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Everybody says dumb things. But this past year has seen more than its share of spectacularly bad calls from CEOs, government officials and market pros. Much of the blame goes to the financial crisis, which escalated so quickly that some statements were out of date almost as soon as they were made. Still, even the so-called experts made plenty of boneheaded comments. Here’s a look at some of them over the past year.
"We had $17 billion of cash" at the end of last year, and "that liquidity cushion has been virtually unchanged."
—Bear Stearns CEO Alan Schwartz telling CNBC in a March 12, 2008, interview that he is not aware of any liquidity problems at the firm.
Two days later, Bear Stearns, the fifth largest U.S. investment bank, was forced to seek emergency funds from the Federal Reserve and JPMorgan Chase. The firm was taken over by JPMorgan that weekend for $2 a share, which was later raised to $10.
—Lehman Brothers CFO Erin Callan responding on March 18, 2008, to the question as to whether the firm would be the next to go out of business.
Callan was ousted from her job in June. In September, Lehman Brothers filed for Chapter 11 bankruptcy protection.
"I expect there will be some failures” of smaller banks. “Among the largest banks, the capital ratios remain good and I don't anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system.''
—Federal Reserve Chairman Ben Bernanke in February 2008.
IndyMac Bank failed in July 2008, with $32 billion in assets. Washington Mutual failed in September 2008, the largest bank failure in history with $307 billion in assets. Wachovia was sold to Wells Fargo in October 2008, amid concerns about its financial health, and Citigroup still scrambles to raise cash from both the government and private sources.
"If you put it in a baseball analogy, and you look at the subprime problem in the U.S., you would say we're in the eighth inning or maybe the top of the ninth."
—Morgan Stanley CEO John Mack in April 2008 on whether the subprime crisis was coming to an end.
"We're probably in the third or fourth quarter."
—Goldman Sachs CEO Lloyd Blankfein, in the same month on the same topic.
In September, AIG and Lehman Brothers collapsed under the weight of subprime debt, escalating the financial crisis and triggering a massive selloff in global stock markets. The government agreed to set up a $700 billion bailout fund for toxic debt. That same month, Morgan Stanley and Goldman Sachs applied to become bank-holding companies in order to help raise capital.
"Lehman is a takeover target…I upgrade to buy".
—Dick Bove, banking analyst at Ladenburg Thalmann on Aug. 21, 2008.
Within three weeks, Lehman Brothers filed for bankruptcy. The stock went from $14 a share to $0.
"Fannie and Freddie are very solid institutions. They have more-than-adequate capital. They have access to capital markets."
—Chris Dodd, chairman of the Senate Banking Committee, July 14, 2008.
In September, the U.S. government seized control of both Fannie Mae and Freddie Mac, concerned about their mounting losses.
"The fundamentals of our economy are strong."
—GOP Presidential Candidate John McCain on Sept. 15, 2008.
The economic crisis worsened throughout the fall as the U.S. sank into the deepest recession in three decades. McCain lost the election to Barack Obama, primarily on economic issues.
"The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy. This troubled asset relief program must be properly designed and sufficiently large to have maximum impact."
—On Sept. 19, 2008, Treasury Secretary Henry Paulson calls for the creation of the $700 billion TARP bailout plan.
Two months later on Nov. 14, Paulson tells CNBC he's dropping the idea of buying illiquid assets: "It was clear that we were facing a much more severe situation than we had envisioned...." Instead, he says the best course is for the government to inject capital into banks, an option he previously rejected but Congress insisted be part of the bailout plan.
"In today's regulatory environment, it's virtually impossible to violate rules...it's impossible for a violation to go undetected, and certainly not for a considerable period of time."
—Well-known investment guru Bernard Madoff, Oct. 27, 2007.
Madoff was arrested in December, 2008 for allegedly running a $50 billion Ponzi scheme, the biggest financial scam in history. Madoff allegedly misled hundreds of investors around the world for years.