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FCIC Interview of John Reed, March 24, 2010

United States of America
Financial Crisis Inquiry Commission

INTERVIEW OF
JOHN REED

Wednesesday, March 24, 2010
2:30 p.m. – 3:45 p.m.

*** Confidential ***

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FCIC Interview of John Reed, March 24, 2010
Financial Crisis Inquiry Commission
Wednesday, March 24, 2010
--o0o—

MR. BONDI:

-- speak here.

It is 2:30 on

March 24th, 2010.
I am Brad Bondi with the Financial Crisis
Inquiry Commission.

And I’m joined by my colleague,

Ryan Schulte.
Our general counsel, Gary Cohen, will calling
in shortly, I believe.
Also -MR. COHEN:

He already has.

MR. BONDI:

Oh, he has?

Hi, Gary, sorry.
Also on the line is Brad Karp and Susanna
Buergel from Paul Weiss, representing Mr. Reed.

And we

have John Reed.
And, Mr. Reed, do you consent to the recording
of this call?
MR. REED:
MR. BONDI:
MR. REED:
MR. BONDI:
MR. REED:

I absolutely consent.
Thank you, sir.
May I correct one thing?
Yes, sir.
The lawyers for Paul Weiss may be

representing Citicorp, but they’re not representing me.
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FCIC Interview of John Reed, March 24, 2010
MR. BONDI:

Oh, I’m sorry.

Well, I thank you

for the correction.
MR. REED:

I mean, I’m a retired old Citi guy;

but they don’t work for me in any sense of the word.
MR. BONDI:

Ah, I misunderstood then.

Thank

you, sir, for the correction.
Let me introduce ourselves.

As I mentioned,

we’re with the Financial Crisis Inquiry Commission in
Washington.

We were established by Congress in 2009 is

to investigate the causes of the financial crisis and to
do a report that’s due at the end of this year in
December of 2010 on our findings, on the causes of the
crisis.
We’ve been tasked to look into various areas,
including institutions that failed or would have failed
but for substantial government assistance.
We are grateful for your time here today, and
we appreciate your time.
We will not keep you very long because I know,
sir, you’re in Boston.
MR. REED:
MR. BONDI:

Okay.
And so without further ado, I’d

like to get your impressions on what you believe were
the primary causes of the financial crisis.
MR. REED:

Well, my own sense is, there were a
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FCIC Interview of John Reed, March 24, 2010
lot of bad mortgages made -- that is, mortgages made to
people who didn’t have a high likelihood of being able
to repay them.

These were packaged and put into

security form and sold pretty broadly throughout the
world.
And, obviously, as these began to appear to be
going bad, all of a sudden there was a freezing up of
markets that was a combination of two factors:

One was

the sense that some of these mortgages were not going to
be paid off and, therefore, the securities in which they
were embedded would not perform as they had anticipated;
and, number two, the financial sector -- by which I mean
the major trading houses in New York and some other
parts of the world had leveraged themselves excessively.
Capital was small as compared to their total balance
sheet.
Very quickly, the market said, “Hey, there are
going to be some losses here.

Very difficult to

ascertain just how much and where; and we don’t think
that the people holding the paper have enough capital,
necessarily, to sustain these losses,” and, therefore,
there became a liquidity crisis.

Because if you think

that somebody with whom you have a lending relationship
doesn’t have enough capital to cover his losses, you
obviously don’t want to lend.
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FCIC Interview of John Reed, March 24, 2010
And so there was a drying up of interbank
lending, if you will, or interbank financial-institution
lending.

And this was the essence of the crisis.
MR. BONDI:

Mr. Reed, what role do you believe

Wall Street investment banks played in the origination
of subprime loans vis-à-vis securitization of those
loans and warehouse lines of credit?
MR. REED:

I think they were a big source of

demand for securities that, you know, were backed by
these subprime loans.
I don’t have any personal knowledge that they
originated these.

There may have been some Wall Street

firms that got into the origination business.
personally aware of that.

I’m not

But certainly by creating a

demand, there were tons of mortgage bankers and others
who were quite willing to originate packages themselves.
And so the demand did come out as the Wall Street
houses.
I suspect that the biggest part of the
origination came from other institutions, but I don’t
know that.
MR. BONDI:

Do you believe that there was any

failures in regulation or regulators leading up to the
crisis or during the crisis?
MR. REED:

Absolutely, yes.

There would have
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FCIC Interview of John Reed, March 24, 2010
been two and a half, maybe three failures.

I have to

sort of count them.
Clearly, it was well-known that subprime and
low-doc, no-doc mortgages were being originated.

It

seems to me that that’s an alarm bell for the regulatory
system.
You know, anytime you have low-doc, no-doc,
subprime –- the name “subprime” virtually suggests that
there’s reason that one should look at it.

So I fault

the regulators for not having jumped in and taken a look
at just what was being originated, and so forth and so
on.

And so I think there was clearly a regulatory

failure at that point.
Second, would be allowing the banks to get to
be capitalized as they did was also something that
regulators should have jumped in on.

There was an awful

a lot of off-balance sheet stuff, that as soon as
practice had been bucked, it had to come back on to the
balance sheet.

So you’ve got to ask yourself whether it

should have been off-balance balance sheet to start with
or not.
And the regulators, for some reason -- because
when I was working, the regulators were tougher than
that on capital -- seemed to allow the industry to
become decapitalized.

I think they probably made the
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FCIC Interview of John Reed, March 24, 2010
mistake of, you know, taking a look at what is, quote,
called “risk-adjusted capital,” end quote.

And since

the securities were, in theory, highly rated, they
presumably didn’t think that they attracted much in the
way of capital requirements.

This was bad logic.

First of all, I think the concept of
risk-adjusted capital is fundamentally flawed.

I

understand that it has been embraced and accepted by the
Basel Agreements, et cetera, et cetera; but I have
always thought that it was a flawed concept, and I still
think it’s a flawed concept.
And so I think the first regulatory failure
was on the origination side; the second was on the
capital side.

And the thing that I say a half --

because I’m not totally sure -- I believe that under the
Basel Agreements, the central banks of each country are
responsible to sort of have some degree of committee
about the effectiveness of the rating agencies.
If that is true -- and you can check it
legally –- then the Feds certainly didn’t pay any
attention to what the rating agencies were doing because
they certainly didn’t do their job.
MR. BONDI:

And with respect to the rating

agencies, do you believe that the rating agencies played
a significant role in the financial crisis or a role or
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FCIC Interview of John Reed, March 24, 2010
no role in the financial crisis?
MR. REED:

I think they were a significant

role because had they not granted the ratings they did,
whole process of securitization and selling would have
been quite different.
And so, you know, they were a necessary
condition for this securitization process to reach the
level and scale that it did.

And so you have to say

that they failed in the only responsibility that they
have, which is namely to provide accurate ratings for
would-be investors.
MR. BONDI:

What regulations would you say are

necessary for banking now or in the future?
MR. REED:
MR. BONDI:
MR. REED:

More capital.
Uh-huh.
When you say “banking,” I mean also

security firms.
MR. BONDI:
MR. REED:

Uh-huh.
Some kind of limitation on

counterparty risk lines.

In other words, it seems to me

that you’re going to have to either have specific
capital allocations associated with counterparty lines
or to simply put a limit and say that the total of your
counterparty lines with any signi- -- any single
financial institution can’t exceed, for example,
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FCIC Interview of John Reed, March 24, 2010
15 percent of your capital or something of this sort.
In other words, the exposure through
counterparties, the intrafinancial sector exposure was
the thing that, you know, sort of ground to a halt.
And, you know, these institutions have very
large exposures to each other.

Some institutions felt

that they had offset this by using these insurance
contracts, the CDS, the swaps.

But the fact of the

matter is, they didn’t look at what stood behind the
swaps.
I mean, had AIG failed, I’m not 100 percent
clear what would have happened to all of the swaps that
they had underwritten.

And I suspect that’s why the

government didn’t allow them to fail.

But the point

is, the regulation, first is going to have to regulate
capital more stringently.

I personally think

risk-adjusted capital is an improper way to approach it.
Secondly, you’re going to have to put some
limitation on counterparty exposure.

And you,

obviously, are going to want to move to have some types
of instrument traded through exchanges because that
limits the actual exposure between counterparties.
And beyond that, you can get into the
structure of the industry and so forth and so on, about
which I have opinions, but which is probably not as
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FCIC Interview of John Reed, March 24, 2010
central and the other things I mentioned.
MR. BONDI:

Mr. Reed, I listened to your -- I

read your testimony, rather, to the Senate Banking
Committee from February 4th, 2010.

And I’ve asked that

you elaborate on a statement you made.
You said, and I quote, “The industry should be
compartmentalized so to as to limit the propagation of
failures and also to preserve cultural boundaries.”
And I believe you’re talking about the banking
industry, but correct me if I’m wrong.
What did you mean by that statement about it
“should be compartmentalized to limit the propagation of
failures and to preserve cultural boundaries”?
MR. REED:

Well, it seems to me that if you

and I were taking a blank piece of paper and saying, how
could we structure the industry so that, on the one
hand, it could serve the public as it’s intended to, and
yet, on the other hand, to be more robust, if you will,
i.e., less likely to produce what I would call
catastrophic failure.

Catastrophic failure is where the

failure of one element propagates around and has an
impact on the real economy.
So if we were trying to, you know, create such
a system, I personally, based on my experience in
running such organizations, would suggest that I would
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FCIC Interview of John Reed, March 24, 2010
keep your major repository institutions separate from
those institutions whose primary business is
intermediating the capital markets on behalf of
customers.

And this is sort of the old glass ego.

You

could rewrite it somewhat differently, if you wanted, to
reflect modern practices.

But it seems to me you

clearly do want institutions whose primary line of
business is to intermediate capital markets on behalf of
customers; and you clearly do want depository
institutions who primarily lend to consumers and to the
business community for working capital needs.
I say “working capital” as opposed to
the “capital, capital.”

So they’re not issuing equity,

they’re not issuing bonds, but they are making loans or
providing credit for working-capital purposes.
I would create a separation, in part because
the risks associated with intermediating the capital
markets are quite different than those associated with
more traditional bank lending.

And I’d just as soon

keep the two fundamentally separate.
And secondly, there’s a big cultural
difference.

If you run under on a [inaudible] that’s

primary businesses, intermediating the capital markets,
you soon become very market-oriented, you’re going to be
a trader, and you’re going to take positions for your
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FCIC Interview of John Reed, March 24, 2010
own account.

Because if you’re in the markets all the

time, you tend to do this.

You have the market

knowledge and the expertise.

And the sets of people who

understand these kind of market, and the cultural is
quite different than the kind of culture that exists in
a traditional banking institution and lending
institution.
And the two, if they’re put together -- and
there are many firms today -- Bank of America plus
Merrill Lynch is an amalgam of these two different
cultures -- and I’m not talking about Merrill Lynch, the
brokerage firm, I’m talking about Merrill Lynch, the
capital markets activity -- if you put them together,
the capital markets activity tends to have a big impact
on the way the company is run, both from a risk point of
view, from a compensation point of view, a sort of
personnel policies that exist and so forth and so on.
And if it were up to me -- and there are many
people who are knowledgeable who have different
opinions -- but if it were up to me and I had a blank
piece of paper, I would segregate the industry into
compartments so that you did not have institutions that
had both of these functions within them.
MR. BONDI:

There’s some, Mr. Reed, who argue

that the genie is out of the bottle, so to speak, in our
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FCIC Interview of John Reed, March 24, 2010
global economy, with European banks and others becoming
large and conglomerated.
Is that something you believe is achievable on
a global scale or achievable even on a domestic scale?
And could you elaborate on your views on whether the
genie is out of the bottle, so to speak, on that point?
MR. REED:
domestic scale.

I’d say it’s achievable on a

I don’t think you’re going to convince

the Europeans to go away from their concept of a
universal bank.

And, you know, I wouldn’t waste a lot

of time trying to do so.
There’s nothing that says the structure in the
United States needs to be the same as the structure of
the industry every place else.
I think you’ll find in Japan, that this kind
of separation does exist, and you have the [inaudible]
who are basically -- you know, they took over Lehman,
and they’re basically dealing with capital markets; and
then you have the traditional large Japanese banks that
are not.
And, you know, the Japanese banks are
perfectly able to survive in a world that has different
configurations elsewhere.
So, you know -- and I don’t actually know the
structure in Singapore, but I would guess that it’s more
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FCIC Interview of John Reed, March 24, 2010
Japanese style than it is sort of continental style.

So

the idea is, you could have differences that are
differences by countries certainly exist.
You are going to want to have big Wall Street
firms that can compete globally.

And there’s no

question that our Wall Street firms can do this.
can serve customers globally.

They

In fact, I think they

probably dominate the business on a global scale.
That doesn’t mean that every bank in the
United States needs to compete on capital market
activities globally.

They could compete in the banking

business.
For example, I would point out to you that
before the merger of Merrill Lynch with the Bank of
America, the Bank of America group, which was a
perfectly good bank and so forth and so on, competed on
a global basis but did not have the capital markets
activity associated with Merrill Lynch.
I believe that there’s no genie that needs to
be kept in bottles or released from bottles.

I think

you look at the structure of the industry from the point
of view of the functions that you would hope it will
perform for your economy.

You do have to look at global

competitiveness.
I ran Citibank from, I guess, 1984 until the
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FCIC Interview of John Reed, March 24, 2010
merger with Travelers.

We had no capital markets

capability to speak of.
with everybody.

We competed internationally

We had no problems doing so.

Earned a

perfectly decent return for our stockholders; and,
therefore, you know, I don’t think the world has
changed, and they could go back to that configuration
and continue to do equally well.
MR. BONDI:

And, Mr. Reed, turning to

Citigroup, Citigroup has been described as an
organization with many different cultures.
Could you speak to the challenges that you
witnessed at Citigroup with respect to the various
different cultures during your tenure at Citi?
MR. REED:

Yes.

I think your comment is

correct.
By the way, the business involves different
cultures.
The retail business is a single culture, which
is very consumer-focused, very much, you know, focused
on the retail business.

It’s akin frankly to running a

retail store or being in the packaged-goods industry.
We brought a lot of people in from the package-goods
industry.

I used to work for the bank, and they found

that transition to the consumer side easy to make.
And then you have the corporate-banking side
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FCIC Interview of John Reed, March 24, 2010
which has its own culture.

It’s very customer-focused.

It’s obviously more sophisticated in a financial sense
of the world.

If you have a large global business like

we did, the ability to operate globally this culture
unto itself as well.

It is difficult for people who

have had all of their working experience in America to
all of a sudden have responsibilities for global
activities.

It helps a lot if you’ve worked overseas,

you understand the difference both on the customer side
as well as the staff side.
You know, the U.S. is very much a culture of
rules.

Most societies around the world are cultures of

relationships, and the rules are less important than the
relationships.

And you have to understand that that’s

true both with regard to your staff as well as with
regard to the governor, government, and your regulators
and also with regard to your customers.
And then you get the sort of trading culture,
the capital markets culture, which exists in the money
centers.

You see it very much in New York.

You see it

very much in London, in Hong Kong, Singapore to a
somewhat lesser degree.
These trading cultures are quite different
than all of these others.

And when we merged, of

course, with Travelers, we had the Travelers Insurance
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FCIC Interview of John Reed, March 24, 2010
Company which was totally different.

You know, if you

go to Hartford and you visited the insurance company, it
had a very different culture, one that was very
interested in investment returns on their reserves.
Because an insurance company that can get a better
return on its investment of its reserves can afford to
take more risks than one that does not; and they really
become very focused on investment management as well as
assessing insurance-type risks.

A very different

dynamic than the banking business.
And then Smith Barney, which is a brokerage
firm and a very good brokerage firm, totally different.
Smith Barney, you know, intermediate in capital markets.
But on behalf of retail customers with basically
salesmen who get to know the customers extremely well
are less knowledgeable about the capital markets than
the people in the capital markets business.
So you had a multiplicity of cultures all put
together.
MR. BONDI:

And how does a CEO manage so many

different cultures and so many different business lines?
And along those lines, was Citigroup too big to manage?
MR. REED:

Well, history certainly suggests

that it might have been.

If you look at the results,

you would have to say it didn’t work.

And, you know,
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FCIC Interview of John Reed, March 24, 2010
it’s got to be laid to the management.
anybody else.

You can’t blame

So then there’s an issue there.

You know, when we did the merger, we did so
because we thought it made sense -- and I can walk you
through why, if you wanted -- but it clearly was a big
company to manage.

It required somebody who had a

fairly decent knowledge of the various businesses, but
also somebody who had an ability to practice, to make
sure that you could both have differentiation of the
different businesses and integration across the
totality.
You may or may not know that the reason I left
Citi was because Sandy and I, who was my co-executive -we were co-CEOs, I guess, at the time -- he and I both
agreed that you couldn’t run the company with two
people.

We were driving everybody nuts because no one

knew who to come to.

Should they come to me?

Should

they go to Sandy, et cetera, et cetera.
He and I had a deal where either one could
veto the activities of the other.
well.

That worked quite

We did things that we agreed on; we didn’t do

things we didn’t agree on.

But we agreed that we needed

a single person.
I suggested that the two of us step down and
that we bring somebody in who was from neither Citi nor
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FCIC Interview of John Reed, March 24, 2010
Travelers; and he disagreed.

He wanted to stay.

I didn’t think he was capable of running the
company.

Not that he isn’t capable of doing other

things or that he wasn’t a capable manager or investor,
et cetera, et cetera.

But this was a big, complex,

global organization with lots of pieces that, you know,
he had no experience with.
manager.

And he is not a practiced

And he doesn’t have much respect for process,

budget disciplines, risk disciplines, et cetera,
et cetera.

He very much managed things through the

personal relationships, which I didn’t think was
appropriate for that particular situation.
We argued to the board.
was the right person.

The board decided he

I disagreed with that; but, you

know, boards make those decisions.

And I argued as best

I could for what I thought was right.

And he stayed on.

History would say that someplace there was a managerial
failure and the place got out of control.
By the way, had Citi not failed, Salomon
Brothers sure would have.

In other words, the merger,

while it created a company that the government had to
come in and save, had we not had the merger, Salomon
Brothers would have been on your list with Bear Sterns
and AIG and so forth and so on, because it was the
trading activities at Salomon Brothers that would have
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FCIC Interview of John Reed, March 24, 2010
been right in the middle of it, just as Lehman was and
Bear Sterns was and AIG and everybody else.
So you could say that this merger created a
problem that the government had to deal with.

I would

argue that there would have been an equal problem had
there not been a merger; it just would have been called
“Salomon Brothers” or “Travelers,” had it not been
called “Citigroup.”
MR. BONDI:

Speaking of Salomon Brothers, the

public filings of Citigroup have suggested, certainly,
that the -- that Citigroup suffered significant losses
from its CDOs, collateralized debt obligations.

And

Citi’s investment bank, Citi Markets and Banking, was
run by former Salomon Brother traders.

Some of them had

started in the junk-bond trading arena.
Do you believe that that Salomon culture led
to or contributed to Citigroup’s financial problems and
perhaps taking on too much risk?
MR. REED:

Yes.

Let me qualify.

I retired

April 2000, and we’re now talking about events that were
subsequent to that.

And I did not have any contact with

the company after I retired.

You know, I’d occasionally

run into somebody in the street or something; but, you
know, no one ever called me and asked my advice -- and
you’re not surprised, given the basis on which I left.
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FCIC Interview of John Reed, March 24, 2010
So I don’t have any insider knowledge.

But my

understanding, if you will, is that the Salomon culture,
and particularly the leverage that they brought in -you know, they were able to leverage themselves
substantially because of their situation within
Citigroup.

And the culture of Salomon did dominate

the -- you know, even before I left, some of the people
from Salomon were being given broader responsibilities
involving the entire capital markets activity.
And my own belief is, it was that risk-taking
culture and so forth that is at the core of the problems
that Citi has suffered.
MR. BONDI:

How does a CEO go about reining in

excessive risk-taking at an investment bank like Citi
Markets and Banking?
MR. REED:

You have limits.

You know, we had -- you know, when I was
running Citi, we had trading activities primarily in the
foreign-exchange area.
involving bonds.

We had some trading activities

Not -- nothing compared to Salomon.

But as with regard to all risk, you have
limits, you have loss limits by individual trading
position and by the aggregation of sets of trading
positions and by trading activities.
You know, we had trading floors around the
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FCIC Interview of John Reed, March 24, 2010
world.

We probably had 30 or 40 significant trading

floors around the world; and we had a whole array of
limits that applied to, you know, what kind of positions
we could take and what kind of losses we could
experience.
My general rule of thumb was that when you
experienced [inaudible], it was about twice the limit,
which showed you more or less the guys always overran
the limit by the time you found out about the loss.
we were aware of that.

But

And so we had limits that, you

know, were designed to create potential losses, and we
felt we could manage.
But you manage trading floors by people.

You

don’t put people in charge of trading activities that
you don’t feel you can trust and who don’t share your
values, if you will, with you.

And I have had occasions

where we’ve removed people from trading positions simply
because we didn’t particularly feel comfortable with
them being in those positions.
And you manage it by having a set of limits,
and you have a set of auditors who you make sure -because, obviously, you’ve got to make sure that people
book things properly -- in fact, you’ve got to make sure
that they book them at all.
And so you have to have an independent audit
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FCIC Interview of John Reed, March 24, 2010
function.

We had a very strong audit and accounting

function, where we often got into battles with people on
how to book things.

And, you know, you’ve got to make

damn sure you book things properly.
But it’s a set of processes to have human
beings but they have checks and they have approvals.
And, you know, just go and talk to Goldman.

They do it,

and they do it pretty well.
MR. BONDI:

You know, Citi has publicly said

in its filings that they maintained the very highestlevel tranches of CDOs.

These were rated above AAA.

There’s some that may argue that taking a position at
AAA should have no limits.
Do you believe that limits still should come
into play with respect to positions that are rated AAA
and above?
MR. REED:

Yes, because as I told you right

from the beginning, I have -- and this was true when I
was working -- I never thought that risk rating made any
sense.
The first time when I was at Citi that we took
a big loss, it was on U.S. government bonds.

That was

because Mr. Volcker came into the Fed and raised
interest rates, and the value of our bonds dropped.

In

those days, banks kept bond portfolios for liquidity
23

FCIC Interview of John Reed, March 24, 2010
purposes, and we took a big write-off on U.S. government
bonds.
I was the young kid in the bank.
have a big responsibility.

I didn’t

And I said, “My, my.

It

turns out you can take losses on something that, you
know, turns out” -- I mean, no one doubted the
government bonds were going to be paid, but you had
interest rate risk.
You know, I spent my life trying to collect
loans from Latin American countries that we had lent
money to.

We were successful in getting it back, but it

took ten years.

And, you know, when I was in the banks,

sovereign lending was thought to be relatively riskless.
I think my predecessor was quoted as saying, “Countries
don’t go broke.”

And I think he’s correct, countries

don’t go broke, but the people who lend to them do.
And so I, early on, decided that this idea of
being able to anticipate risks before the fact was
simply intellectually flawed.

And so as we got into the

debates, which sort of started in the early nineties
about maybe our capital should be allocated based on
risk, I rejected this.

I said that as far as I’m

concerned, all assets have the same amount of risk, and
we [inaudible] associate with them, I don’t care if
they’re AAA, AA, A, E, or what they are.
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FCIC Interview of John Reed, March 24, 2010
And I do not believe that bankers have a good
track record at anticipating risk before the fact.

And,

therefore, all this risk adjustment and so forth and so
on, I just think is wishful thinking.
And I would have paid no attention whatsoever
to the rating on the various instruments -- AAA, AA,
what have you.

You would have had to have had limits on

whatever instrument you were talking about
MR. BONDI:

How much does compensation and

compensation structures play in risk-taking?

And do you

have a view as to the appropriate way to incentivize
employees, that they take the appropriate risk but they
don’t go too far?
MR. REED:

Well, in the culture of a trading

organization or the people who intermediate capital
markets, you’ve got to be careful.

When I joined the

industry people, you know, I used to have a feeling for
some of our customers who have been in the investment
banking business, and particularly Morgan Stanley, which
we were close to at the time.
In the beginning, they were very
customer-oriented.

And my guess -- and I don’t know

this for a fact -- but my guess is the compensation
didn’t particularly affect the sort of risk profile of
the firm.
25

FCIC Interview of John Reed, March 24, 2010
But as trading became more important and as
profits from proprietary positions became more
important, then customer business less important, then
I think compensation begins to play an important role.
I don’t think compensation and traditional consumer
lending or compensation and, you know, traditional
corporate banking makes much difference.
I do think compensation for customers who
originate -- you know, if you’re going to have a
mortgage bank -- we owned a mortgage bank when I was
running Citi -- you have to be very careful as to how
you pay people who originate mortgages because,
obviously, if you pay them just for the volume of
originations, they’re going to originate garbage and
you’re going to be stuck with it.

And so you’ve got to

be very careful at the customer center if you’re talking
about origination.
You also have to be very careful in trading
floors where they can take positions.
they’re trading on your name.

And, of course,

You know, we you’d to

have traders who say, “Well, I made $10 million this
month,” or whatever, and you’d say, “Yes, you made
$10 million because your name is Citibank, and you have
customers that are willing to deal with you.

Now, how

much was it because they dealt with Citibank, and how
26

FCIC Interview of John Reed, March 24, 2010
much was it because you’re this great genius?”
And so you always have this argument about why
people are able to make money.
You clearly need claw-back capability.

If

you’re going to build a business with big bonuses, which
is the current characteristic of the industry, you have
to have some claw-back kind of situation.

You either

have to say, “Hey, you’re not going to be paid until we
actually book the profits.”

Not that we just have a

bookkeeping -- you know, if you’re marking your mark,
your books to market every day, you could have apparent
profits that disappear very quickly.
And you could have a system -- I don’t know
anybody who does it -- you could have a system that
says, “Hey, until we realize those profits, you don’t
get any bonuses.”

Or you could have a claw-back, where

you have an ability to claw-back bonuses that were paid.
I much more prefer long-term compensation.

I

much prefer to pay people enough so that they could eat
based on their salary, and then have any -- you know,
anything that basically goes to their net worth
accumulate over extended periods of time, either by
having deferrals of your ability to get your hands on
bonuses that are earned or by doing it by doing
something that’s related to the price of the stock.
27

FCIC Interview of John Reed, March 24, 2010
This idea of paying people less money than
they need to live but then making up for it with big
bonuses, in my mind, is a flawed system.
MR. BONDI:

And how do you empower a chief

risk officer and risk officers in an organization like
Citigroup to be more proactive?

How do you empower them

to be on the same footing as the business level
personnel and business management?
MR. REED:
them above them.

Well, first of all, you just put

You know, when I was at Citi, the two

most senior people on my team was the head of risk and
the head of HR.

And I made very clear to everybody

that, you know, I looked to the HR person because, you
know, the quality of the people in the organization is
more important, almost, than anything else.
Then secondly, our ability to take risk.

And

everybody knew that if there was the slightest
disagreement, I was going to back the person in charge
at risk.
We had a process, which Sandy stopped, whereby
we had a monthly meeting which we called, “Windows at
risk.”

And we went over -- we spent the morning trying

to assess what risks were out there in the world, and
then we looked at what our positions were; and then
based upon the morning discussion plus our positions, we
28

FCIC Interview of John Reed, March 24, 2010
would make decisions about changes.
I did not allow the people with line-business
authority to be in that last conversation.

And the

reason is because the people in the business obviously
fall in love with it.

They are going to be seen as the

people who are most expert.
reason to defer to them.

And so there’s a natural

And they’re going to be the

last person to have a reasonable assessment of the
risks.
So if we were talking about, say, commercial
real-estate lending, the head of commercial real-estate
lending was not in the room when we made decisions about
how big an exposure we were willing to have in
commercial real estate.

Because he inevitably wanted

more, and he inevitably had lots of facts so that he
could tell us all why we were wrong.

And he inevitably

was wrong.
The last person in the world who would
recognize the risk coming up in commercial real-estate
the was the guy who had line responsibility for running
it, because he fell in love with the business, and he
should.

I mean, you want somebody who loves the

business and loves his [inaudible].
But the point in time is, you’ve got to be
damned sure that the decisions associated with what your
29

FCIC Interview of John Reed, March 24, 2010
risk appetite and so forth are made by people who are
looking at the company’s overall position and not the
people running the businesses.
You can imagine, I was not very popular in
Citi for running things this way; but I did it because
I learned the hard way that the guys running the
business are the last guys in the world who are going to
have a reasonable assessment of the risk.
MR. BONDI:

Mr. Reed, in retrospect, do you

believe that there were seeds planted while you were CEO
at Citi or prior to that, that ultimately grew into
problems that ultimately led to the financial
difficulties of Citigroup in recent years?

Were there

seeds that were planted way back during your tenure -or that you observed others, rather, being planted that
you believe ultimately led to the problems that
Citigroup suffered in recent years?
MR. REED:

Yes, I mean, the seeds were there

was the dominance of the Salomon Brothers sort of
culture; our unwillingness to sort of come to grips with
it.
Remember, Salomon had been absorbed into
Travelers only about five or six months before the
merger with Citi.

So it was, by no means, you know,

fully absorbed when we had our merger.
30

FCIC Interview of John Reed, March 24, 2010
And if you look at the facts, you’ll find that
there were three people responsible for running Salomon
which, by definition, I mean, is not a great idea.
And the seeds were planted by, you know, our
unwillingness to come to grips with Salomon, and then by
our unwillingness to have sort of a process-oriented
management structure for the combined companies.

And

these, of course, were the problems that led to
conflicts between Sandy and myself, and which ultimately
ended up with the board and ended up with them deciding
that Sandy should stay on.
And those were seeds.

I don’t think that, you

know, the balance sheet of the company at that time was
particularly a risky one.
leveraged.

I don’t think the capital was

We didn’t have the off-balance sheet

entities that later turned out to be the source of the
problem.
I think the source of the problem came later,
when this mortgage-backed securities -- I mean, there
was no such thing as subprime, low-doc, no-doc mortgages
at that point.

But it was this cultural thing and this

managerial thing that were precursors, if you will, of
what later on became problems.
MR. BONDI:

And, sir, if you wouldn’t mind,

would you elaborate on that Salomon culture during your
31

FCIC Interview of John Reed, March 24, 2010
tenure?
MR. REED:

Salomon, they were extremely able,

intelligent, capable people; but they were used to
taking big risks, and they were used to leveraging their
balance sheet to the extent that they could.
And mind you, if you look at Salomon, I
believe it had gone bankrupt three times.

In other

words, I think Salomon had some serious troubles at one
point, and they merged -- I can’t remember the name of
the company, but they merged with somebody that was in
the commodity business, and that basically was to keep
them from going down.
And then Salomon got into trouble when, with
goods and they tried to sort of corner the U.S.
government market.

And they had gotten into trouble.

And they sold themselves, of course, to Travelers
because they had been in trouble.

And Warren Buffett

had come in and tried to discipline them unsuccessfully.
So we’re talking about a set of folks who had a history
here of making an awful lot of money for a short period
of time, but then getting into trouble, and then making
a lot of money and getting into trouble.
And that pattern continued within Citi.

They

were nice people, the people were -- you know, I enjoyed
them, they were good folks, et cetera, et cetera,
32

FCIC Interview of John Reed, March 24, 2010
et cetera.

But these guys were serious traders.

And,

of course, my own view was, we were trying to have
Salomon play a role that would help us serve our
customers; but I never put much value on the money you
could make from trading because I didn’t think it meant
much to the stockholders.

It was so unpredictable.

And so, you know, my interest in Salomon was
much more, what could we do with that kind of capability
to serve our customers?
But, anyway, Salomon had a history of taking
fairly big risks, making a lot of money, occasionally
getting caught out.

And as I say, you’d have to go back

and look at the record, but I think they had gone on -they had been in the position where they were forced
into mergers at least twice and maybe three times prior
to becoming part of Citigroup.
And so it was -- it was a -- and it’s a big
organization, and it was housed in its own facility down
in southern, you know, Manhattan.

And so it was a tough

organization to get control of.
And, you know, when Sandy and I first went
off-campus to decide how to put a management structure
in place, we had agreed to have a single manager run
Salomon, Jamie Diamond, who is now over at J.P. Morgan
Chase.
33

FCIC Interview of John Reed, March 24, 2010
And then when we came back, Sandy changed his
mind and said, “Oh, we can’t leave Jamie there alone.
We’ve got to make it a triumvirate,” which turned out to
be crazy.

And so Salomon had a culture of its own.
MR. BONDI:

And did you ever come across Tom

Mahairis?
MR. REED:

Oh, sure.

A nice guy from Chicago.

He was head of it.
MR. BONDI:
MR. REED:

And what was -A trader.

Very smart, but he

certainly was at the base of some of the [inaudible].
MR. BONDI:

Did you -- were there instances

that you observed Mr. Mahairis taking risk, even back
then, that you thought were inappropriate?
MR. REED:

No, sir.

watching his positions.

You know, I wasn’t

I did feel that attitudinally,

he was more aggressive than I am.

And we tried to get

him embedded within a capital markets group, which he
would not have been running; and we were unsuccessful in
getting that done.
There was a guy from Citi who I would have
liked to have put on top of all of our -- you know, our
foreign exchange, our bond trading, and our equity
trading; but we did not do that.
But Mahairis is a smart guy.

I don’t know if
34

FCIC Interview of John Reed, March 24, 2010
you’ve met him, but he’s a very smart, able person.
comes originally from Chicago.
personality.

I like him.

An attractive

His wife had a first child

while he was working for us.
but aggressive.

He

And a perfectly nice guy

And, you know, he had a sense of what

he wanted to do.
And my guess is that -- and I’m guessing -that he outran any sort of controls that might have been
put on top of him.
MR. BONDI:

Now, there are some, Mr. Reed, of

the philosophy that traders shouldn’t control their own
risks; that there should be other persons that control
that risk.

That traders should take the most risk

possible, and that there shouldn’t be any sort of
self-governing of risk.
I take it from your statements that you
probably wouldn’t agree with that?
MR. REED:

No, that’s what limits are.

Limits

say to -- you know, the question is, why does a car have
brakes?
MR. BONDI:
MR. REED:
fast.

Uh-huh.
A car has brakes so that you go

If you got into a car and you knew there were no

brakes, you’d creep around very slowly.

But if you have

brakes, you feel quite comfortable going 65 miles an
35

FCIC Interview of John Reed, March 24, 2010
hour down the street.
The same is true of limits.

You want trading

rooms and trading desks and individual trading positions
to have limits.

Within those limits, you say to the

trader, “Hey, do whatever you think is proper, as long
as you stay within these limits.

You have a sense of

the market, and you should feel free to take positions
as long as they don’t exceed these various limits.”
Those limits should not be set by the traders.
MR. BONDI:
MR. REED:

Uh-huh.
I mean, by definition, you don’t

ask your kids, “Well, what time would you like to come
home tonight?”
“Oh, midnight.”
“Fine.

Well, then let’s agree midnight.”

I think you say, “Mom and dad have decided
that we’d like you to be home at eleven o’clock, and so
would you please get home by eleven o’clock?”
And so the point is, limits should be set by
people who are in the risk business.

You know, at least

in Citibank, our credit people and risk people set
limits.

We had people who had counterparty limits and

so on and so forth.
Obviously, traders could say, “Gee, I think my
limit is too small.”

But they should not be able to set
36

FCIC Interview of John Reed, March 24, 2010
the limits.

You don’t -- I mean, that would be crazy.

MR. BONDI:

And did you have many encounters

with Chuck Prince during your tenure at Citi?
MR. REED:

Yes, Chuck Prince and I used to

talk every morning.

He and I used to come in early,

much earlier than most, and we swapped books and used to
talk.

He sat right down the hall from me, and I saw a

lot of Chuck.
MR. BONDI:

And what is your view of

Mr. Prince as the CEO of Citigroup?

Or do you have a

view?
MR. REED:

He wasn’t qualified for the job.

You know, if you got a job description for a
CEO of a company such as Citigroup and then matched it
with Chuck’s background, there wouldn’t be much of an
overlap.
I presume, but I don’t know, that the board
chose him because they felt that some of the problems
that the company was dealing with were legal.

If you

recall, they had some run-ins with Mr. Spitzer.

So they

must have felt that, you know, he had some skills that
were relevant to what was going on.
I don’t know, I wasn’t there and no one asked
me.
Chuck’s a very good person.

He is very
37

FCIC Interview of John Reed, March 24, 2010
definitely a “Sandy person,” in the sense that he worked
for Sandy for his whole life.
And I once asked him, I said, “Hey, Chuck” -because I was working with him -- I said, “If you had a
situation where you had to choose between being loyal to
Sandy and loyal to the company, which would you do?”
And he said, “I wouldn’t find any such
situation,” which was a way of ducking the question,
which as far as I was concerned, meant that he’d be
loyal to Sandy.
I asked him that after the merger because,
obviously, it was important for me to understand, you
know, just what was going on.
And so he was very loyal to Sandy for good
reason.

I mean, they had worked together for 40 years.

And -- but he’s a perfectly decent person, and I’m sure
he tried very hard to run the company well.

But he had

none of the background that would have allowed him to
have some independent judgment on how to run the
company.
He did know all the people, and he knew them
well; but this was sort of a continuation of Sandy’s
idea that he could run a big company by knowing a set of
folks, which I don’t believe you can.
MR. BONDI:

And, I take it that Salomon
38

FCIC Interview of John Reed, March 24, 2010
culture that you described, that wouldn’t have been the
type of culture that Mr. Prince was part of; is that -MR. REED:
MR. BONDI:
MR. REED:

No.
-- fair to say?
No.

First of all, remember that

they had only been bought in Travelers, you know, five,
six months before, so they were just as new to
Mr. Prince as they were anybody else.
And secondly -- you know, he’s a good, quiet
lawyer.

He’s -- you know, he sits and he thinks and

he’s smart, he’s well-read and [inaudible].

And I think

he has a sense of people, and I think he’s capable of
being tough with people on occasion.

But he would have

had no understanding of trading or risk or leverage or
capital or any of the above.
MR. BONDI:

A couple of follow-up questions,

and that is, in your opinion, did government policies -and by that, I’m namely meaning the affordable housing
goals of Fannie Mae and Freddie Mac or the Community
Reinvestment Act -- did government policies play any
role in the financial crisis?
MR. REED:

It’s hard for me to answer that.

If the reason that the regulators didn’t jump
up and down and yell at the low-doc, no-doc subprime
mortgage is because they felt that the Congress had sort
39

FCIC Interview of John Reed, March 24, 2010
of pushed in that direction, then I would say yes.
If the reason that the regulators didn’t jump
up and down and so forth and so on on that was because
they just didn’t see the risks, then I would say no.
I don’t think that any private-sector
institution would originate a bad mortgage because they
thought the government policy allowed it, unless they
could lay it off to Freddie Mac or Fannie Mae or
something, and sort of say, “Gee, the government wanted
me to do this, and I’m doing it on their behalf.”
There was probably some of that because
Freddie Mac and Fannie Mae were clearly buying some of
this paper.

And so to that extent, it probably was a

policy or…
MR. BONDI:

And you’ve alluded to it before,

and that is the originate-to-distribute model for
mortgage origination.
Do you believe that the model itself of
originating mortgages to distribute on to the secondary
market and to Wall Street for securitization, that that
model had inherent flaws, versus a model of originating
mortgages to hold on portfolio?
MR. REED:

And don’t limit it to mortgages.

In other words, once you do have a way of passing off
risk, it clearly has an impact.

In other words, if you
40

FCIC Interview of John Reed, March 24, 2010
could take credit risk, if you lend money to, say,
General Electric but then hedged the risk by going into
the market and buying one of these credit-derivative
swaps on GE, so that you’d say, “Gee, I just lent GE a
million dollars, but I hedged risk by taking the swap
position,” that’s going to affect your judgment.

It

will affect your risk-taking because you believe you
don’t have any risk.

In other words, you think you’ve

laid off the risk.
And so whether it’s a mortgage-backed security
or something that you could hedge in the market, the
ability to quote, “hedge it,” clearly has an impact on
the care and your willingness to take risk.
You know, as soon as you have these
instruments -- I don’t want to say the model is flawed,
I just want to say it’s very different.
MR. BONDI:

And you’ve touched on, certainly,

the Glass-Steagall, and I know you’ve spoken on that.
Is it fair to say then that the repeal of
Glass-Steagall, in retrospect, was a mistake?
MR. REED:

It certainly, in retrospect, which

is 20/20, is questionable.
You know, at the time there was an awful lot
of pressure from the customers to have their banks be in
a position to help them with capital markets activities
41

FCIC Interview of John Reed, March 24, 2010
and hedging activities and so forth and so on.
And so from the point of view of the customer,
the CFOs of your customer, they were sort of coming to
you, saying, “Look, we’d like you to help us hedge our
foreign-exchange risk or our interest-rate risk or to
raise some money in the bond markets.”

And so there was

a lot of pressure from customers, for legitimate reason,
who get their additional financial suppliers banks to
begin to perform some of these functions.
And some of the capital-market players were
beginning to put together bank loans.

So you were

beginning to get a breakdown of these barriers.

And so

gradually, over time, you know, Glass-Steagall fell
apart so at the time it made a lot of sense.
We now have experienced this meltdown.

I

don’t think you could blame it on Glass-Steagall.
The only institution that benefitted from
Glass-Steagall that was involved in this crisis was
Citi.
During the crisis, the government sort of sold
Bear Stearns to J.P. Morgan Chase, which up until then
had not had an investment banking function much
developed within it.

And they sold Merrill Lynch to

Bank of America, which similarly at that time had not
had such activities as part of it.
42

FCIC Interview of John Reed, March 24, 2010
So the only institution that really was in the
center of the crisis, that was sort of a Glass-Steagall
product, was Citi.

And, as I pointed out before, I

think it’s fair to say that had Citi not been in the
middle of it, Salomon would have.

So the problem for

the government would have been the same, it would have
just been a different name on the door.
So, you know, I’d hate to -- I wouldn’t want
to go around saying, “Hey, had it not been for GlassSteagall, there would not have been a crisis,” because
that’s not true.
period.

There would have been a crisis,

And the only institution that might not have

been in it would have been Citi.
been.

But Salomon would have

And so the dollars are at risk, and the dollars

of the government would have had to put in and so forth
would have been approximately the same.
On the other hand, if you believe, as I said
before, that going forward it would be better to have
some compartmentalism in the industry, then you get
back into something, maybe in retrospect, the
compartmentalization that was created by Glass-Steagall
would be a positive factor.
MR. BONDI:

I have in my notes to go back and

look into that instance that you described earlier,
Mr. Reed, about the Treasury -- the Treasury bills and
43

FCIC Interview of John Reed, March 24, 2010
Paul Volcker.
Do you recall what year that was?
MR. REED:
MR. BONDI:
MR. REED:
thing.

Yes, that was ‘79.
‘79?
Yes.

It was an interest-rate

In other words, Volcker who was –- President

Carter appointed Mr. Volcker to head up the Fed.
raging inflation at the time.

We had

Paul came in, in a really

deft political move, said, “I’m going to control money
supply, not interest rates,” and proceeded to drive
interest rates up into the teens.

And, of course,

anybody who was holding government bonds took a big loss
on them because, you know, in that interest-rate
environment, they were worth less than they had been
when issued.
And most banks in those days, the portfolio of
government bonds for liquidity purposes.

As I recall,

ours was about $3 billion which, in those days, was big
money.

You know, the company probably made profits of

maybe $100 million or something.
And we took a very substantial loss on that
portfolio.

And so I realized right away, you know, that

it had nothing to do with the creditworthiness of the
paper.

It was an interest-rate question.

We took a big

loss.
44

FCIC Interview of John Reed, March 24, 2010
And so I have learned in the banking business
that, you know, you cannot anticipate where losses are
going to come from; and you certainly can’t say, “Oh,
this asset is fine, and that asset isn’t.”
But it was 1979 and Volcker drove up interest
rates when he became chairman of the Fed.
MR. BONDI:

Uh-huh.

And we’re coming off of a

long trek of historically low-interest rates.

Some, as

you know, have blamed that historically low-interest
rate environment on the financial crisis.
Again, what sort of impact would you say the
low-interest rate environment of the early part of the
last decade -- this past decade -- played in the
financial crisis?
MR. REED:

Well, I think that it was part of

the background; and, obviously, there was a lot of
mortgage refinancing and things of that sort because of
the interest-rate environment.

And it undoubtedly was,

you know, part of the background.
But you would never design a banking system
that couldn’t operate in low-interest rates.

In other

words, you wouldn’t say, “Gee, if interest rates are
low, you’re going to have a banking crisis.”
MR. BONDI:
MR. REED:

Uh-huh.
The banking system ought to be able
45

FCIC Interview of John Reed, March 24, 2010
to operate in low rates, medium rates, and high rates.
And it’s like designing a sailboat:

You’ve got to

design the sailboat for whatever wind conditions might
exist.

So this idea of blaming the problems on low-

interest rates is simply, I think, not correct.
I think the fact that they were low
contributed to -- our friend Greenspan would have called
the “irrational exuberance.”
In the current circumstances, where they are
also low, I think the Fed has gone to great length to
tell the industry, “Hey, guys, the interest rates are
low and we’re keeping them low for a while here, but
they are going to go up one of these days, so please
don’t get yourself with a bunch of assets that are going
to produce losses as soon as interest rates go up,
because they are going to go up and you guys should be
aware of that.”
And, I mean, the Fed has made very clear that
while this environment exists now and is going to be
sustained for a while, no one should think it’s going to
go on forever.
And so, you know, interest rates are part of
the world in which bankers have to live.
MR. BONDI:

And, Mr. Reed, we’ve talked about

certainly a lot of subjects in the time that we’ve had
46

FCIC Interview of John Reed, March 24, 2010
here.
Is there anything that you think that the
Financial Crisis Inquiry Commission ought to know or
ought to be focused on that we might not have talked
about today?
MR. REED:
things.

No, I think you’ve covered the key

And I think the conversation that is ongoing, I

think it’s healthy for the country.

No, I think it

touched on everything, and you certainly have touched on
everything.
MR. COHEN:
MR. REED:

Mr. Reed, this is Gary Cohen.
Yes.

MR. COHEN:

I think this has been very, very

thoughtful.
I just have an overall question for you, which
days been bothering me, and it’s really more of a
philosophical question.
How do you think it came to be this way, where
the changes that have been in the last 20, 30 years
evolved in the direction to, you know, increase risk,
including leverage increase?

Essentially, you know,

high-stakes financial gambling that I think you may have
alluded to earlier, and from what seemed to be a fairly
dull financial environment back in the sixties or
seventies and earlier.

Do you have any sort of
47

FCIC Interview of John Reed, March 24, 2010
overall –- if you could, with your position as the elder
statesman in the industry, do you have any sort of
overall philosophical thoughts about how this happened?
MR. REED:

Yes, I would [inaudible] things,

I’ve obviously thought about it.

I’ve actually written

about it.
But, first, let’s focus on shareholder value.
That was new.

That came into being [inaudible] during

the eighties and early nineties.
for good reason.

And it came into being

In other words, we had a fairly long

period of time where the stock market didn’t do very
much, and investors were not earning much of a return,
and there was a lot of pressure, particularly from the
pension-fund managers on the investment managers saying,
“Hey, guys, we’re trying to provide for people who are
going to retire, and we’re not earning much in the way
of returns and we’re unhappy.

And all of a sudden, some

investors came to understand that they could take
positions in a company, and then scare the management
into better performance and do very well.
And there was a clear shift where power moved
from management to investors.

For a lot of time,

managers sort of ran their companies, and if it did
well, they did, and if they didn’t, they didn’t.

But

there wasn’t a lot of pressure from investors.
48

FCIC Interview of John Reed, March 24, 2010
And then all of a sudden you got into this
situation where investors became very demanding, they
would get rid of managements, force mergers, force
divestitures, so forth and so on.

And the industry

shifted into -- CEOs would start out every annual report
saying, you know, the sun comes up and goes down with
shareholder value.
And so this was a big philosophic change, and
it had a tremendous impact on management looking at
short-term sort of things.

And this still exists to a

significant degree.
The second thing is, clearly, we fell in love
with markets, particularly the financial sector but even
more broadly.

There was a feeling that market values --

which, of course, change every day -- reflected reality,
and we should mark our books to market and that, you
know, marking things to market would keep you on your
toes, and so forth and so on.
And I think it was the combination of this
focus on shareholder value which, of course, is the form
of marketing to market as well, and the idea that, you
know, markets really communicated an awful lot of
information, and when they jumped and so forth that one
should pay attention to them.
And I think, like everything else in life, it
49

FCIC Interview of John Reed, March 24, 2010
got carried away.

I mean, the financial sector

particularly got interested in making money.

When I was

young, we were interested in serving customers.

The

money we made was that which was left over after you did
your job with the customer.

I never heard anybody sort

of say, we should just make as much money as we can.
was always, try to serve the customer.

It

And that

shifted.
And so I think it came from those two sort of
philosophical things in the sense that stockholder value
was everything and, secondly, that somehow the market
accurately reflects all values.

And if your stock goes

up, you must be doing good things; and if it goes down,
you must be doing bad things, and et cetera, et cetera.
And it did change attitudes.

It was

inconceivable to me as an old-time person, that you
could have the entire banking community basically go
bankrupt.

And that’s what they did.

Had the government

not stepped in, I believe every major player would have
gone down.

And maybe Goldman would argue that they

wouldn’t have, but it would have been awfully tough for
them.
And so I’m astounded that we became so
blindsided that we could get ourselves into that
position.
50

FCIC Interview of John Reed, March 24, 2010
MR. COHEN:
MR. REED:

Okay, well, thank you.
Okay.

I hope it is useful, because [inaudible]
report would be beneficial to call me up, you should
feel free to do so.
MR. COHEN:

Okay, and if you have any articles

or, you know, presentations in the past which by some
small chance we actually missed, you should feel free to
send them off to Brad.
MR. REED:

Okay, I’ll take a look.

I wrote something for the American Academy of
Arts and Sciences once, before this crisis on the
shareholder-value thing.

And I may just e-mail you a

copy of it.
MR. BONDI:

That would be wonderful, Mr. Reed.

I’ll give you my e-mail.

It’s BBONDI,

B-B-O-N-D-I -MR. REED:

Okay.

MR. BONDI:
MR. REED:

-- at FCIC.GOV.
Okay, got it.

MR. BONDI:

And if, by chance, we do need to

reach out to you, what’s the best way to reach you?
MR. REED:
Terri, and it’s at

I have a secretary.
36CFR1256.56: Privacy

Her name is

And you could just

call her up.
51

FCIC Interview of John Reed, March 24, 2010
MR. BONDI:

Wonderful, sir.

Well, thank you very much for your time today.
I really appreciate it, and I’ve enjoyed this
conversation.
Thank you.
MR. REED:

Okay, well, I appreciate it.

And

hopefully it was helpful.
MR. BONDI:

Yes, sir.

MR. REED:

Have a good one.

MR. BONDI:

Thank you, sir.

MR. REED:

Yes.

MR. BONDI:

Bye.

MR. COHEN:

Okay, bye-bye.

MR. BONDI:

Going off-record.

It is -- the

time is 3:45 p.m.
(End of interview with John Reed)
--o0o--

52