IN HIS SPEECH ACCEPTING THE Democratic nomination for president in 1912, Woodrow Wilson noted the United States had grown immensely rich. But to what end? “Prosperity? Yes, if by prosperity you mean vast wealth no matter how distributed or whether distributed at all.”1 Wilson was no Socialist. He campaigned on free enterprise and limited government. But, to him, this also meant a level playing field. (Although, as we discussed earlier, Wilson’s idea of a level playing field did not include providing economic opportunity for people of color, nor for that matter was he on the cutting edge of the growing movement to grant women the vote.)
Central to Wilson’s assessment was a critique of large banks, which financed railroad barons and steel magnates but not the hopes and dreams of US workers. “The great monopoly in this country is the money monopoly,” Wilson said:
So long as that exists, our old variety and freedom and individual energy of development are out of the question. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men, who, even if their actions be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved, and who, necessarily, by every reason of their limitations, chill and check and destroy genuine economic freedom.2
The architect of Wilson’s economic policy was Louis Brandeis, a lawyer and social justice advocate who had spent more than a decade seeking to block J. P. Morgan & Co. from establishing a railroad monopoly in New England. Under Wilson, Brandeis helped create the Federal Reserve to regulate banks and the Federal Trade Commission, which was charged with breaking up monopolies and fighting “unfair business practices.” In 1916 President Wilson appointed Brandeis to the Supreme Court, where he would serve for twenty-three years.
When Wilson was first elected, J. P. Morgan was the focus of a major congressional investigation for profiting off the economic Panic of 1907. That year, J. Pierpont Morgan himself had rallied bankers to bail out the financial system, pouring in plenty of his own money. But the congressional investigation found that Morgan had also used the crisis to expand his dominance of the American economy. By 1913, the committee discovered, officers of J. P. Morgan had created a “money trust,” sitting on the boards of directors of 112 corporations with a market capitalization that rivaled the entire New York Stock Exchange.
Brandeis used the congressional report as grist for a series of blistering critiques of the banking industry published in Harper’s magazine beginning in 1913. What galled him most was that bankers often enriched themselves at the expense of the rest of society by playing with money that wasn’t even theirs. The following year, the articles were collected into a book titled Other People’s Money: And How the Bankers Use It. Though it was written more than a century ago, Brandeis’s critique could easily have been written about the mortgage-backed securities that JPMorgan Chase created for Tom Barrack’s rental empire after the housing bust.
“The dominant element in our financial oligarchy is the investment banker,” Brandeis wrote. “The goose that lays golden eggs has been considered a most valuable possession. But even more profitable is the privilege of taking the golden eggs laid by somebody else’s goose. The investment bankers and their associates now enjoy that privilege.” Banks such as J. P. Morgan & Co., he explained, took the public’s money in the form of deposits and then used that money to keep themselves at the top and everyone else at the bottom. “They control the people through the people’s own money.”3
DURING THE 2008 housing bust, Jamie Dimon, the president and CEO of JPMorgan Chase, was frequently compared with Morgan. “Dimon lives up to J. Pierpont Morgan’s legacy,” read a headline in the New York Times published on March 12, 2008, the day he bought the investment bank Bear Stearns. Like Morgan, the story said, “he is capitalizing on the fear and panic that can grip the markets to expand his storied bank empire.”4 In fact, Jamie Dimon was taking disaster profiteering to a far greater level than J. P. Morgan did a century earlier. Back then, Morgan bailed out his rivals and the government and used it to consolidate power. In 2008 the system was rigged so badly that when Dimon stepped in to provide “help,” it was the government that gave him money. When Bear Stearns faltered, JPMorgan Chase emerged to save it—but only after it got a $30 billion guarantee from the Federal Reserve. Two days later, the government gave JPMorgan Chase a $12 billion piece of that bailout.5 In September 2008 Dimon “helped” again when the government facilitated JPMorgan Chase’s takeover of America’s biggest thrift, Washington Mutual. That saved the FDIC another IndyMac-style disaster, but it also gave the New York bank its first national, physical footprint, with a new network of branches across the West Coast and Florida.6
The acquisitions made JPMorgan Chase the biggest bank in America, leapfrogging over its competitors, with more than $2 trillion in assets. “JPMorgan Chase is a true colossus, the kind that progressives like Louis Brandeis inveighed against early in the previous century,” Roger Lowenstein wrote in the New York Times.7 When some of the loans inevitably went bad, JPMorgan Chase sued the FDIC, seeking indemnification against claims arising from Washington Mutual’s mortgages. It dropped the suit only after the government agreed to pay it $645 million.8
Given JPMorgan Chase’s dramatic transformation, it seemed important to ask, What kind of bank was this new behemoth? Who did it help? The headline of Lowenstein’s article proclaimed Dimon to be “America’s Least-Hated Banker,” but the more I looked at Jamie Dimon’s story, the more I saw another Homewrecker; a vulture capitalist born into privilege who focused on the bottom line to the exclusion of his fellow man, like the others motivated by money—only money.
LIKE STEVE MNUCHIN, Jamie Dimon was raised at the center of financial elite. His father was a stockbroker. His grandfather was a stockbroker. Also, like Mnuchin, he seemed almost preternaturally focused on becoming affluent, even at an early age.
“When he was nine years old, his father asked him and his two brothers what they wanted to be when they grew up,” financial journalist Patricia Crisafulli wrote in her 2009 book The House of Dimon: How JPMorgan’s Jamie Dimon Rose to the Top of the Financial World. “Older brother Pete wanted to be a physician. Twin brother Ted said he didn’t know. Jamie, however, piped up. ‘I want to be rich.’”9
Jamie was the grandson of Greek immigrants. His grandfather Panos Papademetriou, arrived in New York in 1921, settled in Manhattan and promptly changed his name to the French-sounding Dimon. But while his grandfather worked his way slowly up the ladder at the Bank of Athens before landing a job at the brokerage10 Shearson, Hammill & Co., the path for Jamie was much easier.
“Although he has accomplished much, Dimon’s is not a Horatio Alger tale,” Duff McDonald wrote in Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase. “He spent the majority of his life within the same five blocks on Park Avenue, home of New York’s upper class.”11 Jamie’s father, Theodore “Ted” Dimon, had followed in his father’s footsteps at Shearson and become close to the company’s legendary chairman, Sandy Weill. The Dimons bought a country house in Greenwich, Connecticut, not far from the Weill home, and the two families often socialized together.12
When Dimon was in seventh grade, his father paid cash for a four-bedroom co-op at 1050 Park Avenue—a short stroll up the street from “the world’s richest apartment building,” where Steve Mnuchin, John Thain, and Steve Schwarzman would reside a generation later. When the housing bust shook the US economy in 2008, Dimon was living up the street in a top-floor apartment in a building with grand courtyards and gothic archways at 1185 Park Avenue.
Jamie’s parents sent him to the Browning School, an all-boys private school with 189 students in converted townhouses on East Sixty-Second Street.13 Students wore jackets and ties to class. (Notable alumni include at least three members of the Rockefeller family, as well as politician and diplomat Sargent Shriver, and Arthur Ochs Sulzberger Jr., the publisher of the New York Times.) Jamie’s family greased the skids for him at every turn. Though he was intelligent and, by all accounts, a hard worker during his college years at Tufts University and graduate studies at Harvard Business School, it was Jamie’s father’s relationships that gave him a leg up.
When Jamie was in college, he and Sandy Weill had bonded in Weill’s backyard going over financial statements together. After Jamie graduated from business school, his first job was special assistant to Weill, then chairman of American Express. “Most MBAs toil in obscurity before they get their shot at the big time,” McDonald noted in Last Man Standing. “Dimon was immediately exposed to deal making at the highest levels.”14
And Sandy Weill wasn’t just any deal maker—he was the deal maker who shattered generations of federal banking regulations designed to prevent another Great Depression. The banking reforms ultimately imposed by Woodrow Wilson and Louis Brandeis had helped reduce the power of America’s largest banks, but they failed to restrain rampant stock market speculation that proliferated across America in the 1920s. Millions of Americans who had never played the market before began trading “on margins,” meaning they would buy stock by putting up as little as 10 percent of the purchase price and borrowing money from their stockbroker for the rest of the shares’ value. This didn’t matter, they were told, because the stock market would most certainly go up. It was not unlike the way salesmen at companies such as IndyMac encouraged Americans to buy houses during the bubble even when they had no money to put down and no real way to make mortgage payments.
“The celerity with which margin transactions were arranged and the absence of any scrutiny by the broker of the personal credit of the borrower encouraged persons in all walks of life to embark upon speculative ventures in which they were doomed by their lack of skill and experience to certain loss,” a 1934 Senate investigation determined. “By the vision of quick profits, they assumed margin positions which they had no adequate resources to protect, and when the storm broke, they stood helplessly by while securities and savings were washed away in a flood of liquidation.”15
When the stock market crashed in 1929, the fundamental unsoundness of this system spurred the Great Depression. Because the banks engaging in risky stock market trading were the same ones taking consumer deposits, the money Americans had placed in supposedly secure savings accounts also evaporated, and banks failed one after another. To restore trust in the banking system and make sure this didn’t happen again, FDR signed legislation creating the Federal Deposit Insurance Corporation, which guaranteed almost all consumer deposits up to the then-princely sum of $2,500. But if the federal government was going to back those deposits, it didn’t want them being used for the kind of speculative trading that could cause them to fail. So, Congress passed the Banking Act of 1933, also known as the Glass-Steagall Act, which said that the same bank could not be both an investment house—creating securities, buying stocks, and so on—and a commercial bank, which took government-insured consumer deposits and lent them out to help families buy homes.
The law stood for sixty-six years, until Weill orchestrated a deal that would have been illegal unless the law was changed. In 1998 Dimon was working for Weill at the Travelers Group, an insurance and investment banking giant. Weill wanted to merge with Citicorp, one of the nation’s largest consumer banks, so he launched a full-fledged lobbying and public relations campaign. He personally worked the phones, calling Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and even President Bill Clinton, urging them to scrap the safeguards put in after the Great Depression. After the Republican-controlled House of Representatives passed repeal legislation by a narrow 214-to-213 margin, Weill called Clinton again to break a deadlock in the Senate. (A few days after the Clinton administration signaled its support for repealing the Glass-Steagall Act, Treasury Secretary Rubin raised eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant.)16
When the global economy crashed a decade later, Citigroup collapsed. It might have disappeared completely like Lehman Brothers had the federal government not agreed to shoulder most of the losses on $306 billion of its riskiest assets.17 At the center of Citi’s failure seemed to be the repeal of Glass-Steagall, which allowed the bank to place chancy bets on mortgage-backed securities with its depositors’ money. Had the Glass-Steagall Act still existed, banks that were “too big to fail” wouldn’t have existed, the reasoning went, and the economic crash would have been far less severe and a massive taxpayer bailout unnecessary.
It took years, but Sandy Weill ultimately agreed with that assessment. Though he kept a four-foot hunk of wood in his office—etched with his portrait and the words “The Shatterer of Glass-Steagall,”18 he told CNBC in 2012 that he thought it was time to reregulate the financial sector. “What we should probably do is go and split up investment banking from commercial banking,” he said. The biggest banks, should “be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk, the leverage of the banks will be something reasonable, and the investment banks can do trading.”
The TV hosts on CNBC were incredulous. Was the man known for decimating financial regulations turning into a trust buster? “Well, I think the world changes,” said Weill, who was by then seventy-nine years old. “It’s not the same world that it was ten years ago, and I think you have to think, ‘What’s this world about?’”19
As for Jamie Dimon, he likes to present himself as a student of history who avoided some of the worst excesses of the housing bubble by remembering the busts of the past, including the Great Depression. “Experience and judgment—I don’t think they’re replaceable. You go to a lot of businesses; they don’t remember how bad things can get,” he told journalist Patricia Crisafulli. “We will never forget the aftermath of the housing bubble, but forty years from now, believe me, someone is going to forget again somewhere.” But as the head of the biggest bank in America, Dimon appears to have learned different lessons than the rest of us. He never had the change of heart of his mentor, Sandy Weill. Since JPMorgan Chase had more than five thousand deposit-taking branches20 and a robust investment bank, it’s perhaps not surprising that he doesn’t want change. A new Glass-Steagall Act would mean the breakup of his company. “Glass-Stegall had nothing to do with the crisis,” he gruffly told CNBC in 2016. The law, he said, was “an anachronism of the past. I know there’s a lot of anger at the banks,” he added, but breaking them up was not a solution.21
SO, WHAT DID Jamie Dimon learn from the housing bust? After the global economic meltdown, JPMorgan Chase behaved very similarly to Steve Mnuchin’s OneWest Bank. Increasingly, Dimon’s bank supported other people who were rich just like him. Instead of helping everyday Americans live their dreams, JPMorgan Chase exacerbated the wealth gap. Like OneWest, it was more Mr. Potter than George Bailey. Between 2010 and 2016, JPMorgan Chase’s wealth management business nearly tripled in size, from $67 billion to $173 billion. But though it greatly expanded the part of its business that helped the rich invest their money, it retreated from helping Americans buy homes. As the recession turned into recovery, JPMorgan Chase’s home lending shrunk by a third—from $165 billion in 2010 to $111 billion in 2016.22 The withdrawal was particularly stark for working-class borrowers served by the Federal Housing Administration loan program, which had been created by FDR eighty years before. “The real question is, should we be in the FHA business at all?” Dimon said on a call with analysts in July 2014, three months after his bank funded Colony’s first bundle.23
The impetus for the comment was a $614 million settlement JPMorgan Chase had been forced to pay to the government after the Justice Department declared the bank had violated the False Claims Act. In particular, the government alleged JPMorgan Chase was foreclosing on government-insured loans that should never have been made in the first place.24 “We want to help the consumers,” Dimon said, “but we can’t do that at great risk to JPMorgan.” If the government didn’t create “some kind of safe harbor” where his bank wouldn’t be fined if it broke the rules, he would stop using the program to lend to working-class homeowners.25 True to his word, federal lending data show the number of FHA loans originated by JPMorgan Chase dropped by more than 60 percent in 2014 and fell to almost nothing the year after.
No one would deny the bank the right to screen loan applicants fairly. The problem was that JPMorgan Chase wasn’t obeying the law. If he couldn’t break the law, Dimon argued incredibly, he would simply bypass making loans to working-class home buyers entirely. Besides, it was faster and easier and just as lucrative to make large piles of cash available to Homewreckers such as Tom Barrack. From 2014 to 2016, JPMorgan Chase helped six thousand Americans buy homes using FHA mortgages. During the same time period, it extended almost four times as much capital to Tom Barrack’s Colony, handing it $3.3 billion in cash as it created six mortgage-backed securities covering twenty-three thousand rental homes.26
JPMorgan Chase’s transactions with Colony came quickly, one after another. After creating the $514 million debt ball that included the Butler family bungalow in April 2014, Colony and JPMorgan Chase put together a second, half-billion debt bundle covering 3,727 homes that July. Another $679 million bundle of debt followed in 2015. Then, in 2016, after Colony merged with Barry Sternlicht’s Starwood Waypoint Residential Trust to create an empire of 31,000 homes that rivaled Blackstone in size and reach. JPMorgan Chase lent the new ownership group $1.1 billion in exchange for liens against 7,563 homes. Each of these giant balls of debt was carved up into tranches and sold on the bond market, with the ultimate owners of the debt unknown to the public.
TOM BARRACK ENDORSED Donald Trump in early 2016. At the time, the real estate developer and reality TV star was still a curiosity and a pariah among the GOP elite. Though he led in the polls, he was seen mostly as a sideshow who would eventually be stopped by the Republican establishment that still backed former Florida governor Jeb Bush and senator Marco Rubio.
“One of the kindest and most humble friends I’ve had,” is how Barrack described Trump to CNBC shortly after the Iowa caucuses. “I actually think he can win,” he said. “America’s ready to say, ‘Why don’t we approach America like you would running a business?’” Barrack seized on Trump’s own campaign rhetoric, painting him as man so wealthy that he was bankrolling his own run for the White House. “So, whether you like it or don’t like it, what you’re getting is unfiltered and raw from a guy who’s writing his own checks. I think that’s novel.”27
The truth, of course, was more complicated. It wouldn’t be long before Barrack was actively reaching out to his friends seeking donations for Trump’s campaign. All told, Barrack helped put at least $130 million into Trump’s campaign coffers: he raised $23 million for the pro-Trump Rebuilding America Now super PAC, and, as chair of Trump’s inaugural committee, he raised $107 million more.28
“He may have been the one peer of the president within the campaign circle,” political operative Roger Stone, another longtime Trump confidant, told me. It was Barrack, Stone noted, who introduced Trump to campaign manager Paul Manafort, who would later be convicted on eight counts of bank fraud and tax evasion, and plead guilty to “conspiracy against the United States.”29 (Barrack’s relationship with Manafort was long-standing, and as with Barrack’s other business associates, he had profited off Manafort’s distress. In 2004, for example, Barrack had given Manafort’s wife a $1.8 million loan secured by their home in the Hamptons.30 The house was later listed in an indictment the federal government sought to have forfeited as “derived from proceeds traceable in the conviction.”31)
What Barrack offered Trump was trust, Stone said. They had “maintained a very close relationship” ever since the Plaza Hotel deal in 1988, and since then Trump found Barrack to be “extremely circumspect.” In addition, Stone said, Barrack brought connections which brought money into Trump’s campaign coffers: “He’s a smart guy and he’s made a great deal of money in the real estate market.”
Fund-raising also played to one of Barrack’s great talents—schmoozing. The first big fund-raiser came on May 25, 2016, shortly before Barrack’s company cashed in by rolling Sandy Jolley’s old house into a $536 million mortgage-backed security.32 Trump had just won the Indiana primary and become the presumptive Republican presidential nominee. Steve Mnuchin, OneWest’s recently departed chairman and Trump’s new campaign finance chair, sent out the fund-raiser invitations. Barrack hosted the event in a twenty-four-thousand-square-foot Santa Monica mansion that he’d bought for $25 million following his third marriage in 2014.33 To get to the party, guests pulled their luxury cars up its long, gated, and hedge-lined drive until they reached a grand front porch held up by columns meant to evoke George Washington’s Mount Vernon residence or Thomas Jefferson’s Monticello.
“It was the biggest house I’d ever been in in LA,” one of the donors, eighty-one-year-old retired lawyer Robert Rosenthal told me. “I’ve been to big houses, and I’ve been to castles in England where people live. This was more like a castle in England.” Tickets were $25,000 a person, $100,000 to have your photo taken with Trump.
The fund-raisers’ guest list was quintessentially Barrack—or perhaps quintessentially Trump. With so much of the big Hollywood money going to the probable Democratic nominee, Hillary Clinton, Barrack brought in early support from the types of people you might suspect would write a check to elect a real estate developer turned reality television star. Campaign finance disclosures show donations came in that day from Dr. Garth Fisher, a Beverly Hills plastic surgeon who goes by the nickname “the Enhancer” (his website includes a picture of him standing on a golf course in a lab coat, holding a putter, next to a twenty-foot-tall inflatable breast), and Mareva Georges, the former Miss France. Checks also flowed in from the world of real estate, including from Douglas Manchester, a combative San Diego developer whom Trump would appoint ambassador to the Bahamas. Barrack brought in a contribution from the owner of a winery next to his in Santa Barbara County. A generous check also came from another executive at Colony, and from Andy Puzder, the CEO of CKE Restaurant Holdings, the parent company of the fast-food chains Carl’s Jr. and Hardee’s. Puzder, who would later withdraw his nomination to be Donald Trump’s labor secretary amid reports of domestic violence, was also an investor in Barrack’s rental home empire.34
Barrack spoke briefly and then introduced Trump, who went on for an hour without notes. Rosenthal was mesmerized. At this fund-raiser full of elites, Trump didn’t deviate from the populist message he was delivering at rallies on the campaign trail. In that moment, Rosenthal said, he knew Trump would win the election. “Donald Trump knows Joe Six-Pack,” he explained. “I don’t know how to describe it. He has a feeling for Andy Ordinary.”
But Rosenthal’s own path to the fund-raiser showed how substantially Trump’s inner circle differed from his populist voting base. Originally from Scarsdale, an affluent suburb in Westchester County, New York, Rosenthal said he’d known Trump for years, having mingled with him on the charity circuit in Manhattan. Another connection: Rosenthal said he had once dated Steve Mnuchin’s aunt. When he heard that Mnuchin was behind a Trump fund-raiser in Los Angeles, it was an opportunity too serendipitous to pass up. He drove over from Burbank. “It’s getting to be a smaller and smaller word,” Rosenthal said. Within months, the Homewreckers would be going to Washington.