he said croakily. “Believe me, I feel as strongly as anyone here about curbing the excesses we’ve witnessed on Wall Street. We will ask the Treasury secretary about that later, but our first panel has many questions to answer. I urge them to talk openly, not to attempt to hoodwink the American people.”
The camera cut to Harry and Greene and showed the lawyers and officials arrayed to their rear in mute support. Just left of Harry’s head, about two rows back, was Nora. In the front row, precisely between Harry and Greene, as if to emphasize his neutrality between his old and new bosses, was Felix. Sitting in my apartment, months after this show trial had been enacted, I found myself urging Harry to stay calm. It was useless to try to influence the past, but I couldn’t stop myself. As if hearing me, Harry nodded as Greene took the microphone.
“Senator, I pledge the full cooperation of Seligman Brothers in uncovering the mistakes that were made, because there were significant errors that we all regret, and in ensuring that the taxpayers’ investment is repaid,” Greene said sternly.
Not having bothered to follow a congressional committee hearing before, I didn’t know what to expect, but it turned out that the first order of business was to let all the senators make a speech while the witnesses sat silently. Greene composed his face in a supportive expression, while Harry glowered. I skipped through this interlude until I saw the camera focus on Harry, who was reading from a piece of paper clutched in both hands, wearing his spectacles. Once I’d slowed down the video to listen, his speech sounded good. I assumed that Felix had drafted something contrite.
“I would like to assure the committee that, while I regret bitterly what happened, I always did what I believed was best for Seligman Brothers and for this country.” His voice was calm, but his shoulders slumped in relief as he came to the end of the sentence. He’d obviously been tensing himself to get through it.
The first senator to ask questions had a crew cut, a beaky nose, and a rough gaze. He stared at Harry and Greene as if they were beneath him, not just physically but morally, and thrust a hand up to scratch his temple as he spoke.
“Mr. Shapiro, that all sounds dandy, but I’m puzzled by one thing. If everything you did was fine, then why did you step down?”
“Senator, I believed Seligman needed a fresh start after-”
“Come on, you didn’t resign, did you? You were fired. You were forced out because you’d made a mess of it, hadn’t you?”
Harry flinched, but then the accusation seemed to fire him up. He tilted his head toward the senator like a bull getting ready to charge toward the matador’s red cloak and spoke in a fierce, controlled tone.
“Given the failure of the firm and our need to accept capital from the taxpayer, I resigned as a matter of honor.”
“Mr. Greene, you told us in your opening statement that you came from a middle-class family?”
“That’s right, Senator Highfield. My father was not a Wall Street guy. He worked as a mechanic. I managed to win a college scholarship and I supported myself by working during vacations.”
“I expect you worked hard,” the senator said encouragingly.
“I did, Senator. My father always wanted me to get a good job, to achieve more than he’d been able to. He was a GI, fought in Normandy. He was a hero to me.”
“So you got to Wall Street. How’d that happen?”
“I was lucky. Rosenthal recruited me out of Rutgers. They had an open mind, took people from all kinds of places as long as they were bright and scrappy.”
A few of the senators released a rumble of laughter, but others stayed stony-faced, not wanting to be seen sympathizing on television with Wall Street, I imagined.
“Then you were enterprising enough to start your own bank. It says here that you got to be a billionaire, is that right?”
“On paper, that might still be true. I don’t feel as rich as I used to,” he said. A few more senators joined in that time.
“So why did you sell your bank to Mr. Shapiro last year? I’d have thought you liked being independent.”
“I didn’t see it that way, Senator. Harry and I joined forces to make a bigger firm, one we believed could compete in the big leagues. I believed I could learn from Harry. He’d teach me a few tricks.”
Harry shot Greene an ambiguous glance, half appreciation for the remark and half unease. I thought of what had happened just six months later-the mess that Harry had made of Greene’s body. Perhaps I wouldn’t have noticed the tension if I hadn’t known the outcome, but there was something unnerving in the stiff way they sat next to each other, as if divided by an invisible barrier.
The next senator was a Democrat, a woman in her sixties who was technocratic and stern. She spat out her questions crisply, hardly looking at the witness who was answering, but Greene didn’t appear bothered.
“Mr. Greene, can you explain to some of us who are still baffled exactly how your bank came to need the taxpayers’ assistance?”
“Senator, it’s complicated and I don’t think that anyone here, myself included, fully understood the risks we were taking. As I said before, mistakes were made and I bear full responsibility for those errors.”
“I’m glad to hear you say that-” she interjected sharply, but Greene carried on talking, and she gave way.
“Let me try to explain this as best I can,” he continued. “Our trading desk held mortgage paper that it considered entirely safe. It was triple-A paper that no one believed was in danger of default. Those positions were not reported to the risk committee.”
“You mean you didn’t even know they were there?”
Greene sighed heavily and closed his eyes for an instant, as if the blunder still pained him. “Unfortunately not. There were flaws in the risk management procedures at Seligman. It examined what it believed were risky assets, and it didn’t include any of these CDOs. That stands for collateralized debt obligations, by the way. There are many abbreviations on Wall Street, I’m afraid.”
Greene had something, I thought. Imperceptibly, he’d managed to seize control of the hearing and was overriding the questions to present the story he’d prepared. He had a natural authority that subdued others without them realizing it. It sounded as if he were giving a lesson to an appreciative audience, rather than defending himself.
“What happened to these CDOs?” the senator asked obediently.
“This spring, mortgage-backed securities started to fall along with house prices in a way that no one had anticipated. In May, the senior management was informed that heavy losses were occurring on the CDO tranches. I believe the projection was a $5 billion loss. Our estimate now …” Greene glanced at a sheet of paper on the desk and read out a figure dispassionately: “is $21.6 billion.”
The senator looked at Greene openmouthed. “And you had no idea about this before you lost those billions? You were in the dark?”
Greene held his right hand half-clenched and thrust out to emphasize his words. “Let me address this, because it is absolutely the right question. When I took over as chief executive, I made a complete examination of our balance sheet. I found we had been using too much leverage and didn’t have a thorough grasp of some of the instruments we had been trading. I put a halt to it immediately.”
The senator still looked astonished, but Greene had managed subtly to deflect attention from himself. He’d become an expert witness explaining the financial complexities, not the one who should be answering for the mess.
“Who ran Seligman while it was doing this and crying to the government for $10 billion to stay in business? Who was in charge?”
Greene paused and looked hesitant. He glanced fractionally sideways at Harry, as if not wanting to say it himself. The camera cut to Harry, who looked crushed. He sat upright and his tongue flicked out of his mouth to moisten his lips, like a reptile. Then, with Greene still silent, he leaned forward to the microphone.
“I was, Senator,” Harry croaked.
She shook her head disgustedly. “It sounds as if there was a very good reason why you resigned, Mr. Shapiro.
