Boom Bust and Blame

Crisis A-Z


S&P – Standard and Poor’s:
Standard & Poor's traces its origins to the publication, in 1860, of Henry Varnum Poor's History of Railroads and Canals in the United States, a precursor of modern stock reporting and analysis.

S&P is one of the world’s leading providers of credit ratings, indices, investment research, risk evaluation and data. In 1906, the Standard Statistics Bureau was formed to provide previously unavailable financial information on U.S. companies. In 1916, Standard Statistics began to assign debt ratings to corporate bonds, with sovereign debt ratings following shortly thereafter. In 1941, one year after municipal bond ratings were introduced, Poor's Publishing and Standard Statistics merged to form the Standard & Poor's Corporation. The McGraw-Hill Companies, Inc. acquired Standard & Poor's in 1966.

In October 2008, a congressional hearing into the credit agencies’ role in the housing and banking crisis brought former executives of S&P to Capitol Hill, to explain why the agencies that assigned high ratings to the securities that backed subprime loans severely underestimated their risks. Rep. Henry Waxman of California, chairman of the House Committee on Oversight and Government Reform noted that S&P had downgraded more than two-thirds of its investment-grade ratings. Frank L. Raiter, who was the head of mortgage ratings at Standard & Poor’s for 10 years, characterized the failures at that company by saying simply: “Profits were running the show.” Devan Sharma of S&P testified that his firm “was not alone” in being surprised by the decline in housing markets. He cited 27 initiatives taken to ensure integrity, such as rotating analysts in their assignments, and the establishment of an ombudsman office.

Sadek, Daniel:
founder of Quick Loan Funding, the Costa Mesa, California-based company that wrote $3.8 billion in sub prime mortgages. Before opening his company in January 2002, Sadek used to be an auto salesman. Born in Lebanon and raised in Paris, Sadek moved to Orange County 20 years ago and has amassed a fortune in real estate.

From 2002 to 2007, Quick Loan Funding targeted people with bad credit and provided loans with high interest rates. In 2005, Quick Loan was reporting 29 percent of revenue or $37 million. Sadek used the money to live a very affluent life. He bought luxury cars, flew jets, and produced a movie, “Redline.”

The company eventually collapsed in 2007 and Sadek had his lending licenses revoked by the California Department of Corporations.

Schapiro, Mary:
29th Chairman of the SEC, the Securities and Exchange Commission. Schapiro was appointed by President Barack Obama on Jan. 20, 2009, and unanimously confirmed by the U.S. Senate. She is the first woman to serve as the agency’s permanent Chairman.

Schapiro previously served as a Commissioner at the SEC from December 1988 to October 1994. She was appointed by President Ronald Reagan, reappointed by President George H.W. Bush in 1989, and named Acting Chairman by President Bill Clinton in 1993. She left the SEC when President Clinton appointed her Chairman of the Commodity Futures Trading Commission, where she served until 1996.

Immediately prior to her new SEC appointment, Schapiro was CEO of the Financial Industry Regulatory Authority aka FINRA, the largest non-governmental regulator for all securities firms doing business with the U.S. public. She joined the organization in 1996 as President of NASD Regulation. In 2001, she appointed one of Bernie Madoff's sons, Mark, who was a senior employee at the family firm, to serve on the board of the National Adjudicatory Council - the division that reviews disciplinary decisions made by FINRA.

Schapiro was named Vice Chairman of NASD in 2002. In 2006, she was named NASD’s Chairman and CEO. The following year, she led the organization’s consolidation with NYSE Member Regulation to form FINRA.

In June 2009, Schapiro announced she is considering a crackdown on dark pools, or alternative trading systems, which are electronic trading venues where money managers trade large blocks of shares anonymously. Unlike exchanges, which are strictly regulated, dark pools have less stringent requirements and don't have to report monthly volumes or print bids and offers.

A 1977 graduate of Franklin and Marshall College in Lancaster, Pa., Schapiro earned a Juris Doctor degree with honors from George Washington University in 1980.

Schapiro and her husband Chas Cadwell live in Washington, D.C. They have two daughters and five grandchildren.

Schwartz, Alan:
former Chief Executive Officer of Bear Stearns Inc. He was the last CEO before the company was taken over by JP Morgan Chase in March 2008. Before his short tenure as CEO, Schwartz had been the Director of Bear Stearns since 1987. He was also a member of the firm’s Executive Committee, a position he occupied since 2001. Schwartz first joined the company in 1976. By 1985, he was the executive vice president and head of the Investment Banking Division.

A graduate from Duke University’s class of 1972, Schwartz decided to go back to the university as Chairman of the Board of Visitors at the Fuqua School of Business and as a member of the Duke University Board of Trustees.

Schwartz lives in Greenwich, Connecticut with his wife.

SEC – Securities and Exchange Commission:
As the Great Depression peaked, Congress passed the Securities Act of 1933. This law, together with the Securities Exchange Act of 1934, created the SEC. The agency was designed to restore investor confidence in the nation’s capital markets by providing investors and the markets with more reliable information and clear rules of honest dealing.

President Franklin Delano Roosevelt appointed Joseph P. Kennedy, President John F. Kennedy's father, to serve as the first Chairman of the SEC.

The SEC consists of five commissioners appointed by the President, with staggered five-year terms. One commissioner is designated by the President as Chairman of the Commission, which is the agency's chief executive. By law, no more than three of the Commissioners may belong to the same political party, ensuring non-partisanship. The agency's functional responsibilities are organized into four Divisions and 19 Offices, each of which is headquartered in Washington, DC. The Commission's approximately 3,500 staff are located in Washington and in 11 Regional Offices throughout the country.

The Commission interprets federal securities laws, issues new rules and amends existing rules, oversees the inspection of securities firms, brokers, investment advisers, and ratings agencies, oversees private regulatory organizations in the securities, accounting, and auditing fields, and coordinate U.S. securities regulation with federal, state, and foreign authorities.

In June 2009, Chairman Mary Schapiro announced she was considering a crackdown on dark pools, or alternative trading systems, which are electronic trading venues where money managers trade large blocks of shares anonymously. Unlike exchanges, which are strictly regulated, dark pools have less stringent requirements and don't have to report monthly volumes or print bids and offers.

the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming them into a security. A typical example of securitization is a mortgage-backed security aka MBS, which is a type of asset-backed security that is secured by a collection of mortgages.

September 11, 2001 aka 9/11:
Terrorists trained and funded by al-Qaeda hijacked four U.S. commercial jetliners and crashed them in a coordinated attack on the United States. Nearly 3,000 people lost their lives in the attacks, which toppled the World Trade Center in New York City and smashed the secure outer rims of the Pentagon in Arlington, Virginia. A fourth plane crashed in a field in Shanksville, Pennsylvania, after heroic efforts by passengers to retake the plane from their hijackers. In the years since the attacks, the death toll has grown as workers who searched the wreckage of the World Trade Center have become ill and died from exposure to toxic materials in the pit.

An immediate result of the attacks was the grounding of every single non-military plane across the continental U.S. and a nationwide period of reflection, grief and patriotism. The perpetrator of the attacks was identified by President George W. Bush as Osama bin Laden, a Saudi exile who had found a haven in the Taliban-ruled mountainous countryside of Afghanistan. The U.S. launched a war in Afghanistan to root out bin Laden and unseat the Taliban, followed by a war in Iraq, although the Bush administration never proved any link to the dictatorship of Saddam Hussein and the September 11th attacks.

The long-term impact of 9/11 is still felt at U.S. airports and transit centers with increased security, the creation of the Department of Homeland Security and laws and actions designed to protect Americans from terrorists.

Sherma, Deven:
President of Standard & Poor’s since August 2007. Before being appointed as president, Sharma served as Executive Vice President. He joined the company in January 2002. Prior to that, Sharma worked for 14 years at Booz Allen Hamilton, a global management consulting company.

Sharman studied in India at the Birla Institute of Technology in Ranchi before moving to the United States to study at the University of Wisconsin, where he earned a Master’s Degree. He went on to obtain a Doctoral degree in Business Management from Ohio State University.

Shiller, Robert:
Yale professor and co-developer of the Case-Shiller Index, a value-based measurement of the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. These indices use the repeat sales pricing technique to measure housing markets. Developed in tandem with Karl Case, this methodology collects data on single-family home re-sales, capturing re-sold sale prices to form sale pairs. This index family consists of 20 regional indices and two composite indices as aggregates of the regions. Credited with perhaps the most famous of Alan Greenspan’s quotations, his 1996 phrase “irrational exuberance,” which was first suggested to Greenspan by Shiller, to describe what could possibly be the cause of stock market frenzy.

a trader who sells a security that the seller does not own. Any sale that is completed by the delivery of a security borrowed by the seller is called a short sale. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short. They make money so long as the stock goes down in price.

Snow, John:
John W. Snow served as the 73rd Secretary of the Treasury under President George W. Bush and is the Chairman of Cerberus Capital. He was sworn into office on February 3, 2003. Snow succeeded Paul O’Neill and worked for three years until his resignation on June 29, 2006. He was then succeeded by Henry Paulson, CEO of Goldman Sachs.

Before serving as Secretary of the Treasury, Snow was Chairman and Chief Executive Officer of CSX Corporation, where he worked for 20 years.

Snow’s previous public service included having served at the Department of Transportation as Administrator of the National Highway Traffic Safety Administration, Deputy Under Secretary, Assistant Secretary for the Governmental Affairs, and Deputy Assistant Secretary for Policy, Plans and International Affairs. Snow served as Chairman of the Business Roundtable,. During his tenure as Chairman from 1994 through 1996, he played a major role in supporting passage of the North American Free Trade Agreement and working on the deficit reduction agreement.

Snow was also a former co-chairman of the Conference Board's Blue-Ribbon Commission on Public Trust and Private Enterprise. He also served as Co-Chairman of the National Commission on Financial Institution Reform, Recovery and Enforcement in 1992 that made recommendations following the Savings and Loan crisis.

Snow was born on August 2, 1939 in Toledo, Ohio and received a Ph.D. in Economics from the University of Virginia in 1962. Snow graduated with a law degree from the George Washington University in 1967 and then taught economics at the University of Maryland and University of Virginia, as well as law at George Washington University.

SWF aka Sovereign Wealth Funds:
Money pooled from a country's reserves, set aside for investment purposes to benefit the economy and the public. The funding for a sovereign wealth fund comes from central bank reserves. The types of acceptable investments included in each SWF vary from country to country; countries with liquidity concerns limit investments to only very liquid public debt instruments. The estimated value of all SWFs in the world is estimated to be $2.5 trillion.

Stimulus Bill – aka H.R. 5140 - Economic Stimulus Act of 2008:
A bill that became law when it was signed by President George W. Bush on February 13, 2008. Public Law No: 110-185 provided economic stimulus through recovery rebates to individuals, incentives for business investment, and an increase in conforming and FHA loan limits.

The law allowed a tax credit in 2008 of an amount equal to an individual's net income tax liability or $600 or $1,200 for a joint return, whichever was less. It also allowed at least a $300 tax credit or a $600 credit for a joint return for taxpayers who have a qualified income of at least $3,000. The law defined "qualified income" as earned income, social security benefits for seniors and tier 1 railroad retirees, and certain veterans' compensations and pensions. The law granted a $300 tax credit per child. Eligibility to undocumented immigrants was denied. The law appropriated an additional $266.31 million for the Department of Treasury, to remain available until September 30, 2009. Congress increased the limits on the maximum original principal obligation of mortgages for Fannie Mae and Freddie Mac, and for the Federal Housing Administration.

Subprime Mortgage:

a type of loan granted to individuals with poor credit scores, often below 600. As a result of their deficient credit ratings, these borrowers would not typically be able to qualify for conventional mortgages. Subprime borrowers present a higher risk for lenders because of the greater chance they will not be able to keep making payments, and so many subprime mortgages charge interest rates above the prime lending rate in order to compensate for the additional risk they assumed.

The most common subprime mortgage is the adjustable rate mortgage aka ARM, which initially charges a fixed interest rate, and then converts to a floating rate.

Lenders aplenty granted these highly risky loans from 2004 to 2006 as a result of lower interest rates and high capital liquidity. But once the rate of subprime mortgage foreclosures skyrocketed, many lenders experienced extreme financial difficulties, and even bankruptcy.

Sullivan, Martin:
former Chief Executive Officer for American International Group (AIG). He replaced Hank Greenberg in 2005 and lasted as CEO until June 15, 2008. Before taking over as CEO, Sullivan had been serving as AIG’s Vice Chairman and co-COO since 2002.

Sullivan was born in Essex, England in 1955 and first joined AIG in 1971 through AIU’s finance department. AIU is a British company belonging to AIG. There, Sullivan climbed the corporate ladder until he became President of AIU’s UK/Ireland Division and Managing Director of AIG Europe in 1993. He went on to become Senior Vice President, Foreign General Insurance in 1996, and was later elected to the Board of AIG in 2002.

After an accounting scandal that affected then-CEO Hank Greenberg, Sullivan was picked to take over in 2005. Sullivan was later replaced by Robert Willumstad as the global financial crisis unfolded in 2008.

Sullivan is married and has two daughters.

Syron, Richard:
former Chief Executive Officer and Chairman of Freddie Mac. He held the position from 2003 until September 8, 2008, when the Federal Housing Finance Agency took over Freddie Mac and terminated his contract. Before joining Freddie Mac, Syron was the Chairman and CEO of Thermo Electron Corp.

Syron attended Boston University, where he earned a Bachelors degree and went on to obtain a Master’s and a Doctorate in Economics from Tufts University. He started working in at the Treasury Department and eventually became the assistant of Paul Volcker, who was the Chairman of the Federal Reserve Board. He worked with him until 1982 and went on to hold a senior position at the Federal Reserve of Boston, where he stayed until 1994. He then became CEO of the American Stock Exchange and stayed in that post for the following five years. In June 1999, he became President and CEO of Thermo Electron and its Chairman in January 2000. He switched to Freddie Mac three years later.