William D. Cohan: House of Cards

Hello and welcome to FORA.tv Studios. My name is Blaise Zerega, I am the president and CEO of FORA.tv. I am here today with William Cohan, a former investment banker turned investigative journalist, turned bestselling author. He has recently published House of Cards, A Tale of Hubris and Wretched Excess on Wall Street. It is the story of the collapse of Bear Stearns last spring that is riveting in its own right, that becomes a staggering when seen against the chaos as engulfed with global economy. So welcome Bill. Blaise, good to be here. So let us start where the book begins and that is with… sort of… it is almost like the Cuban missile crisis, these 10 days in March. I mean, they way you have delivered is… just blow by blow, and obviously we do not have time to go in to all of it. But if you could just sort of walkthrough, or some of the key-turning points how Bear Stearns an 85-year-old Wall Street firm that have weathered numerous depression… this is like even one. Depression, World War II, depression ’87, the internet bubble, 9/11, all of it, and yet came crashing down in a period of 10 days. Really because of a combination of decisions that they have been making for years along the way, which is important to note and discuss if we have the time. And then more importantly sort of what they have invested in during the previous 4 or 5 years which was to become a huge manufacturer of mortgage bank securities, which they then use as collateral to get overnight loans that they needed up to $75 billion a night to run their business. So even though they had $18 billion of their own cash on their balance sheet at the end or in that final week. They needed $75 billion on what is called overnight loans and they used these mortgage bank securities as the collateral for those loans. Well that last week as the rumors started swirling about the firms viability and its future, which contributed to this as did the 24 x 7 news cycle that you find on CNBC and other business shows, which also I think contributed to the concern and the fear. Well these overnight lenders and these are people like Fidelity and Federated Investors decided they did not want to lend that money to Bear Stearns anymore. So just to… try to put some data points… so, March 13th the share prices is roughly $65 a share and billions of dollars in assets and thing are humming along… $300 billion. $300 billion in asset and within Bear Stearns things are okay, and what, like 40% of the profits were coming from these mortgage… About 90% of the revenues in any given year were coming out of the fixed income business which was run by Warren Spector until August of 2007 when Jimmy Cayne fired him and then his deputies took over from August 2007 to March of 2008. But it was definitely the engine of the firm, the most profitable part of the firm and had delivered profits year in and year out billions of dollars of profits year in and year out. And then 10 days later… what was the outcome? Well the [indiscernible 3:47] was that basically had JP Morgan, had first the Fed and the treasury not taped together a solution on Friday and this was March 13th, which essentially gave Bear Stearns another day to figure out whether to keep you in business. Without that which is a $30 billion facility that the Fed made available for JP Morgan and then JP Morgan could make available for Bear Stearns that came out Friday morning on March 13th and had that not happened, i.e. through the course of Thursday night many of Bear Stern stocks, they are going to have to file for bankruptcy Friday morning. This came along at about 6:45 a.m. in the morning, there was a lot of euphoria around Bear Stearns when they realized that they would not have to file for bankruptcy. You call it premature high fives. Premature high fives, right. And they thought they have been saved, they actually also thought they have 28 days, but unfortunately that turned in to 28 hours because secretary of treasury Henry Paulson basically dictated the terms of when that money was going to go. So over that weekend, it is a roller coaster and the Bear Stern guys kept thinking if they had it and they kept sort of slipping away, and slipping away. It is like quicksilver unfortunately, that whole week was a huge roller coaster of these guys, and I try to portray that… I think you guys pulling over on the Hodgkin coffees at 3 a.m. People were drinking gin… Not sleeping… Staying up all night… it was… I think it was a combination of desperation, disbelief, absolutely incredulity that something like this could happen, if this… as we talk about this 85-year-old firm could literally be going down the tubes in a matter of days. Yeah, even that weekend is just sort of staggering to read and understand. It was basically… on Friday I think… correct me here… the offer was sort of like was it $10 a share...? On Friday they bought that day so that they could get to the weekend, and then on Friday night as Alan Schwartz the CEO of Bear Stearns who have been up all night and with the rest of the executive team, was going home to try to get some sleep at the end of the day on Friday, that is when he got a call from Paulson, saying, guess what? You thought you had 28 days, you need to get a deal done by Sunday night to sell the company or you are toast… Or bankruptcy… what points… shareholders get zero, employees get zero, get around… Creditors get pennies on the dollar, chaos reigns. At one point also though, Paulson was suggesting a dollar a share. In come the armies of the night as I described it on Friday night, and Saturday and Sunday, and it quickly became clear that only JP Morgan whose office is right across the street from Bear Stearns and who had been Bear Stearns collateral agent. Meaning that they were well aware of the securities that Bear Stearns had used as collateral for these overnight loans, was well aware of Bear Stearns portfolio of assets. And from time to time over the last previous 10 years, Jamie Dimon the CEO of JP Morgan Chase had talked to Jimmy Cayne the CEO of Bear Stearns about buying Bear Stearns and every time Jimmy Cayne sort of waived him off, well now in this desperate situation it became clear that only JP Morgan was to buy… the only viable buyer of this company and the first indication that they gave on Saturday night was basically $8 to $12 a share. The stock had closed down at about 35 on Friday and so to have it 8 to 10, 8 to 12 which is really 10, on Saturday night it was quite a disaster, but was better than bankruptcy, but then on Sunday morning to your point about the roller coaster. On Sunday morning they were supposed to show up for additional due diligence over Bear Stearns’ office and the JP Morgan team did not show up and everybody was poised for additional due diligence they did not show up and everybody was… really got concerned that now it is time to file for bankruptcy, they have been before their offer… and in fact, JP Morgan told Alan Schwartz that they were not going to deal anymore. That is when the Fed got involved again and decided to take off Bear Stearns’ balance sheet about $30 billion of assets that JP Morgan did not want to buy, and they created a separate little investment company, where we – you and I, and taxpayers in America ponied up $29 billion, JP Morgan ponied up a billion and they bought these 30 billion of assets which allowed JP Morgan to do the deal. And then the price for that is false in saying $2 a share, and according to Jimmy Cayne, Paulson actually said $1 a share but that it became $2 a share. Wow! What I wanted to ask is roles of Geitner and Paulson… so Jimmy Cayne was a chairman of Bear Stearns… Not at the end until January of 2008. You write… how they have been kind of, they were trying to lobby to borrow some cheap money basically, the discount window which cut… reopened after the deal was closed, and sort of… they were asking for cheap money, cheap money, cheap money, no you cannot have it, and then they gave it to Jamie Dimon, JP Morgan Chase… or actually can play in to events but… Investment banks were… securities firms were separated from commercial banks by Glass-Steagall Act and then in 1998-1999 the Glass-Steagall Act got repealed. So commercial banks could compete with investment banks in their product lines without any restrictions from the government of the FCC. Well, the problem with that for the investment bank’s perspective was that… if the commercial banks got in to trouble and they were more heavily regulated than the investment banks and they have to keep their leverage a lot lower more like 10 to 1 as opposed to the investment banks which got up to 50 to 1, but if the commercial banks got in to trouble, they knew that they could always go to the Fed discount window and borrow. That was the way the rules worked. If the investment banks got in to trouble, they could not go to the discount window, so that is what the investment banks have been lobbying Geitner and Bernanke and probably Paulson too, to open the discount window to investment banks. So that if they got in to trouble, they could get access to the federal money in case of a liquidity squeeze. Well, Geitner said no, Bernanke said no, Geitner told me and also testified on Capitol Hill on April 2nd that the reason he did that and said no was because he is a central banker, he is a banker, if he is going to lend money to a firm, he wants to make sure he can get it back and he did not think Bear Stearns is credit worthy at the end and it was hard to disagree with him. It was out of business, but that night, you are right on Sunday night after they have announced the deal which JP Morgan Chase at $2 a share on the evening of March 16th. He opened the Fed window – Bernanke opened the Fed window to investment banks for the first time since the mid-1930’s and that is why people like Jimmy Cayne got so upset at Tim Geitner and Bear Stearns executives were very upset at the central bankers because of that decision People have… they have seen the news, they have seen pictures of Paulson, they may not have spoken to them individually… they do not have the same relationship you do. Tim Geitner, Bernanke and so on. But the other characters are very colorful and they have names that sort of seemed like… the all star lineup of a football team, Ace Greenberg, Jimmy Cayne, Cy Lewis, how… what are these characters like, and sort of… how do they end up in these positions of enormous power and wealth… Jimmy Cayne. Jimmy Cayne is literally out of central casting he grew up on the north side of Chicago, his father was a patent lawyer. His mother raised money for Jewish causes in Chicago. But Jimmy wanted basically nothing to do with them as soon as he could possibly get out, he dropped out of Purdue one semester shy of graduating, and basically played bridge the whole time, among other games of chance, other things he told me he did. And eventually after failed marriage and working for his father-in-law as a scrap iron salesman, he was also a photocopy salesman in the far west. He decided he wanted to come to New York in the mid 60’s to become a professional bridge player and that was his ambition, and he got here and he started playing bridge in the bridge clubs on the upper east side. He was a professional bridge player, I think with the hope of making like $500 a week kind of thing. And he would meet these Wall Street titans who would come to the bridge clubs to play bridge because they were amateurs because it was… where to exercise your brain after work I guess, and he met people like Larry Tish who at that time was the single largest investor, first individual investor in the market, he also then got a job selling municipal bonds at Leventhal and Company, and he did that for 4 or 5 years and he was very, very good at it. And he was so good on it that he could be the best salesman at the firm, working 2 or 3 hours a day, and then spend the rest of the time playing bridge. So this worked for a while, until he met the woman who would become his second wife at the bridge club and after a rapid affair she said, well if you want to keep this going with me, you have to get… There is a bridge to nowhere… it is still good being a bridge to nowhere, you need to get a real job. And she said, why do not you go back to law school, and he said well, I never graduated college so I cannot do that. And so he decided he would use his bridge connections to get interviews at Bear Stearns, Lehman and [overlap]… A quick question on that… so, I mean, Michael Lewis is Liar’s Poker, he starts out card playing he is… bridge other forms of cards common on Wall Street? It is a way to compete, bridge now seems a bit removed from this generation or current generation’s passion, but for certain generation of which Jimmy Cayne was part of… that game appealed greatly to Wall Streeters and the interesting thing is that when you play bridge… there is no price money involved if you win this national tournaments, unlike with poker, if you are a professional bridge player and Jimmy had… what was called a sponsor in bridge… he would hire 5 other professional bridge players to play with him on his team, you have six members on your team as you go in to the tournament. Some of these guys could make half a million dollars a year. And Jimmy would pay them to be on his team, but if you won the tournament, you just got prestige you did not get any money. But it is really… it is a game of incredible skill, the irony of course is that when you play bridge you are supposed to know where the cards on the table that can help you. Well he knew where the cards on the bridge table could hurt him, but he did not know where the cards were at Bear Stearns that could hurt him. Hence the title of the book. Hence the the tile of the book, yes. The so called double entendre… Surely after Bear Stearns is sort of rescued ultimately… Well, the creditors have been rescued that’s for sure Lehman Brothers failed, why do you think Bernanke, Geitner, Paulson allowed that to happen? Bear Stearns was technically bankrupt but it was rescued by the government and JP Morgan the creditors, the shareholders first got $2 a share and then that was increased to $10 a share because of a technical glitch I guess in the drafting, the legal documents, the creditors as I said got rescued, they were the real group here that got bailed out. And then sort of… there was this near calamity, everybody freaked out that Monday that week following the announcement of Bear Stearns stocks dropped but then both Lehman and Goldman Sachs came out with good earnings for that first quarter. Bear Stearns actually had been profitable in the first quarter of 2008 after losing a bunch of money for the first time ever in the 4th quarter of 2007. But you see, the thing is, that is why I think the book from my perspective, if I may be so humble, is interesting because if you want to understand what happened in this financial crisis, if you understand what happened to Bear Stearns, you can understand what happened to Lehman and Merrill and Citigroup and all the firms because they all did basically… they all basically made similar mistakes. They all made the mistake of borrowing short, borrowing in this overnight markets, and then having assets that were long term assets, and when those assets lost value, basically they have no more source of cash, allowing them to be very vulnerable to a run on the bank. So where as Lehman was much bigger than… and it probably about $500 billion of assets as opposed to $300 billion at Bear Stearns, they have made similar mistakes, they had the same glut of mortgage securities, the same glut of commercial state asset and they finance their business pretty much in the same way… And do you think… Even if we had a six month lead time, did fall. At six months to try to deal with it, if you really par through it as I did on the book, I mean, they tried a number of things. But just as I think that really when Bear Stearns stock hits it all time high. Fourteen months before it went out. In January 2007 it hit its all time high. It was over then, it just do not fade then, it was really too late, because of the decisions that they had made previously. The same with Lehman. Do you think that during that weekend, in the book you referred to it as going nuclear options, the mutually assured destruction, was Jimmy Cayne aware that if we go down all the other banks are going to go down because the yare doing the exact same thing we are. I mean, or was it more just sort of calculated to self preservation… I think it was… he was thinking of it more as a negotiating tactics, in other words, I have no… think of it as the bridge mentality. I do not have any good cards, my cards are not good, I have been dealt a lousy hand here, and I cannot make much use of it. I got the Fed, the chairman, the treasury secretary telling me I got to do a deal in 24 – 28 hours. I mean that is not enough time to do… to run an M&A process. They have asked for 28 days, they got 28 hours. So he knew, and Jimmy Cayne by the way at that time was playing bridge in Detroit. They have to get him back here, even though he was not the CEO any more… their options were severely limited. So Jimmy Cayne is thinking… at one point, Jimmy Cayne was worth more than a billion dollars in his own stock, and for a guy who never graduated college and who felt sort of outside the Wall Street club, to be the only CEO on Wall Street worth a billion dollars in his own stock at the time. Gave him some sort of macho… walking around cred. So… And some walking around money too. …some majorly walking around with money. But that weekend, he realized that when the stock had been a 172, 69 a year earlier, he was worth a billion dollars, now at $2 a share, his stock was worth 18 million bucks or something. Nothing to sneeze at and he had been taking a lot of money out over the years. But for him that was the equivalent of nothing, so he thought, okay, well, if I cannot get them to pay more than $2 a share, then they might as well pay nothing, we will go in to bankruptcy and all the spider web of relationships that Bear Stearns has will all disintegrate over night, and everyone else will suffer paying as well, as well as the creditors of Bear Stearns because when Lehman Brothers went bankrupt, six months later, not only the equity holders get nothing, but the creditors of Lehman got like 9c to 10c to a dollar which is virtually nothing too. I mean that was going in at Jimmy Cayne’s mind, but quickly he… his board, even though he is a member of the board. The board would never vote in for that, but he was just, his macho way, clever way, trying to see if he could get more leverage for Bear Stearns. And so, do you think Jamie Dimon or JP Morgan Chase, do they get a good a deal? I have to remember there is this quote, I won't to read it, it says, This colorful language describing this is a shotgun wedding to a rapist. Yes. I mean… A little anger on the side… There was a lot of anger in Bear Stearns, well because it was so shocking, and by the way. Now I think if you talk to some of them, I mean, while it was still shocking, I mean the $10 a share they got at JP Morgan stock is a lot better than AIG, or Lehman got, or probably even better than what Merrill got. So, I think to go in first, to help them, but to Jamie Dimon get a good deal. I mean, the price that he paid for the equity of this thing was about equal to the value of that beautiful building at 383 Madison Avenue, which is I said is right next to the JP Morgan offices. So, he just got this beautiful relatively new building, he paid with JP Morgan stock and got everything else for free. So… good deal. Well I do not know, because it assumed a lot of liabilities and it cost him a lot more in severance and other legal liabilities and he thought. I bet all things being equal he probably would not have done that deal, but the government wanted him to do it. And he was a good corporate citizen and he did it. In terms of just failures, and Wall Street is… river at one end and graveyard at the other. What made this flame out so spectacular as opposed as to say Drexel, I mean, you could pick your bank… long term capital owes a hedge fund, but… I mean it is a very good question I mean, Wall Street has always been a very dangerous place. The 200 to 300 years that it has been in existence. Firms have been coming in and out of business all the time. Ace Greenberg used to show sort of new recruits to Bear Stearns what was called the tombstone ad, which would list all of the hundreds or so firm that underwrote an equity offering. And would even show it like 30 – 40 years ago, and he will say, well… 99% of these firms are out of business. We are the only one left standing. Well now they are gone. So Wall Street has always been a very dangerous place. What made this so spectacular, what happened here is because back when firms would go in and out of business, all the time they were small private partnerships. A lot of times nobody ever heard of them. And beyond that, nobody ever did business with them. Well, in the last 25 years, all these firms have gone from private partnerships to major public corporations, and with offices all over the world and huge amounts of capital and the y did business all over the world and everybody heard from, about them, because they are marketing machines. And beyond that, as I said before, they got very much did interactions with… had huge amount of interaction with each other, and banks and insurance companies and investment funds all over the world. So, to have one of this go out of business, in such a spectacular way was number one inconceivable, I mean. Drexel went out of business in part because of the wrong doing that had occurred there, the criminal wrong doing. Sort of in the way that Arthur Andersen went out of business. But at these firms whether there was criminal wrong doing or not remains to be seen, by in large, everybody was just sort of operating under the rules that exist at the time, which may have been poorly chosen rules and even worse enforced rules. But we are basically just doing their jobs, it was really inconceivable that this could ever happen and that is why it made this blow up so spectacular and again, Drexel happened in isolation. 18 years earlier. Now you have this firm after firm on Wall Street, really and just collapse of all these dominoes, and it is totally inconceivable. What is going to be the new landscape on Wall Street, what is the role, as the government sort of steps in… and this was the end of it… as you read it, the second golden age… End of an era, I do not think Wall Street will ever be the same, however, the basic demand for what Wall Street does, I mean Wall Street was very good at providing capital to companies around the globe. Sort of 24/7 that needed it. it was also good at providing advice on mergers and acquisitions in on asset management. So, if Wall Street goes back to what it was good at, I think number one, and takes a lot less risk, I think we will be all better off, and I think that is sort of happening, thanks to the market that is happening, there are a number of firms, like the one I wrote about in that first book, The Last Tycoon Lazard, which has not taken a penny of tarp money, has not cost us anything as citizens, share prices holding up fine, its business model is working. So there are a number of firms like Lazard, like Greenhill, like Evercore a number of private partnerships that are actually sprouting out to provide M&A advice and other services that are actually doing well and are being rewarded… Clearly a firm like Lazard is profit driven, they exist to profitable, absolutely. But there is also a distinction I think that you make the little… versus greed, and… And believe me the Lazard bankers are plenty greedy and lived very well, thank you very much, but the interesting thing is that they, back when it was a private partnership that was run by Michel David-Weill the patriarch of the family that started it and Felix Rohatyn the ambassador to France in the Clinton administration investment banker extraordinaire. Saved New York. Let us see what happens… and back then they constantly resisted calls to… by their fellow partners to get in to the junk bond done writing business, or internet IPO underwriting this. All these riskier business lines and Michel and Felix said, we are just going to stick to what we know well which is advising on M&A deals and asset management then when Bruce Wasserstein then came in and took over the firm from Michel, he kept it the same way which to his credit, they were not as much money as other firms were making during the boom, on the other hand they were getting paid extraordinary well, and living very well, so nobody can really, should cry for them, but they were not taking the same risks that these other firms were and I think there is a lesson to that. There was a book written in 1940 called Where are the Customer’s Yachts by Fred Schwed, in that terrible narrative, this is after the depression from 1929 before the bearish market, in there the customers go broke and the brokers do well. In this case, the bankers are also going… are they going broke or not, I mean, certainly a lot of Bear Stearns are out of work and… Yeah, I mean, again I think as bad as this has been for the bankers and the employees of Wall Street, and there are some very sad story, especially among the mid level people and clerical staff who had their life savings tied up to Bear Stearns stock, Lehman stock, and got it wiped out. The bankers have found a way to do well throughout this, and do not forget they were getting extremely overpaid during the good years, and as long as they did not over extend themselves, which some of them did. I mean, there are horror stories of bankers who got marginal loans based on their stocks and when the stock collapse, they are in risk for personal bankruptcy. So there are stories like that, but in large, if you did not over extend yourself. You are doing a lot better than 99% of the people who are suffering in this economy because of what happened on Wall Street. The incredible thing about all this is, it was entirely preventable… it did not have to happen, and yet it happened. So if you point the finger later blame, pick one reason, it was at the overnight repo, what went wrong… could regulation… I normally say overnight repo, not many people can say like you just said it. To me it comes down to greed, therefore it comes down to human nature. So, in our country which is I capitalist society, where we celebrate the entrepreneur and we celebrate those people that can make huge amounts of money. That becomes part of the culture of the country, and the ethos that we live by and so those people that are able to make a lot of money, we celebrate and we reward and I think that in the last 25 years it became an extreme where you had people on Wall Street because of the compensation system on Wall Street which encouraged taking short term risk with their shareholders’ money because now they are all public companies and this idea of partnership and shared liability had gone out the window. You had bankers and traders and salesman and manufacturing this securities and selling them all over the world and getting this huge bonuses that they put in their pockets with no accountability whatsoever, something went wrong down the road. Well they had all these money. So… in their pocket and no one was going to take it away from them. So you have this environment where this is rewarded and the culture inside these firms… where I worked for 17 years, I know exactly what it is like. Where it is always more, and more and more… it is never enough, you always have to do, you can sell 10 billion worth of mortgage back security, you should have sold 15 billion, I mean it was just that kind of culture where you got rewarded for doing more. So no one was going to stop doing it until the bubble exploded, which is the same thing that has been going on for years since the crash of ’87, the same idea. So short of marching the street with pitchforks and lanterns… how do we prevent this from happening again… or is it going to happen again. I mean… Well these kinds of bubbles have been going on… …cyclical for every 25 years… Well, they have been coming fast and furious if I may use that expression, more fast and furious… Gone in 2 seconds or… Well, in the last 25 years since these firms went from private partnerships to public companies, we seem to… internet IPO bubble, crash of ’87, the emergent telecom bubble, mortgage bank securities now… so the way people on Wall Street were incented to do their jobs… what they are rewarded to do, it is very simple. Human nature is very, very simple, you reward somebody for doing something and you give them more for doing more of it, and they will do it, and that is what is going on Wall Street with nobody being strong enough, no one being able… powerful enough to raise their hand and say, we are getting too risky here guys. But at certain point, that is kind of what happened, they sort of raised their hand, that broker in Florida… indiscernible 33:12] Sedaka, who unfortunately passed away. He did raise his hand at the end, but really if you go back… because that was when it was very… If you go back to the highpoint. Well, if you go back to the spring of ’07 it was really…. What really revealed this to the world, was in those two Bear Stearns hedge funds when Goldman Sachs… Bear Stearns would go out to its counter parties every month to come up with evaluation of… for its hedge funds to report to the investors, and people they did business with were other brokers on the street and they have the responsibility to share with Bear Stearns and the hedge fund managers what the value of the securities were that they were trading all the time. These mortgage banking securities, and everybody had sort of been going along, saying… with 99c, 98c, well in April of 2007 Goldman Sachs came back and said to the hedge fund managers, well actually we think this stuff is worth 50c and that was the moment when the fuse got lit. Because at that moment Bear Stearns hedge fund managers had to average in that mark from Goldman Sachs and then they have to tell their investors that hedge funds have really lost a lot of money What you are describing is the confidence game that you say… you write is Wall Street and once that confidence disappears and you quoted the economist …that once a banker. Tell me with this quote… Which quote… Warren Buffet said, basically it would take a lifetime to build up a reputation and can lose it in five seconds… five minutes, and then what you do. So in Wall Street… Once a banker has no… his credit is gone and he is not… if you have to ask a banker’s credit… there is no credit… a hundred years before… …prize the English banker that came up with that… that is right, I mean once you have to ask the question it is too late. Especially… and most particularly if you finance yourself in the overnight markets. So if Bear Stearns and Lehman and Merrill had chosen to finance themselves in a different way, even if… then as Goldman Sachs had much longer term financing. Much less reliant on the overnight financing markets and that probably helped them survive during that period, because what happened was… these overnight lenders said… no more. So just thinking about… It was Walter Bagehot or Bagehot who was the English banker, journalist I think… Uh-huh… the economist I think… The economist. Yeah. So this thing about… as a game of confidence, there is a… recently they have sort of relaxed the rules on market to market for the investment banks, which sort of held their feet to fire, but have not force them to write down, or to make accurate predictions just to what their assets really worth. Does this sort of fly in… I mean, to me, it gives me less confidence in these banks. You are right, and it should, but it goes to the ongoing power of the Wall Street lobby, to influence what happens in Washington… then that is not to be, even in this… in the aftermath of all of these. That is not to be trifled with, I mean, there was a strong argument that people like Steve Schwatzman and others were making that market to market was the problem. I do not see why telling the truth about something, when something is really worth is the problem. That is the beginning of the solution. You are starting to sound like Jon Stewart here and Jim Cramer. Well, Jon Stewart is right about that. This is… marking these things accurately and saying what they really worth is the beginning of understanding, the path to redemption if you will, the path out of this mess… to obfuscate it again, by saying, you do not have to mark them to what they really worth, because it is too painful. It is like any… weaning any addict, a heroine addict off heroine. It is very painful, any kind of detoxification process is very painful, but we got to go through it or else we are not going to get better… So part of getting better and going through stuff is the sort of public airing of wrongs and wrong doing, so right now politicians like demanding greater regulation, we have the Madoff scandal. Lots of scandals. …lots of scandals and with the hedge fund that you have described and mentioned earlier… 2 executives from Bear Stearns will go on trial this fall. Do you predict or I mean to realize speculation, these are only allegations, will there be Convictions…? Convictions… Lanterns in the street? Lanterns and pitchforks? Well, it is incredible that there has only been 2 indictments so far. Obviously an indictment is not a conviction, and my research in to a situation that these hedge fund managers is been such that it is clear that the prosecutors in their indictment, used parts of emails that they thought would be most damning and most persuasive in making their case, the full emails which I have reviewed are more balanced actually, and show a more nuance approach to what they were thinking about doing. So, maybe they will turn out to be that they were guilty, maybe they will be convicted by a jury, maybe they will plead guilty and will never get to trial. But on the other hand I would say that they were certainly guilty of bad judgment… where they thought there was a buying opportunity in the spring of ’07 as this index has fell and the value of the securities fell, it turned out to be the beginning of tidal wave, but they double down and triple down, and decide it was a buying opportunity and they were wrong. So whether they were guilty of making a wrong business decision, or whether they were guilty of criminal behavior remains to be seen, but the fact that only two… we have these trillions of dollars… lost… and coming out of our pockets maybe more trillions will be lost yet. And only two people have been indicted, seems hard to believe. Two villains and millions… I mean, people have been villainized… between the Time Magazine listing they are one of the 50 people who… a 100 people who you can blame, or CNN they are they are having their list of people you should blame. There are plenty of people who are… should be held responsible here, there are people who think that most of Wall Street are criminals and should be sent to prison as a result. I am not sure that is the way our system works for better or for worst. What will it take them, I mean, is there a chance of somehow of reforming Wall Street in to more of a sane profit-driven machine instead of an insane greed driven machine, if so, will that ever happen, or as your say… just human nature… I mean… Wall Street is the ultimate Darwinian Petri dish. Its capitalism at its most ruthless, most fundamental and I said before. Firms have been going in and out of business since they appeared on Wall Street. Bear Stearns itself rose out of the ashes, the original partners were part of a firm that it failed. So, you have this constant machinations on Wall Street, it clearly got out of hand in the last 25 years, as these companies went from private partnerships to public companies and took risk with their shareholders’ money when they got all the rewards and the shareholders took all the liabilities. I think, it feels like that is going to change, it feels like, compensation is going to be much reduced. There is going to be more accountability. But on the other hand, human nature being what it is, I mean, once the profit machines, the Wall Street figures out a way to make money again. There will be people clamoring for more of that money, or else they will take their expertise and go somewhere else. It seems hard to believe at the moment. But after the crash of ’87 when the stock market went down 22.6% in one day. I saw grown man cry and swearing that they would never repeat anything like that again. Remember the Brady Commission Report – the two inches thick document that supposedly explained what happened and why and how we were not go through this again. Well, how many crisis have we experienced since then? Too many, and whether this would change? I do not know I would like to think, out of this there will be some calm water for a period of time, but I could imagine being here five years from now and having the same discussion again unfortunately. Well, maybe, we will be. Thank you very much. I will be happy to have it but… it is very distressing along the way. Indeed, well, thank you very much. Thank you for having me.