Money, Murder, and Madness: A Banking Life

By Forrest Russell Cook

MONEY, MURDER, AND MADNESS, A BANKING LIFE, HOW YOUR GOVERNMENT CAUSED THE FINANCIAL CRISIS, is not just another book about the crisis. Forrest Cook avoids impenetrable financial jargon and takes the reader on a refreshingly different look on why the crisis happened and who were the government officials responsible. It is an interesting book to read especially in this election year.

He explains why the conventional reporting is misleading or wrong. Cook makes a convincing case that the Clinton and Bush administrations and members of Congress, Democrats and Republicans, pursued an extreme affordable housing agenda that led to the failure of Fannie Mae and Freddie Mac.

Readers will be shocked to learn how Fannie and Freddie officials rewarded themselves with huge salaries and bonuses through fraudulent bookkeeping and dishonest financial reporting. If Fannie and Freddie had not failed requiring a massive government intervention and the largest bailout in our history, its likely the crisis would have been avoided.

Six years after the government takeover of Fannie and Freddie the taxpayers continue to own and heavily subsidize one of the largest companies in the world. Cook also explains how the bailout is hundreds of billions of dollars more than reported in the financial press.

He also writes about his personal journey in banking, and its not what the reader expects. He tells charming stories about the human side of the business and unlikely events including death threats, demonstrations, a violent bank robbery, and the murder of a Boston police officer.

• Language: English
• Publisher: AuthorHouse
• Release date: Jan 29, 2015
• ISBN: 9781496959607

Forrest Russell Cook

Forrest Cook was a senior vice president and retail division head at State Street Bank in Boston. He served on the senior management committee and long range planning committee. He was one of the senior officers who was instrumental in the transition of an old-line Boston bank to a more entrepreneurial organization. Cook recommended State Streets entry into bank credit cards, which greatly expanded the banks retail base and competitive position. It also was the beginning of the evolution of electronic banking. He later served as president and chief executive officer of South Shore Bank in Quincy, Massachusetts. South Shore was a highly regarded regional bank that covered a large territory from Boston to Rhode Island and Cape Cod. South Shore also owned a mortgage company. Cook experienced many changes in the banking world during his career, including the government dismantling of the residential mortgage market. He decided the story of banking and the housing collapse that led to the Financial Crisis needed to be told by someone who actually ran a large bank and mortgage company. Cook graduated from Bowdoin College, was the class president in Rutgers University Stonier Graduate School of Banking, and was the class treasurer in Harvard Business School Advanced Management. He was a second lieutenant in the army and served six years in the reserve as captain. He resides in New England with his family.

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© 2015 Forrest Russell Cook. All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author.

Published by AuthorHouse 02/03/2015

ISBN: 978-1-4969-5961-4 (sc)

ISBN: 978-1-4969-5962-1 (hc)

ISBN: 978-1-4969-5960-7 (e)

Library of Congress Control Number: 2015900054

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Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

Contents

Introduction

Part I: From Boston To Fort Kent

1. A Personal Journey In Banking

2. Early Years At Rockland-Atlas Bank

3. State Street Bank

4. Correspondent Banking

5. A Bare Bones Christmas

6. State Street Bank, A Pioneer In Credit Cards

7. On To New Hampshire

8. Interlude

9. Murder, Threats And Protests

10. Demonstrations And Pickets

11. Saul Alinsky

12. Multibank Financial Corporation

13. The Fed Goes Rogue

14. The Community Reinvestment Act (CRA)

15. Redlining

16. John Kerry

Part II: The History of Banking

17. In The Beginning

18. The National Bank Act

19. Free Banking 1832-1863

20. The Second Bank Of The United State

21. The Federal Reserve

22. The Savings Industry Disappears

Part III: An Exploration and Analysis Of The Recent Financial Crisis

23. The Twins: Fannie And Freddie

24. James Johnson

25. Franklin Raines

26. President George W. Bush

27. Securitization

28. Freddie Scandal

29. Fannie Explodes In Scandal

30. The Government Sponsored Enterprise Act

31. The Repeal Of The Glass-Steagall Act

32. Commodities Futures Trading Commission

33. Mark To Market

34. March 2008: The Panic Begins

35. Fannie And Freddie: Signs Of Trouble

36. The SEC Sues Fannie And Freddie

37. Financial Crisis Inquiry Commission

38. Fannie And Freddie Timeline

39. The Nationalization Of American Banks

40. The Death Star

41. Dodd-Frank

42. Abolish The OCC And The FDIC

Epilogue

Acknowledgements

Notes

Appendix I: Federal Banking Laws

Appendix II: Dodd-Frank

Appendix III: The Financial Crisis Inquiry Commission

About the Author

To June,

It’s been a wonderful journey because of you

Introduction

I was introduced recently by a friend as an unindicted banker. In my early days I made a number of visits to Bank of America in San Francisco for credit card meetings before Bank of America moved to Charlotte, North Carolina. The headquarters was in a new impressive tower building with a large plaza in front. There was a black sculpture of no particular shape prominently displayed on the plaza.

I noticed a group of people taking pictures one day and I heard one of them say, I think they call it the banker’s heart. A lot of people say they hate bankers and I tried not to take it personally.

During my years in banking I received death threats and hate mail and I encountered pickets and demonstrations.

Banking was not the way many politicians and members of the media described it. I worked with people I was proud to be associated with and many of them were outstanding women.

There were very few women officers or department heads in the early days at the Rockland-Atlas Bank and at State Street Bank. I unhappily recall that all the men smoked at their desks and in their offices. Although I never saw any written prohibition or heard any verbal instructions-–it was accepted that women did not smoke while working. The unequal treatment rapidly gave way to a more level playing field when it became apparent there was a need for more talented and competent people. When I retired from South Shore Bank we had thirty-five to forty senior women officers and department heads. Our branch offices were mostly managed by women who were given considerable personal authority.

State Street Bank was a wonderful organization when I was there and it grew into a world-class financial company; however, being in a community bank like Bank of New Hampshire or South Shore Bank was special. Employees and customers were on a first name basis and we loved being involved in the life of the community. Unfortunately community banks are becoming a thing of the past due to mergers. Relationships are less personal and decision-making often remote.

All businesses change over time. The banking business changed during the time I was working, but in recent years the pace of change has dramatically increased and the electronic world in many ways is making traditional banking obsolete. I started as a trainee at the Rockland-Atlas Bank in Boston and I retired almost forty years later after an adventure I could not have imagined on the first day I signed on as a banker.

The first part of this book is about my personal journey in banking. It includes many great people, a few villains and the murder of a Boston police officer at one of our branches. I also wrote that I was fired as chief executive officer of Bank of New Hampshire by the family who owned the bank, in spite of the fact the bank was an outstanding performer.

The second part is how our banking system evolved, no other country does it quite like we do. The Bank of England was established in 1694. Our two early attempts to have a central-bank ended in failure. The Federal Reserve was created in 1913 and it’s 100th anniversary was in December 2013. The debate continues whether the Fed has been a success or failure. It’s curious that the Fed did not originate in the halls of Congress or in the White House. The Fed was conceived at J.P. Morgan’s private club at Jekyll Island, Georgia.

The third part is controversial. I believe our government caused the housing collapse that led to the financial crisis. The elected and appointed officials most responsible have been skillful at blaming others. It may be old news to some but if we do not know the facts it’s highly likely the same mistakes will be repeated.

Part I

From Boston To Fort Kent

Chapter 1

A Personal Journey In Banking

In 1958, after two years in the pharmaceutical business, I was looking for a career in banking. My timing was not good. We were in the middle of a recession and several interviews were not productive.

I happened to be standing on Congress Street in Boston with not much on my schedule when I noticed the Rockland-Atlas Bank across the street. It didn’t appear as imposing as The First National Bank or the Shawmut Bank and the name seemed a little strange for a Boston bank. I hadn’t done any research or checked with my two uncles in the banking business, but the thought was very much on my mind; my wife was pregnant with our first child and it would be nice to go home and say, Honey, I have a job!

I walked in the front door of the Rockland-Atlas Bank and said to someone I was looking for a job. Instead of sending me to Personnel, as it was known in those days and later Human Resources, I was introduced to Heinie Dellicker, Vice President of the Commercial Division. I was quite sure interviewing guys off the street was not in his job description. Fortunately we hit it off immediately. He introduced me to Roy Lawson, the banks only senior vice president, and to Hop Haydock, Vice President of Commercial Lending and to several others. Haydock was brilliant and kind of unpredictable. I enjoyed working for him later on. I had the feeling things were going quite well but you never know. I was increasingly impressed with how enthusiastic everyone was about the bank.

Before I left several hours later Heinie said, don’t call me Mister, and he took me aside and said it was unanimous that they wanted to hire me and I should report to Bob Northup in Personnel to set up a training program. What no training program?

My visit with Bob Northup was as enjoyable as my first day with Heinie Delicker. Bob Northup and I became very good friends and I regularly asked for his advice and guidance, even after I left the bank.

Northup said, "I know there are only a few days left in the year, but if you start tomorrow we can give you your regular two weeks vacation, but also give you full pay when you are on active duty for two weeks with the army reserve in the summer. My salary was set at $5,500 for the year so his thoughtfulness was greatly appreciated.

I was assigned to the Credit Department for my personalized training program. It was demanding and thorough. We analyzed company financial reports and reviewed our work with Chet Patterson who was the head of the department. Patterson required absolute honesty even if risked offending the loan officer. The final step was a meeting with the loan officer responsible for the account. The meetings were often intense.

Chapter 2

Early Years At Rockland-Atlas Bank

In something less than a year I began calling on customers in Maine with Dick Brackett, Assistant Vice President. We both had graduated from Bowdoin College and loved the state of Maine. We had a very agreeable association and he readily shared his several years of experience.

On one trip to Maine we thought it was funny when we crossed the border between New Hampshire and Maine, it was sunny and spring like but beyond Augusta it was late fall, and later in the day in Presque Isle it was like mid-winter.

From Fort Kent on the Canadian border to Kittery there is a vast territory and I found it exciting that an assistant vice president and his side-kick, a non officer who still had to punch a time clock (which incidentally turned from blue ink to screaming red if you were late), were responsible for such a large book of business.

On another occasion I was away from the bank at a convention of Maine Bankers. I left home early on Thursday morning and returned Sunday afternoon. I sent in my time card with a notation, regular hours. A person in personnel sent it back with strict instructions to record actual hours

I consulted with my boss, Hop Haydock, and he laughed and said, Well give them what they want, it’s going to be a good paycheck. I immediately became the only non-officer exception to punching the clock.

We were traveling to Maine on one of our regular visits and Dick told me in absolute confidence that I would be promoted to assistant treasurer at the board meeting that week. He emphasized he shouldn’t be jumping the gun, but he couldn’t wait to share the good news with me.

As we called on customers and prospects in northern Maine, especially bankers, we kept hearing that Rockland-Atlas and State Street were engaged in merger talks. We thought it would be a good idea to check with headquarters. We were told there was no truth to the rumors and to get back to calling on customers. When we got back to Boston it was no longer a rumor. A merger was under way.

By the way, at the board meeting that week my promotion was forgotten. I learned early in the game mergers can be difficult.

Well, the merger took place. Rockland-Atlas was the smaller organization, and some of our new friends tried to make sure we understood who was in charge. Fred Hagemann, President and CEO of Rockland-Atlas, became the new president and CEO of State Street Bank. Guess who was really in charge?

It was a very different world in the early 60s. England, Europe, Italy and Japan were not fully recovered from the ravages of World War II. The United States stood alone.

I remember Barney Frank who has been around for a long time, saying in several speeches, the only competition we had were Swiss watches and chocolate.

Many of the senior guys I worked with were World War II veterans. They seemed committed to making every minute count. They worked hard and did not hold back when it was time to have fun.

We did a lot of entertaining at lunches, dinners and conventions. It’s true martini lunches were common. You see some unusual behavior at conventions. My wife June and I were fortunate that State Street policy encouraged husbands and wives to be together as much as possible when entertaining customers.

We had some good times with Jack and Noreen Ahern at conventions. Jack was head of the Investment Division and I worked closely with him and many of our correspondent bank customers. I’ve forgotten where the convention was being held when I asked if they were going. He said no, the trip was too long. I learned later he had flown many missions as a B17 bomber pilot over Germany during the war. After returning home he vowed never to set foot in a plane again. If he couldn’t get there by car he didn’t go.

Hop Haydock stole a train, a whole damn train, and went for a joy ride in wartime France. Someone must have seen the same thing I saw, he was just too valuable to put in a stockade.

Lew Farley was head of the International Department, that part of the business was relatively small but growing. Lew was soft spoken, rather scholarly and not one you heard a lot from at meetings, but he had the information and skills that very few had. You probably would not have guessed he was a submarine commander and had survived many war time patrols in the Pacific.

My closest friend during my State Street years and all the years thereafter was Stan Lang. He served in the army in France and Germany during the war.

Ned Roberts was another hard-working guy and a real character. We were on the second floor on Congress Street, it wasn’t a very large space, maybe fifteen of us in Commercial Lending. Ned arrived early as usual one morning but this time he had his dog with him. The dog had a wonderful time visiting all of us and Ned then tied his dog’s leash to his desk. Ned left for lunch and didn’t come back. After awhile Ned’s secretary said that she would take the dog for a walk on the Common. The next day the dog dutifully took his spot under the desk. When Ned didn’t show up several of us asked Anne if she knew what was going on and she said she didn’t. Late in the day Ned returned, greeted his dog, and they went home together. The funny thing was none of us thought this was unusual. I look back at those days with appreciation for the friendship and wonderful experiences I shared with such an incredible group of guys.

Chapter 3

State Street Bank

After the merger with State Street I was assigned to the Correspondent Banking Department. Don Lewis was head of the department and it was generally believed he would be the next head of the Retail Division. There was one other vice president from the Rockland-Atlas Bank who was a few years away from retirement.

Joe Robbins, the vice president from the Rockland-Bank and I became good friends and we made many business calls together. Joe had a lot of excellent contacts. Our customer calls were generally built around long very interesting lunches. There were two other assistant vice presidents from State Street, one whose father was a director of the bank.

It didn’t look promising, I was the only non-officer. My friend Brackett didn’t fare much better. He soon left to join another bank.

Lewis was personally responsible for a large number of very good accounts in Maine. We spent a week together calling on his customers and when we got back to Boston he said, Well it’s all yours now, good luck. I had so much business they had to promote me.

My wife and I traveled all over the country, including Hawaii, with Don and Mary Lewis for banking conventions, meetings and dinners. It was a wonderful adventure and we remained devoted friends until both Don and Mary passed away.

Don Lewis had many years of experience in the banking business and he was very careful not to do anything that would embarrass the bank but an unusual event happened at the Wentworth Hotel in New Castle, New Hampshire. The Smiths owned the hotel at the time and had become embroiled in a personal battle with the local police chief. The chief went out of his way to harass the hotel guests.

The chief deliberately escalated a minor incident into a confrontation. He demanded that Lewis remove his car from a public parking space across from the hotel and when Lewis asked why he was promptly arrested and taken to jail.

My assignment was to get him released quickly and have the record erased. I knew a prominent local attorney in Portsmouth who represented one of our correspondent bank customers and I asked him if he could help.

I paid him a large fee, which my boss promptly reimbursed. Lewis was released without any record of the incident. It was an up close and personal event that I witnessed about how a government official used his authority to unreasonably and unlawfully punish people he didn’t like. Unfortunately I would see government officials doing similar things in the years ahead.

I worked hard and loved what I was doing. Several promotions came along quite quickly. Fred Hagemann was an outstanding leader who set the highest example for moral and ethical behavior. It was a great way to start in business.

A group of us met with the boss one day for an informal discussion. I think some would be surprised to hear he didn’t spend a lot of time on the company mission or his vision. One of the things I remember has stayed with me all these years. He said, " You know we expect you to work hard and you should commit to life-long learning, but don’t forget you are a privileged group. I want you to find time in your busy lives to give something back to the communities where we do business and where you live. If you are willing to