Capital Offense: How Washington's Wise Men Turned America's Future Over to Wall Street

353 Pages·2010·1.63 MB·English

by  Hirsh

Table of Contents

Title Page
Copyright Page
Dedication
Acknowledgments
PROLOGUE

Chapter 1 - The Most Certain Man in the World
Chapter 2 - Triumph
Chapter 3 - The Stealth Ideologue
Chapter 4 - The Rise of Rubinomics
Chapter 5 - Larry and Joe
Chapter 6 - Portrait of a Contrarian
Chapter 7 - Children of the Boom
Chapter 8 - The High Tide of Hubris
Chapter 9 - The Last Guy at the Alamo
Chapter 10 - Reaganites Redux
Chapter 11 - The Canary in the Mine
Chapter 12 - The King of the Street
Chapter 13 - Last Gathering of the Faithful
Chapter 14 - Blown Away
Chapter 15 - Geithner Cleans Up (with Bernanke at His Back)
Chapter 16 - Too Big to Jail
Chapter 17 - Larry and Joe (Again)

Notes
Index

Copyright © 2010 by Michael Hirsh. All rights reserved

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ISBN 978-0-470-52067-3 (cloth); ISBN 978-0-470-76957-7 (ebk);
ISBN 978-0-470-76958-4 (ebk); ISBN 978-0-47076959-7 (ebk)
For my parents, Charlie and Barbara,
and my sons, Evan and Calder
Acknowledgments
The bulk of this narrative was drawn from scores of interviews with the principal
characters in the story, their aides—current and former—as well as their
detractors and critics and close observers of the economic scene over the last two
years. This was supplemented by reporting I have done going back some twenty
years, mainly for Newsweek magazine but also for Institutional Investor
magazine and the Associated Press.
I have had the great fortune to have been, as a journalist, a front-row witness to
the rise of the post-Cold War world as well most of the financial crises that have
plagued it since the Mexican peso crash of 1994-1995. I was able to cover most
of the events described in this book in real time, as they were happening, and it
has been fascinating and enlightening to return to them for a second look from
the perspective of the biggest crisis of all, the financial meltdown of 2007-2009.
Unless otherwise noted, the events, scenes, and discussions described in the
narrative are based on my own reporting and interviews. Some of the interviews
were “on background,” meaning the individuals would agree to speak to me only
on condition that I not attribute any quotations to them by name in the text, but
most were on the record. I would like to thank the following people who gave
me their time, attention, recollections, assessments, and views. Together they
contributed inestimably to whatever value this book may have.
They are, alphabetically: George Akerlof, Martin Anderson, Robert Auerbach,
Sheila Bair, Peter Bakstansky, Roy Barnes, Charlene Barshefsky, Gary Becker,
Ben Bernanke, Peter Beutel, Jagdish Bhagwati, Alan Blinder, Joan Blumenthal,
Leonard Bole, Bill Brennan, Mark Brickell, Brooksley Born, James Bothwell,
Chuck Bowsher, Barbara Branden, Nathaniel Branden, Charles Brunie, Michael
Calhoun, Maria Cantwell, Chris Carpenter, Gerald Corrigan, John Dingell Jr.,
Randall Dodd, Kathy Eickhoff, Stanley Fischer, Roberta Fishman, Barney Frank,
Tim Geithner, Gary Gensler, Mark Gertler, Newt Gingrich, Harvey Goldschmid,
Austan Goolsbee, Michael Greenberger, Rob Johnson, Sally Katzen, Ed Knight,
Eric Kolchinsky, Jan Kregel, Anne Krueger, Marc Lackritz, Jim Leach, Arthur
Levitt Jr., Iris Mack, Patrick Madigan, Reuben Marks, Janet Martel, Thomas P.
“Mack” McLarty, Richard Medley, Leo Melamed, Tom Miller, Kevin Muehring,
Paul O’Neill, Jonathan Orszag, Peter Orszag, Frank Partnoy, Hank Paulson,
James Poterba, Lant Pritchett, Raghu Rajan, Robert Reich, Dani Rodrik,
Kenneth Rogoff, Jim Rokakis, David Rubenstein, Robert Rubin, Anna Schwartz,
Robert Shiller, George Shultz, Paul Singer, Roy Smith, Gene Sperling, Robert
Solow, Anya Stiglitz, Eloise Stiglitz, Joseph Stiglitz, Larry Summers, Robert
Teitelman, Sidney Verba, Paul Volcker, Dan Waldman, Timothy Wirth,
Lawrence White, Jim Wolfensohn, and Edgar Woolard.
I want to reserve special thanks for the people who read early drafts of this
book. They corrected many errors and gave me incisive and invariably helpful
advice on how to make it better. Ken Rogoff, Rob Johnson, Steve Weisman, and
Angel Ubide all took time out of their busy schedules to critique the manuscript
in great detail, and they improved it in more ways than I could possibly
enumerate. I will always be grateful to them. Frank Partnoy and Governor Roy
Barnes read parts of the manuscript and also helped to make it more accurate.
Michael Greenberger did so as well and was an infallible guide through the
arcane netherworld of derivatives regulation. My Newsweek colleague Bob
Samuelson, the great and humble dean of American economic columnists, has
been a constant intellectual and journalistic mentor to me over the years, and he
supplied some of the critical reporting details in the book, especially concerning
the Jackson Hole meeting of 2005, which he attended.
Any mistakes or misjudgments in this book, however, remain mine alone.
I would also like to thank my editors at Newsweek. I did not take a leave of
absence to write this book, and they were unfailingly sensitive and supportive as
I tried to balance my time between authorship and my Newsweek work.
My editor at John Wiley & Sons, Eric Nelson, was a pleasure to work with
from the start. Eric defines editing at its best. He dove into the manuscript with
brio and proposed many changes, yet he didn’t insist on a single one. I often
pushed back, but in almost every case his judgment was right, and this is a far
better book than it started out to be because of his handiwork in every chapter.
Kimberly Monroe-Hill of Wiley unerringly supervised the copyediting,
proofreading, and indexing of the book, along with everything else on the way
from Word documents to printed copies. My agent, Andrew Stuart, helped
enormously in refining the concept of the book, and when he eventually liked
what he saw he set about selling it like a warrior. Andrew has been a constant
source of support and advice.
Finally, I would like to thank my entire family, including the very earliest