SEC chief, friend of business

Cox is now president of Bingham Consulting, LLC, a firm that, among other things, defends businesses from the Consumer Finance Protection Bureau and “consumer protection matters,” according to its website.

The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 as a response to the financial crisis and tasked with protecting consumers from potentially harmful financial products and services.

Bingham Consulting’s experience includes “representing non-bank financial institutions in some of the first investigations and inquiries initiated by the CFPB.”

The consulting firm has advised big names including Verizon, American Airlines, Intel, Toyota, Deutsche Bank, and others. Cox says he’s worked on Internet tax issues, real estate leasing and helped clients in multi-state attorneys general matters.

Looking back, Cox now says the capital standards that gave him comfort before the crisis fell short. “In hindsight, every federal and state regulator could have done more, because existing capital standards proved inadequate,” he said in an email.

The SEC succeeded, however, in its oversight of broker-dealers and securities markets before and during the meltdown, he said, pointing out that U.S. stock exchanges remained open and working throughout the crisis.

While chairman in 2006 and 2007, the agency adopted policies that ultimately “delayed cases and produced fewer and smaller corporate penalties,” according to a 2009 investigation by the Government Accountability Office.

These new policies required the enforcement side to establish nine factors to consider before recommending a company pay a penalty for a violation and they also required that enforcers get the commission’s approval for a range of penalties before beginning settlement talks with a company.

Some SEC attorneys saw the Commission as “less as an ally in bringing enforcement actions and more of a barrier,” according to the report. From fiscal 2005 to 2008, total annual penalties fell 84 percent from $1.59 billion in 2005 to $256 million in 2008.

Cox disputes those findings.

“During my tenure at the SEC, we imposed unprecedented penalties in enforcement actions,’’ he said.  The agency in 2006 fined AIG $800 million, the largest penalty in SEC history.

Cox, an appointee of President George W. Bush, left the SEC when President Barack Obama took office in early 2009.

He moved back to Orange County where he bought a $5.3 million home in 2011, according to public records, and settled into a comfortable life in the private sector.

Timothy Geithner

While America’s largest financial institutions were on the brink of falling like dominos, Timothy Geithner emerged from the shadows of the Federal Reserve Bank of New York to become one of the most influential regulators in power during the financial crisis.

Since leaving the Treasury Department in January 2013, he is, not surprisingly, writing a book and cashing in on his government exposure on the lecture circuit.

In the midst of the crisis, Geithner was often seen alongside Bernanke and Paulson and became a familiar face as a key decision maker. He had a direct hand in selling Bear Stearns to JPMorgan, letting Lehman Brothers go bankrupt and later bailing out insurance giant AIG.

In speeches and testimonies during and following the crisis, Geithner said the government’s primary concern was providing relief for Main Street, not Wall Street.

However, the dozens of books, reports and investigations into the crisis have painted a picture of Geithner as more concerned with the needs of big banks than consumers.

On Sept. 15, 2008, the same day Lehman Brothers filed for bankruptcy, AIG was on the brink of collapse after insuring billions of dollars-worth of credit default swaps to companies across the globe. The swaps were like insurance against investment losses. The Federal Reserve and Treasury Department feared that letting AIG fail “would have posed unacceptable risks for the global financial system and for our economy,” said Bernanke in testimony to Congress.

That day Geithner reached out to big banks in an effort to convince them to provide the failing insurance giant with private financing. One look at AIG’s books and the banks balked, saying the company’s liquidity needs were greater than its assets.

The music stopped and Geithner was left holding “a bag of sh*t,” as he called it himself on a phone call with AIG’s stunned regulator — John Reich of the OTS — according to Reich’s testimony to Congress.

Geithner took matters into his own hands and the New York Federal Reserve Bank pumped $85 billion into AIG, a move that skirted the edges of the law, according to a report by the Special Inspector General for the Troubled Asset Relief Program, Neil Barofsky.

AIG’s counterparties — those that were owed — including Goldman Sachs, Deutsche Bank, and Merrill Lynch, were paid face value for their credit default swaps that otherwise would have been worthless in what many investors called a backdoor bailout of the investment firms. Eventually the government invested $182.3 billion in AIG, according to the Treasury.

Sheila Bair, who was chairwoman of the Federal Deposit Insurance Corp. during the crisis and who battled Geithner regularly, called him “bailouter in chief” in her book “Bull by the Horns.” Geithner declined a request to be interviewed for this story through his spokeswoman.

Geithner was tapped by Obama to take over the Treasury from Hank Paulson in 2009.

Since his return to private life, Geithner joined the Council on Foreign Relations as a distinguished fellow but has yet to publish anything, according to the CFR website.

He signed a deal in March with The Crown Publishing Group to write a “behind-the-scenes account of the American response to the global financial crisis,” according to a press release. Geithner  tapped Time Magazine’s senior national correspondent, Michael Grunwald, to help him write the book.

Geithner has also hit the speaking circuit, becoming an exclusive speaker for the Harry Walker Agency, which also represents former President Bill Clinton. Geithner banked $400,000 for three talks this summer, according to a report in the Financial Times. He made $200,000 speaking at a Deutsche Bank conference, and $100,000 each at the annual meetings of private equity firms Blackstone Group and Warburg Pincus. That’s more than double his annual salary of $199,700 as Treasury Secretary.

Geithner’s spokeswoman declined to comment on specific speaking engagements or fees.

Sheila Bair

Bair, former chairwoman of the Federal Deposit Insurance Corp. which pays off depositors if their bank fails, became the folk hero of the financial crisis because she appeared to be the only top regulator in Washington advocating for borrowers and small banks.

A plain-spoken Kansan who got her start in politics working for former Republican Sen. Bob Dole, also of Kansas, Bair emerged from the crisis beloved by many on Capitol Hill but with few friends among those she dealt with every day. Bair advocated for simple solutions to the problems that the captains of finance suggested were unbearably complex.

Since she left the FDIC, she has, of course, written a book: “Bull by the Horns.” In it, she has no shortage of advice and criticism for almost everyone.

“I did take people to task, but only when I thought there was a good reason for it,” she said in an interview at Fortune Magazine’s Most Powerful Women Summit in October 2012. “There were fundamental policy disagreements that I think people should understand, because they're really still at the heart of the approach we're using now to try to reform the system.”

Today Bair works from an office in the sparkling white headquarters of the Pew Charitable Trusts in Washington, D.C., where she leads an organization called The Systemic Risk Council. The group of former regulators, bankers and academics is calling for stringent financial regulations, including higher bank capital requirements.

For Bair, the problems in the U.S. banking system come down to one thing: capital.

She had been warning against the movement in the middle of the decade to relax capital and leverage rules wherever she could find a podium. As early as 2006, Bair was arguing against international banking reforms — known as Basel II — which would have allowed banks to cut their capital and increase borrowing.

When the banking crisis hit, Bair was thrust into the middle early with the failure of IndyMac.

The Bair-led FDIC took over the bank, made depositors whole and then took an unorthodox approach to IndyMac’s troubled mortgage portfolio, halting foreclosures and trying to renegotiate the terms of the loans so that people could keep their homes.

Under her program, known as “mod-in-a-box,” the FDIC would first cut the interest rates, then extend the loan term to as long as 40 years, and then defer part of the principal in an effort to ensure borrowers’ payments didn’t exceed 38 percent of income.

When the crisis exploded in September and began toppling ever-bigger banks, Bair insisted on having a seat at the negotiating table with Paulson, Geithner and the Wall Street titans where she looked after depositors while the captains of finance worried about their creditors and shareholders.\

She cast herself as the outsider — outside of Wall Street and outside of the boys’ club — and in doing so became the hero of those who saw the Treasury and the Federal Reserve as looking out for their banker buddies while Sheila was looking out for them.

The FDIC resolved 375 failed banks from the beginning of 2008 through Bair's departure in July 2011, costing the deposit insurance fund an estimated $78.2 billion, according to FDIC data. 

“The regulators have too much of a tendency to view their jobs as making the banks profitable, as opposed to protecting the public,” she said.

John Reich and the ‘watchdog with no bite’

The SEC was criticized for its performance during the crisis but the Office of Thrift Supervision was euthanized.

OTS, under its leader John Reich, was chief regulator of Washington Mutual, which became the largest bank failure in U.S. history.

“OTS was supposed to serve as our first line of defense against unsafe and unsound banking practices,” said Sen. Carl Levin, D-Mich., at a 2010 congressional hearing investigating the causes of the financial crisis. “But OTS was a feeble regulator. Instead of policing the economic assault, OTS was more of a spectator on the sidelines, a watchdog with no bite.”

Twenty seven banks with $385 billion in accumulated assets failed under OTS supervision between 2008 and 2011. The agency had jurisdiction over IndyMac, which failed in the summer of 2008, and Countrywide Financial, the mortgage lending giant whose losses almost sank Bank of America, which bought it in 2008.

Its performance was so bad, it was abolished as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Reich had a long record of advocating deregulation before he was tapped to lead the bank regulator. As vice chairman of the FDIC he advocated for the Economic Growth and Regulatory Paperwork Reduction Act, which eliminated “outdated or unnecessary regulations that impose costly, time-consuming burdens on the banking industry,” according to a 2003 FDIC annual report.

Alan Greenspan

Alan Greenspan was no longer chairman of the Federal Reserve when the meltdown hit, but his monetary policies have been blamed for contributing to the collapse.

The bespectacled, smirking Greenspan weathered his first storm — the 1987 “Black Friday” market crash — and continued to lead the U.S. through subsequent drops in the market over his 18-year tenure as Fed Chairman. As he steered the economy around the dot com bubble and through the terrorist attacks of 2001, he picked up nicknames like “the oracle” and “the maestro.”

But the biggest drop in history was around the corner.

On the morning of Sept. 29, 2008, the House of Representatives struck down a $700 billion bailout plan proposed by the Bush Administration following a month marked with the bankruptcy of Lehman, the failure of Washington Mutual, and the bailout of AIG among other catastrophic events. The Dow Jones industrial average plunged 778 points and $1.2 trillion vanished from the market that day.

Greenspan, who had left the Federal Reserve in 2006, suddenly found himself defending his policies rather than being praised for them — a dramatic role reversal for the man who was awarded the “Presidential Medal of Freedom” in 2005, the nation's highest civilian honor. Bush called him, “one of the most admired and influential economists in our nation’s history,” in a speech honoring the winners of the award that year.

Greenspan’s ideology called for as little government regulation in the free markets as possible — including exotic investments like derivatives and credit default swaps. His policy of extended periods with low interest rates is largely credited with helping to inflate the housing bubble whose explosion triggered the crisis.

He believed market participants would discipline themselves and each other to ensure their investments were safe and their reputations remained intact.

“More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe,” said the Financial Inquiry Commission Report in 2011.

He was the only individual regulator blamed in the report.

Greenspan testified in front of Congress in 2008 admitting his ideology contained a “flaw” and that he was “shocked” when he realized it.

In his post-Fed years Greenspan has been busy on the speaker circuit, writing books and consulting.

In 2007 he published his memoir, “The Age of Turbulence: Adventures in a New World,” which debuted at the top of the New York Times best seller list.

He’s represented by the Washington Speakers Bureau, which specializes in booking high level speakers including Madeleine Albright, Tony Blair, George W. Bush, Sarah Palin and Rudy Giuliani. Greenspan was reportedly paid $250,000 to speak at a Lehman Brothers event for 15 executives in 2006.

He also became an adviser to Paulson & Co, the hedge fund firm run by John Paulson, and formed Greenspan Associates, LLC, a private advising company that is headquartered in Washington, D.C.

Greenspan declined to be interviewed for this story at the request of the publishers of his next book.