Grubstakers - Episode 160: Sandy Weill and Citigroup (Part 1)

Episode Date: April 29, 2020

The first part of our 3 part series exploring the saga of Citigroup, the first American bank to become too big to fail. We follow the career of its billionaire CEO Sandy Weill: a rich kid from Brooklyn who had a dream to climb the corporate ladder by smashing up a million people's pensions, health benefits, salaries, and then to make a corporate monstrosity that would cook up fake documents to steal their house as well. When we talk about too big to fail banks we are talking about government sponsored entities. These are "private" banks run by private boards of directors that pay the profits to private individuals but are almost entirely funded with public (taxpayer) money. This series will study how this strange system came to be and hopefully motivate enough people to demand it end. The primary source for this episode was the biography "Tearing down the Walls" by Monica Langley: https://www.barnesandnoble.com/w/tearing-down-the-walls-monica-langley/1023673999

It's the kind of thing that makes the average citizen puke. I look at this system and say, yeah, you know, what's going on? I don't know anything about this man except I've read bad stuff about him. And I don't like, you know, I don't like what I read about him. We are more than just one coin. We create the world around this coin. Cop. Invention. Cop. Cop. In 5, 4, 3, two, the evil has gone.

Hello, you're listening to Grubstakers, the podcast about billionaires. My name is Sean P. McCarthy, and I'm joined today by my co-hosts. Steve Jeffers. Yogi Poliwal. And so what we wanted to talk about today is, well, the too-big-to-fail banks. We wanted to continue to talk about this topic in the wake of the coronavirus bailouts, which we previously did an episode on. But what we specifically wanted to talk about with regards to the too big to fail banks is the fact that without anybody noticing, and without really much public commentary, these private too big to fail banks have all become

primarily funded with public money. Sean, are you saying that somehow the banks have duped us into thinking that their private entities are somehow being funded by our public wealth? Well, it's like, it's so weird to me because, again, this has happened with very little public commentary, but we've essentially, in the U.S., we've set up the worst of the U.S. financial system with the worst of the Soviet Union. So, you know, these things are basically government-sponsored entities at this point. I think that's fair to say.

And what I wanted to talk about with regards to the six largest banks in the U.S., because, you know, people hear this term, too big to fail. They don't always know what it means. We should just go through. As of 2012, in order, the six largest banks in the United States are JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley. And, you know, these people are run by supposedly swashbuckling capitalists. But this is really a government project at this point. And I think

that should hopefully at least, it should spark outrage. But what I wanted to do with this podcast is go through and talk about all six of them. And you know, in addition, there's also banks like Deutsche Bank and Barclays and such, which could also be considered too big to fail. But I think primarily, we're talking about the big six in the U.S. But what I wanted to do with this podcast is, throughout the course of this year, kind of go through these six and just talk about what happened. Because these were private institutions at one point.

They were banks that would live or die on their own wits and trades, but now they just can't fail. They have a massive public backstop, and no matter what they do, they make money. The rule of the U.S. government is to support their asset prices. And today, I wanted to start with Citigroup, because Citigroup, you know, it's the third largest, but it was the first to set off this trend trend because Citigroup is the one that repealed the Glass-Steagall Law, which was created in 1933 during the New Deal, to separate banking functions and prevent these giant conglomerates from existing. I don't know, Sean. Criticize Citigroup? I mean, my Citibike membership, I just put $1,000 on, so I really don't want to jeopardize how i get around town look do you know how many people they had to illegally foreclose on to give

you those bikes do you know how much uh uh sinaloa cartel uh cocaine money they had to launder to get you one of those bikes you should be grateful to city group now now in addition to having the moral hazard of a important a systemically important financial institution going down we have to worry about big bike and their their control over the discourse surrounding city group do you know how much cocaine they had to smuggle in those little red umbrellas to get you those. I just like how they spell the word city with an I instead of a Y. It lets me know that they're not focused on the sometimes Y. They're focused on the always I.

Yeah. Right. And so what we're going to do with this episode is this is going to be a multi-parter. Part one is going to talk primarily about Sandy Weil and Citigroup. Sandy Weil is a billionaire. He's the Sandy Weil and Citigroup. Sandy Weil is a billionaire. He's the former CEO of Citigroup. He was the CEO of Citigroup until 2003. He was the chairman until 2006.

He kind of stepped down, then the whole thing blew apart in the 2008 financial crisis. But we're going to talk about his biography on this first part, and if necessary, we'll continue that biography on the second part and also talk a bit more about his family and then on the final part we'll talk about city group specifically the company you know particularly with regards to what they did in the 2008 financial crisis and also what's happening with them with this current crisis because you know WallStreetOnParade.com talks a lot about how Citigroup just quoting from their website Citigroup received at least 2.5 trillion in secret cumulative revolving loans from the Federal Reserve in the wake of the 2008 financial crisis they say Citigroup

received the largest bailout in global banking history. And not only that, you're seeing that again now with this current coronavirus pandemic, where Citigroup's share price in February traded at a high of about $78. As of this recording, it's trading about $43. We'll see if it changes throughout the weeks, but this is an almost 50% decline in share price. And in the 2008 crisis, Citigroup's share price went as low as 99 cents. And rather than nationalize it, the government just bailed them out. So, you know, you're just seeing this institution that was set up that cannot lose money.

The U.S. government policy is to keep this thing afloat, no matter what the cost. Yeah, in one of our earlier episodes where, when this financial crisis was first starting to become an issue, we went through what the Federal Reserve was doing. This is a lot like, like we said then, what's going on today is a lot like then, in that they have these huge multi-trillion dollar just standing facilities for banks to swap securities with the Fed at theoretically unlimited amounts. And some people will say, well, that was all fine because that's a loan and they paid it back, right? Well, maybe so, but Main Street doesn't get those types of discounts in the way that big banks and Wall Street do.

So it doesn't matter if it was a loan, it was all paid back. If you had all the small businesses that are applying today to the Paycheck Protection Program. Like, I mean, that's just been proven to be, like, a massively corrupt system where only the bank's largest or best customers get first access to the credit facilities, whereas the banks themselves have, like, unlimited access to these Federal Reserve programs. Yeah, like, everybody who kind of concerns trolls about, oh, it's just a loan, like,

I would love to take a loan at a 0.25 interest i will take as much money as you will give me at 2.25 interest because i'll just stick that shit in the stock market and pay you back at a profit and then you know the other thing is uh there's in economics there's the concept of liquidity premium where especially in a financial crisis, there is a dollar amount to being able to access cash, and that goes up during a financial crisis. So there is real value, even if these are, quote unquote, just loan. But you know, in many cases, it's also asset purchases and, and all these other things. And I did just want to mention, I'm quoting from CNBC, there was a pair of PhD students at the

University of Missouri, Kansas City. They tried to assess the total size of the Fed's Federal Reserve's commitments in 2008, not just loans, but also asset purchases. They came up with the figure of $29 trillion. So that is the total amount that the federal reserve dumped in in the 2008 financial crisis so that yeah i remember that report it was everywhere for a while and a couple like of um the modern monetary people were the ones who broke it like um casey is like a hotbed for that um uh theoretical tradition in economics. And yeah, I mean, where did all the money come from? Well, they just credited it onto computers of commercial banks.

How many trillions was it? 29? 29 trillion. Wow, that's fucking wild. What that is, it's like total credit extended that's only 14 trillion less than the british empire stole from india according to articles city group is like look put some bikes out there we got to make it look like we're doing something with this money okay uh but so again this the the subject of today is Sandy Weil, the first CEO of Citigroup, because Citigroup was originally called Citibank, and then it merged with Travelers Insurance. And Sandy Weil was first the first co-CEO, and then he pushed out the other guy. He became the first sole CEO of Citigroup.

So he's really the guy who sets this off. And in fact, I wanted to talk again briefly about Glass-Steagall. Again, this is a 1933 law preventing banks from entering into these securities and insurance business. It was passed in response to the Great Depression stock market crash because all these things were going wrong. And it kept financial crises mostly out of u.s life for uh 70 years and or you know 60 years and then they went back on it but what i

wanted to quote from in sandy wheel there's a new york times profile uh and they visit him in his office and i'm just going to quote from it on another wall hangs a hunk of wood at least four feet wide, etched with his portrait and the words, quote, the shatterer of Glass-Steagall, unquote. So he actually has a framed picture in his office lauding him as the man who shattered Glass-Steagall. Wow. The man that broke the Glass-Steagall. Yeah. And so again, Glass-Steagall is this New Deal era legislation which separates securities and insurance businesses from banks and also deposit-taking banks from investment banks.

And it's a very sensible piece of legislation and it prevented concentrated risk from building up in the U.S. economy, because the idea is that if one of these institutions fails, the taxpayer is not on the hook for bailing them out, because they are small enough to fail. But also, banks that take deposits are not engaging in risky investment banking and proprietary trading with subsidized deposit money because of course, depositor money in banks is insured and subsidized by the federal government. So it's a very sensible piece of legislation and repealing it has been a disaster.

And again, when we talk about the six too big to fail banks, JPMorgan Chase, JPMorgan merged with Chase after this legislation was repealed. This could not exist without this legislation being repealed. So Citigroup and Sandy Weil are really the people who set this chain of events in motion, and we're still facing and dealing with the consequences today. today yeah so in on november 12 1999 that's when the graham leach bliley act was passed which effectively uh repealed got the glastiegel act from the earlier banking act of 1933 and so by the time that was really finalized um the the effects were almost immediate. So commercial banks between roughly 2002 to 2007 ended up taking a lot of proprietary bets with money that was supposed to be there to secure their retail and commercial banking side.

And they got more and more risk and went into fancy products like uh credit default swaps and all those things that we uh you might be familiar with from some of our other episodes and uh there's a lot of sort of systemic risk that people um looking back they like to see like how could we have known but there are other economists like uh nasa uh nasa talib uh the author of the black swan book um where he's saying like you always expect to see a white swan but eventually you'll see a situation that's so unusual that um or or it's usual but we just choose to ignore it. And this is basically the latter case.

He's also the author of many tweets with the word imbecile in it. The last thing you see before you see that block screen. But so I wanted to kind of tell the chronological story about Sandy Weil, and this will mostly bring us up to the repeal of Glass-Steagall. We'll talk a little bit about how this legislation actually got repealed, the lobbying that was done by former President Gerald Ford and Jesse Jackson, interestingly enough, were two people who lobbied to repeal this legislation. Jesse Jackson, eh?

Yeah. What was his hand in this? Well, so Sandy Weil kind of used his fortune to fund a bunch of charities, and then Jesse Jackson became a friend of him through that, through his, I believe, Harlem charity investments. And then because a lot of community groups were understandably opposed to repealing Glass-Steagall, Jesse Jackson kind of leaned on them and leaned on members of Congress to support the repeal of Glass-Steagall.

It's an unfortunate mark on his legacy. You know, we certainly talk about philanthropy a lot on the show, but I don't think we ever really get into how much of a just straight ripoff the American taxpayer and just wellness in general, general philanthropy is. Because it doesn't seem to me that any person we've covered that has several charitable organizations does more good with the wealth they have than evil. Yeah. I mean, it's like it is really philanthropy is such a good deal for these billionaires

where not only do they launder their reputations, but they clearly buy influence and power. We've talked about it on the Bloomberg episode and some other episodes where if you're donating to these groups, you can use them to assert power. You can use them to lobby for your interests. They will be dependent on you

because they need your money. So they'll basically do what you ask them to do. And for many billionaires, their failed sons and failed daughters will end up being members on the boards of charitable organizations. And, you know, the notion that nepotism has ever ended is very funny to me. Because I think as a child, I did feel like, oh, you know, people don't usually get a job from who their parents are. And then now my eyes are so open to the fact that like, no, that is literally most of the reason some people get jobs. Yeah, certainly Sandy Weil's kids would both get multimillion dollar salaries at Citigroup. And that's kind of like the thing is we'll go through to kind of start the biography of sandy

while i would say up top his reputation is as a cost cutter you know he takes he's taken over a bunch of different companies he's come in there he's slashed pay he's slashed benefits he's got all the expenses down but it's like oh yeah you still managed to find uh you still managed to find room in the budget to give your fucking fail kids multi-million dollar salaries huh i guess that was a vital expense oh you you managed to find room in the budget to have your gulfstream jet and your uh nightly steak dinners and that's basically what it means to be a cost cutter is this guy you know eat who for a while ate at the four seasons every day you know steak lunches uh steak dinners. This is a guy who's

rich, multimillionaire, later billionaire, and he's the one who like slashes your 50k a year salary down 10% and throws you off of your health insurance plan. And that's how you get a good reputation on Wall Street. That's how you get a good reputation as a cost cutter is putting suffering onto other people so does he have corona we don't know if uh sandy wheel has corona yet please please say yes he was like he was a longtime cigar smoker so uh that study showing that uh tobacco prevents Corona might actually be going in his favor. We'll find out. Here it is again.

Big virus taken down big tobacco. Once again, we see how the pharmaceutical industry just wants to cut into that tobacco dollar that they've been so envious of this whole time. That would be great though. If like big tobacco just had a bunch of researchers on staff with nothing to do, and they're like, all right, let's get a fucking coronavirus study out there

before anybody knows what's going on. Like, yeah, nicotine prevents coronavirus. Come on. This is what we pay you for. But the one other thing I wanted to say about Sandy Weil before we get into kind of his chronological biography is he does define he's representative of a change in American capitalism. Because there was a period in American capitalism where the CEO of a company didn't just feel obligated to shareholders and to juicing next quarter's returns. You know, they had obligations to employees. They had obligations to stakeholders. You know, this had obligations to employees, they had obligations to stakeholders.

You know, this was partly by legislation, partly by culture. But Sandy Weil is one of the first CEOs to really pioneer the model of, I have zero obligation to anybody except for the shareholders in this company. And in fact, when he takes over, when he creates Citigroup, and he's initially co-CEO with the other CEO, John Reed, they have a lot of battles because John Reed was kind of more of an old school CEO. And he was focused on keeping the company going five years from now as opposed to the next quarter. He focused on having the employees have benefits and these sorts of things. And eventually, Sandy Weil pushes him out. And the focus on nothing but next quarter's returns dominates and eventually takes over the entire US financial system.

Yeah, he is a trailblazer akin to Lewis and Clark into the new wave of a CEO that only cares about profits and not about the people that work for them. Yeah. And also, he's a pretty gin soaked. Like I would say if I were to define his reputation in one sentence, it would be gin soaked cost cutter. Like, so I read this book. Gin soaked. Yeah. I read this book, uh, tearing down the walls by Monica Langley. She's a wall street journal reporter. She wrote a biography about Sandy Sandy Weil I read through it and this will be the

primary source for this episode but if you were to just control F the word gin in that book you would have hundreds of results because this guy like like these people have such a great reputation as like such business geniuses but his job seems to be to just go to lunch and then the waiters already know to give him a gin martini and then to refill it as soon as it disappears. So, you know, I mean,

he's just living madman life, man. What a life. Just eat fancy lunches and get to drink every day. And people treat you like you're a fucking king. So he had a steak and gin every day for like 30 years? Yeah. This guy disproves every single medical treatment we've ever studied.

He's just giving himself coronavirus for longevity. Well, the studies on how to live a healthy lifestyle are based off of his dietary habits. They found out everything not to do by everything this guy has done. But yeah, and so to kind of start the chronological biography of Sandy Weil, though one other thing I do want to mention is when we talk about him as cost cutting another strategy he comes up with is to push stock options onto employees which seems like you know seems like a generous thing to do it's it is something he talks up but it's also another way of cost cutting where a lot of uh we'll go through some representative examples but basically every single company he's ever taken over which which were a lot of them throughout his career, he pushes all sorts of different cash benefits out the window.

You know, he slashes your vacation days. He slashes your medical to shit. He cuts your pay. He lays off people. But then he gives you stock options. And this is his way of saying, you know, hey, now you're invested in the company. But really, it's taking a more expensive benefit and giving you a lesser benefit and saying, hey, I'm doing you a favor, you know? Right, right. The restaurant you work at no longer has bathrooms, but we're going to give you a water

bottle to pee in every now and then. I'm taking away defined benefits and giving you defined contributions. Basically, yes. But so, to start the chronological biography, again, this is based on the book Tearing Down the Walls by Monica Langley. Sandy Weil is born in 1933. He grows up in Bensonhurst, Brooklyn. Apparently, he was short and chubby. He was an easy target for bullies, who apparently sent him often scurrying to his mother's

protective skirts. Shy and reclusive. He made no close friends at school. And his only real friend growing up was his little sister, Helen. You see, I think the bullies kind of overdid it there. So they need to find a sweet spot.

So, I mean, usually the billionaires we cover, I think they didn't go far enough. But I don't know. Reading through some of his bio stuff, it seems pretty harsh. From a few of the articles I read on him, his name is Sanford I. While, and the I initial he says was his mother gave him the initial and intended on giving him a middle name that started with the letter I, but never got around to it and told him to create one for himself after the age

of 21. And I think the I stands for indefensible. They just, for the age of 21. And I think the I stands for indefensible. They have a tradition where they let the child name themselves. I don't know, but I came across it because at first I thought it was like Sanford the First. How do you say his last name, Sean? Weil. Weil.

So I thought it was like Sanford the First or something. And then I was like, for the first or something, and then I was like, oh, no, this is just the letter I. And the quote from him is that his mom wanted to give him a name with the letter I, but just never got around to it. And it's like, just don't have that be a part of your name then, you know? Yeah, his mom was like, yeah, mommy will give you a middle name after she finishes her gin and tonic, sweetie. She said that every day for 21 years.

This initial is a promise to give you a name later. Yeah, we're switching your defined benefit middle name to a defined contribution middle name. Yeah, you provide it later. But yeah, so he grows up in Bensonhurst, Brooklyn. His dad owns a steel importing business. It was the Super Deluxe Steel Plating Co. It had five plants across the country. This is the 1930s and 40s.

So his family was, you know, even throughout the Depression, relatively prosperous. His dad had a business. And basically, the long and short is that Sandy gets into Cornell. He originally majors in metallurgical engineering, though even before that, he goes to military school. Then he goes to Cornell. He majors in metallurgical engineering with the hopes of joining his dad's company you know go on that track route but uh instead he joins a jewish fraternity aepi and uh he starts to get a heavy schedule of alcohol and parties at night missed classes in the mornings and weekends full of dates, according to the Monica Langley biography.

So he starts to flunk all his engineering courses and he switches over to liberal arts instead, which, you know, is easier than metallurgical engineering. I don't like that this guy was a frat guy because he's got a face like a loser, if you know what I mean. Yeah. And also, it should just be noted that while he was at Cornell, he had a yellow Pontiac convertible and a credit card, both supplied by his father.

So he grows up a rich kid, is what I'm saying. Wait, what car did he have? A yellow Pontiac convertible. Oh, wow. And this is like mid-50s, mid-60s? Yeah and this is like uh mid 50s mid 60s uh yeah this is uh early early 50s his family his family owned a steel company so i mean yeah this is just over you're gonna be rich for the rest of your life right dad i need a newer model of convertible to offset my face. But yeah, so he graduates from Cornell, or actually, while he's still in Cornell,

something rather interesting happens to him. Just quoting from the biography here, his father sprang a stunning surprise. Leaving the house on the pretext of going for a pack of cigarettes, his father, Max, phoned his unsuspecting wife to tell her that he had long been having an affair with a younger woman and now he intended to divorce etta and marry his lover um and then his mother calls sandy and tells him about all this sandy and his sister drive out to confront their father and then the father reveals to them that he also sold the steel company so there's no job waiting for sandy and also his dad was having you know a long-term affair with a younger woman right yeah so you know these are these kind of formative experiences

that make you into a business asshole who seems to do nothing but think about his work and his job and care nothing for his family life and any other pursuits. I wonder what the number is on children of divorce versus children of parents with marriages still intact that become billionaires. Because it's not necessarily an even split by any regards, but I feel like we don't run into that many divorced parents as we do. I don't know, actually. Yeah, we'd have to go through and count it. I don't know. I mean, have to go through and count it i don't know i mean like there's no real theme i mean like there's bullying the theme uh you know some sort

of bullshit job whether it be paper routes or you know hustling is a theme but i don't know if necessarily happy parents versus or i mean uh parents in successful relationships versus parents that got divorced is a theme yet. Yeah, it's possible. Like, I don't know. Divorce is one of those life events that puts you on the pathway to if I can just get enough money, then that money could be set up into stacks and it will play catch with me kind of a thing. Yeah, perhaps. catch with me kind of a thing yeah perhaps but um you know and and then so in 1954 uh through his aunt sandy weill meets uh joan mosher they have their first date in 1954 they later get married

uh joan mosher's uh family is like a rich country club family uh her dad was in public relations and in like some i think in the forbes tidbit it said that uh sandy weill and his wife lived at their parents house for a while but what it doesn't say is that her parents lived in a fucking mansion so he had the spare room in a mansion um they get married they honeymoon in florida apparently on his dad's dime because his dad wanted to make up for like hey son sorry i was banging this 24 year old for your entire adolescence um but you know and then that kind of brings you through he graduates from cornell with a liberal arts degree and he gets a job in 1955 he gets a job at bear stearns as a runner um and back in those days the uh the wall street runners would like take

stock certificates and orders and run them to back and forth from the floor of the exchange or wherever else and this was sandy wild's first job for about 150 a week in 1955 that's where that's where they took interns and they raced them. And then the winner gets to keep their job. Really? That happened? Yeah. No, it didn't. Wow.

Oh. Steven, I just believe your cold, cold demeanor. Those blood red eyes just scream truth. Yeah, Jordan Belfort would innovate the intern race by using little people instead of interns. Runner. Oh, fun fact. So stock certificates, physical ones, are still the basis of most stock trades yeah so whatever stock people are buying on their electronic trading accounts um right there's still one call there's like there's like two depository companies that basically handle all of the paper certificates for like all stocks.

Yeah. There's one company, this thing is called Seed & Co. Yeah, it's been around for like 100 years. How do we invest in those companies? What? How do we invest in the companies that run the runners? Because I feel like they'll be around recession or not. There might still be runners, I don't know.

Runners are all classified as essential workers during coronavirus running back and forth because the law says they got to deliver the physical certificates 80 casualty rate right but so the uh the his first job bear stearns runner he does that for about a year he he takes the brokerage licensing exam he becomes a broker and then not too long after in 1956 he moves to a different company called burnham and co which was a jewish firm run by iw burnham and then in 1960 sandy we Weil opens his own firm. And the story of that, again, from the Monica Langley biography,

he goes into business with his neighbor and two other brokers, so it's four of them. The four young partners each contributed $60,000 for a total of $240,000, enough to buy a seat on the New York Stock Exchange. For $160,000 for a total of $240,000, enough to buy a seat on the New York Stock Exchange. For $160,000, rent a tiny office and hire one secretary.

To fund his share, Sandy went to his mother. She lent him $30,000, and Sandy used all but $1,000 of his and Joan's savings, money they had set aside to buy a new house to make up the rest. In 1960, May 1960, the new firm, Carter, Berland, Potema, and Weil, opened on 37 Wall Street. So this is kind of like their own little firm. It starts out in 1960, a good year for the stock market. But quoting from the book again, Peter Potema was, again, one of the four partners. He was the, quote unquote, wild card among the four founders.

And then quoting here, his rich father-in-law sent Carter Burland a significant chunk of business. So, you know, again, what you're kind of getting from this story is there is certainly some measure of analytical skill and mathematics here. But really, it's also like, oh, hey, I met a rich neighbor. And oh, hey, I met another guy who is a rich father in law who's going to steer the business to our new firm that is going to allow us to get through the early years. So they survive on the early years because one of the partners has a rich father in law. I mean, that's why you need to survive. Hey, are you married to anyone whose dad's richer than your dad? I bet we could survive.

And, you know, and then the early years, I'm just going to kind of skip through it because, you know, the bulk of the story happens later on. But Arthur Carter, one of the partners, according to his secretary there,

Arthur Carter has at least one secretary in tears every day. That's a quote. Wow. So, you know, this is, again, madmen culture of the 60s, but very impressive to bring a secretary to tears every day at your little shitty fucking stock research firm. Does he like, he like cites that stat? He's like, oh, he walks in, one day he walks in and nobody's crying he's like what the hell is going on here no laughing it's like he's like a sabermetrics guy for like making secretaries cry

so it's like yeah you know if if they're like cry vomiting that's actually just as good as a regular abuse cry so i've been I've been poisoning the secretaries. One thing I found out about Joan Mosher is that their first date was April Fool's Day, 1954. And it went so well that Sanford told his friend he was going to marry her. And then she actually was the one who proposed to him. Which, I mean, not like crazy, but but girl wanted it if you know what i mean pretty progressive for a guy who was in a

no woman allowed golf club until like 2002 but so the new firm their first real break is in the 1960s they do a research report about insurance companies that are sitting on cash that could be dispersed to shareholders. You know, they had like big piles of savings and they're like, oh, if we if other banks were to launch takeovers of these insurance companies, they could pay out to their shareholders instead of just hoarding this cash. And so this trend actually launches a wave of mergers throughout the 60s. Eight of the 10 insurance companies they identify in their research report get taken over. There's congressional hearings, an SEC investigation, and the laws are changed to put a stop to this. But for their trouble, the firm, they go into business with a company to raid an insurance company called Reliance and Carter

Burland and while they reap $750,000 as a finder's fee and another $47,000 commission. And they also kind of make their reputation on Wall Street. And at this point, it's called Carter Burland and while because one of the founders with the rich father inin-law has been pushed out, and then the Carter guy also gets pushed out. And, you know, it'll change names a bunch. But the important change here is that then it becomes Kogan Burland while at Levitt, and Levitt is important because that's Arthur Levitt. He joins and becomes a partner. They hire him.

They make him a partner. Arthur Levitt is a future advisor to the Carlisle Group, and more importantly, he's the SEC chairman from 1993 to 2001 throughout the entire Bill Clinton administration. So basically, when we talk about the Glass-Steagall repeal, which was, of course, done under Bill Clinton, the head of the SEC was partners in the company with the guy who got Glass-Steagall repealed. So you just can't imagine there's any sort of regulation here where this guy is supposed to be the top cop on Wall Street at the SEC, but it's like, no, yeah, I used to be in business with that guy. He's a solid dude. But the only effective regulation you can have for interpersonal things like that

is just to know that it would look bad to hire someone like that to run the SEC. But that would imply you have some principles that keep you from doing that. Yeah. Right, and so, you know, then there's the 60s boom, then there's kind of a 70s slowdown. The new firm, it's called CBWL for short. It buys out another firm called Hayden Stone, and then it goes public in 1971.

They dump their cash, and quoting from the, or they dump their stock shares. They go public in 1971, they dump their shares. Intentionally or not, Sandy and his partners had picked precisely the right moment

to sell stock in their company. Shortly after the initial public offering, the stock market turned down and stayed down for the next few years. The shares that had sold for $12.50 per share eventually hit a low of $1.63. So the 71 IPO and they all dumped their shares and they're, you know, at this point, very wealthy people, or at least relatively wealthy throughout the 70s and onwards. So do they think it was a pump and dump? Do they think that they got it to the IPO it was and then once they sold, the shit crashed and they think it was a pump and dump? Do they think that they got it to the IPO it was

and then once they sold, the shit crashed and they knew it? Because that's what the intentional or not thing is, right? It seemed like they had an exit strategy, like most serial entrepreneurs would. It kind of looks like a pump and dump because it just plummeted after that but i don't know if they're planning anything right right and this other company takes over hayden stone this is where he kind of like sets up his playbook sandy wild because as we mentioned

earlier he was like a shy guy not very charismatic but he gets a reputation for digging through public filings of all these companies and really getting into the numbers. And so he takes over Hayden Stone. He puts 10% pay cuts across the board. He actually hired a chef at one point, but he had to fire his chef, sadly. But, you know, so this is kind of where he gets his playbook going. And this follows throughout the 70s, because, you know, there's this crash in the 70s and that's actually a great buying opportunity where the the market turns sour he can buy up a lot of different companies he becomes the he pushes out his remaining partner Marshall Kogan and becomes the sole CEO in 1973 he takes over another company called Shearson Hamill and company uh and then he makes several acquisitions

throughout the 1970s all well on this kind of same playbook of take it over cut costs and you know stay liquid so that if another company stumbles you can go in there and grab it and make an acquisition right and then you know the 1980s. And then this is like really, of course, as we all know, the boom years for Wall Street, a real transition. But it's also the first step on his government connections empire where he gets former President Gerald Ford to join the Shearson Loeb Rhodes Board of Directors, which is, of course, a major coup that gave him a lot of cachet and credibility, but also gave him a lobbyist in Washington. And Gerald Ford was, throughout his life, not a rich man, but because he sat on all these boards of Sandy Weill companies, he became extremely rich throughout the 80s and the 90s. So Gerald Ford, former president, owed this guy a big favor, and he certainly paid it back in terms of just lobbying

and getting the government to break up all these different laws that prevented the existence of companies like city group it's crazy how like there are so many people that we don't know that are definitely connected to billions but may only have a net worth of like you know 10 maybe even 100 million, but the potential of their network could be priceless. Isn't that wild to think about? Like, I might only have $50 to my name, but I know enough people to where the value of who I am is a number that's astronomical. I mean, it makes sense, but it's also so fucked up. Yeah.

It could be a mere tens of millionaire, And within your social circle, like one or two degrees away, there is a billionaire somewhere. Definitely. But yeah, so, you know, he's moving on up throughout the 80s. He hires Gerald Ford to be on the board of his company. He actually just, like, I hate to get diverted, but I had to read this little anecdote from the book. He rents offices in the World Trade Center in, like, the late 70s. And just quoting from the book here, scared of heights and flying, Sandy hesitated initially about moving Shearson's headquarters into the clouds, the World Trade Center. But the World

Trade Center's owners told him that the Twin the world trade center uh but the world trade center's owners told him that the twin towers were built to withstand the crash of a 747 jet plane what 1970s and then like like look do with this what you will but apparently city group owned the majority of the offices in tower seven so i don't know if they're just fucking with us. I like that because of time constraints, Sean can't truly dig into this juicy dirt that he just found. That is, there is a 9-11 connection to Citibank. We won't have time to get into my 15,000 words of notes on this, but I'm just going to upload the dossier to Discord,

and you guys can go at it. Look, if you subscribe to my other YouTube channel, you can find the full story. But just a warning, look, it's been flagged for hate speech, and it's bullshit, but, you know, Google has an algorithm, and I can't monetize it right now, but you should check it out. You know who might have the answers? The guy that runs Grubstakers.com. We own.net, but Grubstakers.com is a straight 9 to 18 different sources of 40-page documents for every conspiracy going on between oil and 9-11 and other things in the world he might and you know so he's initially his company is based in

the world trade center but what he does sandy while he manages to engineer their sale to american express the credit card company uh so in 1981, American Express buys them for triple their book value. So again, you know, they're already rich. This makes them extremely rich, all of the partners who are still in at this point. But they kind of like, you know, put them out to pasture. They buy him and then they give him, you know,

no portfolio, nothing to do. But he initially likes it because he has like a car and a driver. He attends, you you know corporate parties with uh henry kissinger barbara walters carl molden among others wow he starts showing up man in the mid 70s is just a rich guy to stay a rich guy like he could do nothing from the 70s on and he would have been made yeah absolutely and you know that's i mean that's something we talked about is like why some of these billionaires even keep working it's just like at some point you have no other purpose or sense in life where it's like if i had 10 million

dollars i would immediately quit this podcast i don't give a shit but you know this is how some of these people define themselves and like you know sandy like even uh he gets he retires at city group and then when the financial crisis comes he wants to go back in he wants back in he wants to take over he wants to fix it but they're like we don't we don't need you get out of here yeah so it's just you know, when your entire life's purpose has been going into the books of companies and slashing out payrolls and slashing out benefits like this is your meaning. This is what you are on this earth to do. And you get very confused and frustrated when that's taken away from you because you just don't know what else you're supposed to be doing with the short time you have on a god's green earth for any billionaire lawyer listening right now the number sean has given to for us to stop this project is 10 million uh my

dude's 10 million a piece uh let's not pretend like we each take 2.3 and we'd be satisfied with it i'm kind of like i'm not glad that we've kind of leveled off on listenership but i do the more listeners we get the more nervous I am that I'm going to have a hit put out on me. And so I do like to remind people every episode that I can be bought. There's no need to send fucking Jean-Claude Van Damme after me. Why take the risk? Let's just get a mutually beneficial arrangement

where I can retire and play psvr for the next 60 years yeah uh i i won't say that i advocate for low uh subscriber reviews on itunes but i will say when i see them part of me goes good the elite think that we're not a threat like appearing to be mediocre is the only thing that will save all of us from not being murdered by the elite this one again this drops again uh but so you know so in amex he's like he's kind of famous or at least he appears on television he's written up in these new york society columns but he doesn't have anything to do so eventually american express pushes him out in 1985. He's extremely wealthy, but again, he has nothing to do.

He's in, you know, for him, early retirement. He's worth about 50 million U.S. dollars when he leaves American Express in 1985. But what he does is he sets up a deal with American Express where, first of all, he takes Jamie Dimon, who was another employee at American Express. He's the current CEO of JPMorgan Chase. A future episode will be about him, but he's Sandy Weil's protege. Jamie Dimon is at this point in 1985. He's 28 years old, and he actually follows Sandy Weil when he leaves American Express. And the deal that Sandy Wiles strikes with American Express

is they set him up with an office at the Four Seasons in Manhattan. And this is, you know, kind of his launching pad where he eats lunch. He eats lunch every day at the Four Seasons for like a year on, for a while, American Express's dime. And this is kind of his getting loaded at the Four Seasons for like a year on for a while American Express's dime and this is kind of his uh his getting loaded at the Four Seasons period where he goes to these lunches you know with uh this lunchroom at the Four Seasons is very famous people like Henry Kissinger I mentioned earlier but also Larry and Bob Tisch uh uh Barry Diller, Ron Perelman.

These people are all regulars at the Four Seasons, Power Lunches. Sandy was among the elite, I'm quoting from the Monica Langley book. The moment Sandy was seated, a waiter would place a frosty Gibson, a martini with pickled onions rather than olives, before him. The second Gibson would arrive just as he drained the last of the first one. And this is his everyday routine while he's like waiting in exile for his business career to pick up again for like more than a year. So this is like his version of like you just go to a coffee shop where they have like they don't kick you out after five hours and then you apply for jobs or something. Yeah, it's sort of like his business purgatory. In between companies he wants to tear down, he just goes to a restaurant and gets the same drink every day.

And the staff is so afraid of him and his power that they make sure that the drinks stay frosty. Right. This is like, you know, we talk about billionaire struggle stories. This is Napoleon in exile period. He's like trapped in the Four Seasons, forced to eat, you know, the fucking finest steaks every day. You know, forced to share a room with Barry Diller and all the other elites. But, you know, so Jamie Dimon is with him at this point

and initially has some regrets or doesn't really think this guy knows what he's doing because he's getting loaded every day and, you know, passing out on the couch. And they're not really doing anything for like a year. But then in 1986, this company called Commercial Credit seeks him out. Well, actually, an employee at Commercial Credit seeks him out uh well actually an employee at commercial credit seeks him out commercial credit was a company was a company that basically operated as a loan shark company throughout the 80s they started out with just kind of um unsecured personal loans so they would give people you know

19 to 23 interest rate to buy a fridge or whatever other bullshit, you know, blue collar workers need it. But they would also do, you know, second mortgages. So it was always a loan sharking company, but it, uh, well, they certainly made it a little more predatory, but, uh, but the basic story is that Robert Voland was, um, the vice president for finance at commercial credit. Um, but this company in turn was owned by another company called Control Data Corp. And then the company that owned them, Control Data Corp,

was borrowing heavily from their subsidiary. So he gets the idea and he approaches Sandy Weil and says, hey, why don't you buy out Control Data from this other company that's like, you know, running into the ground. Why don't you buy it out from them and spin it off into its own company and IPO it? And Sandy Weil and Jamie Diamond, they look through the books and they say, hey, this is a great idea. And they raise the money and they do it, you know, from their banking contacts. I believe they raise it from Morgan Stanley. But Voland, the guy who gave them this tip for his trouble is sidelined because neither Jamie

Diamond or Sandy Weil trust him because they don't trust an employee who would do that go behind the board's back and talk to another person so you know I wonder why but yeah and this is what makes Sandy Weil's fortune so again this is how he treats the the people who give him the info that that make him a billionaire but so they take over commercial credit in 1986 it's uh it goes public in october of that year they they make it go public really fast but it's based in baltimore and the story here when i talk about you know his reputation as a cost cutter there's just a couple anecdotes i can run through here uh he wants to have again this is a baltimore company he initially wants to have the uh introductory party at 5 30 p.m and is informed

that it'd be better to have it at 4 p.m because people leave the office at 5 p.m and he's like well no if if they're working for me they're not going to be leaving the office at 5 p.m anymore and you know so he and jamie diamond and some of the other executives they move out to baltimore for a bit um and but essentially what you're saying is that this is a guy that gets rich and then instead of retiring saying fuck it i don't need money anymore goes back into companies and says i'm gonna crack the whip harder than any of you because even if i get fired it doesn't really matter because i'm Sandy Wheel. Right. And this is his entire idea is he wants to build a business empire out of this.

And, you know, there's just a bunch of people in Baltimore who have like a decent job that doesn't require them to be there until 7 p.m. who are going to face the wrath of this, who are going to be his little Russian soldiers, you know, pushed into the German machine gun nests with one gun between two of them, and all for the glory of Sandy Weil. It'd be like if Grubstakers got bought out by, like, Marin or, like, Kevin Smith or something, and they were like, oh, you guys are going to do eight episodes a week from now on, and we're like, oh, we don't want to do that. And they're like,

we don't, I don't care. You, what are you going to do? Fire me. I own you now. And it's like, I guess we have to do what the boss says.

Right. Well, I mean, it is basically that like, I'm just going to read a bit from the Monica Langley book here because you know, the, the entire team goes from New York out to Baltimore. Within an hour,

Sandy and his handpicked team stormed into commercial credits lobby. The new CEO stopped abruptly to see the stack of Wall Street Journal and Baltimore Sun papers awaiting distribution. See if these papers are paid for by commercial credit, he instructed Diamond. Cancel all subscriptions. If employees want a Wall Street Journal, tell them pay it yourself. Pay for it yourself. When Sandy got off the elevator elevator he noticed that the few employees already there at eight o'clock were filling up coffee pots take the coffee pots away we aren't

going to pay for anybody's coffee pots in their offices spotting a plant service contractor watering the pot pot at trees outside his office sandy scowled no more watering plants he then turned to his secretary water your plant yourself what they're probably just using tap water okay yeah so like and that's just kind of like and that's just one example where not only that he slashes you know car benefits he slashes um uh he slashes carpool benefits uh he slashes 2000 jobs immediately. Uh, then he orders another 125 jobs because he, uh, he ends medical benefits and he smashes up this vacation day bank. Like it gets worse here. And then like all the while he's doing these dinners after work with his executive team

every day, these steak dinners, which the book is not clear about but i assume they're billing the company for these things yeah of course and like that he's just trimming the fat as much as he can and no one beneath him or no one beneath or above him really has enough money to be like fuck this guy and And so he just kind of does what he wants. And it's not even that really impressive. He's just improving the company by that 1% marginal cut that you have to do to make something slightly better. It's a fucking genius move because it's not even really that good,

but it just makes everyone's life work worse. And it makes your company something that is more of a fucking dictatorship than it is a functioning company well it's like we wonder why these fucking jobs in america have gotten so awful and soulless it's like okay so the guy just like threw out all the free coffee and like he's like hey let the plants die you know you just have the fluorescent lights now because and like you know the thing is okay you know all right the wall street journal subscriptions he gets rid of all these little perks and you know these are like small cost saving stuff but it gets worse like just from the book uh a few days later he summons the human

resources head he points to a line called earned vacation bank and the human resources uh director the h Resources director. The HR director explains that many employees had been saving their vacation each year to use for early retirement. Consequently, commercial credit was carrying the amount on its books and had to reserve against the future costs.

I want to get rid of this, Sandy said. I believe in use it or lose it. The HR head says that people earned this. They'll want money if they don't get time off. And he says, fine, we'll buy them out at 25% of the value. So he smashes up the vacation bank. So all of your vacation days are gone now for 25% of the value. Then he hones in on a large amount reserved for retiree medical. He asked the HR head, how much does a retiree for commercial credit pay in medical? Nothing. Commercial credit pays their medical costs for life.

Sandy recoiled violently. What, he snarled? We're changing that right now. Retirees will pay 100% of their own medical costs. He pointed out that many of the retirees weren't eligible for medicare because they weren't yet 65 years old sandy couldn't believe his ears why are they retiring so early if they make a life choice why should the company pay for it and you know bad publicity and lawsuits do actually follow this but he gets away with it and again he's we we study these billionaires as examples of wider phenomenon.

Sandy Weil is an example of a wider phenomenon in American business, American capitalism, where workers in every single industry and field have seen this shit, where they used to have unions and they used to have good benefits. And in many cases, they used to have vacation banks and defined benefit pensions. And guys like Sandy Weil came in and became geniuses because they were cost cutters who smashed that all up. And we shouldn't think of them as geniuses. No. Since all they're doing is just they tell a bunch of HR people to give me a list of all the benefits the employees have. And then he just goes through and cuts a bunch of them.

And he's not some like financial engineer or something right it's like you know he gets this reputation as you know of course we don't think of him as a genius but it's just like pick up the fucking uh pick up the budgeting book and then draw a red line through everything that belongs to the employees, basically. Yeah, I mean, I guess if anything is even approaching genius, it's just his ability to not care about the people whose lives he ruins. So there's probably been other CEOs and senior officers before him in the company who, I mean, that's not a secret that you could do that, but they just either felt bad or thought it would hurt them politically.

So divorce was the key to his success this entire time. See, this is what happened in America. His parents started getting divorced, but before they got divorced, the kids had communal feelings, and they wouldn't want to smash up somebody's medical benefits. But, you know, that aggression that follows divorce. Really, I guess eventually I'm just going to become one of those like trad psychopaths who thinks the birth control pill destroyed the society. And, you know, maybe they're right. right i will say that like one of our uh review says that uh our analysis 100 of the time is

negative towards the person we're uh looking at and it's like our analysis isn't what's negative these people are doing horribly terrible things yeah and we're choosing it like the world should ought to be to not be as negative so and then we'll stop evaluating it as such, as far as billionaires. Those are my favorite reviews, who are like, we're too negative on the billionaires. Like, oh, you want a not negative treatment of the billionaires? Well, just read any newspaper.

Have you turned on any cable television network? You can find the opposite case. We are the only ones doing negative treatment of these billionaires but so you know and look the list as what they did at commercial credit the list goes on and on but the the point is this is what he did with almost every company this is just one very egregious example this is his playbook this is why you know jamie diamond becomes his protege a lot of people become his protege they follow this same playbook. This is why, you know, Jamie Dimon becomes his protege. A lot of people become his protege. They follow this same playbook. And I did just want to mention one other thing with regards to commercial credit from the Monica Langley book. He and Jamie Dimon

discovered a $50 million surplus in the company's pensions plan. Sandy's eyes lit up. He summoned the HR director. I need that $50 million, Sandy stated. He told the HR director he intended to terminate the current pension plan in order to put its cash surplus into the company's coffers. Doesn't that surplus belong to the participants, the HR head asked? I need that $50 million, and I need it now, Sandy stated urgently. Basically, the surplus had accumulated from good investments the pension plan had made. They smashed all surplus, all cushion for the pension plan to nothing so that, you know, if the pension plan goes south, all the employees were fucked and eventually all the employees

were moved over to a far less generous defined contribution as opposed to defined benefit pension plan so it was just jamie diamond and sandy wild going to this company and they're like oh hey they've got a 50 million dollar barrier against losses on their pension plan let's smash it let's put it back into stock let's pay ourselves with their fucking retirement and you know this is the story of commercial credit where he gets a reputation as a cost cutter but they are doing nightly steak dinners at the harbor court hotel for the executive team where sandy weill is apparently ordering everything on the menu and in fact in many cases ordering two of everything on the menu in order that he will always have the most opulent of the entire executive team he has the most opulent meal in front of him so it's like

cost cut for what a fat fucking piece of shit hey sorry uh everyone at work can't have coffee because i want fucking lamb tomorrow it's like yeah coffee today costs less than a dollar per cup this is like yeah this will get him like bulk for a company it's a fucking like you know it's it's not the same as having water but it's a fucking basic need and for sandy to be like ah sorry guys uh i like my fucking fettuccine with lobster i'm gonna be at lunch for another hour and a half and not only is it like most likely he's charging the company for it but this is how he does his job his operating costs involve his ass eating caviar every fucking day he's going over the expenses with the building management teams and he's like oh just give him decaf just give him the just give him the decaf pods for the

machine he's going through the office like dump out that coffee pot throw those newspapers out the window this will get me one one thousandth of the way there to a fucking filet mignon and you know that like new york times however the company had it set up must have either been at like a bulk cost or like a business cost or something so like him cutting it it's not like he was probably paying the price of a paper at at inventory value but more that like you know the company's got to subscribe just it's fucking gross man this motherfucker's gross he's got fucking dijon mustard on his fucking lips as he's telling people hey stop using so much ink when you write up reports it's just fucking bullshit and in one hand this is how a boss operates but at the same time the level of callousness you need

to fucking make this much money through banking is fucking heartless right and again you know we talked about at the beginning of the episode, there was a transition in American capitalism from the CEO having like some sort of mission to his and his or her employees, um, the stakeholders and the wider community. And now it's just the shareholders where he goes wider and whiter community. Yes. Uh,

he goes into commercial credit. Uh, the unused vacation time is erased employee health insurance costs go up company contributions to 401k plans end and a less lucrative pension plan had been put into place so that they could raid the 50 million dollars and pay it back to themselves because as we mentioned in october 1986 they take this company public, and then they just do everything they can to juice the returns and cash out. And then to kind of wrap up the commercial credit story, we should just say they also start offering new loan products, you know, variable rate loans, different forms of insurance, where this thing, when they took it over, only had two different products, but they do a bunch of different other loan shark products so again this is classic business 101 they slash cost the bone and then they look for all these different revenue streams they look for cross-selling uh they get you know all these

offices of aggressive sales people so throughout the 80s they really turned this into an efficient and quite vicious loan sharking operation with all these fucking variable rate loans they're pushing people into and uh the stock price rebounds and this is set sandy back on the path to become a billionaire uh forbes as of april 2020 puts him at about one billion dollars net worth and commercial credit is the stepping stone that puts him on that pathway and uh i guess i did just want to mention that apparently there was a blizzard in Baltimore and Sandy personally called the governor to demand to know why public transit wasn't running

and his employees weren't there. He calls the governor of Maryland and then he puts a policy into place that anyone who doesn't show up during a snow day will not be paid for that day. Wow. Yeah, and so, you know, and then he's just complaining

that these people in Baltimore are leaving the office at 5 p.m., which is, you know, this is ridiculous. He's going around with a puff of cigar smoke asking everybody he sees in the office, what do you do? He's like interrogating these employees and, of course, thousands of layoffs like how does

he get these employees to accept all these benefit cuts because he's firing all these fucking people and this happened to the american worker all over the place in every different industry but so that's you know the nuts and bolts story of commercial credit the first company that Sandy Weil took over, or his rebound company. He took it over, and this set him back on the track to eventually take over Traveler's Insurance, eventually merge Traveler's Insurance with Citibank to become Citigroup and become a billionaire and create this monster that we're still dealing with today. We're going to wrap up this part one here. We're going to continue part two on the Patreon. And, uh, if necessary, we'll have a part three as well.

Uh, part two, we'll continue the story of Sandy Weil throughout the, uh, 1980s, all the way up to the repeal of Glass-Steagall. And, uh, the part three will cover kind of Citigroup as a corporate entity and what it did in the 2008 financial crisis and in the current coronavirus crisis. But thank you for listening and stay safe. Thank you to our Patreons. And thank you to all of the reviewers who are furious that they cannot find good press

for billionaires on our podcast. Furious that we would take a negative look at these people who are so mistreated by the wider american media i'm not sorry it is just like funny that we talked throughout this episode about how sandy weill is like lauded as a genius like just a fucking one or two hour google disproves that like you see the human cost of all of this so again it is funny to me when people come into our reviews and are like you guys are so negative about these billionaires it's like

why the fuck do they have the reputation as a genius to begin with something went horribly wrong somebody has to be negative about these people right but I like I find myself also being you know there's a flip that happens because there have been a handful of episodes that we've done as a show that when we went into it i felt like i don't really know why we're covering this person and within 20 minutes of looking at information about them you start seeing oh this person is purely evil and the more altruistic a billionaire looks to be, sometimes the more fucked up they seem to be as a human being. Like, Epstein pre-first arrest is literally just like the smartest, most philanthropic, nicest, intelligent billionaire around before it's revealed that this man runs a pedophile ring. One star.

They were way too negative on Jeffrey Epstein. I came to this podcast for a balanced look at the life of Jeffrey Epstein, but they were criticizing him the entire time. And with that, this is McGruff Stakers. I'm Yogi Pauly Wall. I'm Steve Jeffers. I'm Sean P. McCarthy. Check us out part two for the continuation of the Sandy Wiles story on the Patreon,

and part three for a further look at Citigroup, the too-big-to-fail bank. Thanks for listening. Bye.