Page 590 - untitled

Notes to Chapter 4 561

38. Fed Chairman Alan Greenspan, “Private-sector Refinancing of the Large Hedge Fund, Long-Term
Capital Management,” prepared testimony before the House Committee on Banking and Financial Serv-
ices, 105th Cong., 2nd sess., October 1, 1998.
39. Fed Chairman Alan Greenspan, “Financial Derivatives,” remarks before the Futures Industry As-
sociation, Boca Raton, Florida, March 19, 1999.
40. “Over-the-Counter Derivatives Markets and the Commodity Exchange Act,” report of the Presi-
dent’s Working Group on Financial Markets, November 1999.
41. Gross market value is the current price at which the outstanding swaps contract can be sold or re-
placed on the market. As such, that amount reflects the current amount owing on a contract but does not
reflect the possible future exposure on these generally long-term instruments.
42. Bank for International Settlements, data on semiannual OTC derivatives statistics.
43. Alan Greenspan, testimony before the FCIC, Hearing on Subprime Lending and Securitization
and Government-Sponsored Entities (GSEs), day 1, session 1: The Federal Reserve, April 7, 2010, tran-
script, pp. 88–89.
44. Robert Rubin, testimony before the FCIC, FCIC Hearing on Subprime Lending and Securitization
and Government-Sponsored Entities (GSEs), day 2, session 1: Citigroup Senior Management, April 8,
2010, transcript, pp. 108–10, 123–24.
45. Lawrence Summers, interview by FCIC, May 28, 2010.
46. Daniel K. Tarullo, Banking on Basel: The Future of International Financial Regulation (Washington,
DC: Peterson Institute for International Economics, 2008), p. 58.
47. Final Rule—Amendment to Regulations H and Y,” Federal Reserve Bulletin 75, no. 3 (March 1989),
164–66.
48. Tarullo, Banking on Basel, pp. 61–64.
49. For more on derivatives, see FCIC, “Preliminary Staff Report: Overview on Derivatives,” June 29,
2010.
50. Warren Buffett, testimony before the FCIC, Hearing on the Credibility of Credit Ratings, the In-
vestment Decisions Made Based on Those Ratings, and the Financial Crisis, session 2: Credit Ratings and
the Financial Crisis, June 2, 2010, transcript, pp. 312, 326, 325.
51. Eric R. Dinallo, former superintendant, New York State Insurance Department, written testimony
for the FCIC, Hearing on the Role of Derivatives in the Financial Crisis, session 2, Derivatives: Supervi-
sors and Regulators, July 1, 2010, p. 7; Rochelle Katz, State of New York Insurance Department, letter to
Bertil Lundqvist, Skadden, Arps, Slate, Meagher & Flom, LLP, June 16, 2000.
52. Data provided by AIG to the FCIC, CDS notional balances at year-end.
53. Bank for International Settlements, semiannual OTC derivatives statistics.
54. Dinallo testified that the market in CDS in September 2008 was estimated to be $62 trillion at a
time when there was about $16 trillion of private-sector debt (written testimony for the FDIC, July 1,
2010, p. 9).
55. “AIGFP also participates as a dealer in a wide variety of financial derivatives transactions” (AIG,
2007 Form 10-K, p. 83). AIG’s notional derivatives outstanding were $2.1 trillion at the end of 2007, in-
cluding $1.2 trillion of interest rate swaps, $0.6 trillion of credit derivatives, $0.2 trillion of currency
swaps, and $0.2 trillion of other derivatives (p. 163).
56. FCIC staff calculations using data from Office of the Comptroller of the Currency; call reports.
57. Data provided to the FCIC by Goldman Sachs.
Chapter 4
1. 103 Public Law 103-328, September 29, 1994. Before the 1994 legislation, some states had voluntar-
ily opened themselves up to out-of-state banks. FDIC, History of the Eighties: Lessons for the Future, vol. 1,
An Examination of the Banking Crises of the 1980s and Early 1990s (Washington, DC: FDIC, 1997),
p. 130.
2. These were the largest banks as of 2007. See FCIC, “Preliminary Staff Report: Too-Big-to-Fail Fi-
nancial Institutions,” August 31, 2010, p. 14.
3. Data from SNL Financial (www.snl.com/).
4. Public Law 104-208, sec. 2222, codified as 12 U.S.C. § 3311; law in effect as of January 3, 2007.
5. Arthur Levitt, interview by FCIC, October 1, 2010.