A Fighting Chance

One day in December 2009, the congressman called to say that he had resigned. As his replacement, the Republicans appointed Mark McWatters, a seasoned tax lawyer and CPA. Earlier that year, Senator Sununu had left as well; several months later, his replacement, Paul Atkins, did the same. This time, the Republicans named Dr. Ken Troske, a highly respected conservative labor economist. Mark and Ken had strong points of view about many of the issues our panel was grappling with, and though I didn’t always see eye to eye with them, they consistently worked hard to dig at the truth. Both men were sharp-witted and deeply engaged, and they helped drive the COP investigations to greater depths.

COP taught me something important about nonpartisanship: It didn’t have to be timid. Despite our different backgrounds and perspectives, the panelists didn’t search for the lowest common denominator and issue statements saying, “The sky is blue” because that’s all anyone could agree on. We pushed and prodded and sometimes argued. We sweated over our analysis, but the result was that our reports were strong, and our language was bold—and when we couldn’t work things out, the dissents were just as strong. In the end, I think our eclectic, nonpartisan team produced better work than any one individual (or any one political party) could have produced alone. During my time at COP, 10 of our 23 reports were unanimous, and 16 out of 23 were bipartisan. Not bad.

Who Goes to Jail?



COP kept churning out reports, month after month. Secretary Geithner came back to testify three more times, and a clip from one of those hearings went viral on YouTube. Vikram Pandit, the CEO of Citibank, testified, as did the CEO of Ally Bank. We asked the CEOs of several other big banks to testify, but they turned us down, and since we didn’t have subpoena power, there wasn’t much we could do about it.

In June 2010, we wrote a special report focused entirely on the AIG bailout. Clearly we struck a nerve. The report got an unusual amount of media coverage and revived interest in what was happening at AIG. A few weeks later, Hank Greenberg, the former CEO of AIG, demanded to see me in my office at Harvard. He was pretty angry about our report, although he didn’t dispute what we’d said about the wildly dangerous risk taking at AIG and the threat it posed to the whole economy. Instead, he wanted to talk about why he was underappreciated as a great CEO. When he realized that I wasn’t going to back away from our conclusion that AIG had become a risky tangle under his leadership, he turned his wrath on an investigation years earlier by New York’s then attorney general Eliot Spitzer. When that rant also yielded no sympathy, he abruptly left, unsatisfied. The encounter reminded me that CEOs of giant financial companies seem to have very different worldviews from those of most people.

Greenberg had lost his job, but that was before the crash. Once TARP arrived, the CEOs of the bailed-out banks fared a lot better. By now I was more or less resigned to the fact that the federal government wasn’t going to force any of these guys to step down. But I still hoped that the government would launch investigations into whether any of the top management had violated the law.

COP had no authority to file civil or criminal cases, but the Department of Justice and plenty of other agencies had the power to do so if that seemed warranted. For months, I assumed that sooner or later some regulator would think to himself, The banking system just collapsed—I wonder if any banking executives did anything illegal? I figured it was just a matter of time until there would be a string of announcements that major players in the financial markets had been indicted.

But the silence stretched out. No perp walks. No mass indictments.

Were the banks really above the law? That certainly hadn’t always been the case. Back in the 1980s, the country had suffered through another banking crisis, this one involving savings and loan institutions that took advantage of a recent round of deregulation to become giant Ponzi schemes. (Did I mention how stupid it was to deregulate the banks without putting safeguards in place?) In those days, federal officials did not take such a generous line toward errant bankers. When an institution failed, the government launched a detailed investigation, and if the executives had cooked the books, they had to answer for it. People went to jail—lots of people. More than a thousand executives were indicted. As my uncle Billy said at a family reunion during the S&L crisis, “My banker friends used to work nine to four. Now they are in prison, serving five to seven.” Then he gave his big belly laugh.