Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present

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A vivid history of the economics of greed told through the stories of those major figures primarily responsible.
Age of Greed shows how the single-minded and selfish pursuit of immense personal wealth has been on the rise in the United States over the last forty years. Economic journalist Jeff Madrick tells this story through incisive profiles of the individuals responsible for this dramatic shift in our country’s fortunes, from the ...

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Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present

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A vivid history of the economics of greed told through the stories of those major figures primarily responsible.
Age of Greed shows how the single-minded and selfish pursuit of immense personal wealth has been on the rise in the United States over the last forty years. Economic journalist Jeff Madrick tells this story through incisive profiles of the individuals responsible for this dramatic shift in our country’s fortunes, from the architects of the free-market economic philosophy (such as Milton Friedman and Alan Greenspan) to the politicians and businessmen (including Nixon, Reagan, Boesky, and Soros) who put it into practice. Their stories detail how a movement initially conceived as a moral battle for freedom instead brought about some of our nation's most pressing economic problems, including the intense economic inequity and instability America suffers from today. This is an indispensible guide to understanding the 1 percent.

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Editorial Reviews

From Barnes & Noble

If greed is good, America is great. In 2009, the richest five percent of our country owned 63.5% of the nation's wealth, almost double what it was in the mid-1970s. How this radical shift occurred and why it is still continuing is the subject of this new book by economics columnist Jeff Madrick (The End of Affluence). This major financial history tells its story through the movers and shakers of major players, including Ronald Reagan, Richard Nixon, Jimmy Carter, Sam Walton, Ivan Boesky, Walter Winston, Jack Welch, Michael Milken, Milton Friedman, and Alan Greenspan. Madrick's cogent reporting and insightful commentary make The Age of Greed a must-read for those who have enjoyed books like 13 Bankers and The Big Short.

From the Publisher
A Washington Post Notable Nonfiction Book

“A fascinating and deeply disturbing tale of hypocrisy, corruption, and insatiable greed. . . . A much-needed reminder of just how we got into the mess we’re in.”
The New York Review of Books 

“Compelling . . . Important . . . Age of Greed abounds with powerful men, ugly fights, infamous scandals, twists and turns, and, true to the book’s title, lots of shameless cupidity.”
The Washington Post

“Richly detailed and often riveting. . . Clear and compelling. . . A must-read.”
The Huffington Post

“Bold. . . Readers will find worthwhile stories in these pages.”
The New York Times Book Review  

“The timing could not be better for a book like Age of Greed . . . A solid review of half a century of economic history . . . A commendable compendium.”
San Francisco Chronicle
“Excellent . . . Straightforward . . . We owe Madrick thanks for what he has done.”
The American Prospect
“A compelling and worthy read. Madrick is an able journalist; an excellent and cogent storyteller in a field that often defies the straightforward plot or easy explanation—economics.”

“Persuasive . . . Vivid . . . As a comprehensive survey of the way institutions work together to create wealth for a few individuals and destroy it for a mass of others, Age of Greed deserves attention.”
The Columbus Dispatch

“Madrick pulls no punches . . . Readers who want to understand where we are, how we got here, and some possible outcomes will repay their investment in reading time if they pick up this new volume.”
Free Lance-Star
Age of Greed is lucid and compelling because of its character-driven nature.”
Dallas Morning News
“Meticulous . . . Madrick makes a good case—and financial news junkies will savor it.”
Boulder Daily Camera
 “Jeff Madrick has written one of those rare, wonderful books that allow us to understand a huge and important historical development that we may not have realized was a coherent and coordinated series of events. Madrick’s account of Alan Greenspan’s ideologically-driven mistakes alone is worth the price of admission, but it is but one course in a feast of wonderful reporting and writing. If you want to know what has happened to your country, read this book.”
—Robert G. Kaiser, author of So Damn Much Money: The Triumph of Lobbying and the Corrosion of American Government
“Jeff Madrick’s devastating biography of greed is rife with carefully documented cautionary tales of the rich, greedy and unregulated, which collectively constitute the definitive answer to Milton Friedmanesque laissez faire economics.”
—Victor Navasky, author of Kennedy Justice
“In Jeff Madrick’s important new book, Age of Greed, we are introduced to some of the best and brightest moneychangers in the murky world of high finance.”
—Gay Talese, author of A Writer's Life
“Madrick tells us who did what and how they did it—the ideologues, demagogues, corporate titans, and crooks. A wonderfully insightful but deeply troubling account of the movers and shakers who toppled America.”
—Robert B. Reich, author of Aftershock: The Next Economy and America’s Future
“This is a book that bears reading by everyone with an interest in the American economy and the American future.”
—David Nasaw, author of The Chief: The Life of William Randolph Hearst
“Madrick provides a powerful story of the damage done to our nation by hubris, delusions and lust for money.”
—David Cay Johnston, author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)

David Greenberg
…compelling…Ambitious in its scope and frequently persuasive in its arguments, Age of Greed abounds with powerful men, ugly fights, infamous scandals, twists and turns, and, true to the book's title, lots of shameless cupidity…Madrick is no polemicist or ideologue. He writes in restrained, dispassionate prose, letting out only hints of the outrage rumbling below.
—The Washington Post
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Product Details

  • ISBN-13: 9781400075669
  • Publisher: Knopf Doubleday Publishing Group
  • Publication date: 6/12/2012
  • Pages: 480
  • Sales rank: 419,531
  • Product dimensions: 5.26 (w) x 7.78 (h) x 0.96 (d)

Meet the Author

Jeff Madrick is a regular contributor to The New York Review of Books, a former economics columnist for The New York Times, and editor of Challenge magazine. He is an adjunct professor of humanities at The Cooper Union, and senior fellow at the Roosevelt Institute and at the Schwartz Center for Economic Policy Analysis, The New School. His previous books include The End of Affluence and Taking America, and he has written for The Washington Post, the Los Angeles Times, Institutional Investor, The Nation, and The American Prospect.

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Read an Excerpt

Chapter 1

Walter Wriston

Regulatory Revolt

As Ronald Reagan led his rebellion against government, a quieter one was born in the business community. Its leader was Walter Wriston, a tall, slouched, deeply intelligent and taciturn man with unusual ambition, little regard for tradition, and a highly conservative political ideology that he had inherited from his father. Wriston wanted to transform banking into a business like any other, capable of increasing profits as rapidly as the most admired companies in the nation. The goal would require undoing the federal financial regulations established during the Great Depression.

Walter Wriston was born in 1919 in Middletown, Connecticut, his father, Henry, an eminent history professor at the town's prestigious university, Wesleyan. When Walter was five, his father was named president of Lawrence College in Appleton, Wisconsin, where Walter grew up until he entered Wesleyan in 1937. Despite the Depression, the Wriston family remained comfortable during Walter's adolescence.

Henry Wriston's reputation rose in these years and he was named president of Brown University in 1936, from which perch he was able to preach against FDR and the New Deal, convinced that the programs would lead to a planned economy. His heroes included Adam Smith, who, despite the complexities in thinking of the Scottish philosopher, he saw largely as the father of the invisible hand and laissez-faire economic philosophy. He also deeply admired the British philosopher Herbert Spencer, who a century after Smith had become popular for what was later called social Darwinism. Spencer, who beginning in the 1850s was philosophically opposed to government intervention in markets, was the popular author of the notion that human poverty was natural because the "survival of the fittest" (a phrase Charles Darwin borrowed from him) was a law of nature.

At Wesleyan, Walter Wriston studied history, his father's field. He entered the Fletcher School at Tufts University, one of the nation's most prestigious schools of diplomacy, just outside Boston, to pursue a graduate degree in foreign affairs. Wriston was married to a coed he had met at Connecticut College by the time he graduated in 1942. He was drafted into the Navy in 1944 and sent overseas but did not see combat. He returned to the United States in 1946, one of hundreds of thousands of other soldiers wondering what to do with their lives-and whether the economy would slide back into depression.

Wriston said he did not want an academic career like his father's. "I knew I wouldn't do that because you'd have nothing but comparisons," he said. "My sister's an academic and a very good one. But I didn't want any part of that." Hostility toward his father surfaced when Henry remarried in 1947, only a year after his mother's death, at which point Walter stopped speaking to him.

Wriston at first had "very little" interest in business. It was his mother's doctor who suggested he go into banking. "If I stayed up all night, I couldn't think of anything more stupid to do," he said, but the bank "hadn't hired anyone new since 1933," and it badly needed recruits. Moreover, it was willing to pay salaries comparable to those in industry. So in 1946 he took a temporary job in New York with National City Bank, at that time a diminished version of its pre- Depression glory, when it had been the largest and most visible bank in the nation. He fully expected to leave in a year and return to his planned career in diplomacy.

When Wriston joined National City, banking was a stodgy and unimaginative business. Regulations had been imposed in the 1930s to prevent the excesses in finance that had buffeted America time and again. Overaggressive banks had been a serious national concern throughout the nineteenth and early twentieth centuries.

To attract savers, deposit-taking banks historically had to make good the promise to pay back a depositor's money at a moment's notice, which in the 1800s usually meant maintaining specie (gold and silver coins) against deposits and investing those deposits cautiously. The essence of banking was dependability. The banks redeemed deposits in specie when requested and some created paper currency they also would redeem in specie.

During good economics times ever more confident banks offered higher interest rates to attract depositors and made riskier loans to farmers and businesses at higher interest rates. They kept less in specie as reserves and paid back less in specie for their paper currencies, and the system of credit expanded rapidly to support speculation in agriculture and livestock, land itself, and countless new businesses. Regularly, speculative bubbles were created, then burst, and financial panic turned into severe recession. Banks went out of business by the hundreds, depositors lost money, and debtors went bankrupt-and, in the early years of the century, often to prison.

In its early years, the United States had had a national bank, the principal legacy of Alexander Hamilton (there had also been an earlier, informal national bank just after the Revolution), to restrain overspeculation, but it also tended to restrict lending to elite businesses and urban financiers. The bank's original charter was renewed under President James Madison in 1816 for another twenty years. But in 1836, President Andrew Jackson's veto ended the reign of the Second Bank of the United States. Jackson flamboyantly sided with the farmers and populists who believed the big Eastern bankers were corrupt and habitually made credit too scarce or expensive for them.

Jackson's anti-bank policies have been widely criticized by business historians, but the farmers were correct about often inadequate credit from the national bank for smaller borrowers. Looser banking standards did contribute to economic growth and the democratization of credit in these years. But a balance between adequate credit and overspeculation could not be reached. Big centralized banks favored elites, and overspeculation at smaller banks almost invariably had painful consequences, contributing to the uneven if occasionally exuberant growth of the nineteenth century.

In the wake of a devastating panic in 1907, the U.S. Federal Reserve was created in 1914 to avoid such unstable conditions. But the bankers who manned the new young central bank had neither the experience nor the will to do the job properly, and lacked some of the necessary authority. Flagrant abuse in the financial community was unchecked in the 1920s and the roaring stock market, supported by highly indebted speculators, burst in 1929. The real estate market, also supported by mammoth levels of debt, collapsed as well. By then, banks were not only making business and consumer loans in excess, but also selling stocks and bonds, running investment management companies, and creating new and highly speculative investment vehicles for individuals-as well as promoting their own stock prices.

Such a credit boom and bust alone may not have resulted in the Depression but it contributed substantially to its severity. Thousands of banks failed in the early 1930s as savers withdrew their funds, fearing that the banks had no assets with which to pay them-a classic bank run. By 1932, one fourth of all U.S. banks had failed, and state after state imposed a moratorium on banking. Franklin Roosevelt, on taking office as president in 1933, declared a bank holiday, closing the deposit and withdrawal windows around the country temporarily. Roosevelt resisted pleas to nationalize the banks, but he and his advisers established comprehensive new regulations. Under Roosevelt, the federal government created the Federal Deposit In-

surance Corporation (FDIC) to insure savers' deposits in case of bank failure, giving the government further oversight of member banks. The federal government also restrained overly risky investments with insured deposits by establishing limits on the interest banks could pay savers to attract their money (Regulation Q of the new law), and eliminating interest entirely on checking accounts. The fear was that competition for deposits would drive rates up and encourage banks to make more risky investments to earn higher returns.

FDR and members of Congress were determined to end the conflicts of interest of the financial institutions. If a commercial bank owned equity in a company, it had incentives to lend money to the company, disregarding the risk of the loans. There were natural incentives to provide biased information to stockbroker clients about companies in which the banks had investments or to whom they made loans. The Glass- Steagall Act of 1933, named after its congressional sponsors, Senator Carter Glass and Congressman Henry Bascom Steagall, legally separated commercial banks, which collected deposits and lent money, from investment banks and stockbrokers, who could own parts of companies, raise equity for clients, and advise investors on what investments to make. (The establishment of the FDIC and Regulation Q were parts of the legislation as well.)

Wriston's bank, National City, was, before the Depression, the largest bank in the world, and was an aggressive leader in many of the interdependent businesses that eventually caused so much trouble, including stockbrokerage. Its high-profile chairman, Charles Mitchell, was forced to resign in 1933 in the depths of the banking panic, but the bank survived. Under Glass-Steagall, National City, like other major banks, was required to divest itself of its brokerage and underwriting arms, and do business only as a commercial bank, accepting deposits and making conservative purchases of government securities or cautious loans to business. The prestigious J.P. Morgan bank, run by the most influential financier of the age, was also separated from its investment banking arm, which took the name Morgan Stanley. The investment banks and brokerage firms were now regulated by the newly created Securities and Exchange Commission, whose first chairman was Joseph P. Kennedy, an aggressive financier himself and the father of a future president. The principal demand of the SEC was disclosure of far more information by investment banks about the firms for which they raised money, and other investor protections. America thus entered the post-World War II era with New Deal programs and state government regulations to control interest rates on consumer loans, which in sum regulated banking and the financial system far more thoroughly than at any time in its history.

The New Deal philosophically infuriated Wriston as much as it had his father. When he joined National City (it changed its name to the First National City Bank of New York in 1955), state law restricted it to operate branches in only the five boroughs of New York City. Regulation Q, with its limits on interest rates on savings and checking accounts, particularly frustrated Wriston. Since access to new funds was restricted, its lending policies were restrained as a result. Wriston felt the company he worked for could never thrive under the weight of such regulation, and might not even survive.

Wriston's effort to undo one regulation after another became a personal crusade, driven less perhaps by the desire for profit than by an almost inchoate anger against government intrusion. The desire to have one's way can rise to the level of greed, too. "There was something emotional about his drive," said Albert Wojnilower, a leading Wall Street economist of the time. "I felt Wriston wanted simply to dismantle the financial system as we knew it."

Wriston's early career was characterized by clever innovation, a useful willingness to discard tradition for its own sake, and considerable intelligence. He made small but rapid advances up the ranks at National City, soon becoming a lending officer. A year into the job, he was assigned Ari-stotle Onassis as a client. Onassis, in his early forties, was already a wealthy and glamorous Greek shipping entrepreneur, a conspicuous member of the new international jet set, who had been borrowing at National City for years. After World War II, he saw an opportunity to expand his operations. A postwar boom in energy demand, and a surge in oil discovery and production in the Middle East, would mean the world was short of ships to transport adequate petroleum supplies efficiently. Onassis needed substantial financing to acquire more tankers, and eventually the enormous supertankers that came to dominate trade on the seas. When Wriston's superiors passed Onassis on to him, Wriston was only twenty-eight.

In the past, the cautious banks and insurance companies had made collateralized shipping loans based only on the asset value-in other words, the resale value-of the ship itself. But just after World War II, a steep recession made the ships almost worthless, and undermined confidence they would recover their value. Onassis argued that growth of energy demand was inevitable, but bankers, who had money on the line, were not as confident in the future as he claimed to be. In his first encounter with Wriston, Onassis told him he was willing to pledge the income from the charter he was awarded to deliver oil for Texaco as collateral against a loan rather than on the resale price of the ship. Wriston was convinced, believing that such a loan, if unprecedented at National City, was less risky than it seemed. Wriston won quick approval from his open-minded boss, George Moore. Moore, a rare charismatic banker and then head of the lending department, encouraged Wriston's willingness to take risks and some observers credited Moore with the new entrepreneurial spirit at the bank, and with some of the innovations Wriston eventually implemented. While Moore alone would not have been able to accomplish what Wriston did, he gave Wriston the green light time and again, and approved of his aggressive instincts. Wriston would not have done it without Moore, as he readily acknowledged. "The rest as they say was history," said Wriston.

National City soon became the largest bank lender to shippers, often in tandem with Metropolitan Life, the insurance company that made the longer-term tanker construction loans. Since insurance policies had long-term payouts, it made sense for insurance companies to make long- term loans. Banks, in contrast, had to meet withdrawal requirements from depositors on short notice, so they typically tried to make short- term loans, at least if they were managing their funds prudently.

Shipping loans based on income rather than asset value became a model for loans to finance trucks, railroad cars, planes, and office buildings. The other major shipping magnate of the time, Stavros Niarchos, Onassis's brother-in-law, offered Wriston's counterpart at Metropolitan Life, Walter Saunders, a permanent job directing his financing. Saunders moved to Monaco, where both Onassis and Niarchos lived. Onassis then offered Wriston $1 million a year to come with him to Monaco. It was too bold for the modest Wriston, who was then living in Stuyvesant Village in Manhattan, a middle-income housing project, with his wife and daughter. Wriston, well paid by banking standards, would not earn more than $1 million in a single year until 1982, the first commercial banker to do so in the post-Depression era. Wriston remained friends with Onassis and his eventual companion, the celebrated opera singer Maria Callas, and later with the former first lady, Jacqueline Kennedy, who wed Onassis in 1968.

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Table of Contents

Introduction ix

1 Revolution

Prologue: Lewis Uhler Believer 3

1 Walter Wriston Regulatory Revolt 10

2 Milton Friedman Proselytizer 26

3 Richard Nixon and Arthur Burns Political Expediency 52

4 Joe Flom The Hostile Takeover and Its Consequences 71

5 Ivan Boesky Wanting It All 86

6 Walter Wriston II Bailing Out Citibank 96

7 Ronald Reagan The Making of an Ideology 110

8 Ted Turner, Sam Walton, and Steve Ross Size Becomes Strategy 125

9 Jimmy Carter Capitulation 144

10 Howard Jarvis and Jack Kemp Tapping the Anger 155

11 Paul Volcker, Jimmy Carter, and Ronald Reagan Revolution Completed 160

2 The New Guard

12 Tom Peters and Jack Welch Promises Broken 179

13 Michael Milken "The Magnificent" 202

14 Alan Greenspan Ideologue 222

15 George Soros and John Meriwether Fabulous Wealth and Controversial Power 248

16 Sandy Weill King of the World 286

17 Jack Grubman, Frank Quattrone, Ken Lay, and Sandy Weill Decade of Deceit 318

18 Angelo Mozilo The American Tragedy 351

19 Jimmy Cayne, Richard Fuld, Stan O'Neal, and Chuck Prince Collapse 371

Epilogue 398

Notes 405

Acknowledgments 443

Index 445

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Sort by: Showing all of 5 Customer Reviews
  • Posted September 7, 2011


    Having lived thorugh all this I found the book a bit long and tedious, however that being said...for those who did NOT live through all the eras that are followed here this is a wonderfully accessible bit of financial history that will explain most of why we are in the mess we are in. Worth the time invested to read.

    2 out of 2 people found this review helpful.

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  • Posted January 18, 2012

    Highly Recommended

    "Age of Greed" is a remarkable compendium of the political and business developments that culminated in the 2008 meltdown of the financial system. It is biographically based on the central characters involved from the Nixon administration through the recent financial crisis that peaked in 2008 and includes economists (such as Milton Friedman); presidents (Nixon and Reagan), Fed Chairmen (Burns, Volker and Greenspan); and various financial players, dishonest (Boesky and Milken) as well as just greedy (too many to name).

    When presented the way Madrick has, the sheer enormity and variety of the disfunction of the financial part of our economy is mind boggling. The political context (the rise of laissez faire market driven economics) with the deregulation of the Carter, Reagan, Clinton and Bush administrations unifies the financial chaos. This book makes an overwhelming case by simply presenting the players as each one acting as a piece of a jigsaw puzzle that results in an overwhelming realization on the part of the reader that we have been living through a sea change and we are in waters that are more treacherous than we ever imagined.

    "Age of Greed" is one of the best books I have read on the U.S. economy in the age of financialization and globalization.

    1 out of 1 people found this review helpful.

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