After Pushing the Wall Street Scheme to Repeal Glass-Steagall, the New York Times Returns to Puff Pieces on Rodge Cohen and Jamie Dimon

Gunnar Larson g at
Fri Apr 7 04:15:13 PDT 2023

By Pam Martens and Russ Martens: April 4, 2023 ~

A.G. Sulzberger, Publisher of the New York Times
A.G. Sulzberger, Publisher of the New York Times

The New York Times has been able to fly below the radar in terms of its
insufferable ability to muck up the financial system of the United States
and then canonize its aiders and abettors with puff pieces.

It was none other than the New York Times that repeatedly used its
editorial page to advocate for the repeal of the Glass-Steagall Act, which
had protected the U.S. financial system from crisis for 66 years until its
repeal under the Wall Street friendly Bill Clinton administration in 1999.
It took only nine years after its repeal for the U.S. financial system to
crash in 2008, requiring the largest public bailout in U.S. history. We’re
now in banking crisis and bailout 3.0.

The 1933 Glass-Steagall Act was passed by Congress at the height of the
Wall Street collapse that began with the 1929 stock market crash, the
insolvency and closure of thousands of banks, followed by the Great
Depression. The legislation addressed two equally critical flaws in the
U.S. banking system. It created, for the first time, federally-insured
deposits at commercial banks to restore the public’s confidence in the U.S.
banking system and it barred commercial banks that were holding those
newly-insured deposits from being part of Wall Street’s trading casinos –
the brokerage firms and investment banks that were underwriting and/or
trading in stocks and other speculative securities.

In 1988 a Times editorial read: “Few economic historians now find the logic
behind Glass-Steagall persuasive.” Another in 1990 ridiculed the idea that
“banks and stocks were a dangerous mixture,” writing that separating
commercial banking from Wall Street trading firms “makes little sense now.”

On April 8, 1998, the editorial board of the New York Times became an
outright cheerleader for a bank merger that would end up devastating Wall
Street. The editorial was so pro-Wall Street and anti-public interest that
it could have come straight from the desk of Sandy Weill, the man who
wanted to merge his brokerage firm, Smith Barney, his investment bank,
Salomon Brothers, and his insurance company, Travelers Group, with the
large insured commercial bank, Citicorp, owner of Citibank. (The behemoth
bank became known as Citigroup as a result of the merger and was the single
largest recipient of the taxpayer bailout during the 2007-2010 financial

The New York Times editorial in 1998 sounded like it came from Sandy
Weill’s publicist. The Times wrote:

“Congress dithers, so John Reed of Citicorp and Sanford Weill of Travelers
Group grandly propose to modernize financial markets on their own. They
have announced a $70 billion merger — the biggest in history — that would
create the largest financial services company in the world, worth more than
$140 billion… In one stroke, Mr. Reed and Mr. Weill will have temporarily
demolished the increasingly unnecessary walls built during the Depression
to separate commercial banks from investment banks and insurance companies.”

With the green light from the New York Times, Congress repealed the
Glass-Steagall Act the very next year.

Here’s what happened to Sandy Weill’s grand creation, Citigroup: By early
2009, it was a 99-cent stock and clearly insolvent. Despite this reality,
the Federal Reserve made secret, cumulative loans of more than $2.5
trillion to prop up Citigroup from December 2007 through at least July 21,
2010, according to a Fed audit conducted by the Government Accountability
Office. In addition, the U.S. Treasury injected $45 billion in capital into
Citigroup; there was a government guarantee of over $300 billion on its
dodgy assets; and the FDIC provided a guarantee of $5.75 billion on its
senior unsecured debt and $26 billion on its commercial paper and interbank

But Sandy Weill made out just fine, walking away as a billionaire as a
result of his Count Dracula stock options. (Compensation expert, Graef
“Bud” Crystal, coined the Count Dracula stock option moniker because
nothing could kill them, because the Citigroup Board had authorized them.)

One of the men who had put the pieces in place for these monster bailouts
of the new mega banks on Wall Street was lawyer Rodge Cohen of Sullivan &
Cromwell. In testimony to the Financial Crisis Inquiry Commission (FCIC) in
2010, Cohen admitted that he was personally involved in the amendment
contained in the Federal Deposit Insurance Corporation Improvement Act
(FDICIA) that changed the Fed’s emergency lending powers under Section
13(3) of the Federal Reserve Act.

That one-sentence amendment to Section 13(3) was interpreted by the Federal
Reserve from December 2007 to mid-2010 as giving it carte blanche to shovel
$29 trillion in cumulative loans to Wall Street banks and their foreign
derivatives counterparties.

Cohen also admitted during his FCIC testimony that during his negotiations
on behalf of the Board of Bear Stearns (a Wall Street investment bank that
collapsed in the spring of 2008) he effectively provided a legal
interpretation of the law to the Fed. Cohen stated during the interview:
“We did say that we thought 13(3) provided broad power; that the ability
was there if the Fed could satisfy itself on the collateral.”

In 2009, the New York Times canonized Cohen as follows in a feature article
headlined as: H. Rodgin Cohen: Trauma Surgeon of Wall Street:

“All told, from March 2008, when Bear Stearns was purchased for a song by
JPMorgan Chase (both Sullivan & Cromwell clients), to mid-September, when
A.I.G. (another client) was handed several billion by the government, Mr.
Cohen, 65, took part in a breathtaking 17 financial deals, often hurrying
among negotiations like a surgeon running between O.R.’s.”

A week ago Monday, a new feature on Rodge Cohen appeared in the New York
Times. It sounded like a worn out refrain on a creaky old player piano:

“There are plenty of differences between the fallout from the collapse of
Silicon Valley Bank and the 2008 financial crisis, but one similarity is
the man trying to clean it up: H. Rodgin Cohen, known as Rodge, the senior
chair at the law firm Sullivan & Cromwell.

“The soft-spoken Mr. Cohen was at the center of efforts to save Silicon
Valley Bank and First Republic, the latter of which involved a call between
the Federal Reserve chair Jerome Powell, Treasury Secretary Janet Yellen
and the JPMorgan Chase boss Jamie Dimon.”

Jamie Dimon is the Chairman and CEO of the largest federally-insured bank
in the United States, JPMorgan Chase, which also happens to be one of the
largest trading houses in the world — allowed as a result of the repeal of
the Glass-Steagall Act. Dimon learned his craft, unfortunately, at the knee
of Sandy Weill, where he functioned as Weill’s first lieutenant at
Citigroup before moving on.

Like Weill, Dimon has also become a billionaire on his stock awards at
JPMorgan Chase – notwithstanding his bank’s serial run ins with the
criminal division of the Justice Department under Dimon’s “leadership,”
resulting in an unprecedented five felony counts.

Dimon has all the same warts as Weill but, nonetheless, the New York Times
deems him worthy of canonization.

At the height of the 2008 financial crisis, on September 26, 2008, the New
York Times published a feature on Jamie Dimon, which carried this gushing

“As one institution after another is laid low by the present crisis, Mr.
Dimon stands at the head of a small band of bankers who are coming out on
top in the new financial landscape.

“With two bold deals — first Bear and now WaMu — Mr. Dimon has muscled in
further on Wall Street’s traditional turf and transformed JPMorgan into the
country’s largest commercial bank. With WaMu, JPMorgan will have $905
billion in deposits and 5,400 branches nationwide, rivaling Bank of America
in size and reach.”

If nothing else, the New York Times is Manhattan-centric. Bank of America
is headquartered in Charlotte, North Carolina. By allowing JPMorgan Chase
to gobble up WaMu (Washington Mutual), the mega bank power base was
solidified in New York.

Last Thursday, propping up the sagging reputation of Jamie Dimon was back
in full display at the New York Times. The digital headline read: “Jamie
Dimon Reprises 2008 Role as Rescuer of a Failing Bank.” The headline for
the same article on the front page of the Business Section in the print
edition of the New York Times read: “Once Again, It’s Dimon To the Rescue.”

The somewhat comical problem with the newest effort to canonize Dimon in
the New York Times is that the facts revealed in the article by the
reporters stand in stark disagreement with the headline. For example, there
is this in the article:

“Ms. Yellen [U.S. Treasury Secretary Janet Yellen] and Mr. Dimon discussed
a plan to rope in other banks to steady First Republic. As the chief
executive of the nation’s largest bank, Mr. Dimon would carry it out. The
plan, which some executives at rival banks privately called ‘the Jamie and
Janet show,’ involved 11 banks collectively depositing $30 billion into
First Republic, and was meant to signal confidence in the teetering lender.

“Whether the $30 billion loan helped steady the lender and stave off
financial contagion — First Republic shares tanked the day after the
announcement, and remain down nearly 90 percent for the year — remains an
open question, even though its shares have moved a little higher this week,
along with other bank stocks, as fears of a bigger crisis recede.”

Here’s actually what happened. Dimon et al hatched a plan to put $30
billion in uninsured deposits into First Republic Bank as it was
experiencing a bank run because 68 percent of its deposits were already
uninsured by the FDIC. (The FDIC caps federal deposit insurance at $250,000
per depositor, per bank, but First Republic catered to the very wealthy so
it had lots of deposits above that amount.) Reuters reported the story
about the $30 billion infusion before the stock market closed on Thursday,
March 16. First Republic Bank (ticker FRC) closed trading that day at a
price of $34.27. The next day, Friday, March 17, First Republic closed at
$23.03 – a plunge from the day before of 33 percent. Yesterday, First
Republic closed at $14.60 – a decline of 57 percent from where the stock
closed on the day the Dimon & Cohorts’ deal was announced. (Remind me,
again, how this constitutes a “rescue”?)

S&P Global was so unimpressed with this “rescue” that the Sunday after the
deal was announced, on March 19, it cut the credit rating of First Republic
Bank three notches and deeper into junk status. Again, not the stuff of

This would not be the first time that Wall Street On Parade has caught the
New York Times brazenly attempting to write a revisionist history of the
financial calamities that have ensued as a result of the repeal of the
Glass-Steagall Act. We have repeatedly asked the New York Times’ management
to correct the mountain of errors that appeared in a 2012 Andrew
Ross-Sorkin revisionist history of the crisis of 2008 and the role that the
repeal of Glass-Steagall played in it. There is no debate about these
egregious errors. There is only the question as to why the New York Times
refuses to correct them.
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