House of Cards, page 64
NOTES
Abbreviations
NY The New Yorker
NYT New York Times
SEC Securities and Exchange Commission
WSJ Wall Street Journal
Chapter 1: The Ultimate Roach Motel
4. Thornburg had a liquidity problem: SEC filings of Thornburg Mortgage.
5. UBS filing: SEC, February 14, 2008.
5. Thornburg … caught a major cold: SEC filings of Thornburg Mortgage.
6. “Financial Ebola”: Yahoo message board, March 2, 2008.
7. “one or two million light”: “Focus: A Day in the Life of Masters of the Universe,” Independent (U.K.), April 25, 2004.
7. fund closed in February 2008: Ron Beller letter to investors, February 28, 2008.
8. “Our mission is to be …”: Carlyle Capital Web site.
10. sixty-three thousand jobs had been lost: NYT March 7, 2008.
10. “Godot has arrived”: Ibid.
10. price of the credit default swaps: WSJ, March 10, 2008.
10. “were off in a world of their own”: Australian, May 29, 2008.
Chapter 2: The Confidence Game
15. “Being denied such a loan”: Roddy Boyd, “The Last Days of Bear Stearns,” Fortune, March 31, 2008.
18. “Though Bear Stearns's overall financing”: WS], May 28, 2008.
18. “We are now pretending”: Michael Shedlock on Mish's Global Economic Trend Analysis blog, March 10, 2008.
19. “no comment”: Interview with Dean Debuck, May 21, 2008.
25. “Bear did not get out of the way fast enough”: SmartMoney.com, March 13, 2008.
25. “Even if I were the most bearish”: Bloomberg.com, August 11, 2008.
25. At about the moment: Interview with New York Federal Reserve public information officer Calvin Mitchell.
27. “So that left only ten days”: Steven Smith, TheStreet.com, March 14, 2008.
27. At 5:06 on the afternoon of March 11: Copies of e-mails between Stuart Smith at Hayman Capital and Goldman Sachs. Christopher Kirkpatrick, the general counsel of Hayman Capital, did not respond to numerous requests to be interviewed.
31. “The prime brokerage withdrawals”: Interview with Roddy Boyd. JPMorgan Chase declined to answer any questions for this account.
Chapter 3: “Bear Stearns Is Not in Trouble!”
33. “Let's stay focused”: WSJ, May 28, 2008.
35. “Every banker knows that”: Walter Bagehot, Lombard Street: A Description of the Money Market (New York: BiblioBazaar, 2006), 43.
36. “Mr. Schwartz's delivery”: George Anders, WS], March 19, 2008.
Chapter 4: The Run on the Bank
49. “They were the ones”: NYT, July 13, 2008.
53. Bear Stearns had trading positions with some five thousand other firms: WSJ, June 23, 2008.
Chapter 5: The Armies of the Night
61. “And it was widely rejected out of hand”: Transcript, Senate Banking Committee hearing, Sen. Chris Dodd, chairman, April 3, 2008.
64. At 2 A.M. Geithner called: John Cassidy “Anatomy of a Meltdown,” NY, December 1, 2008.
65. “the further we got into it”: Ibid.
Chapter 6: Feeding Frenzy
74. “the final humiliation”: Financial Times, March 15,2008.
76. “When Bear's liquidity crisis”: NYT, M&A blog, June 30, 2008.
78. available liquidity: Bear Stearns & Co. proxy statement, April 28, 2008, 43.
Chapter 7: Total Panic
81. “It was just clear”: WSJ, March 18, 2008.
Chapter 8: The Price of Moral Hazard? $2
94. “We kind of slept on it”: Bryan Burrough, “Bringing Down Bear Stearns,” Vanity Fair, August 2008.
94. “That article certainly had an impact”: Ibid.
95. “Things didn't firm up”: WS], March 18, 2008.
98. “I believe this is the right action”: Ibid.
102. “That sounds high to me”: Burrough, “Bringing Down Bear Stearns.”
103. “I tell people”: Jamie Dimon on The Charlie Rose Show, July 7, 2008.
104. “jumped up”: Washington Post, November 11, 1999.
Chapter 9: The Fed Comes to the Rescue (After the Battle Is Over)
109. Two million square feet of office space: WSJ, March 18, 2008.
110. “What can I say?” Burrough, “Bringing Down Bear Stearns.”
114. “five-vodka event”: WSJ, March 18, 2008.
Chapter 10: Mooning at the Wake
116. “This is like waking up”: NYT, March 17, 2008.
121. “Once you have a run”: Ibid.
121. “Basically we're all wondering”: WSJ, March 18, 2008.
121. “The hard capitalist truth”: Ibid.
122. “Make no mistake”: NYT, March 18, 2008.
125. “Same with the team at Bear Stearns”: Ibid.
Chapter 11: “New Developments from Hell”
133. “What do you mean, we”: WSJ, May 29, 2008.
135. “Send Bear back into bankruptcy”: NYT, March 24, 2008.
135. “seething, fearful”: NYT, March 20, 2008.
Chapter 12: “We're the Bad Guys”
145. “There has been no evidence”: New York Sun, April 16, 2008.
Chapter 13: Cy
153. Just after the start: NYT, May 1, 1923.
153. “mainly rich Park Avenue”: Judith Ramsey Ehrlich and Barry Rehfeld, The New Crowd (Boston: Little, Brown & Co., 1989), 143.
Chapter 14: Ace
160. “He was a terrific boy”: Daily Oklahoman, October 7, 2000.
162. “I just thought it was”: Alan Green-berg on The Charlie Rose Show, January 2, 2004.
162. “that was it”: Mark Singer, “The Optimist,” NY, April 26 and May 3, 1999.
163. “I was very well prepared”: University of Missouri Alumni Magazine, October 2005.
164. In April 1957: New York Stock Exchange records.
165. “Well, the odds aren't too bad”: NYT June 11, 1989.
165. “I never put anything off”: Daily Oklahoman, October 7, 2000.
166. “I went to Cy”: Singer, “The Optimist.”
167. “He was the only one”: Ehrlich and Rehfeld, The New Crowd, 147.
Chapter 16: May Day
183. When Cayne came back to the office: Marvin Davidson declined to be interviewed for this account.
Chapter 17: Haimchinkel Malintz Anaynikal
193. “We had to start”: The Charlie Rose Show, January 2, 2004.
194. “The implications”: Alan C. Green-berg, Memos from the Chairman (New York: Workman Publishing, 1996), 13.
194. “I would also like to add”: Ibid., 15.
194. “Some of the things”: Ibid., 16.
194. “appears to be”: Ibid., 17.
197. “There has been a lot of”: Green-berg, Memos, 19.
198. “I think we should be”: Ibid., 21.
198. “Every partner”: Ibid., 20.
199. “I am well aware”: Ibid., 22.
199. “more determined than ever”: Ibid., 27.
200. “Lets make nothing but money”: NYT, June 12, 1983.
206. “I own stock”: NYT, June 10, 1998.
206. “From this day on”: Greenberg, Memos, 40.
208. “a strikingly attractive”: NYT June 11, 1989.
Chapter 19: “Bullies Always Cave”
217. “loves or admires Jimmy Cayne”: David Vise, Washington Post, October 29, 1989.
217. “[B]ridge is a man's game”: M, December 1989.
218. “Cayne is a man”: London Evening Standard, March 31, 2008.
220. “I can't make any apologies”: USA Today, August 4, 1992.
Chapter 20: The Math Whiz and the Baseball Star
224. “best deal”: Cigar Aficionado, November/December 1999.
224. “No Wall Street CEO”: Trader Monthly, June 2007.
224. “No smoking anywhere”: Greenberg, Memos, 118.
227. “moment arrived that would make”: Bloomberg, October 3, 2007.
232. “Its bet paid off”: WSJ, November 11, 1993.
Chapter 21: “We're All Going to a Picnic and the Tickets Are $250 Million Each”
239. “bucket shop”: Gretchen Morgenson, “Waiting for the Other Shoe to Drop,” Forbes, November 3, 1997.
240. “on charges of being”: NYT, June 6, 1997.
245. “Minute by minute”: Roger Lowenstein, When Genius Failed (New York: Random House, 2000), 145.
246. “Where are you”: Ibid., 156.
Chapter 22: The Fish Rots from the Head
263. “dull businesses and scandal”: Erin Arvedlund, “Who Will Buy Bear Stearns,” Barron's, August 7, 2000.
267. Anamarie Giambrone: NYT, February 28, 2002.
Chapter 23: The 10-in-10 Strategy
271. “I've never seen all these people”: Chief Executive, January 1, 2002.
273. “That was all nonsense”: Ibid.
274. “Bear Stearns and its impressive”: Business Wire, April 4, 2002.
275. “The Card Player”: Forbes, October 14, 2002.
277. “Investors said, ‘I don't want”: NYT November 9, 2008.
277. “The Fed's easy-money”: John Cassidy “Anatomy of a Meltdown,” NY December 1, 2008.
282. “He had come up with an approach”: NYT, June 28, 2007.
283. “eight-figure compensation”: Bloomberg, July 3, 2007.
283. 75 percent of BSAM's total revenues: Bank of America lawsuit, filed October 29, 2008, against Bear Stearns, Ralph Cioffi and Matthew Tannin.
283. He certainly lived very well: Details about Cioffi's lifestyle from Northjersey.com, June 18, 2008.
Chapter 24: Cayne CAPs Spector
288. On the call: New York Post, August 6, 2004.
292. “Consistently performing makes”: Andrew Bary “How Sweet It Is,” Barron's, August 2, 2004.
Chapter 25: Cioffi's Bubble
293. “pockets of severe stress”: Alan Greenspan speech at Americas Community Bankers Annual Convention, Washington, D.C., October 19, 2004.
293. “global savings glut”: Ben Bernanke speech at the Virginia Association of Economics, Richmond, Virginia, March 10, 2005.
293. “In retrospect”: John Cassidy, NY December 1, 2008.
294. “increase home ownership”: Dennis Sewell, Spectator, October 1, 2008.
296. “an explicit target”: Russell Roberts, “How Government Stoked the Mania,” WSJ, October 3, 2008.
300. “I have been waiting”: NYT, October 19, 2008.
Chapter 26: “The Entire Subprime Market Is Toast”
302. “Funds operating procedure”: The Commonwealth of Massachusetts in the matter of Bear Stearns Asset Management, Inc., administrative complaint, docket no. E-2007-0064, filed November 14, 2007, 3.
304. “I don't like to argue”: Ibid., 28.
305. The “investment philosophy”: This account of the Bear Stearns hedge funds is taken from a variety of sources, including the actual monthly statements sent to investors, the Bank of America complaint, the Commonwealth of Massachusetts complaint, the amended complaint filed by Barclays against BSAM, the June 18, 2008, U.S. grand jury indictment of Cioffi and Tannin, the offering memoranda of the High-Grade and Enhanced Leverage Funds, conversations with BSAM executives and the funds' investors, and a review of related e-mails.
306. testimony of Kyle Bass: “The Role of Credit Rating Agencies in the Structured Finance Market,” September 27, 2007, at a U.S. House of Representatives subcommittee hearing.
306. “In part as a response”: United States against Ralph Cioffi and Matthew Tannin, filed June 18, 2008, in the U.S. District Court for the Eastern District of New York, CR 08-415, 6.
307. Everquest Financial: Information regarding the proposed Everquest transaction was taken primarily from the Everquest S-l document filed with the SEC on May 9, 2007, and from various other sources referred to in the note for page 305.
309. At least one plaintiff: Bank of America complaint, filed October 29, 2008, 10.
312. “suggested that the houses”: NYT, December 6, 2006.
Chapter 27: “If There's Fraud, We're Gonna Pay”
315. get Paulden fired: Interview with Pierre Paulden. He directed me to Mike Carroll, the editor of Institutional Investor. Carroll did not respond to an e-mail seeking information.
317. “It's time to buy”: WSJ, July 11, 2007.
317. “When you read the research”: Ibid.
319. “I don't see that going forward”: Bank of America complaint, 11.
322. “broad financial concern”: Ben Bernanke testimony to House budget committee, February 28, 2007.
323. “Don't talk about”: Ibid., 11.
325. “inappropriately categorized”: BusinessWeek, March 15, 2007.
326. “We're very proud”: Reuters, August 6, 2007.
329. The next day, April 25: The account of the April 25, 2007, conference call with investors comes from a transcript of the call.
346. “but that the article was untrue”: Bank of America complaint, 29.
350. June 14 meeting: The account of the June 14, 2007, BSAM meeting with creditors comes from a transcript of the meeting.
352. “underestimating the severity”: WSJ, June 23, 2007.
355. Meeting again with the fund's repo lenders: The account of the June 18, 2007, BSAM meeting with creditors comes from a presentation used at the meeting by BSAM executives.
356. “were taken aback”: WS], June 23, 2007.
Chapter 28: A Very Stupid Decision
358. “I've never seen a dealer”: National Mortgage News, June 25, 2007.
358. “They were all friends”: Bloomberg, June 25, 2007.
366. “the current scourge of Wall Street”: WSJ, June 23, 2007.
369. hire Marc Lasry: Financial Fines, January 10, 2008.
369. “It's like painting the Verrazano Bridge”: WS], June 30, 2007.
370. Cayne played about twenty rounds of golf: Reuters, August 6, 2007.
370. “grow and grow”: Business Limited, June 30, 2007
Chapter 29: Nashville
374. “they did not say a word”: NYT, August 8, 2007.
382. Cayne shot an 88: New York Post, August 8, 2007.
386. “the Bernanke doctrine”: NY, December 1, 2008.
Chapter 31: Desperate Times Call for Hare-Brained Schemes
417. “Jimmy Cayne should be out”: Financial Fines, January 9, 2008.
418. “Being acquired is not a strategy”: Financial Fines, January 10, 2008.
Epilogue: The Deluge
431. The e-mail correspondence referred to regarding Lehman Brothers was made public at Richard Fuld's October 6, 2008, testimony before the House Committee on Oversight.
442. “With Bear Stearns”: Cassidy, NY, December 1, 2008.
ACKNOWLEDGMENTS
This book would have been inconceivable—literally—without any number of dedicated professionals at Doubleday. At the very top of this list is my friend and editor Bill Thomas, who woke up one day in March 2008, saw that his 401(k) had been decimated and decided there must be a book in what became the financial crisis of 2008. Steve Rubin, another longtime friend and the former publisher of Doubleday, was also instrumental to this book's fruition. I am immensely grateful to both of them. I am also very appreciative of Sonny Mehta's support as my new publisher.
From there, in alphabetical order, I would like to thank, at Doubleday, Melissa Ann Danaczko, David Drake, John Fontana, Chris Fortunato, Rebecca Gardner, Phyllis Grann, Suzanne Herz, Rebecca Holland, Corey Hunter, Alison Rich, Kathy Trager, and Sue Warga. I would also like to thank my British team, Helen Confort and Pen Vogler.
There were also a number of people formerly affiliated with what used to be known as Bear Stearns & Co. who were very helpful to me in the writing of this book. They were, especially, Paul Friedman, Robert Upton, Tom Flexner, Donald Tang, Steve Begleiter, Doug Sharon, Tom Marano, Sam Molinaro, Fares Noujaim, David Glaser, Ed Levy, Vince Tese, Fred Salerno, Tony Novelly, and Suzette Fasano. A special thanks— for his insights and generosity of spirit—goes to Jimmy Cayne, the longtime CEO and personification of Bear Stearns.
Others, not affiliated with Bear Stearns, were extremely helpful, too, including Frank E. Schramm III, Sandy and Barbara Lewis, Roger Lewis, Tim Geithner, Calvin Mitchell, Susan McLaughlin, Gary Parr, Rodgin Cohen, Steve Schwarzman, Peter Rose, Larry Summers, Alan Mnuchin, John Gutfreund, Harold C. Mayer Jr., Gary Cohn, Ken Wilson, David Solomon, Michael DuVally, Lucas Von Praag, Peter Truell, Andy Merrill, Sam Heyman, John Angelo, Patricia Cayne, Philip Alder, Russell Roberts, Michael Ledeen, Roddy Boyd, Bennet Sedacca, Meredith Whitney, Guy Moszkowski, Laurie Kaplan, Anne Norton, Alexandra Lebenthal, Dr. Jay Meltzer, Erin Callan, Felicia Grumet, and Stephen Cohen, No surprise, there were many others who were essential to telling this story but who would prefer to remain anonymous. They know who they are, and I thank them.
Personally, I have been sustained throughout this eight-month sprint by my usual cast of unusual characters, who always knew when to serve up either a laugh or a dose of worthy criticism. Among them were David Supino and Linda Pohs Supino, Jamie Kempner, Don and Anne Edwards, Al Garner, Jeffrey Leeds, Jeremy Sillem, David Resnick and Cathy Klema, Alan and Pat Cantor, Gil Sewall, Andy and Courtney Savin, John Buttrick, Jerome and M. D. Buttrick, Hamilton Mehlman, David Webb, Kit White and Andrea Barnet, Mary Murfitt and Bonnie Hundt, Seth Bernstein, Marc Daniel, Freddi Wald, Adam Reed, John Brodie, Andy Serwer, Carol Loomis, Shawn Tully, Jeff Liddle, Patty Marx, Robert Douglass, Gwen Greene, Peter Davidson and Drew McGhee, John Morris and Marcia Santoni, Jeff and Kerry Strong, Mike Cannell, John and Tracy Flannery, Robert and Francine Shanfield, Andy and Lauren Weisenfeld, Alan and Amanda Goodstadt, Alexandra Penney and Dennis Ashbaugh, Stuart and Randi Epstein, John Feldman, Esther Newberg, Jay and Louisa Winthrop, Stu and Barb Jones, Michael and Fran Kates, Jim and Sue Simpson, Jay Costley, Jay Pelofsky, Eric Osserman, Charlie and Sue Bell, Rick Van Zijl, Steve and Leora Mechanic, Stuart Reid, Tim and Nina Zagat, Joan Osofsky, Bryce Birdsall and Malcolm Kirk, Tina Brown and Sir Harry Evans, John Gillespie and Susan Orlean, and Gemma Nyack. I also want to thank my in-laws and relatives, the Futters and Shutkins, in toto. My parents, Suzanne and Paul, as well as my brothers, Peter and Jamie, and their wives and families, continued to be hugely supportive of me, and I thank them, again.
