Conversations With Wall Street
The Inside Story of the Financial Armageddon & How to Prevent the Next One
Peter Ressler & Monika Mitchell
Copyright © 2011 FastPencil, Inc.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior consent of the publisher.
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2011-10-11
Dedication
“Peter Ressler and Monika Mitchell’s insightful new book transforms complex financial history into the stuff of real life. “Conversations with Wall Street” is a riveting expose and desperately needed reminder that noble character still fuels our nation. Brilliant in its simplicity, complemented by insider perspectives gathered first-hand during Wall Street’s most tumultuous years, this is a book to be studied, cherished, and put to immediate practical use.”
Prof. Joshua M. Greene, Hofstra University
Former SVP, Ruder Finn
“’Conversations With Wall Street’ challenges all of us to rethink the fundamental purpose of our financial system—and whether the industry truly serves that purpose. Rather than post-crisis platitudes, this important new book provides an intimate view of the financial system through frank discussions with the people who make up the banking industry—not just about what they do, but about why they do it. These discussions are a must-read
for anyone who wants to understand the financial crisis and what we should do about it—from bond traders to bureaucrats. The gap between Wall Street and Main Street has never been wider than it is today, and ‘Conversations With Wall Street’ is an critical first step toward bridging that gap.”
Robert Jackson
Advisor on Executive Compensation and deputy to Kenneth R. Feinberg
Special Master for TARP Executive Compensation.
“Bravo for a compelling exposé of the moral crisis that infected America, led Wall Street to cannibalize itself, and plunged the United States into the Great Recession. Peter and Monika’s conversations with Wall Street veterans show the need to restore the financial industry to its proper place as a servant of society. Just as forcefully, they remind the rest of us to do our part in the age-old struggle to overcome greed and to draw a clear line between exploitation and productive enterprise. Congratulations
to them for demonstrating that the underlying issue is the need to re-spiritualize business and finance.”
Rinaldo Brutoco
Founding President & CEO, World Business Academy
A courageous expose packed with blood boiling facts and heart warming wisdom. It is powerful, honest and needs to be said.
Peter and Monika remind us of truths as old as time: that we are all connected, and that love, like greed, operates from the inside out. Either can change the world. We can be grateful that such pure hearts are at work within the financial body of America.
Radhanath Swami
Spiritual Leader
Author, “The Journey Home”
Contents
Preface
This book began with discussions Peter and I had during the collapse of investment banks and former clients Bear Stearns and Lehman Brothers. After twelve years of working together as partners in our Wall Street executive search firm, which specialized in senior management for the fixed income (bond) markets, we had an up close and personal view of the market collapse. Not only did we see an industry on fire whose management teams we helped build, but also twelve years of building our own business was threatened. No one really knew what to expect as the markets crashed, firms folded, and the government stepped in, but the story unfolds through these pages as we saw the collapse progress. We documented the confusion and emotions this formerly stable and self-controlled industry felt as we experienced it.
We almost did not publish this book, debating for a year whether to ignore all of the things we heard and discussions we had on the self-destruction of the mortgage markets. In the beginning of the crisis, we were as horrified as anyone else. Just like the general public, we, along with many others in the finance world, were outraged and furious at colleagues who had damaged, if not destroyed, our livelihoods. As the anger simmered and the shock was absorbed, something entirely new and unexpected emerged: the human side of an industry viewed as heartbreaking at its best and savage at its worse. We weighed our discomfort with telling this story against a sense of greater purpose that it needed to be told. Ultimately, our mission is to educate those interested while helping heal the nation’s mounting distrust and contempt for the financial industry. Our goal is to bring a deeper understanding of how Wall Street works, stripped of its glamour for all the world to see. With that, we wish to inspire a sense of unity that might help prevent another crisis of this magnitude from occurring again.
This book actually began as the “Economy of Trust™ Ethics Program (EOT)” intended to help troubled investment banks and securities firms resolve the conflicts of interest that brought the industry to crisis. Prior to the collapse, ethics programs in finance (as one senior manager explained) amounted to two minute online surveys twice a year. In 2009, the big firms were keenly interested in the EOT program and asked us to develop training models for new recruits and adapt these for front-line producers. By 2010, as the government took the pressure off these firms, their interest in a comprehensive ethics program waned. Peter did present the EOT program at a friend’s smaller firm with great success; however, the industry began to shift back to business as usual.
In 2010, two high profile New York publishers expressed interest in the manuscript provided we “name names” of those whose stories we wished to tell. We explained printing the names would be antithetical to the book’s purpose of inspiring a deeper set of values and integrity in the world of high finance. The purpose of these pages is to shed light on the human side of the business in order to inspire necessary change. It took an innovative and mission-driven publisher, Fast Pencil, from the enlightened mecca of San Francisco, to give this book a home. They never once asked for the names, and from our first conversations with FP executives, they seemed to recognize the power in these pages.
The intention behind writing this book is not to compromise the industry or those in it, but instead to offer a more balanced view of how to resolve the issues. From our view across multiple firms, the system is deeply flawed and in dire need of repair. We try to offer an objective look at the market makers and see things as they saw them. Our firm belief is if those on the outside do not understand how the model works from the inside, we cannot resolve the existing problems. The industry is comprised of human beings of all different characters. Each has a role to play in the economy we depend on as a nation. The following pages are full of confidential and candid conversations by individuals who never intended these for public view. We respect their privacy and take their need for anonymity to heart. As such, we have gone to great lengths to protect the careers of our speakers and disguise their identities so they will not be exposed on our end. Each speaker has been given a pseudonym with personal details of their life altered slightly to mask their identities. The speakers come from a couple dozen firms, including the five former investment banks (Lehman Brothers, Bear Stearns, Goldman Sachs, Merrill Lynch, Morgan Stanley), hedge funds, private equity firms, and the largest U.S. and foreign commercial