Faces of the financial crisis: Where are they now? (Banker edition)

July 31, 2018 10:00 PM

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Jamie Dimon and Lloyd Blankfein are still in their old jobs and Dick Kovacevich is a fixture on CNBC. But other crisis-era CEOs have kept low profiles, and many of them have failed to come to grips with the roles they played in the near-collapse of the U.S. economy. Read on.

Richard Kovacevich, ceo of Wells Fargo & Co. in Dallas, TX on September 23, 1999. Photographer: Paul Howell. Bloomberg News.

Paul Howell/Bloomberg News

Richard "Dick" Kovacevich

When the crisis hit, Richard “Dick” Kovacevich had recently retired as Wells Fargo’s chief executive. But as chairman of the board, he often still served as the public face of the San Francisco bank.

Wells drew praise for dodging many of the mortgage market pitfalls that befell other big banks, and its purchase of Wachovia catapulted the San Francisco company into the industry’s top tier.

Kovacevich soon emerged as a vocal critic of the federal government’s response to the crisis. Wells received $25 billion under the Troubled Asset Relief Program — funds that were repaid in late 2009 — even though Kovacevich insisted that his bank didn’t need the money.

“Shortly after TARP, the stock market fell by 40%,” the outspoken former CEO said in a 2013 interview. “And the banking industry stocks fell by 80%. How can anyone say that TARP increased the confidence level of an industry, when its stock market valuation fell by 80%?”

Seven years after Kovacevich retired as Wells’ chairman, the bank’s phony- accounts scandal came into public view. That black eye and subsequent revelations of misconduct at the bank have led to re-evaluations of Kovacevich’s legacy, because he was seen as more responsible than anyone else for building the bank’s aggressive sales culture.

Since his retirement from Wells Fargo, Kovacevich has served on the boards of Cargill, Target, Cisco Systems and Theranos, the embattled health care startup whose founder now faces fraud charges.

Kovacevich also makes frequent appearances on CNBC, where he provides commentary on the economy, banking regulation and other topics.

Wachovia Corp. CEO Ken (Kennedy) Thompson listens during an interview at Bloomberg headquarters in New York, December 7, 2004. Wachovia Corp., the fourth-biggest U.S. bank, plans to open 100 branch offices a year as it expands into Texas and certain markets on the East Coast, Thompson said. Photographer: Jonathan Elmer/Bloomberg News.

JONATHAN ELMER/BLOOMBERG NEWS

Ken Thompson

“Here is my promise to you. Like the Hippocratic oath, we will do nothing to screw up that model. We will only add to it."

Ken Thompson uttered those infamous words in May 2006 while defending Wachovia’s decision to buy Golden West Financial, a San Francisco lender that focused heavily on option adjustable-rate mortgages. Thompson, who had previously shown restraint as an acquirer, agreed to pay $26 billion for Golden West in a deal that was hurriedly assembled while he juggled responsibilities of hosting a professional golf tournament that Wachovia was sponsoring.

The deal was the beginning of the end for Wachovia. Losses piled up as homeowners turned in their keys instead of making payments on underwater mortgages. Legal settlements and securities losses spiked. Thompson was ousted in June 2008, shortly after a contentious shareholder meeting. He was replaced by Robert Steel, a former Treasury Department official.

Wachovia was on the verge of failing in September 2008 when the FDIC intervened and arranged for Citigroup to buy Wachovia’s retail bank. Then Wells Fargo, which had a squeaky clean record at the time, swooped in and agreed to buy the entire company for $15 billion.

Less than a year after leaving Wachovia, Thompson joined Aquiline Capital Partners, a New York private equity firm, as a senior adviser and eventually became one of the firm’s principals.

Aquiline had bought a sizable stake in BNC Bancorp in High Point, N.C., after the crisis, the proceeds of which were used to roll up struggling banks, and Thompson joined the company's board in 2011, serving as Aquiline’s representative.

BNC sold itself to the Pinnacle Financial Partners in Nashville, Tenn., early last year. Thompson now serves on the $23 billion-asset company's board.

“We’re bringing….leading technology, analytics and governance experts together to create a solution that will make lenders competitive quickly, while transferring critical know-how so that they become self-dependent in the long run,” said Vikram Pandit, chairman of EXL and former CEO of Citi.

Andrew Harrer/Bloomberg

Vikram Pandit

Vikram Pandit took the helm of Citigroup in late 2007, the same year it bought a hedge fund that he had co-founded. Citi had begun to disclose the extent of its crippling mortgage losses, and his successor, Chuck Prince, had just resigned. Pandit led the bank through the financial crisis and three federal bailouts that totaled $476 billion in cash and guarantees — and for a while made Uncle Sam a 36% shareholder.

At a Congressional Oversight Panel hearing in 2010, he blamed short-sellers — not a lack of capital or funding — for the need for government intervention.

That argument was met with skepticism. "So … Citi had back luck?" asked Elizabeth Warren, then a professor who chaired the panel.

Yet Pandit slowly guided Citi back to profitability and oversaw the repayment of its bailout funds. In 2009 he pledged to take $1 in salary and bonus until Citi made money again, and it did so starting in the first half of 2010; the board would restore his compensation the next year.

Pandit touted his management team’s de-risking efforts and a return to core banking in that 2010 panel hearing.

"We have sold more than 30 businesses and substantially scaled back proprietary trading,” he testified. “Citi is a better bank today, but for Citi, being better is not good enough."

His work at Citi wasn’t good enough for his doubters, either. He was second-guessed by regulators, lawmakers and industry observers. He resigned in 2012 as Citi chief and was replaced by Michael Corbat.

Since then, Pandit has enjoyed a second life as an investor in financial startups. The Orogen Group, an investment firm he leads, said this spring that it was investing $100 million in Fair Square Financial, a credit card issuer that targets consumers with blemished credit. He recently warned about swift technological changes that would reshape financial services and put 30% of bank jobs at risk. "I see a banking world going from large financial institutions to one that's a little bit more decentralized," he said.

John Mack, former chairman and CEO of Morgan Stanley.

Chris Goodney/Bloomberg

John Mack

The push to save Morgan Stanley began in earnest when another venerable Wall Street investment bank, Lehman Brothers, filed for bankruptcy on Sept. 15, 2008.

“I knew that Morgan Stanley would be next in line,” then-CEO John Mack later recalled.

During the harrowing week that followed, Mack implored Morgan Stanley employees to remain focused on their clients. He desperately tried, in vain, to line up emergency financing from Chinese or Japanese investors.

And he stared down Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke and New York Fed President Timothy Geithner, who were pressuring him to arrange what would have been a fire sale, in order to avoid the bloodbath they feared was coming when markets opened on Monday, Sept. 22.

In a 2009 speech, Mack recalled what he said at the end of a tense phone call with Paulson, Bernanke and Geithner: “I have the utmost respect for the three of you. What you do for this country makes you patriots. But I have 45,000 employees. I won’t do it. I’ll take the firm down. Click.”

On the evening of Sept. 21, Morgan Stanley got the lifeline that it needed. The Fed announced that Morgan Stanley and Goldman Sachs would become bank holding companies, instantly providing the two firms with new sources of liquidity.

Mack stepped down as Morgan Stanley’s CEO on Jan. 1, 2010, and he relinquished his chairmanship two years later.

More recently, Mack has served as a board member at several fintech companies, including LendingClub and Lantern Credit.

James Dimon, chief executive officer of JPMorgan Chase & Co., pauses during a Bloomberg Television interview at the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday, Jan. 18, 2017. World leaders, influential executives, bankers and policy makers attend the 47th annual meeting of the World Economic Forum in Davos from Jan. 17 - 20. Photographer: Simon Dawson/Bloomberg

Simon Dawson/Bloomberg

Jamie Dimon

There is perhaps no detail more telling about Jamie Dimon’s tenure at JPMorgan Chase than the fact that, a decade after the crisis, he’s still at the helm.

He is the rare crisis-era CEO who, barring any unforeseen surprises, will have the opportunity to someday leave on his own terms.

Still, while Dimon’s title has remained the same, the $2.6 trillion-asset company he runs has changed immensely over the past decade. That’s due, in part, to a pair of acquisition JPMorgan made as the housing market was crashing.

With the assistance of the Federal Reserve, JPMorgan in March 2008 bought Bear Stearns, as the storied investment bank that was on the brink of collapse. Six months later, it acquired the failed Washington Mutual Bank.

Those deals came back to bite Dimon, as the problems JPMorgan inherited were a big reason the bank in 2013 wound up paying a record $13 billion settlement with regulators over the sale of faulty mortgages.

Dimon’s reputation was bruised in other ways, as well. In the spring of 2012, for instance, JPMorgan’s $6 billion London Whale trading loss became a symbol of risky behavior and lax controls at big banks.

But Dimon survived — and kept his company profitable throughout the tumult. Over the past year, JPMorgan has embarked on a new phase of growth, announcing a 400-branch expansion in several major East Coast markets. It also launched a digital-only bank for millennials.

Dimon has also come to embrace his role as the industry's elder statesman, taking the lead in several public policy debates as the head of the Business Roundtable, an influential corporate lobbying group.

Amid chatter about his political ambitions, Dimon, 62, made it clear in January that he’s staying put at JPMorgan for five more years.

James "Jimmy" Cayne, former chairman and chief executive officer of Bear Stearns Cos., testifies at a Financial Crisis Inquiry Commission (FCIC) hearing on shadow banking in Washington, D.C., U.S., on Wednesday, May 5, 2010. Cayne blamed market forces and loss of confidence in his firm for its collapse in 2008. Photographer: Joshua Roberts/Bloomberg *** Local Caption *** James Cayne

Joshua Roberts/Bloomberg

James "Jimmy" Cayne

Jimmy Cayne has the dubious honor of being at the helm of the first large financial institution to go down during the financial crisis.

The company he led, Bear Stearns, was ahead of the trend as it teetered in early 2008 due to a liquidity crisis. The government intervened in March by helping to arrange a sale to JPMorgan Chase for just $2 a share in what it hoped would put a damper on the crisis — a move that worked for a time.

Cayne was already gone by then having been ousted as CEO in January, and he sold his entire stake in the firm on March 27. He was named by Time magazine as one of the 25 people most to blame for the financial crisis.

Though gone from Wall Street, Cayne has not managed to stay away from scandal. He is a competitive bridge player — he was often criticized for participating in bridge events as Bear Stearns was imploding — and in 2015 two of his teammates were accused of cheating during a bridge tournament.

His wife, Patricia, told The Wall Street Journal earlier this year that Cayne was retired and “doing what he loves—playing bridge.”

Kerry Killinger, former chief executive officer of Washington Mutual Inc., arrives to testify at a Senate Homeland Security and Governmental Affairs subcommittee hearing into the company's collapse in Washington, D.C., U.S., on Tuesday, April 13, 2010. Killinger said his company became the largest bank failure in U.S. history in part because it was excluded from a group of financial institutions favored by U.S. policy makers. Photographer: Jay Westcott/Bloomberg *** Local Caption *** Kerry Killinger

Jay Westcott/Bloomberg

Kerry Killinger

No bank in U.S. history grew as rapidly and failed as spectacularly as Washington Mutual Bank under Kerry Killinger.

When Killinger took over as CEO in 1990, the Seattle thrift company had less than $10 billion of assets and had little name recognition outside of the Pacific Northwest. A dozen years and a dizzying number of acquisitions later, WaMu had become one of the nation’s largest financial institutions, with nearly $240 billion of assets a network of branches and mortgage offices that stretched from Seattle to Houston to New York.

Home loans, many of them made to subprime borrowers, accounted for nearly 80% of WaMu’s loans by the time housing crisis hit. The losses kept piling up and a $7.2 billion cash infusion from the private equity group TPG Capital in early 2008 wasn’t enough to save Killinger’s job, or the bank. Killinger was removed as chairman in June 2008 and three months later he was forced out as CEO. The bank failed on Sept. 25, 2008, and its assets were taken over by JPMorgan Chase. It was the largest bank collapse in U.S. history.

In 2011, the Federal Deposit Insurance Corp. sued WaMu executives, accusing them of making reckless loans while ignoring warnings of a housing bubble and then transferring their wealth to their wives as the housing market was crashing. The FDIC sought $900 million in damages and later settled for about $65 million.

A 2012 book detailing the bank’s collapse said that the failure might have been avoided if Killinger had acknowledged the loan problems sooner and communicated them to employees, directors and regulators. But Killinger disputed that characterization and said in open letter to friends and family that the book ignored “the many steps the [bank’s] board and management took to reduce the company’s exposure to the housing market.”

Killinger, 69, spends most of his time these days running his Seattle-based foundation, according to recent media reports. The foundation focuses on higher education, affordable housing and social and racial injustice, according to its website.

Kenneth "Ken" D. Lewis, outgoing chief executive officer of Bank of America Corp., addresses employees during an event with incoming CEO Brian T. Moynihan, unseen, at the McGlohon Theatre at Spirit Square in Charlotte, North Carolina, U.S., on Thursday, Dec. 17, 2009. Bank of America Corp., the biggest U.S. lender, promoted Moynihan to CEO, opting for an insider to repair the company after the tumultuous takeover of Merrill Lynch & Co. prodded Lewis into early retirement. Photographer: Jason Miczek/Bloomberg *** Local Caption *** Kenneth "Ken" D. Lewis

Jason Miczek/Bloomberg

Ken Lewis

"We all know it is easier and more profitable to expand existing relationships than to build new ones."

Ken Lewis made that statement in February 2007 during a high-profile investor day at a Florida resort dedicated to showing shareholders that Bank of America no longer needed acquisitions to grow. Rather, he expressed confidence in the “embedded opportunities” that already existed.

Just two months later, BofA bought LaSalle Bank in Chicago for $21 billion. Within a year, it had acquired Countrywide Financial for what ended up being $2.5 billion, and during the darkest days of the financial crisis, it paid $21 billion for the embattled Merrill Lynch.

Those deals were a reversal of ideals he had expressed before the crisis.

“I’ve had all the fun I can stand,” he said of investment banking in early 2007. Of mortgages, Lewis once said he “liked the product but not the business."

Countrywide was a major disaster, costing the bank more than $50 billion in regulatory settlements. Lewis also faced claims that BofA misled investors over mounting losses and executive bonuses at Merrill before the deal closed.

Lewis quickly went from being the white knight of the financial crisis to becoming one of its punching bags. He was ousted as Bank of America’s chairman at its 2009 annual meeting; a hurried retirement took place at the end of that year.

Lewis has kept a low profile since. He sold his Charlotte, N.C., home in 2013 and a South Carolina vacation house a year later. He had been involved with a charity that provides solar panels to villages in Africa and he donated $1 million to create a chair in physical therapy at his alma mater, Georgia State University.

In March 2014, Lewis reached a settlement with the New York attorney general under which he agreed to pay a $10 million fine and not serve as an officer or director of a public company for three years. He did not have to admit wrongdoing as part of the settlement.

Angelo Mozilo, chief executive officer of Countrywide Financial Corp., testifies at a hearing of the House Oversight and Government Reform Committee on severance packages for executives involved in the subprime mortgage crisis, in Washington, D.C., U.S., on Friday, March 7, 2008. Mozilo, who left Countrywide upon it's acquisition by Bank of America in July 2008, may now be the target of a civil-fraud claim by the Securities and Exchange Commission. Photographer: Jay Mallin/Bloomberg News

JAY MALLIN/BLOOMBERG NEWS

Angelo Mozilo

Before Countrywide Financial got burned for peddling high-risk mortgages to unsuspecting borrowers, its founder and CEO, Angelo Mozilo, was a Wall Street darling.

Mozilo built Countrywide into the largest mortgage lender and servicer by touting homeownership to the masses. He originated so-called "exotic mortgages" — subprime adjustable-rate and stated-income loans loaded with fees and penalties — that were bought by Wall Street investment banks, packaged into securities and sold all over the globe.

When the liquidity crisis hit in 2008, many borrowers could not refinance their high-priced loans at lower rates. Defaults skyrocketed. Mozilo was forced to sell Countrywide in a fire sale to Bank of America.

In 2009, the Securities and Exchange Commission accused Mozilo of using insider information to sell $140 million in stock. He was permanently barred from the industry and ordered to pay $67.5 million in penalties (most was paid by insurance). The Justice Department dropped a fraud case against him in 2016.

Throughout the crisis Mozilo was unrepentant. In testimony to the Financial Crisis Inquiry Commission in 2010, he called Countrywide "one of the greatest companies in the history of this country."

Mozilo, who used to drive a gold Rolls-Royce and yellow Lamborghini Gallardo, and flew in a Gulfstream V, is keeping a much lower profile these days.

In 2011, he sold his Thousand Oaks, Calif., home in the Sherwood Country Club Estate for $3.4 million. His wife of 50 years died last year.

Mozilo reportedly lives in a beach house near the Montecito Country Club in Santa Barbara, Calif.

John Thain and Stan O'Neal

Stan O’Neal and John Thain presided over the demise of Merrill Lynch, perhaps the nation’s most iconic investment bank, but their careers after the crash followed radically different paths.

O’Neal’s was an all-American story. A rare example of an African-American making it big on Wall Street, he advanced from General Motors assembly line to CEO of “Mother Merrill.” O'Neal, who joined Merrill from GM in 1986, was appointed CEO in 2001. The firm reaped huge profits in his first five years but ran into trouble by investing heavily in subprime mortgage bonds, then deepening its position as other firms began pulling back in 2006.

He precipitated his downfall by seeking to sell Merrill to Wachovia and Bank of America before first informing the board. Ironically, less than a year later, Thain was lauded for selling Merrill to Bank of America.

O’Neal never got the chance to run another company, but his fall was cushioned by a golden parachute payout estimated at $161.5 million. Just 56 at the time of his resignation, O’Neal went on to serve as a director at Arconic, an Alcoa spinoff. He joined Alcoa's board in 2008.

Thain entered the saga in December 2007, when Merrill Lynch tapped him to replace O'Neal. The choice seemed a natural, given his role shepherding the New York Stock Exchange through its initial public offering in 2006.

Thain’s tenure was short, though. Days after Merrill’s sale to BofA closed on Jan. 1, 2009, he resigned from under a cloud, upended by revelations of a million-dollar office renovation, as well as billions paid out in eleventh-hour bonuses to Merrill personnel. On top of that, Merrill's losses for the fourth quarter of 2008 had come in significantly higher than expected.

Though Thain's reputation took a beating, he managed to recover. CIT hired him as CEO in 2010. Before stepping down in 2016, he returned the company to profitability and engineered its acquisition of OneWest Bank. Last fall, he joined Uber's board following the departure of founder and CEO Travis Kalanick.

Richard Fuld, former chairman and chief executive officer with Lehman Brothers Holdings Inc., listens during a House Financial Services Committee hearing on the Lehman Brothers bankruptcy in Washington, D.C., U.S., on Tuesday, April 20, 2010. Lehman, which filed the biggest bankruptcy in U.S. history, violated its own risk-management rules with the knowledge of the U.S. Securities and Exchange Commission, a bankruptcy examiner said. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Richard Fuld

Andrew Harrer/Bloomberg

Richard "Dick" Fuld

Once nicknamed “the gorilla of Wall Street,” former Lehman Brothers CEO Dick Fuld had been the longest-tenured chief executive on Wall Street when the crisis struck. Under Fuld’s leadership, Lehman became one of the first Wall Street firms to wade into the subprime mortgage business.

Lehman’s holdings in subprime and low-rated mortgage tranches ultimately lead to massive losses when housing prices started declining, and the firm’s bankruptcy filing in September 2008 is still the largest in U.S. history. After an infamous congressional appearance later that year, Fuld emerged as one of the villains of the crisis. An examiner’s report in 2010 revealed the firm had regularly used accounting gimmicks to make its finances appear more solid than they actually were.

Fuld returned to Wall Street not long after Lehman’s failure. In 2009, he launched a business development and capital management advisory firm, Matrix Advisors LLC, and in 2016 he founded an asset management firm, Matrix Private Capital Group.

He has made few public appearances since Lehman’s collapse, but he surfaced in 2015 to deliver the keynote address at a New York financial services conference. During that speech, Fuld laid the blame for the crisis on lax government regulations and homeowners who used equity in their homes “as ATM accounts," and said that Lehman might have survived the crisis if it had had been “mandated into bankruptcy.”

When asked at the conference why he didn’t just ride off into the sunset after Lehman’s collapse, Fuld responded, “Why don’t you just bite me?”

He has apparently not delivered any keynote addresses since.

Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc., listens during an interview hosted by Politico in Washington, D.C., U.S., on Thursday, June 13, 2013. Blankfein said debate about when the Federal Reserve will raise interest rates may help avoid "a jarring surprise" to markets. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Lloyd Blankfein

Andrew Harrer/Bloomberg

Lloyd Blankfein

Lloyd Blankfein is set to retire this fall after 12 years as chairman and CEO of Goldman Sachs, but his run might have been much shorter if the federal government and Warren Buffett hadn’t helped the investment bank weather the financial crisis.

When credit markets seized up in September 2008 and Goldman suddenly had limited access to capital, the company hurriedly converted to a bank holding company so it could accept a $10 billion infusion from the Treasury Department’s Troubled Asset Relief Program. (Blankfein’s predecessor at Goldman, Henry Paulson, was Treasury secretary at the time.)

“We believe that Goldman Sachs, under Federal Reserve supervision, will be regarded as an even more secure institution with an exceptionally clean balance sheet and a greater diversity of funding sources,” Blankfein said at the time.

Separately, Buffett’s Berkshire Hathaway bought $5 billion of preferred stock in Goldman. The investment paid Buffett a healthy 10% yearly dividend, but also signaled to the market that Buffett thought Goldman would survive.

The investments did help prop up Goldman, and its status as a bank holding company paved the way for it to enter a new line of business — consumer banking.

In 2015, Goldman bought roughly $16 billion of retail deposits from General Electric and a year later launched an internet-only bank to gather more retail deposits. It also recently started an online consumer lender — dubbed Marcus in honor of founder Marcus Goldman —that has originated more than $3 billion of loans.

Blankfein, 63, announced in July that he would step down as CEO on Oct. 1 and relinquish the chairman’s title at the end of year. He will be replaced by President and Chief Operating Officer David Solomon.

John Kanas and Wilbur Ross

BankUnited wasn’t the largest bank to fail during the financial crisis, but its revival was one of the era’s most compelling stories thanks to the high-profile names who engineered it and the sweet deal they received from the federal government to make it happen.

With billions of dollars of toxic mortgages on its books, the $13 billion-asset thrift in Coral Gables, Fla., was seized by regulators in May 2009 and sold to a group of investors led by veteran banker John Kanas and the billionaire private equity investor Wilbur Ross for about $940 million.

As a condition of the deal, the FDIC agreed to absorb 80% of the first $4 billion of BankUnited’s losses on soured loans and 95% of further losses. (The buyers retained the bank’s name.) The loss-sharing agreement was among the most generous of the crisis, and it was significant because it encouraged more PE groups to bid on failed banks.

“It broke the logjam and helped [the FDIC] clean up a long line of failed banks in the U.S.," Kanas told the Palm Beach Post in 2012.

With the FDIC absorbing the lion’s share of losses on mortgages, BankUnited quickly shifted its focus to commercial lending. Kanas, who had previously been the CEO of North Fork Bank on Long Island before selling it Capital One, took BankUnited public in 2011 and expanded into the New York market soon after. By 2014 Ross and other PE investors, which included the Carlyle Group and the Blackstone Group, had cashed out after more than doubling their investments.

Kanas, 71, stayed on as BankUnited’s CEO through 2016 and remained chairman at the end of last year. Under a consulting agreement he has with the bank through the end of this year, he still devotes half his time to meeting with clients, employees and his successor, Raj Singh.

Ross, now 80, went on to become a key economic adviser to Donald Trump during his campaign for president. He is now a member of Trump's cabinet, serving as commerce secretary.

Laura Alix, Dean Anason, Kate Berry, Rob Blackwell, Kristin Broughton, Paul Davis, Andy Peters, John Reosti and Kevin Wack contributed to this slideshow.