Explore The Timeline:
Crisis A - Z
What exactly is a CDO? How about an ARM?
What was Alan Greenspan talking about when he described the "froth" in the housing market back in 2005?
We know that trying to keep track of the terms mentioned during the financial crisis can be complicated.
Our A-Z lists contain the key people, terms, government programs, and companies stuck in the middle of the crisis.
What was Alan Greenspan talking about when he described the "froth" in the housing market back in 2005?
We know that trying to keep track of the terms mentioned during the financial crisis can be complicated.
Our A-Z lists contain the key people, terms, government programs, and companies stuck in the middle of the crisis.
G
GDP aka Gross Domestic Product:
A measure of economic activity at its most broad perspective. Annualized quarterly percent changes in GDP reflect the growth rate of the nation’s total economic output. Inventory and net export swings in particular can produce significant volatility in GDP.
The broad components of GDP are: consumption, investment, net exports, government purchases, and inventories. Consumption is by far the largest component, totalling roughly 2/3rds of GDP. Data is released on the third or fourth week of the month at 8:30 ET for the prior quarter, with subsequent revisions released in the second and third months of the quarter.
Geithner, Timothy:
75th United States Treasury Secretary, serving under President Barack Obama’s administration. He was sworn in on January 26, 2009 with the task of allocating $350 billion of Wall Street bailout money. Geithner was previously the ninth President of the New York Federal Reserve Bank, where he had been serving since 2003.
Geithner was born on August 18, 1961 in Brooklyn, New York. Throughout his childhood he lived outside of the United States in places like Zimbabwe, Zambia, India, Thailand, China, and Japan. He completed high school in Thailand at the International School Bangkok. When he returned to the United States, he attended Dartmouth University where he earned a Bachelor of Arts degree in government and Asian studies in 1983. He then earned a master’s in International Economics and East Asian Studies in 1985 from John Hopkins School of Advanced International Studies.
Before joining the Department of Treasury, Secretary Geithner worked for three years at Kissinger and Associates in Washington, D.C. He then started working in the International Affairs division of the U.S. Treasury Department in 1988 and worked for five different Secretaries of the Treasury in different positions including Under Secretary for International Affairs from 1999 to 2001 and then as Director of the Policy Development and Review Department at the International Monetary Fund from 2001 to 2003.
Geithner has been married with Carole Sonnerfeld since 1985 and they have two children, Elise and Benjamin.
Gramlich, Edward (Ned):
Former Federal Reserve governor who unsuccessfully pushed Fed Chairman Alan Greenspan to crack down on irrational lending before the mortgage boom. Gramlich died of leukemia in 2007 at the Washington Home and Community Hospices. He was a Washington resident.
Dr. Gramlich served on the Board of Governors of the Federal Reserve System from 1997 to 2005.
He published "Subprime Mortgages: America's Latest Boom and Bust" on a topic that he had warned about for years. Much earlier, as chairman of the Neighborhood Reinvestment Corp., he had urged lawmakers to better protect consumers against predatory lending practices and toughen the regulation of mortgage lenders and banks. He continued that campaign as a Fed governor; in December 2000, he was among those who wanted to tighten regulation of high-cost home loans long before the current panic set in.
After resigning from the Fed in 2005, Dr. Gramlich became interim provost at the University of Michigan and then a senior fellow at the Urban Institute in Washington.
Edward Martin Gramlich was born in Rochester, N.Y., and graduated from Williams College in Massachusetts. He received a master's degree in 1962 and a doctorate in 1965, both from Yale University. His spent his early career in the research division at the Federal Reserve.
He had a long career at the University of Michigan, where he was a professor of economics and public policy from 1976 to 1997, dean of the School of Public Policy from 1995 to 1997, chairman of the economics department twice in the 1980s and director of the Institute of Public Policy Studies from 1979 to 1983 and 1991 to 1995.
He was also staff director for Major League Baseball's economic study commission in 1992. After the 1994 strike, he recommended that richer teams funnel some profits to poorer teams.
Dr. Gramlich was an acting director of the Congressional Budget Office in 1986 and 1987 and chairman of the Social Security advisory commission from 1994 to 1997. After the Sept. 11, 2001, attacks, he was chairman of the Air Transportation Stabilization Board, charged with administering $10 billion in government loan guarantees for financially strapped airlines.
Gramm, Phil:
Former Representative and U.S. Senator from Texas and Chairman of the Senate Banking Committee from 1995 through 2000. Time Magazine called Gramm Washington's most prominent and outspoken champion of financial deregulation. In 1999, Gramm led the fight to repeal the Depression-era Glass-Steagall Act, that established a separation between Wall Street and commercial banks. The next year, it was his idea to install a provision in the Commodity Futures Modernization Act that exempted over-the-counter derivatives like credit-default swaps from regulation by the Commodity Futures Trading Commission. CDSs took down AIG, which has cost the U.S. $150 billion.
Following his work on the 2008 campaign to elect John McCain, the Republican from Texas decided to step down from Capitol Hill in 2002 to work as an investment banker and lobbyist for the Swiss bank, UBS.
In 2001, he made a personal plea in the Senate for understanding of the need for subprime loans. “Some people look at subprime lending and see evil,” Gramm said. “I look at subprime lending and I see the American dream in action.” He cited how in 1950 his mother, a young nurse working double shifts to support her three children and her disabled husband, was able to take out a mortgage with relatively high interest rates that he likened to today’s subprime loans.
Gramm was a staunch ally of financial companies that objected to efforts by Washington to put the brakes on deceptive or predatory lending. He was the author of legislation that divided the responsibility for oversight of Wall Street while toppling any opposition to the increasing power of the brokerage business. A provision strongly supported by Gramm assured that there would be no regulation of derivatives, including credit swaps.
Over the years, his tell-it-like-it-is style have backfired politically: he has urged that food stamps be cut because “all our poor people are fat,” said it was hard for him “to feel sorry” for Social Security recipients and, as the economy soured last summer, called America “a nation of whiners.”
Gramm was born in Fort Benning, Muscogee County, Georgia on July 8, 1942.
Greenberg, Alan (Ace):
Former Chief Executive Officer of Bear Stearns. Between 1985 to 2001, Greenberg served as Chairman of the Board and was Bear Stearns CEO from 1978 to 1993. Born on September 3, 1927, Greenberg was also the Director of Bear Stearns between 1985 and 2008, and saw the company collapse in March, 2008. He has also been a Director of Viacom Inc. since January 1, 2006.
Greenberg, Maurice (Hank):
Former Chairman and Chief Executive Officer of American International Group (AIG). He is regarded as one of the main figures in the growth and success of the insurance firm. Greenberg became CEO in 1968, after AIG’s founder Cornelius Vander Starr chose him as his successor. He lasted until 2005, when he resigned after being accused of fraud by former New York Attorney General, Elliot Spitzer. Currently, Greenberg is serving as Chairman and CEO for C.V. Starr and Company.
Greenberg was born on May 4, 1925 in New York City and grew up under his mother’s care after his father died when he was 6 years old. A World War II veteran, Greenberg attended the University of Miami after returning from battle. He earned a Bachelor of Arts degree in 1948 and went on to receive his LLB in 1950 from New York Law School. He then became involved in the Korean War, where he became a captain and was awarded the Bronze Star.
After the Korean War, he started his career in insurance working at the Continental Casualty Company. Then, in 1960, he joined AIG and, by 1962 he had become president of the American Home Assurance Company, a main subsidiary of AIG. He stayed in that position after Starr named him to become his successor.
Greenberg has been married for more than 50 years to his wife, Corinne. They have four adult children.
Greenspan, Alan:
Former Chairman of the Federal Reserve of the United States who served in the position from August 11, 1987 to January 31, 2006 -- the second-longest tenure in the position. Before his appointment as Chairman of the Fed, Greenspan held numerous positions in the corporate world in companies such as JP Morgan, Mobil Corporation, and The Pittston Company. Currently, Greenspan is a financial advisor for his company Greenspan Associates LLC.
Greenspan was born on March 6, 1926 in New York City. Raised by his mother and grandmother, he developed an interest in music at a very early age and enrolled at the Juilliard School for a year. He then went on to perform as a tenor, saxophone and clarinet player until he started attending New York University’s school of commerce in 1944. He earned a bachelor’s degree in Economics in 1948 and two years later received a Master of Arts degree also from NYU. After, Greenspan started graduate studies at Columbia University, but eventually dropped out choosing instead to work for the National Industrial Conference Board as an economic analyst.
In 1954, Greenspan created an economic consulting firm, Townsend-Greenspan and Company, with partner William Townsend. He acted as president and Chairman for the company from 1954 to 1974. It was during that time that Greenspan first became involved in politics after he started serving as Director of Domestic Policy for Richard Nixon in 1967. He went on to serve as Chairman of the President’s Council of Economic Advisers in 1974 and completed a Ph.D. from New York University in 1977.
Before his nomination for Chairman of the Federal Reserve on June 2, 1987, Greenspan served as Chairman of the National Commission on Social Security Reform. He officially started his tenure as Chairman of the Fed in August 11, 1987 and went on to serve five straight terms.
Alan Greenspan is married to NBC’s chief foreign affairs correspondent, Andrea Mitchell, since 1997 and they live in the Palisades, Washington.
Green Tree Financial:
Now named Green Tree Servicing, LLC, a privately held financial services organization headquartered in Saint Paul, Minnesota, this subprime lender’s name has been linked to prominent people and institutions but also many failed promises and dashed hopes. Its current website boasts it services the nation's largest portfolio of manufactured housing loans, more commonly called “mobile homes,” as well as home equity, home improvement and consumer installment loans. The firm also markets insurance products to customers on a nationwide basis, operating service centers in Tempe, Arizona and Rapid City, South Dakota, as well as a network of field offices.
In 1998, Green Tree Financial Corporation was acquired by insurance and finance giant Conseco for approximately $6 billion in stock, a price seen as an overpayment. Conseco looked for a buyer, but found no takers. In what some say was a foreshadowing of Enron and other celebrated collapses, Conseco’s acquisition binge saddled the once mighty insurance powerhouse with a huge debt load it could not unload. The mobile home market turned out to be much riskier than Conseco had realized. And shortly after the Green Tree deal, the company recruited General Electric wizard Gary Wendt as CEO, awarding him one of the most lucrative contracts in history, worth at least $75 million and guaranteeing him a retirement annuity of $1.5 million yearly. The company also made loans of nearly $550 million to its executives and directors.
Conseco became insolvent after it failed to make a $4.7 million payment and filed for Chapter 11 bankruptcy protection in December 2002, at that time, the third-largest corporate bankruptcy filing in history.
Two former finance executives at Conseco Inc. were fined and suspended by the Securities and Exchange Commission in July 2006 for their role in an accounting scandal dating back to 1999.
Rollin Dick, a former chief financial officer of Conseco’s Green Tree Financial, was ordered to pay a $110,000 civil penalty and barred for five years from acting as an officer or director of any public company.
James S. Adams, formerly chief accounting officer, treasurer, and senior vice-president, was ordered to pay a $90,000 civil penalty and barred for five years from acting as an officer or director of a public company.
In an amended complaint, the SEC alleged, among other things, that from March 1999 through February 2000, Conseco and Conseco Finance made false and misleading statements about their earnings in SEC filings and in public statements announcing their earnings, overstating their financial results by hundreds of millions of dollars. Investigators said their aim was to further inflate Conseco and Conseco Finance's earnings for these quarters in order to meet Wall Street's analysts' consensus earnings targets.
In 2003, Conseco Finance Corporation was sold to CFN Investment Holdings LLC, an investor group made up of Fortress Investment Group, which changed the company’s name back to Green Tree. The sale delivered a 150% gain on a $400 million investment.
With those impressive returns and continued hedge fund success, Fortress unveiled an Initial Public Offering in February 2007 that was wildly successful, making instant billionaires of CEO and co-founder, Wesley Edens and his four partners: Robert Kauffman, Randal Nardone, Peter Briger and Michael Novogratz. The stock soared from $18.50 to $31 the day it debuted. Even before the IPO, all four had contrived to rake off hundreds of millions in cash dividends, paid for by loans the firm took out in addition to the sale of a 15% stake in Fortress to Nomura Holdings Inc. The five reinvested their haul in Fortress' funds and operations.
But the market turned down, and Fortress' fortunes with it. Briger's and Novogratz's hedge fund operations, which together account for about 40% of Fortress' $27 billion in assets, suffered their first yearly losses ever in 2008, with returns down more than 20% for most funds. All told, since the end of 2007, hedge fund assets dropped by $5 billion, to $11.3 billion.
Fortress earned the worst kind of publicity in 2007 during the presidential campaign, when it was reported that its Green Tree subsidiary had foreclosed on 32 residents living in mobile homes because of the devastation of Hurricane Katrina. Fortress Investment Group had hired candidate John Edwards and he had invested in the company in the year prior to his run for the White House.
Edwards, who launched his campaign in a Katrina-stricken section of New Orleans, vowed in 2007 that he would raise $100,000 to set up a fund that, administered by the anti-poverty group ACORN, would see to it that the 32 affected homeowners would be made whole.
In June 2009, the Washington Post reported those homeowners never received the promised assistance. ACORN said the group had trouble finding the 32 homeowners. He said the group received $50,000, not $100,000, and that it went to the group's general mortgage-counseling program in New Orleans. Edwards said the $50,000 came from him.
One chapter in Green Tree’s history was a big win at the nation’s highest court: in December 2000, the United States Supreme Court ruled 5 to 4 in favor of Green Tree Financial against a loan customer. The court decided to okay the use of mandatory arbitration to settle mortgage financing disputes. Larketta Randolph financed a mobile home through Green Tree Financial Corp. Within the mortgage agreement was a requirement to maintain mortgage insurance, a term which Randolph said had not been disclosed. When she sued Green Tree, a lower court ruled that she had no right to sue because the mortgage agreement required that disputes must be settled through mandatory arbitration.
Randolph appealed the initial decision, arguing that it was unfair to require arbitration when the costs of this process were not set out in advance. The 11th U.S. Circuit Court of Appeals in Atlanta supported her view, and the case was subsequently appealed to the Supreme Court. In Green Tree v. Randolph, the Supreme Court ruled that "Randolph’ s agreement to arbitrate is not rendered unenforceable simply because it says nothing about arbitration costs."
GSE – Government Sponsored Enterprises:
Privately held corporations such as the Fannie Mae and Freddie Mac, Federal Farm Credit Bank and the Resolution Funding Corporation, created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. Members of these sectors include students, farmers and homeowners. GSEs carry the implicit backing of the U.S. Government, but they are not direct obligations of the U.S. Government. For this reason, these securities will offer a yield premium over Treasuries.
A measure of economic activity at its most broad perspective. Annualized quarterly percent changes in GDP reflect the growth rate of the nation’s total economic output. Inventory and net export swings in particular can produce significant volatility in GDP.
The broad components of GDP are: consumption, investment, net exports, government purchases, and inventories. Consumption is by far the largest component, totalling roughly 2/3rds of GDP. Data is released on the third or fourth week of the month at 8:30 ET for the prior quarter, with subsequent revisions released in the second and third months of the quarter.
Geithner, Timothy:
75th United States Treasury Secretary, serving under President Barack Obama’s administration. He was sworn in on January 26, 2009 with the task of allocating $350 billion of Wall Street bailout money. Geithner was previously the ninth President of the New York Federal Reserve Bank, where he had been serving since 2003.
Geithner was born on August 18, 1961 in Brooklyn, New York. Throughout his childhood he lived outside of the United States in places like Zimbabwe, Zambia, India, Thailand, China, and Japan. He completed high school in Thailand at the International School Bangkok. When he returned to the United States, he attended Dartmouth University where he earned a Bachelor of Arts degree in government and Asian studies in 1983. He then earned a master’s in International Economics and East Asian Studies in 1985 from John Hopkins School of Advanced International Studies.
Before joining the Department of Treasury, Secretary Geithner worked for three years at Kissinger and Associates in Washington, D.C. He then started working in the International Affairs division of the U.S. Treasury Department in 1988 and worked for five different Secretaries of the Treasury in different positions including Under Secretary for International Affairs from 1999 to 2001 and then as Director of the Policy Development and Review Department at the International Monetary Fund from 2001 to 2003.
Geithner has been married with Carole Sonnerfeld since 1985 and they have two children, Elise and Benjamin.
Gramlich, Edward (Ned):
Former Federal Reserve governor who unsuccessfully pushed Fed Chairman Alan Greenspan to crack down on irrational lending before the mortgage boom. Gramlich died of leukemia in 2007 at the Washington Home and Community Hospices. He was a Washington resident.
Dr. Gramlich served on the Board of Governors of the Federal Reserve System from 1997 to 2005.
He published "Subprime Mortgages: America's Latest Boom and Bust" on a topic that he had warned about for years. Much earlier, as chairman of the Neighborhood Reinvestment Corp., he had urged lawmakers to better protect consumers against predatory lending practices and toughen the regulation of mortgage lenders and banks. He continued that campaign as a Fed governor; in December 2000, he was among those who wanted to tighten regulation of high-cost home loans long before the current panic set in.
After resigning from the Fed in 2005, Dr. Gramlich became interim provost at the University of Michigan and then a senior fellow at the Urban Institute in Washington.
Edward Martin Gramlich was born in Rochester, N.Y., and graduated from Williams College in Massachusetts. He received a master's degree in 1962 and a doctorate in 1965, both from Yale University. His spent his early career in the research division at the Federal Reserve.
He had a long career at the University of Michigan, where he was a professor of economics and public policy from 1976 to 1997, dean of the School of Public Policy from 1995 to 1997, chairman of the economics department twice in the 1980s and director of the Institute of Public Policy Studies from 1979 to 1983 and 1991 to 1995.
He was also staff director for Major League Baseball's economic study commission in 1992. After the 1994 strike, he recommended that richer teams funnel some profits to poorer teams.
Dr. Gramlich was an acting director of the Congressional Budget Office in 1986 and 1987 and chairman of the Social Security advisory commission from 1994 to 1997. After the Sept. 11, 2001, attacks, he was chairman of the Air Transportation Stabilization Board, charged with administering $10 billion in government loan guarantees for financially strapped airlines.
Gramm, Phil:
Former Representative and U.S. Senator from Texas and Chairman of the Senate Banking Committee from 1995 through 2000. Time Magazine called Gramm Washington's most prominent and outspoken champion of financial deregulation. In 1999, Gramm led the fight to repeal the Depression-era Glass-Steagall Act, that established a separation between Wall Street and commercial banks. The next year, it was his idea to install a provision in the Commodity Futures Modernization Act that exempted over-the-counter derivatives like credit-default swaps from regulation by the Commodity Futures Trading Commission. CDSs took down AIG, which has cost the U.S. $150 billion.
Following his work on the 2008 campaign to elect John McCain, the Republican from Texas decided to step down from Capitol Hill in 2002 to work as an investment banker and lobbyist for the Swiss bank, UBS.
In 2001, he made a personal plea in the Senate for understanding of the need for subprime loans. “Some people look at subprime lending and see evil,” Gramm said. “I look at subprime lending and I see the American dream in action.” He cited how in 1950 his mother, a young nurse working double shifts to support her three children and her disabled husband, was able to take out a mortgage with relatively high interest rates that he likened to today’s subprime loans.
Gramm was a staunch ally of financial companies that objected to efforts by Washington to put the brakes on deceptive or predatory lending. He was the author of legislation that divided the responsibility for oversight of Wall Street while toppling any opposition to the increasing power of the brokerage business. A provision strongly supported by Gramm assured that there would be no regulation of derivatives, including credit swaps.
Over the years, his tell-it-like-it-is style have backfired politically: he has urged that food stamps be cut because “all our poor people are fat,” said it was hard for him “to feel sorry” for Social Security recipients and, as the economy soured last summer, called America “a nation of whiners.”
Gramm was born in Fort Benning, Muscogee County, Georgia on July 8, 1942.
Greenberg, Alan (Ace):
Former Chief Executive Officer of Bear Stearns. Between 1985 to 2001, Greenberg served as Chairman of the Board and was Bear Stearns CEO from 1978 to 1993. Born on September 3, 1927, Greenberg was also the Director of Bear Stearns between 1985 and 2008, and saw the company collapse in March, 2008. He has also been a Director of Viacom Inc. since January 1, 2006.
Greenberg, Maurice (Hank):
Former Chairman and Chief Executive Officer of American International Group (AIG). He is regarded as one of the main figures in the growth and success of the insurance firm. Greenberg became CEO in 1968, after AIG’s founder Cornelius Vander Starr chose him as his successor. He lasted until 2005, when he resigned after being accused of fraud by former New York Attorney General, Elliot Spitzer. Currently, Greenberg is serving as Chairman and CEO for C.V. Starr and Company.
Greenberg was born on May 4, 1925 in New York City and grew up under his mother’s care after his father died when he was 6 years old. A World War II veteran, Greenberg attended the University of Miami after returning from battle. He earned a Bachelor of Arts degree in 1948 and went on to receive his LLB in 1950 from New York Law School. He then became involved in the Korean War, where he became a captain and was awarded the Bronze Star.
After the Korean War, he started his career in insurance working at the Continental Casualty Company. Then, in 1960, he joined AIG and, by 1962 he had become president of the American Home Assurance Company, a main subsidiary of AIG. He stayed in that position after Starr named him to become his successor.
Greenberg has been married for more than 50 years to his wife, Corinne. They have four adult children.
Greenspan, Alan:
Former Chairman of the Federal Reserve of the United States who served in the position from August 11, 1987 to January 31, 2006 -- the second-longest tenure in the position. Before his appointment as Chairman of the Fed, Greenspan held numerous positions in the corporate world in companies such as JP Morgan, Mobil Corporation, and The Pittston Company. Currently, Greenspan is a financial advisor for his company Greenspan Associates LLC.
Greenspan was born on March 6, 1926 in New York City. Raised by his mother and grandmother, he developed an interest in music at a very early age and enrolled at the Juilliard School for a year. He then went on to perform as a tenor, saxophone and clarinet player until he started attending New York University’s school of commerce in 1944. He earned a bachelor’s degree in Economics in 1948 and two years later received a Master of Arts degree also from NYU. After, Greenspan started graduate studies at Columbia University, but eventually dropped out choosing instead to work for the National Industrial Conference Board as an economic analyst.
In 1954, Greenspan created an economic consulting firm, Townsend-Greenspan and Company, with partner William Townsend. He acted as president and Chairman for the company from 1954 to 1974. It was during that time that Greenspan first became involved in politics after he started serving as Director of Domestic Policy for Richard Nixon in 1967. He went on to serve as Chairman of the President’s Council of Economic Advisers in 1974 and completed a Ph.D. from New York University in 1977.
Before his nomination for Chairman of the Federal Reserve on June 2, 1987, Greenspan served as Chairman of the National Commission on Social Security Reform. He officially started his tenure as Chairman of the Fed in August 11, 1987 and went on to serve five straight terms.
Alan Greenspan is married to NBC’s chief foreign affairs correspondent, Andrea Mitchell, since 1997 and they live in the Palisades, Washington.
Green Tree Financial:
Now named Green Tree Servicing, LLC, a privately held financial services organization headquartered in Saint Paul, Minnesota, this subprime lender’s name has been linked to prominent people and institutions but also many failed promises and dashed hopes. Its current website boasts it services the nation's largest portfolio of manufactured housing loans, more commonly called “mobile homes,” as well as home equity, home improvement and consumer installment loans. The firm also markets insurance products to customers on a nationwide basis, operating service centers in Tempe, Arizona and Rapid City, South Dakota, as well as a network of field offices.
In 1998, Green Tree Financial Corporation was acquired by insurance and finance giant Conseco for approximately $6 billion in stock, a price seen as an overpayment. Conseco looked for a buyer, but found no takers. In what some say was a foreshadowing of Enron and other celebrated collapses, Conseco’s acquisition binge saddled the once mighty insurance powerhouse with a huge debt load it could not unload. The mobile home market turned out to be much riskier than Conseco had realized. And shortly after the Green Tree deal, the company recruited General Electric wizard Gary Wendt as CEO, awarding him one of the most lucrative contracts in history, worth at least $75 million and guaranteeing him a retirement annuity of $1.5 million yearly. The company also made loans of nearly $550 million to its executives and directors.
Conseco became insolvent after it failed to make a $4.7 million payment and filed for Chapter 11 bankruptcy protection in December 2002, at that time, the third-largest corporate bankruptcy filing in history.
Two former finance executives at Conseco Inc. were fined and suspended by the Securities and Exchange Commission in July 2006 for their role in an accounting scandal dating back to 1999.
Rollin Dick, a former chief financial officer of Conseco’s Green Tree Financial, was ordered to pay a $110,000 civil penalty and barred for five years from acting as an officer or director of any public company.
James S. Adams, formerly chief accounting officer, treasurer, and senior vice-president, was ordered to pay a $90,000 civil penalty and barred for five years from acting as an officer or director of a public company.
In an amended complaint, the SEC alleged, among other things, that from March 1999 through February 2000, Conseco and Conseco Finance made false and misleading statements about their earnings in SEC filings and in public statements announcing their earnings, overstating their financial results by hundreds of millions of dollars. Investigators said their aim was to further inflate Conseco and Conseco Finance's earnings for these quarters in order to meet Wall Street's analysts' consensus earnings targets.
In 2003, Conseco Finance Corporation was sold to CFN Investment Holdings LLC, an investor group made up of Fortress Investment Group, which changed the company’s name back to Green Tree. The sale delivered a 150% gain on a $400 million investment.
With those impressive returns and continued hedge fund success, Fortress unveiled an Initial Public Offering in February 2007 that was wildly successful, making instant billionaires of CEO and co-founder, Wesley Edens and his four partners: Robert Kauffman, Randal Nardone, Peter Briger and Michael Novogratz. The stock soared from $18.50 to $31 the day it debuted. Even before the IPO, all four had contrived to rake off hundreds of millions in cash dividends, paid for by loans the firm took out in addition to the sale of a 15% stake in Fortress to Nomura Holdings Inc. The five reinvested their haul in Fortress' funds and operations.
But the market turned down, and Fortress' fortunes with it. Briger's and Novogratz's hedge fund operations, which together account for about 40% of Fortress' $27 billion in assets, suffered their first yearly losses ever in 2008, with returns down more than 20% for most funds. All told, since the end of 2007, hedge fund assets dropped by $5 billion, to $11.3 billion.
Fortress earned the worst kind of publicity in 2007 during the presidential campaign, when it was reported that its Green Tree subsidiary had foreclosed on 32 residents living in mobile homes because of the devastation of Hurricane Katrina. Fortress Investment Group had hired candidate John Edwards and he had invested in the company in the year prior to his run for the White House.
Edwards, who launched his campaign in a Katrina-stricken section of New Orleans, vowed in 2007 that he would raise $100,000 to set up a fund that, administered by the anti-poverty group ACORN, would see to it that the 32 affected homeowners would be made whole.
In June 2009, the Washington Post reported those homeowners never received the promised assistance. ACORN said the group had trouble finding the 32 homeowners. He said the group received $50,000, not $100,000, and that it went to the group's general mortgage-counseling program in New Orleans. Edwards said the $50,000 came from him.
One chapter in Green Tree’s history was a big win at the nation’s highest court: in December 2000, the United States Supreme Court ruled 5 to 4 in favor of Green Tree Financial against a loan customer. The court decided to okay the use of mandatory arbitration to settle mortgage financing disputes. Larketta Randolph financed a mobile home through Green Tree Financial Corp. Within the mortgage agreement was a requirement to maintain mortgage insurance, a term which Randolph said had not been disclosed. When she sued Green Tree, a lower court ruled that she had no right to sue because the mortgage agreement required that disputes must be settled through mandatory arbitration.
Randolph appealed the initial decision, arguing that it was unfair to require arbitration when the costs of this process were not set out in advance. The 11th U.S. Circuit Court of Appeals in Atlanta supported her view, and the case was subsequently appealed to the Supreme Court. In Green Tree v. Randolph, the Supreme Court ruled that "Randolph’ s agreement to arbitrate is not rendered unenforceable simply because it says nothing about arbitration costs."
GSE – Government Sponsored Enterprises:
Privately held corporations such as the Fannie Mae and Freddie Mac, Federal Farm Credit Bank and the Resolution Funding Corporation, created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. Members of these sectors include students, farmers and homeowners. GSEs carry the implicit backing of the U.S. Government, but they are not direct obligations of the U.S. Government. For this reason, these securities will offer a yield premium over Treasuries.
