Street's captains of industry and top policymakers in Washington are
often the same people. A lot of them get rich by playing for both teams.
The financial crisis has unveiled a new set of public villains—corrupt
corporate capitalists who leveraged their connections in government for
their own personal profit. During the Clinton and Bush administrations,
many of these schemers were worshiped as geniuses, heroes or icons of
American progress. But today we know these opportunists for what they
are: Deregulatory hacks hellbent on making a profit at any cost.
Without further ado, here are the 10 most corrupt capitalists in the
1. Robert Rubin
Where to start with a man like Robert
Rubin? A Goldman Sachs chairman who wormed his way into the Treasury
Secretary post under President Bill Clinton, Rubin presided over one of
the most radical deregulatory eras in the history of finance. Rubin's
influence within the Democratic Party marked the final stage in the
Democrats' transformation from the concerned citizens who fought Wall
Street and won during the 1930s to a coalition of Republican-lite
Rubin's most stunning deregulatory
accomplishment in office was also his greatest act of corruption. Rubin
helped repeal Glass-Steagall, the Depression-era law that banned
economically essential banks from gambling with taxpayer money in the
securities markets. In 1998, Citibank inked a merger with the Travelers
Insurance group. The deal was illegal under Glass-Steagall, but with
Rubin's help, the law was repealed in 1999, and the Citi-Travelers
merger approved, creating too-big-to-fail behemoth Citigroup.
That same year, Rubin left the
government to work for Citi, where he made $120 million as the company
piled up risk after crazy risk. In 2008, the company collapsed
spectacularly, necessitating a $45 billion direct government bailout,
and hundreds of billions more in other government guarantees. Rubin is
now attempting to rebuild his disgraced public image by warning about
the dangers of government spending and Social Security. Bob, if you're
worried about the deficit, the problem isn't old people trying to get
by, it's corrupt bankers running amok.
2. Alan Greenspan
The officially apolitical, independent
Federal Reserve chairman backed all of Rubin's favorite deregulatory
plans, and helped crush an effort by Brooksley Born to regulate
derivatives in 1998, after the hedge fund Long-Term Capital Management
went bust. By the time Greenspan left office in 2006, the derivatives
market had ballooned into a multi-trillion dollar casino, and Greenspan
wanted his cut. He took a job with bond kings PIMCO and then with the
hedge fund Paulson & Co.—yeah, that Paulson and Co., the
one that colluded with Goldman Sachs to sabotage the company's own
clients with unregulated derivatives.
Incidentally, this isn't the first
time Greenspan has been a close associate of alleged fraudsters. Back
in the 1980s, Greenspan went to bat for politically connected Savings
& Loan titan Charles Keating, urging regulators to exempt his bank
from a key rule. Keating later went to jail for fraud, after, among
other things, putting out a hit on regulator William Black. ("Get Black –
kill him dead.") Nice friends you've got, Alan.
3. Larry Summers
During the 1990s, Larry Summers was a
top Treasury official tasked with overseeing the economic
rehabilitation of Russia after the fall of the Soviet
Union. This project, was, of course, a complete disaster
that resulted in decades of horrific poverty. But that didn't stop top
advisers to the program, notably Harvard economist Andrei Shleifer,
from getting massively rich by investing his own money in Russian
projects while advising both the Treasury and the Russian government.
This is called "fraud," and a federal judge slapped both Shleifer and
Harvard itself with hefty fines for their looting of the Russian
economy. But somehow, after defrauding two governments while working
for Summers, Shleifer managed to keep his job at Harvard, even after
courts ruled against him.
That's because after the Clinton administration, Summers
became president of Harvard, where he protected Shleifer. This wasn't
the only crazy thing Summers did at Harvard—he also ran the school like
a giant hedge fund, which went very well until markets crashed in 2008.
By then, of course, Summers had left Harvard for a real hedge fund, D.E. Shaw,
where he raked in $5.2 million working part-time. The next year, he
joined the the Obama administration as the president's top economic
adviser. Interestingly, the Wall Street reform bill currently
circulating through Congress essentially
leaves hedge funds untouched.
4. Phil and Wendy
Summers, Rubin and Greenspan weren't
the only people who thought it was a good idea to let banks gamble in the
derivatives casinos. In
2000, Republican Senator from Texas Phil Gramm pushed through the
Commodity Futures Modernization Act, which not only banned federal
regulation of these toxic poker chips, it also banned states from
enforcing anti-gambling laws against derivatives trading. The bill was
lobbied for heavily by energy/finance hybrid Enron, which would later
implode under fraudulent derivatives trades. In 2000, when Phil Gramm
pushed the bill through, his wife Wendy Gramm was serving on
Enron's board of directors, where she made millions before the
company went belly-up.
When Phil Gramm left the Senate, he
took a job peddling political influence at Swiss banking giant UBS as
vice chairman. Since Gramm's arrival, UBS has been embroiled in just
about every scandal you can think of, from securities fraud to tax
fraud to diamond smuggling. Interestingly, both UBS shareholders and
their executives have gotten off rather lightly for these acts. The
only person jailed thus far has been the tax fraud whistleblower. Looks
like Phil's earning his keep.
5. Jamie Dimon
J.P. Morgan Chase CEO Jamie Dimon has done a lot of
scummy things as
head of one of the world's most powerful banks, but his most grotesque
act of corruption actually took place at the Federal Reserve. At each
of the Fed's 12 regional offices, the board of directors is staffed by
officials from the region's top banks. So while it's certainly galling
that the CEO of J.P. Morgan would be on the board of the New York Fed,
one of J.P. Morgan's regulators, it's not all that uncommon.
But it is quite uncommon for a
banker to be negotiating a bailout
package for his
bank with the New York Fed, while simultaneously serving on the New
York Fed board. That's what happened in March 2008, when J.P. Morgan
agreed to buy up Bear Stearns, on the condition that the Fed kick in
$29 billion to cushion the company from any losses. Dimon-- CEO of J.P.
Morgan and board member of the New York Fed-- was negotiating with
Timothy Geithner, who was president of the New York Fed-- about how
much money the New York Fed was going to give J.P. Morgan. On Wall
Street, that's called being a savvy businessman. Everywhere
else, it's called a conflict of interest.
6. Stephen Friedman
The New York Fed is just full of
corruption. Consider the case of Stephen Friedman (expertly presented by Greg Kaufmann
for the Nation).
As the financial crisis exploded in the fall of 2008, Friedman was
serving both as chairman of the New York Fed and on the board of
directors at Goldman Sachs. The Fed stepped in to prevent AIG from
collapsing in September 2008, and by November, the New York Fed had
decided to pay all of AIG's counterparties 100 cents on the dollar for
AIG's bets—even though these companies would have taken dramatic losses
in bankruptcy. The public wouldn't learn which banks received this
money until March 2009, but Friedman bought 52,600 shares of Goldman
stock in December 2008 and January 2009, more than doubling his
As it turns out, Goldman was the top
beneficiary of the AIG bailout, to the tune of $12.9 billion. Friedman
made millions on the Goldman stock purchase, and is yet to disclose
what he knew about where the AIG money was going, or when he knew it.
Either way, it's pretty bad—if he knew Goldman benefited from the
bailout, then he belongs in jail. If he didn't know, then what exactly
was he doing as chairman of the New York Fed, or on Goldman's board?
7. Robert Steel
Like better-known corruptocrats Robert
Rubin and Henry Paulson, Steel joined the Treasury after spending
several years as a top executive with Goldman Sachs. Steel joined the
Treasury in 2006 as Under Secretary for Domestic Finance, and proceeded
to do, well, nothing much until financial markets went into free-fall
in 2008. When Wachovia ousted CEO Ken Thompson, the company named Steel
as its new CEO. Steel promptly bought one million Wachovia shares to
demonstrate his commitment to the firm, but by September, Wachovia was
in dire straits. The FDIC wanted to put the company through
receivership—shutting it down and wiping out its shareholders.
But Steel's buddies at Treasury and
the Fed intervened, and instead of closing Wachovia, they arranged a
merger with Wells Fargo at $7 a share—saving Steel himself $7 million.
He now serves on Wells Fargo's board of directors.
8. Henry Paulson
His time at Goldman Sachs made Henry
Paulson one of the richest men in the world. Under Paulson's
leadership, Goldman transformed from a private company ruled by client
relationships into a public company operating as a giant global casino.
As Treasury Secretary during the height of the financial crisis,
Paulson personally approved a direct $10 billion capital injection into
his former firm.
But even before that bailout, Paulson
had been playing fast and loose with ethics rules. In June 2008,
Paulson held a secret
meeting in Moscow with
Goldman's board of directors, where they discussed economic
prognostications, market conditions and Treasury rescue plans. Not
9. Warren Buffett
Warren Buffett used to be a reasonable
guy, blasting the rich for waging "class warfare"
against the rest of us and deriding derivatives as "financial
weapons of mass destruction." These days, he's just
another financier crony, lobbying Congress against Wall Street
reform, and demanding a light touch on—get this—derivatives!
Buffet even went so far as to buy the support of Sen. Ben Nelson,
D-Nebraska, for a filibuster on reform. Buffett has also been an
outspoken defender of Goldman Sachs against the recent SEC fraud
allegations, allegations that stem from fancy products called
"synthetic collateralized debt obligations"—the financial weapons of
mass destruction Buffett once criticized.
See, it just so happens that both
Buffet's reputation and his bottom line are tied to an investment he
made in Goldman Sachs in 2008, when he put $10 billion of his money
into the bank. Buffett has acknowledged that he only made the deal
because he believed Goldman would be bailed out by the U.S. government. Which, in fact,
turned out to be the case, multiple times. When the government rescued
AIG, the $12.9 billion it funneled to Goldman was to cover derivativesbets
Goldman had placed with the mega-insurer. Buffett was right about
derivatives—they are WMD so far as the real
economy is concerned. But they've enabled Warren Buffett to get even
richer with taxpayer help, and now he's fighting to make sure we don't
shut down his own casino.
10. Goldman Sachs