The villains behind the financial crisis

Dick Fuld © Getty images

Ten years on, perhaps the most surprising thing about the financial crisis is the fact that almost everyone involved got away scot-free. Below, Jane Lewis looks at five of the main culprits – and where they are now.

Dick Fuld

“Hi, I’m Dick Fuld, the most hated man in America,” was how the boss of Lehman Brothers introduced himself shortly after the crisis. As Vanity Fair noted in 2015, Fuld, now 72, has spent the past decade blaming everyone but himself for Lehman’s demise, and seething at the government’s refusal to stage a rescue.

Known as “The Gorilla” during his 14-year reign, New York-born Fuld (pictured above) joined the bank in 1969 after a brief career as an air force pilot ended when he got into a fight with an officer. Over time he moved Lehman’s “fixed income” backbone aggressively into mortgage-backed securities. For a while, it was a bonanza: Fuld himself made $500m in the eight years before the bust.

Fuld disappeared from public view shortly after the bankruptcy, but has since made a quiet return to Wall Street as head of wealth manager Matrix Private Capital. In his foyer hangs a framed print with the message: “That Was Then This Is Now.” But he is still convinced posterity will exonerate him.

Fred Goodwin © Getty images

Fred Goodwin

On 7 October 2008, the British taxpayer bailed out RBS to the tune of £45bn, much of it now written off. It has taken the bank over a decade to emerge from government ownership and the long shadow cast by its last hubristic CEO, Fred Goodwin.

Goodwin’s powerbase was built on the 2000 acquisition and integration of NatWest. The excesses of his regime were laid bare in Ian Fraser’s book Shredded, which depicted him as a sociopathic bully, whose self-delusion reached its apogee with RBS’s fatal 2007 takeover of the Dutch bank ABN Amro.

Now divorced, Goodwin, 60, still lives in Edinburgh, having hung onto his multi-million-pound RBS bonuses and his £350,000-a-year pension, writes the Daily Mail. His friends say his notoriety – and the stripping of his knighthood in 2012 – is punishment enough. But to critics, he will always personify the astonishing fact that no banker ever faced real public scrutiny, let alone punishment, for the 2008 financial calamity.

Maurice Greenberg © Getty images

Maurice Greenberg

The driving force behind AIG, “Hank” Greenberg wasn’t at the helm of the insurer when it was forced into a $185bn bailout, days after Lehman fell. He had been forced to quit three years earlier, following an accounting investigation instigated by the US attorney general. “Greenberg has long contended AIG would never have collapsed” if he’d been in charge, says The Economist. Yet critics point out that AIG built the “massive derivatives position” that hastened its destruction long before he left.

A D-Day landings veteran, “known for ruling AIG with an iron fist”, Greenberg became CEO in 1967 and “did deal after deal, paid for with AIG’s fast-rising stock”, says the FT. Now 93, he has spent much of the past decade building up AIG offshoot CV Starr & Co, while waging near-constant legal battles against both AIG (in one suit he demanded the return of a Persian rug) and the government. Even his friends say it’s hard to distinguish between “a principled stance” and “sheer bloodymindedness”.

Angelo Mozilo © Getty images

Angelo Mozilo

Back in the early Noughties, Angelo Mozilo, butcher’s son and founder of Countrywide, “was regarded with awe in the business world”, says The New Yorker, as the main supplier of mortgages for Wall Street banks to parcel up. But as 2007 progressed, subprime defaults escalated and the bankers fled. In August, the firm’s short-term funding was cut off; soon Mozilo had to choose between bankruptcy or a $4bn sale to Bank of America. 

Mozilo, who earned nearly $400m between 2002 and 2006, was vilified for running America’s largest mortgage lender at the bubble’s height. He has remained unrepentant, claiming to have provided home loans to the disenfranchised. Yet any sympathy for that view evaporated when it emerged he had cashed in tens of millions of dollars’ worth of stock options during the downturn.

Mozilo has largely escaped punishment. In 2016 the US Department of Justice dropped its investigation into mortgage fraud. He now lives quietly in a beach house in California.

Alan Greenspan © Getty images

Alan Greenspan: the arch-villain

After Lehman’s collapse, the former Federal Reserve chairman, Alan Greenspan, testified before Congress that he had “found a flaw” in the pro-market ideology that self-policing “efficient markets” would protect society from the financial system’s excesses. By then, of course, the damage had already been done. But Greenspan’s reputation took a big dive downwards, says Sebastian Mallaby in The Washington Post. Once hailed as “the Maestro”, he was “painted as the high priest” of a “laissez-fairy-tale delusion”.

Blaming the crisis on the supposed naivete of policymakers such as Greenspan is “unfair and unfounded”, argues Mallaby. It was “political constraints not intellectual failures” that prevented policymakers from curbing the housing mania that preceded the crash. “Nobody remembers that in 2001 the Greenspan Fed banned the most abusive subprime mortgages, for the good reason that the ban was circumvented.” Why? Because of the “capture of Congress” by financial lobbies.

Greenspan can’t be let off the hook that easily, says Steve Hanke in Forbes. Indeed, you might say he’s the arch-villain of the piece because his policies, dating from his arrival at the Fed in 1987, “not only created a classic aggregate-demand bubble, but also facilitated the spawning of many market-specific bubbles in the housing, equity and commodity markets”.

During his reign, the Fed “over-reacted to both real and perceived crises”, by first turning on the “money pumps” (in response to both the 1987 market crash and the Asian crisis of the late 1990s) and then, “having gone too far”, lurching back too swiftly in the opposite direction. That helped produce “a mild recession” in 1991, and a “full-scale slump” following the bursting of the dotcom bubble in 2001. His last great coup was to slash interest rates to a then-record low of 1% in July 2003 on the back of a “false deflation scare”. This easing produced “the mother of all liquidity cycles” – and laid the foundations for “one bubble too many” to burst in 2008.

The growing perception that the Fed would always ride to the rescue with easy-money policies if anything went wrong was a massive incentive for banks to take risks; the Fed essentially created a casino where the house would cover your losses. After leaving the Fed in 2006, Greenspan, now 92, founded a private economic consulting group that has advised banks, hedge funds and government agencies. But he leaves a deeply troubled legacy.