Even though Cayne lost around $1 billion when the value of his Bear Stearns stock fell to around $2 a share in the days after the March 15 agreement to sell to JPMorgan Chase, he was able to sell it all a few weeks later for around $61 million after JPMorgan was forced to increase the price of the deal to $10 a share. “The only people [who] are going to suffer are my heirs, not me,” he told me back then. “Because when you have a billion six and you lose a billion, you’re not exactly, like, crippled, right?” He told me his net worth was then around $400 million, although some people wonder if that may be a bit of an exaggeration, in keeping with Cayne’s general flamboyance. In addition to the Plaza apartment and his huge beach house, in New Jersey, he also owns a sixth-floor condominium at the posh Boca Beach Club, in Boca Raton, Florida, for which he reportedly paid $2.75 million in 2010, through a trust bearing the name Legion Holdings III, according to the Web site Gossip Extra.
Last December, Cayne sat for a deposition in a lawsuit brought by Bruce S. Sherman, an angry former C.E.O. of a Florida-based hedge fund, which lost approximately $500 million when Bear Stearns collapsed. According to a person familiar with the conversation, Cayne’s recollection of the meltdown has become cloudy. Some say he is just being cagey; others say he is a little out of it, a combination of getting older and spending too much time far from the Wall Street action that was once his lifeblood. He no longer remembers anything about the adequacy of Bear’s risk models. He no longer admits to having had anything to do with the decision to close down the two problematic Bear Stearns hedge funds that had disastrously invested in subprime mortgages. He doesn’t remember being notified about problems on Bear’s trading desk, or about Bear’s inability to obtain financing from the market, or the billions of dollars of lethal mortgage-backed securities on its balance sheet. In public, anyway, he has become a jovial but forgetful old man who knows that any payments to Sherman will be coming out of JPMorgan Chase’s shareholders’ pockets, not his own. “He’s just kind of sad” these days, a longtime friend of his told me.
THE GANG’S ALL HERE
John Thain, a former partner at Goldman Sachs and onetime C.E.O. of the New York Stock Exchange, got a $15 million signing bonus to replace O’Neal as the C.E.O. of Merrill in January 2008. Thain then steered Merrill to its inevitable demise, in September 2008, when Bank of America bought it for $50 billion in stock, thanks to a major financial assist from the federal government. Thain, too, declined to be interviewed for this piece. Since February 2010, he has been the chairman and C.E.O. of CIT Group, a middle-market lender. His total compensation from CIT in 2013 was $8.25 million and his approximately 350,000 shares of CIT stock are worth around $16 million.
But Thain was already rich. As a pre-I.P.O. partner of Goldman Sachs and a co-chief operating officer of the firm, he received a windfall of more than $500 million when Goldman went public, in May 1999. He still lives at 740 Park Avenue, home to Ronald Lauder and Stephen Schwarzman, among others, in an apartment he bought for $27.5 million from the philanthropist Enid Haupt, in 2006. He also still owns a 14-bedroom mansion, on more than 10 acres, in Westchester, with two swimming pools and a tennis court.
Lewis, it will be recalled, also engineered another disastrous deal: Bank of America’s $4 billion purchase in January 2008 of Angelo Mozilo’s Countrywide Financial Corporation, which may go down as one of the worst deals in American corporate history. The timing could not have been worse, and Countrywide’s ongoing liabilities still seem bottomless. Since 2008, Bank of America has paid monetary and non-monetary fines and penalties of more than $91 billion, according to the finance and business Web site Motley Fool, in some 51 settlements, including a record $16.65 billion to the Justice Department and several states in August 2014. Even though there was a time when Countrywide C.E.O. Angelo Mozilo was a regular guest on CNBC, flaunting an impossibly deep carroty tan along with flashy gangster-style charcoal suits, these days he rarely gives interviews. Nobody responded to messages left on phones at his office and at his 13,000-square-foot residence, in Santa Barbara, California.
Fuld remains fabulously wealthy, although just how wealthy remains a subject of some dispute. During the same October 2008 congressional hearing in which he sparred with Mica and Henry Waxman, the committee chairman, about how much money he had made at Lehman, Waxman released a chart showing that Fuld had been paid $484 million between 2000 and 2007. Under oath, Fuld argued he had received closer to $310 million. Later in the hearing he conceded that it may have been $350 million. A subsequent analysis by Harvard law professor Lucian Bebchuk and colleagues concluded that the figure was $522.7 million; Oliver Budde, formerly a lawyer who worked at Lehman on regulatory matters, has calculated that Fuld made $529.4 million between 2000 and 2007.
In any event, Fuld still owns houses in Sun Valley, Idaho—said to be worth $19 million—and on Jupiter Island, Florida, for which he paid around $14 million in 2004. In 2009, he sold his Park Avenue apartment for $25.9 million but still owns a mansion in Greenwich, Connecticut. Last November, he showed up at the Museum of Modern Art’s annual benefit for its film department with his wife, Kathy, who is a member of the museum’s board of trustees. A week later, he surfaced in China to announce that he had advised one of his clients on the acquisition of something called the National Stock Exchange, a tiny New Jersey-based outfit that accounted for about 0.2 percent of U.S. stock-trading volume. During his visit, Fuld said that the National Stock Exchange was working with Suzhou Kaida Capital to help facilitate the initial public offerings of small Chinese companies in the United States.
SURVIVOR: WALL STREET
Cohn, 54, and Blankfein, 60, left the bank, in downtown Manhattan, on foot to return to Goldman’s office, then at 85 Broad Street. Cohn had ordered the firm’s traders to report to work that afternoon with the hope that Goldman, like other banks, would be able to settle its trades with Lehman in an orderly fashion. But now Cohn and Blankfein knew that would no longer be possible; instead it would be a free-for-all. The two walked down Broad Street together, neither saying a word. Cohn knew that he had to tell the traders to go home, that there was no sense in waiting, and Blankfein agreed to go with him. When he got back, Cohn dismissed the traders and told them to come back early Monday morning prepared for the worst. The traders were stunned. When Cohn returned to his office, they began calling him, asking what they were supposed to do. Cohn instructed them to go home, to see their spouses and children. He assured them that it would all work out, even though he was far less than certain that would be the case.
Only in retrospect, Cohn explains, did he consider the depth of the existential danger Wall Street faced. “When you go through these situations you either just throw yourself in the middle of them and try to deal with everything coming at you 24 hours a day, seven days a week, or you sort of get in a position where you withdraw and you try and just reason and try to understand exactly what’s going on,” he says. “I tried to be in the first camp with just dealing with the situation real-time…. I was focused on Goldman Sachs and our clients and our liquidity and our risk position. And I probably, for better or worse, wasn’t spending the time obsessing about the second-derivative and third-derivative and fourth-derivative things.”
Understandably, he laments that his firm later became the Zeitgeist’s poster child for unethical behavior in the years after the crisis. It was labeled a “giant vampire squid” in Rolling Stone, lampooned on The Daily Show, hauled up in front of the Senate for an all-day hearing, and fined $550 million by the Securities and Exchange Commission for inadequate disclosure in the sale of a complex security.
Cohn says the firm has learned valuable lessons from being pilloried. “We talk more about what should we be doing as a firm, not just can we do things, what should we be doing?,” he explains. “We think more expansively about our brand and our reputation. We engage a lot more with the press. We engage a lot more with Main Street. We try and explain ourselves more, and more today than we ever have, and those important lessons that we learned coming out of the crisis. And, you know, I think they are important lessons. I think they’ve made us a better firm in the end.” One example of the new Goldman approach, Cohn says, is that the firm decided not to underwrite and sell so-called European contingent convertible, or “CoCo,” bonds (which have terms favorable to the issuer) to retail investors, even though Goldman’s competitors did. The firm decided they were not appropriate for anyone other than highly sophisticated investors.
Unlike Morgan Stanley, which has changed its business dramatically in order to deal with the structural changes it perceives in the industry, Goldman Sachs is sticking to its knitting. Cohn believes that when all the dust settles the disruption will prove to be cyclical, not structural. Wall Street will return to normal, with Goldman Sachs standing tall.
Both Blankfein and Cohn are well paid to lead the way to this bright future: in 2014, they received compensation of $24 million and $22 million, respectively. They also own Goldman stock currently worth around $590 million (Blankfein) and around $340 million (Cohn). Asked if he is waiting for Blankfein to retire so he can ascend to the top spot—guessing when is a favorite parlor game on Wall Street these days—Cohn says, “I’m a happy guy. I’m here at 5:35 on a Friday night talking to you.”
TALES OF THE CITI
Then pandemonium hit. “I’m sure if I had known that [the crisis was coming], I would have thought about [taking the C.E.O. job] a lot more,” he says. Over time, he and his team sold the storied Smith Barney brokerage and wealth-management firm to Morgan Stanley; sold Citigroup’s retail business in Germany and other, smaller businesses; fired 115,000 of the bank’s 375,000 employees worldwide; and hived off 40 percent of the company’s assets into something called “Citi Holdings,” which would be sold off slowly over time. The challenge was “to take the psychology of people and put the right leadership in place so you can take the psyche back from where it was by saying, ‘This is who we are. We are going to be proud of who we are going forward.’ ” The low point for Pandit came when Citi’s stock traded for under a dollar in February 2009, even though he knew the bank was doing better. “It’s the height of uncertainty,” he remembers. “You did everything you could. You were at the right point, but it just hadn’t turned. It turned out that was the bottom.”
He is grateful to the American taxpayers and the federal government for the help Citigroup received during the crisis, and he is happy to say so publicly. “If it weren’t for TARP, if it weren’t for all of the liquidity lines and the funding lines the Fed and everybody provided, I don’t know if we could have collectively instilled confidence in the financial markets,” he says. But he also believes Citigroup was “a good steward” of that money, which it paid back quickly with interest—the government saw a $12 billion profit thanks to the equity investment it made in Citigroup as part of the bailout. “I was really pleased that we could use the money for the purpose it was provided, which was to instill confidence, get all the changes made, turn around, pay it back, get out of there,” he says. (Citigroup still has many skeptics, who point to its failure to pass certain Treasury “stress tests” and the fact that it remains a sprawling mess. “They are hanging on to this pretty far-flung enterprise, which I don’t see how one can manage,” says one competitor.)
Greg Fleming also had a front-row seat while the crisis was unfolding. As the president of Merrill Lynch, he devised and executed the strategy that resulted in the eleventh-hour sale of Merrill Lynch to Bank of America. Had that deal not happened, it is more than likely Merrill Lynch would have followed Lehman Brothers into bankruptcy. Fleming, 52 and now the head of wealth and investment management at Morgan Stanley, says part of the problem as the crisis developed was that many senior Wall Street executives had been conditioned by previous crises to believe that once the initial problem presented itself—in this case, the collapse of Bear Stearns—the smart money assumed that the worst had passed and that huge profits could be made during the resulting financial chaos and recovery. But this time was different. “People were like, ‘Bear was the issue. They were the smallest. They were the issue.’ And because of that there wasn’t enough fear that we had better get ahead of this.”
Fleming says that when Merrill was in the throes of the meltdown, it felt to him like experiencing the Hunger Games. “One of the things that I’ll never forget is the unremitting feeling of being hunted,” he says.
To Fleming, Merrill’s survival became existential. “I wanted Merrill to be the animal that survived,” he says. “And away from that I had nothing else on my mind. It wasn’t my issue what was happening elsewhere. I was having a hard enough time with Merrill. But I was singularly focused on my firm not being the one to get killed. And that’s why I was so focused on Bank of America, because they were the only ones who would buy a company in 72 hours.”
He doesn’t believe that just the banks were bailed out; he believes the American way of life was preserved, whether it was General Motors, or money-market funds, or commercial paper, or increasing depositor’s insurance to $250,000. “Damaging the whole bank system that way also damaged the country,” he says. “It damaged a belief in the system. In hindsight, if you look back, what really saved the system wasn’t TARP and it wasn’t the stress test. What really saved the system was the wall of liquidity that the Fed put up…. Businesses had liquidity and the market started to come back and the confidence returned.”
In retrospect, Dimon says, a better way to rescue the system may have been to dismantle the banks that screwed things up. “If management ruined their companies, their boards should have been fired, management should have been fired,” he continues. “I support the clawbacks. I think that’s perfectly fine. The American public would have received some sense of justice being done.” He thinks there should have been some differentiation between well-run banks and poorly run banks: “If you said to me, how do I feel about some of these C.E.O.’s who walked away with $50, $100, $150 million and their company blew up? Terrible. It’s outrageous. I agree with them. Everyone says that’s bad. If this company went bankrupt, we should all give back the money we earned in the last five years or more. You wouldn’t have to ask me.”
Instead, what happened, Dimon says, is that every banker got tarred with the same broad brush. “What happened with TARP is it just became every banker’s scarlet letter,” he says. The damage the financial crisis did to the banks’ reputations will take a generation to repair. “That is the way it’s going to be probably in my working lifetime,” he says. “What happened was too damaging. The general population is too mad.”
Somewhat surprisingly, Dimon makes clear he would not have rescued Bear Stearns if he had it to do over again. “In a new world we wouldn’t buy Bear,” he says. “There was just too much litigation afterwards, and we were held responsible for their historic mistakes.” He’s right about that. Since June 2011, using its shareholders’ money, JPMorgan Chase has paid more than $35.2 billion in fines and penalties related to various scandals, frauds, and mistakes that came to light because of the financial crisis, including a mammoth $13 billion fine paid in November 2013 to the federal government and several states related to the pre-crisis underwriting of mortgage-backed securities at both Bear Stearns and JPMorgan itself.
In the wake of that settlement—record-breaking at the time—the JPMorgan board gave Dimon a raise to $20 million from $11.5 million. In 2014, the bank earned $21.8 billion in profit—its most ever—and the board maintained Dimon’s total compensation of $20 million. His 8.1 million JPMorgan Chase shares are worth around $480 million these days.
A day after he was diagnosed, Dimon called Lee Raymond, the former C.E.O. of Exxon Mobil and the lead director on the JPMorgan Chase board. Raymond was supportive, as were his fellow board members. “Don’t worry about the company,” they told him. “Don’t worry about us. Focus on yourself and family.”
Dimon appreciated that because, he says, he knew he was in a battle. He scheduled his radiation treatments for seven o’clock in the morning, when few other patients were there. They fitted a mask to his face and bolted him down to the table to make sure he would not move, and then with laserlike precision the machines administered the treatment. He also had six full days of chemotherapy. He lost 35 pounds. His body was burning some 4,000 calories a day because of the treatment. “It was hard to eat,” he says. “Your throat hurts. You have no appetite. Everything tastes just absolutely terrible. So you literally just search for the foods that you can get down.” Into this group fell oatmeal, scrambled eggs, and milk shakes.
He could not help but think of his own mortality. “You wonder: how could it possibly be me?,” he says. “Well, of course it could happen to you. You have it. Then, of course, you wake up every morning and you hope it’s a bad dream. Then you wake up. I have cancer. I have to go to treatment again. Then I have to wait three months to find out if it worked. Even then you’re bracing for ‘Well, we have a problem. It spread.’ You think, I may die. What are you going to miss?”
In early December, Dimon got the good news that he is cancer-free. His doctors won’t declare him completely cured until three years have passed and there is no evidence of the disease. He has regained some of the weight he lost but still looks thinner than before. He occasionally gets tired and takes quick naps, but he has begun exercising again. “Not quite like I used to,” he says. “I don’t have my full appetite and taste back yet, but I feel good. It’s nice to be healthy and back at work.”
He is not yet sure how the bout with cancer has changed him. He believes the way he can still make the most difference for the world is at JPMorgan. “I really mean that,” he says. He talks about jobs that can be created through providing capital to companies. He talks about how the firm has hired 8,000 military veterans and is investing in Detroit. He feels great about these things. “So that’s what I can do,” he says. “That’s my contribution—running a sound, healthy company that serves millions of customers well and employs hundreds of thousands of people. What else am I going to do? I’m not an artist. I’m not a writer. I’m not a musician. I’d love to be a tennis player or musician. I’m not.”
Maybe when he retires he will consider philanthropy. But, with his health much improved, he makes it clear that he has no plans to leave his company anytime soon. “I think our company has done well in very challenging times,” he says. “I love my job and this company, so if it were up to me it would be about five years or so, but that’s up to the company’s board to decide.”–ends