Inside Job (53 page)

Sandoz Pharmaceuticals

Sanford Bernstein

Sankey, Brian

Sanofi

Sarbanes-Oxley Act

Saudi Arabia

Savings & loan institutions (S&Ls)

Schmalensee, Richard

Schneiderman, Eric

Scholes, Myron

School dropout rates

School graduation rates

Schultz, Howard

Schwab (
see
Charles Schwab, Inc.)

Schwarzman, Steve

Scott, Hal

Seattle, Washington, homelessness in

Second-lien loans

Securities and Exchange Commission (SEC)

Securities Exchange Act of 1934

Securities Investor Protection Corporation (SIPC)

Securities rating (
see
Rating agencies)

Securitization food chain

Senate Banking Committee

Senate Permanent Subcommittee on Investigations

September 11, 2001 terrorist attacks

Severance payments

Shadow banking

Shapiro, Carl

Shapiro, Mary

Shearson Lehman

Shiller, Robert

Short-term financing

Sidak, Geoffrey

Silverado

Silverstein, Baron

Simmons, Ruth

Simmons Bedding Company

Simon, William

Simons, Jim

Singapore

SIVs (
see
Structured investment vehicles (SIVs))

60 Minutes

Skilling, Jeffrey

Sloan, Allan

Smith, Yves

Smith Barney

Snow, John

Software industry

Soros, George

South Korea

Soviet Union

S&P 500 stock index

Spain, debt crisis and

Spar, Debora

Sparks, Dan

Speakers’ bureaus

Special dividends

Special purpose entities (SPEs)

Spector, Allen

Speculative arbitrage

Sperling, Gene

Spitzer, Eliot

Squam Lake Group

Squared

Standard & Poor’s

Stanford, Allen

Stanford University

State, US Department of

State government spending

Stated income loans

Stated liens

Statute of limitations

Steel industry

Stewart, Martha

Stiglitz, Joseph

Stock-index futures

Stock market

Stock options

Stoneville

Strauss-Kahn, Dominique

Structural concentration

Structured investment vehicles (SIVs)

Student loans

Subpoena power

Subprime mortgages

Success of Open Source, The
(Weber)

Sudan

Sullivan, Martin

Sumitomo Bank

Summers, Larry

Supreme Court of the United States

Sweden

Swiss banks, tax evasion and

Sworn testimony

Synthetic CDOs

T-Mobile

Taconic Capital Advisors

Taibbi, Matt

Taiwan

Tax avoidance

Tax cuts

Tax evasion

Tax reform

Tea Party movement

Teaser rates

Teece, David

Telecommunications industry

Temin, Peter

10b-5 offence

Terrorism

Tett, Gillian

Texas Pacific Group

Thailand

Thain, John

Third parties

THL

Thornton, John

Thurow, Lester

Tightly coupled system

Timberwolf

Time Warner

Title search

Tourre, Fabrice

Trade deficit

Travelers Insurance

Treasury, US Department of the

Treasury instruments

Tricadia

Trillion Dollar Meltdown, The
(Morris)

Turkey

Turner, Lord Adair

Tyson, Laura D’Andrea

UBS

Undisclosed liens

Unemployment

Unions

U.S. Trust

University graduation rates

University of California, Berkeley

Venture capital investment

Verizon

Vernon Savings Bank, Texas

Verschleiser, Jeffrey

Vestar

Vietnam war

Viniar, David

Virgin Islands pension fund

Visa

Volatility

Volcker rule

Wachovia

Wade, Robert

Wall Street Journal

Walmart

Washington Mutual (WaMu)

Watergate affair

Waters, Maxine

Wealthy

Weber, Steven

Weil, Raoul

Wells Fargo

Wharton School

WMC Mortgage

Workforce skills

World Bank

World Economic Forum (2011)

WorldCom

Wozniak, Steve

Yahoo

Yale University

Yield spread premiums

Yom Kippur war

Zames, Matthew E.

Zero-Sum Society, The
(Thurow)

Zingales, Luigi

Zuckerman, Greg

ABOUT THE AUTHOR

Charles Ferguson won an Oscar in 2011 for
Inside Job
, his documentary on the financial crisis, and was an Oscar nominee for his first documentary,
No End In Sight
, on the war in Iraq. He is a graduate of the University of California at Berkeley, holds a PhD in Political Science from MIT, and has been a technology policy consultant to
the White House and the Office of the US Trade Representative, as well as to leading technology companies including Apple, IBM, and Texas Instruments. He was the co-founder of Vermeer Technologies,
which invented the web tool Front Page, later sold to Microsoft. A former visiting scholar at MIT and Berkeley, he has also been a senior fellow at the Brookings Institution in Washington, DC. He
has written four books, and is a life member of the Council of Foreign Relations and a director of the French-American Foundation.

ENDNOTES

1
FICO is the stock ticker symbol for the Fair Isaac Corporation, the company that pioneered the three-digit credit
score.

2
That calculation was across all the securities. In the pool example used here, the 73.8 percent LTV implied equity of 26.2 percent. If LTV was
really 90.5 percent, the equity falls to 9.5 percent, which is 64 percent lower.

3
The puzzle here is why
Morgan Stanley
could have been on the long side in Hudson, since they were also selling seemingly toxic
instruments to their own investors. But it merely illustrates how few firms had the internal discipline of Goldman. Both Morgan and Goldman had large asset-management businesses that invested on
behalf of their clients; to a naïf at Morgan asset management, a Goldman-sponsored investment-grade security would look pretty reasonable. One can bet that no one at Goldman’s asset
management group bid for it.

4
: Yves Smith gives a cautious estimate of $128 billion of Magnetar-induced lending. The production of cash subprime CDOs over this period was
about $450 billion. Other estimates of the Magnetar impact are as high as $250 billion.

5
: Canadian Imperial bank of Commerce

6
: Swap agreements almost always include breakup fees calculated as the present value of the net stream of income due to the aggrieved party over
the remaining life of the deal.

7
: Merrill, for example, offered investors the opportunity to recover four times the return on referenced Madoff funds. An investor would put up,
say, $1 million, and receive a Merrill note in exchange, plus a top-up loan of $3 million. In return, Merrill received an investment fee, plus a hefty lending fee. To cover its liability, Merrill
then would typically invest the $4 million into the referenced Madoff fund—although it was not required to do so. Each month, it paid the amount of dividends the customer would have received
if he or she had a $4 million Madoff account, less a 20 percent incentive fee. Note that Merrill itself did not have to take any investment risk, and that customer funds were never directly
invested in a Madoff account.

8
. The original account was opened in 1986 with Chemical Bank, which later merged with Chase. The Chase/JPMorgan merger was in 2001, when Madoff
was on the verge of spectacular growth.