Infectious Greed (75 page)

14
Radford, p. 6.

15
Hazell v. Hammersmith and Fulham London Borough Council,
2 QB (CA) 697 (1990), p. 801.

16
Liebowitz, p. 6.

17
“Credit Suisse Financial Products Establishes Representative Office in New York,”
PR Newswire,
September 26, 1990, p. 1.

18
These agencies were designated “Nationally Recognized Statistical Ratings Organizations.” By the late 1990s, only Moody's, S&P, and Fitch had NRSRO status, and the Securities and Exchange Commission consistently had denied applications from competing agencies from the 1970s until 2002. Frank Partnoy, “The Siskel and Ebert of Financial Markets: Two Thumbs Down for the Credit Rating Agencies,”
Washington University Law Quarterly, Volume 77,
Fall 1999, p. 619.

19
The News Hour with Jim Lehrer:
Interview with Thomas L. Friedman (PBS television broadcast), February 13, 1996.

20
Partnoy, “The Siskel and Ebert of Financial Markets: Two Thumbs Down for the Credit Rating Agencies,” pp. 619-711.

21
John Eatable and Lance Taylor,
Global Finance at Risk: The Case for International Regulation
(New Press 2000), p. 101.

22
Leslie Scism, “Low Yields Spark Flurry in New Notes,”
Wall Street Journal,
October 4, 1993, p. C1.

23
“Structured Products: Background and Investment Opportunities,” Morgan Stanley, March 1994, p. 12.

24
Michael Liebowitz, “Can the Triple-A Subs Live Up to their Billing?”
Investment Dealers' Digest,
November 2, 1992, p. 16.

25
“An Issuers' View of the Structured Note Market,”
Derivatives Strategy,
February 20, 1994, p. 6.

26
Liebowitz, “Credit Suisse Derivative Unit Opens with a Bang in New York,” p. 6.

27
Scism, p. C1.

28
“An Issuers' View of the Structured Note Market,” p. 6.

29
Kevin Muehring, “Who Do You Trust?”
Institutional Investor,
May 1992, p. 73.

30
“Once in Jeopardy, Diff Swaps Prove Resilient,”
Bloomberg News,
May 7, 1993.

31
James M. Mahoney, “Correlation Products and Risk Management Issues,”
Federal Reserve Bank of New York Economic Policy Review,
October 1995, p. 7.

32
Miriam Bensman, “How Do I Get Out of This? New Exit Strategies for the Structured Note Market,”
Futures,
October 1993, p. 32.

33
Mahoney, p. 7.

34
“Traders Sell Strategies for Falling European Rates.”

35
Ronald H. Coase, “The Problem of Social Cost,”
Journal of Law and Economics, Volume 3,
October 1960, pp. 1-44.

36
“A Large Car-Loan Issue,”
The New York Times,
December 13, 1985, p. D4.

37
Steven Bavaria, “Fuzzy Line between Private and Bank Debt,”
Investment Dealers' Digest,
September 16, 1991, p. 13.

38
Everette D. Hull and Leslie Annard, “Time to Jump on the Securitization Band-wagon?”
ABA Banking Journal,
October 1987, p. 137.

39
David Gillen, “More Junk Bonds May Be Repackaged as High-Grade Securities, Analysts Say,”
The Bond Buyer,
February 22, 1990, p. 3.

40
Martin Mayer, “The Latest Junk Bond Scam?”
Los Angeles Times,
January 7, 1990, p. D3.

41
David Gillen, “Columbia to Sell Entire Junk Holdings, Put at $3.5 Billion, through First Boston,”
The Bond Buyer,
March 15, 1990, p. 3.

42
Anne Schwimmer, “Chancellor's CBO Pulled as Investor Backs Out,”
Mergers & Acquisitions Report,
November 19, 1990, p. 9.

43
“Moody's Affirms the Rating of CBC Holdings CBO,”
Asset Sales Report,
September 30, 1991, p. 3.

44
Kevin Muehring, p. 73; “In World of High-Tech Financial Instruments, Compliance Officer to Become King of Bank,”
Thomson's Financial Compliance Watch,
March 23, 1992, p. 3.

45
Philip Maher and Ron Cooper, “CS First Boston's Wheat Begins to Exert Control,”
Investment Dealers' Digest,
October 11, 1993, p. 5.

46
Dunne, p. 32.

47
Ron Cooper, “In Switch, First Boston Comes to Rescue of CSFB,”
Investment Dealers' Digest,
December 7, 1992, p. 5.

48
“CS First Boston, All Together Now?”
The Economist,
April 10, 1993, p. 90.

49
Tracy Corrigan, “Survey of Derivatives,”
Financial Times,
December 8, 1992, p. 4.

50
Dunne, p. 32.

51
“CS First Boston's Wheat Plans Strategy after Reorganization,”
Bloomberg News,
September 27, 1993.

52
Peter Lee, “Wheat and the Chaff,”
Euromoney,
May 1996, p. 46.

53
Dunne, p. 32.

54
Dunne, p. 32.

55
Michael Siconolfi, “CS First Boston Asks Departing Workers to Sign Sweeping Nondisclosure Pact,”
Wall Street Journal,
February 27, 1995.

56
“The Market's Revenge,”
BusinessWeek
, April 18, 1994, p. 32.

57
Dunne, p. 32.

58
Fairlamb, p. 64.

1
Roger Lowenstein,
When Genius Failed: The Rise and Fall of Long-Term Capital Management
(Random House 2000), p. 5.

2
Peter Grant and Marcia Parker, “Hurtling toward Scandal,”
Crain's New York Business,
June 1-7, 1992, p. 3.

3
Lowenstein, p. 33.

4
Grant and Parker, p. 3.

5
Lowenstein, p. 19; Nicholas Dunbar,
Inventing Money: The Story of Long-Term Capital Management and the Legends behind It
(John Wiley & Sons 2001), p. 110.

6
Grant and Parker, p. 13.

7
Lowenstein, p. 4.

8
Lowenstein, p. 15.

9
Dunbar, p. 123.

10
Dunbar, p. 123.

11
Dunbar, p. 79.

12
Dunbar, p. 58.

13
Burton G. Malkiel,
A Random Walk Down Wall Street
(W. W. Norton 2000), p. 243.

14
Dunbar, p. 118.

15
Lowenstein, p. 11.

16
Grant and Parker, p. 9.

17
Dunbar, p. 82.

18
Dunbar, p. 107.

19
Robert Lenzner and William Heuslein, “The Age of Digital Capitalism,”
Forbes,
March 29, 1993, p. 62.

20
Lenzner and Heuslein, p. 66.

21
Lenzner and Heuslein, p. 62.

22
Neil Bennett, “Salomon Takes $194m Hit over London Errors,”
London Times,
February 3, 1995.

23
“Ways of Wall Street, Bad News for Brokerage Accounting,”
Bloomberg News,
February 27, 1995.

24
Grant and Parker, p. 4.

25
Dunbar, p. 105.

26
Dunbar, p. 97.

27
Dunbar, p. 95.

28
Dunbar, p. 98.

29
Dunbar, p. 110.

30
Grant and Parker, pp. 3, 13.

31
Grant and Parker, p. 12.

32
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
Securities Exchange Act of 1934, Release No. 34-31554, December 3, 1992, p. 11.

33
Martin Mayer,
Nightmare on Wall Street
(Simon & Schuster 1993), p. 196.

34
Robert J. McCartney, “Salomon's Mines; What Makes These Traders Tick?”
The Record,
September 29, 1991, p. B1.

35
Mayer, p. 200.

36
Grant and Parker, p. 13.

37
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
p. 4, note 3.

38
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
p. 4.

39
Kenneth H. Gilpin, “Credit Markets; Treasury's Rule Upsets Note Sale,”
New York Times,
July 12, 1990, p. D1.

40
Grant and Parker, p. 13.

41
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
pp. 5-6.

42
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
p. 6.

43
Grant and Parker, p. 14.

44
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
p. 8.

45
In the Matter of Paul W. Mozer,
Securities Exchange Act of 1934, Release No. 34-34373, July 14, 1994, p. 3.

46
Mayer, pp. 206-208.

47
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
p. 10.

48
Mayer, p. 210.

49
Michael Lewis,
Liar's Poker
(Penguin 1990), p. 92.

50
Lewis, p. 111.

51
Lewis, p. 101.

52
Mayer, p. 155.

53
Lowenstein, p. 21.

54
Dunbar, p. 101.

55
Lewis, p. 124.

56
Lewis, p. 126.

57
Salomon ultimately decided to abandon this cap; for example, the firm paid Michael Lewis, author of
Liar's Poker,
more. Lewis, p. 245.

58
Lewis, p. 126.

59
James Sterngold, “Merrill Lynch Puts Bond Loss at $250 Million,”
New York Times,
April 30, 1987, p. A1.

60
Sterngold, p. A1.

61
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
p. 12.

62
Mayer, p. 214.

63
In the Matter of John H. Gutfreund, Thomas W. Strauss, and John W. Meriwether,
pp. 14-15.

64
“Basham Leaving Treasury Department,”
United Press International,
August 5, 1991; Michael Vachon, “Basham to Smith Barney,”
Investment Dealers' Digest,
August 19, 1991, p. 15.

65
Susan Antilla, “Ex-Salomon Trader Gets 4 Months,”
New York Times,
December 15, 1993, p. D2.

66
“Now Hear This,”
Fortune,
January 10, 1994, p. 20.

67
Keith Bradsher, “Former Salomon Trader to Pay $1.1 Million Fine,”
New York Times,
July 15, 1994, p. D1; Antilla, p. D2.

68
Katherine Burton and Liz Goldenberg, “Ten Years Ago, Salomon Treasury Scandal Changed Traders' World,”
Bloomberg News,
August 9, 2001.

69
Burton and Goldenberg.

70
Peter Woodifield, “Gutfreund Joins Unterberg, Towbin as Senior Managing Director,”
Bloomberg News,
November 14, 2001.

71
Ron Cooper, “Return of the King,”
Investment Dealers' Digest,
November 19, 2001.

72
Burton and Goldenberg.

73
Dunbar, p. 130.

74
Lowenstein, pp. 37-38.

1
Robert Hurtado, “Fed's Move Jolts Stock and Bond Markets,”
New York Times,
February 5, 1994, Sec. 1, p. 37.

2
Jonathan R. Macey, “Derivative Instruments: Lessons for the Regulatory State,”
Journal of Corporation Law,
Fall 1995, p. 93.

3
In re County of Orange,
U.S. Bankruptcy Court, Central District of California, Case No. SA 94-22272 JR,
County of Orange v. Morgan Stanley & Co.,
Complaint, June 11, 1996, p. 27.

4
Laura Jereski, “Merrill Lynch Saw Big Profit on Orange Fund,”
Wall Street Journal,
January 26, 1995, p. A4.

5
Tim Quinson, “A Tough Week, and It's Only Wednesday,”
Bloomberg News,
December 7, 1994, p. 2.

6
In re County of Orange,
p. 30.

7
In re County of Orange,
pp. 41-42, 72.

8
In re County of Orange,
p. 41.

9
In re County of Orange,
p. 43.

10
Sallie Hofmeister, “California Fund Woes Worsening,”
New York Times,
December 3, 1994, p. C1.

11
Katherine Burton, John Pickering, and Dave Liedtka, “Credit Agencies Dropped Ball, Investors Say,”
Bloomberg News,
December 5, 1994, p. 1.

12
“Orange County Crisis: The Fallout—Wall Street Races to Sell $10 Billion in Collateral,”
Dow Jones News,
December 8, 1994, p. 2.

13
Laura Jereski, “Salomon's $8.1 Billion Derivative Offer Seen by Other Firms as Latecomer's Bid,”
Wall Street Journal,
March 27, 1995, p. A4.

14
Jereski, p. A4.

15
“Orange County Crisis—Local Heroes: Public Finance Chiefs Are Often Very Boring; That's the Good News,”
Dow Jones News,
December 8, 1994, p. 3.

16
“Orange County Crisis—Local Heroes,” p. 1.

17
“Orange County Crisis—Local Heroes,” p. 2.

18
Jill J. Barshay, “Star Struck: How Piper Tied Its Fortunes to a Maverick,”
Minneapolis Star Tribune,
February 8, 1999, p. 1D.