http://www.time.com/time/specials/packa ... 50,00.html
Here they are, in no particular order:
Seems like a pretty good article to me. Anything people can find to disagree with? It's too bad so many Americans think Clinton was some kind of hard-left liberal. He really wasn't; his entire career was based on taking the Democratic Party sharply to the right in order to poach voters from the Republicans.Angelo Mozilo
The son of a butcher, Mozilo co-founded Countrywide in 1969 and built it into the largest mortgage lender in the U.S. Countrywide wasn't the first to offer exotic mortgages to iffy borrowers, but it popularized such products. In the wake of the housing bust, which toppled Countrywide, Mozilo's lavish pay package was excoriated by critics. He left Countrywide last summer after its sale to Bank of America, which later pledged to pay $8.7 billion to settle predatory-lending charges filed against Countrywide filed by 11 state attorneys general.
As chairman of the Senate Banking Committee from 1995 through 2000, Gramm was Washington's outspoken champion of deregulation. And he got it, by playing a lead role in the writing and passage of the 1999 repeal of the Depression-era Glass-Steagall Act, which had separated commercial banks from Wall Street. Then he inserted a provision into the 2000 Commodity Futures Modernization Act that exempted derivatives like credit-default swaps from regulation.
He was the one who could have stopped it. As Federal Reserve chairman, Greenspan deftly managed the 1987 stock-market crash and presided over the 1990s economic boom, cementing his status as Washington's money wizard. But the low interest rates he sired in the early 2000s and his long-standing disdain for regulation underpinned the mortgage crisis. The maestro admitted in an October congressional hearing that he had "made a mistake in presuming" that financial firms could regulate themselves.
The ex-SEC chief's blindness to repeated allegations of fraud in the Madoff scandal is mind-blowing, but it's his lax enforcement that lands him on this list. Cox says his agency lacked authority to limit the massive leveraging that led to the financial collapse. In truth, the SEC had plenty of power to rein in risky behavior by such investment banks as Lehman Brothers and Merrill Lynch, but it chose not to. Cox oversaw the dwindling SEC staff and a sharp drop in action against some traders. We could have used more.
We really enjoyed living beyond our means. No wonder we wanted to believe it would never end. But the bill is due. Household debt in the U.S. — the money we owe as individuals — zoomed to more than 130% of income in 2007, up from about 60% in 1982. We've been borrowing, borrowing, borrowing — living off and believing in the wealth effect, first in stocks, which ended badly, then in real estate, which has ended even worse. Now we're out of bubbles. We have a lot less wealth — and a lot more effect.
When Paulson left the top job at Goldman Sachs to become Treasury Secretary in 2006, his big concern was whether he'd have an impact. Careful what you wish for. He almost single-handedly ran economic policy for the last year of the Bush Administration. Impact? You bet. Positive? Not yet. Paulson was too late in battling the crisis, and letting Lehman fail was a pivotal mistake that rapidly eroded confidence. His attempt to fix the problem — a bailout that netted $700 billion from Congress — has been a wasteful mess.
Before the meltdown, few people had ever heard of credit-default swaps. They are insurance contracts — or, if you prefer, wagers — that a company will pay its debt. As a founding member of AIG's financial-products unit, Cassano knew them cold. In good times, AIG's massive CDS-issuance business minted money by essentially writing insurance against a financial Katrina. What were the odds? Those contracts were at the heart of AIG's downfall. So far, the U.S. has invested and lent $150 billion to keep AIG afloat.
As CEO of Beazer Homes since 1994, McCarthy has become something of a poster child for worst builder behaviors. In 2007 the Charlotte Observer highlighted Beazer's aggressive sales tactics, including lying about borrowers' qualifications to help them get loans. The company has admitted that its mortgage unit violated regulations — like down-payment-assistance rules — at least as far back as 2000. It is cooperating with federal investigators.
Raines was at the helm of Fannie Mae, the bastard offspring of politics and finance, when things really went off course. A former Clinton Administration Budget Director, Raines took over as CEO of Fannie in 1999. He left in 2004 with the company embroiled in an accounting scandal just as it was making big investments in the subprime mortgage securities that would later sour. Last year Fannie and rival Freddie Mac became wards of the state.
By slapping AAA seals of approval on even risky pools of loans, rating agencies helped lure investors into collateralized debt obligations (CDOs) that are now unsellable. Corbet ran the largest agency, Standard & Poor's, though Moody's and Fitch played by similar rules. These outfits are paid for their ratings by the bond issuer, an apparent conflict of interest that has not gone unnoticed, despite the agencies' denials. As one S&P analyst wrote in an e-mail, "[A bond] could be structured by cows and we would rate it."
The Gorilla of Wall Street, as Fuld was known, steered Lehman deep into the business of subprime mortgages, bankrolling lenders across the country that were making convoluted loans to questionable borrowers. Lehman even made its own subprime loans. The firm took those loans, whipped them into bonds and passed on to investors billions of dollars of what is now toxic debt. For all this wealth destruction, Fuld raked in nearly $500 million in compensation during his tenure as CEO, which ended when Lehman did.
Marion and Herb Sandler
In the early 1980s, the Sandlers' World Savings Bank became the first to sell a tricky home loan called the option ARM. And they pushed the mortgage, which offered several ways to back-load your loan and thereby reduce your early payments, with increasing zeal and misleading advertisements over the next two decades. The couple pocketed $2.3 billion when they sold their bank to Wachovia in 2006. But losses on World Savings' loan portfolio led to the implosion of Wachovia, which was sold under duress late last year to Wells Fargo.
He oversaw an era of great prosperity — and deregulation. Clinton ushered out the Glass-Steagall Act and signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. He also loosened housing rules, putting added pressure on banks to lend in low-income neighborhoods. None of it was an endorsement of permissive lending and risk-taking. But if you believe deregulation is to blame for our troubles, then Clinton earned a share too.
George W. Bush
From the start, the "ownership society's" No. 1 fan embraced deregulation and allowed federal oversight agencies to ease off on banks and mortgage brokers. True, he stumped for tighter controls over Fannie Mae and Freddie Mac and backed and signed the aggressively regulatory Sarbanes-Oxley Act after Enron blew up. But when SEC head William Donaldson tried to regulate hedge funds, he was blocked by Bush's advisers at the White House and quit. Plus, let's face it, the meltdown happened on Bush's watch.
Merrill Lynch's CEO for nearly six years, ending in 2007, he guided the firm from its familiar turf — fee businesses like asset management — into the lucrative game of creating collateralized debt obligations, which were largely made up of subprime mortgage bonds. To provide a steady supply of the bonds — the raw pork for his booming sausage business — O'Neal allowed Merrill to load up on $41 billion of them. As the subprime market unwound, Merrill went into crisis, and Bank of America swooped in to buy it.
If cheap credit was the crack cocaine of this crisis — and it was — then China was one of our primary dealers. Wen leads a China that is now the U.S.'s largest creditor, holding some $1.7 trillion in dollar-denominated debt. Its massive dollar holdings can be linked to determined efforts to control the value of the renminbi vs. the buck; China didn't want its currency to rise too rapidly against the dollar, in part because a cheap currency kept its export sector humming. And humming it was until U.S. demand cratered last fall.
When the chief economist at the National Association of Realtors, an industry trade group, tells you the housing market is going to keep on chugging forever, you apply the discount. But Lereah, who held the position through early 2007, did more than issue rosy forecasts. In his 2005 book, Are You Missing the Real Estate Boom?, and elsewhere, he regularly trumpeted the infallibility of housing. Lereah grew concerned about the market in 2006, but consider his January 2007 statement: "It appears we have established a bottom."
Hedge funds played an important role in the shift to sloppy mortgage lending, and Devaney was one of the cheerleaders. By buying up mortgage loans, Devaney and other hedgies earned fat returns for a while, which encouraged mortgage outfits to make ever sketchier loans. Devaney knew some of those products were ugly; in early 2007, referring to option ARMs, he told Money, "The consumer has to be an idiot to take on those loans, but it has been one of our best-performing investments."
His alleged Ponzi scheme could inflict $50 billion in losses on society types, retirees and nonprofits. The bigger cost comes from the notion that Madoff pulled off an epic fraud right under the noses of regulators. Assuming it's all true, the banks and hedge funds that neglected due diligence were stupid and paid for it, while the "feeders" were reprehensibly greedy. But if in fact Madoff depantsed the regulators, exposing them as grossly incompetent, then this downturn is that much tougher to take.
Meet the father of mortgage-backed bonds. In the late 1970s, the college dropout and Salomon trader coined the term securitization to name a tidy bit of financial alchemy in which loans were packaged and sold to institutional investors. It was a terrific idea, as it allowed banks to shed risk and make more loans. But as home ownership exploded in the early 2000s, the mortgage-bond business inflated Wall Street's bottom line. So the firms placed ever bigger bets on ever riskier varieties of these securities. You know the rest.
The programming czar at Scripps Networks, which owns HGTV and other lifestyle channels, never made a subprime loan. But his shows pumped air into the real estate froth by teaching us how to extract value from our homes. Designed to Sell, House Hunters and My House Is Worth What? created addicted audiences. So did shows like Flip That House (TLC) and Flip This House (A&E). No one on these shows ever seemed to lose a dollar, giving the housing game a little too much glamour and gusto.
The face of overreaching bankers everywhere, Goodwin got greedy. More than 20 takeovers helped him transform the Royal Bank of Scotland (RBS) into a world beater after he assumed control in 2000. But he couldn't stop there. As the gloom gathered in 2007, Goodwin's mouth watered over a $100 billion takeover of Dutch rival ABN Amro, stretching RBS's capital reserves to the limit. The result: the British government last fall pumped $30 billion into the bank, which expects 2008 losses to be the biggest in U.K. corporate history.
Who decided banks had to be all things to all customers? Weill did. Starting with a low-end lender in Baltimore, he cobbled together the first great financial supermarket, Citigroup. Along the way, Weill's serial acquisitions, (Travelers, Smith Barney, etc.) and persistent lobbying shattered Glass-Steagall, the law that limited banks' ambitions. Rivals followed Citi. The swollen banks are one of the nation’s major economic problems. Solution? Back to banking. Citigroup is selling Smith Barney and other noncore assets.
In his two decades as Iceland's Prime Minister and then as central-bank governor, Oddsson made his tiny country an experiment in free-market economics by privatizing three main banks, floating the currency and fostering a golden age of entrepreneurship. When the market turned ... whoops! Iceland's economy is now a basket case. The three banks, which were massively leveraged, are in receivership, GDP could drop 10% this year, and the IMF stepped in after the currency lost more than half its value. Nice experiment.
No Wall Street CEO seemed more asleep at the switch than Bear Stearns' Cayne. He left the office by helicopter for long golf weekends. He was regularly out of town at bridge tournaments and reportedly smoking pot. (Cayne denies the weed allegation.) Back at the office, Cayne's charges bet the firm on risky home loans. Two of its highly leveraged hedge funds collapsed in mid-2007. That was the beginning. Eventually, Bear was sold for less than the value of its office building. "I didn't stop it. I didn't rein in the leverage," Cayne later told Fortune.