its mortgage-buying subsidiary CitiMortgage. We know this, as Ivry explains, because a public-spirited CitiMortgage executive, Sherry Hunt, thought there was something wrong with the shady mortgages whose purchase she was forcefully encouraged to approve for later sale to the taxpayer, as represented by the Federal Housing Administration.

After her efforts to raise the matter internally went nowhere, Hunt brought her concerns to the attention of Preet Bharara, U.S. Attorney for the Southern District of New York. He, too, thought there was something wrong, and brought suit against Citi. The bank quickly caved and paid $158.3 million to settle the charges. So watertight was the case against it that the bank actually had to admit to having done something wrong. But that didn’t stop Sanjiv Das, Citigroup’s chief executive, from telling Ivry with a straight face that “the FHA was not defrauded.” Hearing this astonishing claim, Ivry recalls trying “to find the switch on my bullshit meter, which I had on vibrate and which was now rattling my molars.”

By the way, you and I didn’t know about that $99.5 billion tide-them-over loan at the time, because the Fed’s colossal Wall Street bailout — $1.2 trillion committed on a single day — was a closely held secret, not to be mentioned in front of the children, thus enabling such lucky recipients as Wells Fargo to claim with a straight face that they never needed or wanted a bailout, and to explain that they took $25 billion from the Troubled Asset Relief Program (TARP, the bailout we did hear about) only because the Treasury Secretary forced it down their throats. In fact, Wells Fargo asked for $45 billion on February 26, 2009, because they really needed it, in a hurry. And of course they got it, no questions asked.

The Seven Sins of Wall Street, by Bob IvryWe know about these events now thanks to Ivry’s partner in crime at Bloomberg News, the late, great Mark Pittman, who conceived the idea of suing the Federal Reserve under the Freedom of Information Act. As Seven Sins recounts in chapter two (“Wrath”), the Fed and the Clearing House Association (a.k.a. Wall Street’s biggest banks) fought bitterly to keep the story of the crisis under wraps, citing the sanctity of “trade secrets.” Ultimately justice, buoyed by Bloomberg’s bounteous legal war chest, prevailed, and we got to learn how dirty some of those secrets were.

The sins go on and on, though Ivry hews to convention and stops at number seven, (“Greed”). Meanwhile Rebecca Black, the nurse who lost her Memphis home to the snakes, lives in a one-bedroom apartment and works an $11 per hour job. The company she works for is owned by JPMorgan Chase.

Share
Single Page
(@andrewmcockburn) is Washington Editor of Harper’s Magazine.

More from Andrew Cockburn:

From the June 2019 issue

The Military-Industrial Virus

How bloated defense budgets gut our armed forces

From the March 2019 issue

No Joe!

Joe Biden’s disastrous legislative legacy

Conversation December 26, 2018, 9:12 am

Northern Aggression

Dana Frank, the author of The Long Honduran Night, discusses the parties who orchestrated the 2009 coup and the resistance that has risen to fight against them

Get access to 169 years of
Harper’s for only $23.99

United States Canada

CATEGORIES

THE CURRENT ISSUE

August 2019

The Last Frontier

= Subscribers only.
Sign in here.
Subscribe here.

A Play with No End

= Subscribers only.
Sign in here.
Subscribe here.

The Call of the Drums

= Subscribers only.
Sign in here.
Subscribe here.

Brutal from the Beginning

= Subscribers only.
Sign in here.
Subscribe here.

The Alps

= Subscribers only.
Sign in here.
Subscribe here.

view Table Content

FEATURED ON HARPERS.ORG

Article
The Last Frontier·

= Subscribers only.
Sign in here.
Subscribe here.

The San Luis Valley in southern Colorado still looks much as it did one hundred, or even two hundred, years ago. Blanca Peak, at 14,345 feet the fourth-highest summit in the Rockies, overlooks a vast openness. Blanca, named for the snow that covers its summit most of the year, is visible from almost everywhere in the valley and is considered sacred by the Navajo. The range that Blanca presides over, the Sangre de Cristo, forms the valley’s eastern side. Nestled up against the range just north of Blanca is Great Sand Dunes National Park. The park is an amazement: winds from the west and southwest lift grains of sand from the grasses and sagebrush of the valley and deposit the finest ones, creating gigantic dunes. You can climb up these dunes and run back down, as I did as a child on a family road trip and I repeated with my own children fifteen years ago. The valley tapers to a close down in New Mexico, a little north of Taos. It is not hard to picture the indigenous people who carved inscriptions into rocks near the rivers, or the Hispanic people who established Colorado’s oldest town, San Luis, and a still-working system of communal irrigation in the southeastern corner, or a pioneer wagon train. (Feral horses still roam, as do pronghorn antelope and the occasional mountain lion.)

Article
A Play with No End·

= Subscribers only.
Sign in here.
Subscribe here.

When I caught up with the Gilets Jaunes on March 2, near the Jardin du Ranelagh, they were moving in such a mass through the streets that all traffic had come to a halt. The residents of Passy, one of the wealthiest neighborhoods in Paris, stood agape and apart and afraid. Many of the shops and businesses along the route of the march, which that day crossed seven and a half miles of the city, were shuttered for the occasion, the proprietors fearful of the volatile crowd, who mostly hailed from outside Paris and were considered a rabble of invaders.

Article
The Call of the Drums·

= Subscribers only.
Sign in here.
Subscribe here.

The Great Kurultáj, an event held annually outside the town of Bugac, Hungary, is billed as both the “Tribal Assembly of the Hun-­Turkic Nations” and “Europe’s Largest Equestrian Event.” When I arrived last August, I was fittingly greeted by a variety of riders on horseback: some dressed as Huns, others as Parthian cavalrymen, Scythian archers, Magyar warriors, csikós cowboys, and betyár bandits. In total there were representatives from twenty-­seven “tribes,” all members of the “Hun-­Turkic” fraternity. The festival’s entrance was marked by a sixty-­foot-­tall portrait of Attila himself, wielding an immense broadsword and standing in front of what was either a bonfire or a sky illuminated by the baleful glow of war. He sported a goatee in the style of Steven Seagal and, shorn of his war braids and helmet, might have been someone you could find in a Budapest cellar bar. A slight smirk suggested that great mirth and great violence together mingled in his soul.

Article
Brutal from the Beginning·

= Subscribers only.
Sign in here.
Subscribe here.

Celebrity sightings are a familiar feature of the modern N.B.A., but this year’s playoffs included an appearance unusual even by the standards of America’s most star-­friendly sports league. A few minutes into the first game of the Western Conference semifinals, between the Golden State Warriors and the Houston ­Rockets—the season’s hottest ticket, featuring the reigning M.V.P. on one side and the reigning league champions on the other—­President Paul Kagame of Rwanda arrived with an entourage of about a dozen people, creating what the sports website The Undefeated called “a scene reminiscent of the fashionably late arrivals of Prince, Jay-­Z, Beyoncé and Rihanna.”

Article
The Alps·

= Subscribers only.
Sign in here.
Subscribe here.

A Toyota HiAce with piebald paneling, singing suspension, and a reg from the last millennium rolled into the parking lot of the Swinford Gaels football club late on a Friday evening. The HiAce belonged to Rory Hughes, the eldest of the three brothers known as the Alps, and the Alps traveled everywhere together in it. The three stepped out and with a decisive slam of the van’s side door moved off across the moonscape of the parking lot in the order of their conceptions, Rory on point, the middle brother, Eustace, close behind, and the youngest, ­Bimbo, in dawdling tow.

Cost of renting a giant panda from the Chinese government, per day:

$1,500

A recent earthquake in Chile was found to have shifted the city of Concepción ten feet to the west, shortened Earth’s days by 1.26 microseconds, and shifted the planet’s axis by nearly three inches.

“What’s the point?” said Senator Tim Scott, who is paid at least $174,000 per year as an elected official, when asked whether he had read the Mueller report.

Subscribe to the Weekly Review newsletter. Don’t worry, we won’t sell your email address!

HARPER’S FINEST

Happiness Is a Worn Gun

By

“Nowadays, most states let just about anybody who wants a concealed-handgun permit have one; in seventeen states, you don’t even have to be a resident. Nobody knows exactly how many Americans carry guns, because not all states release their numbers, and even if they did, not all permit holders carry all the time. But it’s safe to assume that as many as 6 million Americans are walking around with firearms under their clothes.”

Subscribe Today