Full text of Federal Reserve Oral History Interviews : Interview with William Ryback, Former Associate Director, Division of Banking Supervision and Regulation

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Federal Reserve Board Oral History Project
Interview with

William Ryback
Former Associate Director, Division of Banking Supervision and Regulation

Date: November 24, 2008, and April 15, 2009
Location: Washington, D.C.
Interviewers: Michael Martinson and Cynthia Rotruck Carter

Editor’s note: William Ryback died before having the opportunity to edit and revise this
interview transcript. Light editing was done to the transcript, but no other changes were made.

Federal Reserve Board Oral History Project
In connection with the centennial anniversary of the Federal Reserve in 2013, the Board undertook an oral
history project to collect personal recollections of a range of former Governors and senior staff members,
including their background and education before working at the Board; important economic, monetary
policy, and regulatory developments during their careers; and impressions of the institution’s culture.
Following the interview, each participant was given the opportunity to edit and revise the transcript. In
some cases, the Board staff also removed confidential FOMC and Board material in accordance with
records retention and disposition schedules covering FOMC and Board records that were approved by the
National Archives and Records Administration.
Note that the views of the participants and interviewers are their own and are not in any way approved or
endorsed by the Board of Governors of the Federal Reserve System. Because the conversations are based
on personal recollections, they may include misstatements and errors.

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Contents
November 24, 2008 (First Day of Interview) .............................................................................. 1
Professional Background; Working at the Office of the Comptroller of the Currency .................. 1
International Examinations ........................................................................................................ 3
Franklin National Bank Failure ................................................................................................. 8
Setting Up the OCC’s Multinational Division .......................................................................... 12
Moving from the OCC to the Federal Reserve Board .................................................................. 20
International Agreement on Money Laundering .......................................................................... 24
Capital Accord .............................................................................................................................. 25
William “Bill” Taylor ................................................................................................................... 28
Classification of Foreign Debt ...................................................................................................... 35
Barings, Daiwa, and Sumitomo ..................................................... Error! Bookmark not defined.
The Foreign Bank Supervision Enhancement Act ........................................................................ 41
April 15, 2009 (Second Day of Interview) ................................................................................. 63

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November 24, 2008 (First Day of Interview)
MR. MARTINSON. Today is Monday, November 24, 2008. This interview is part of
the Oral History Project of the Board of Governors of the Federal Reserve System. I am Mike
Martinson, a former associate director in the Board’s Division of Banking Supervision and
Regulation [BS&R]. I am joined by Cynthia Rotruck Carter, a current staff member in BS&R.
We are conducting an interview with William Ryback, also a former associate director in BS&R,
who joined the Board in 1986 and retired in 2003. This interview is taking place at the Board.
Professional Background; Working at the Office of the Comptroller of the Currency
MR. MARTINSON. Let’s start by having you talk about your background and how you
got into banking supervision in your early years with the Office of the Comptroller of the
Currency [OCC] before you came to the Board.
MR. RYBACK. I don't think anybody grows up wanting to be a bank examiner. I don't
think that's high on your list of career choices. Mine was quite by accident. When I graduated
from Seton Hall University in 1968, we had limited options. There were plenty of jobs available,
but with a degree in finance that moved you towards either a banking career or a career in
insurance, neither of which appealed to me at the time.
There was a government agency called the Office of the Comptroller of the Currency that
was looking to expand its force considerably. I was not aware of that agency. I went for an
interview. In those days, the OCC’s office was located in the same building as the Federal
Reserve Bank of New York, on Liberty Street. I got lost and couldn’t find my way. I realized,
looking at my watch, that I’d be an hour late and I’d look like an idiot. It was better not to go.
So I went home and later that night I got a call asking me to consider working for the OCC and
indicating that whatever happened yesterday, happened yesterday. I thought, well, if the agency
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is pursuing me, I ought to consider working there. The salary looked paltry on paper, but there
were other benefits that gave you side income that more than compensated for the low salary. So
I signed on board. My salary was going to be $6,200 a year. I couldn’t officially join the force
until the end of August because it took me the rest of the summer to get my degree. In between,
I received a letter saying that the OCC had raised my salary $200. I thought, working for the
government is great! I got a $200 raise and I haven’t even started!
My first week on the job was spent reading a manual that nobody understood; it was just
gibberish. On Friday, I was told that I would be a field examiner. I had read the manual and it
was time for me to get some on-the-job training in the field. I was sent to Tom’s River National
Bank. I said, “I can find Tom’s River, but how do I find the bank examiners? I was told to go
outside the bank to a nearby coffee shop. The bank examiners would be there. I said, “How will
I know they’ll be bank examiners?” I was told that I will know. I did what I was told. I went to
Tom’s River. I found the coffee shop, walked in, and sure enough I could identify the bank
examiners.
In those days, all the examinations were surprises. The bank didn’t know we were
coming. Around 8:30 a.m., we would enter the bank en masse. I was introduced to the
examiner-in-charge, a guy named Ed Lake. Ed was a heavy smoker. He had about seven
cigarettes all lit at various burning points in this ashtray, and he was lighting another one. I was
thinking to myself: What in the hell did you get into? Why on earth would you want to do this?
Nevertheless, fate sent me doing my first rookie job, which was counting cash.
In those days, we counted every single penny in the bank. I remember running the
deposit ledgers, which wasn’t unusual; it was a job they gave to a rookie. When I finished, I was
pretty proud because I got within eight cents or so. I thought that was pretty good. I went to

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sign off that I had proved these accounts and the examiner-in-charge said, “You proved them,
right?” I said, “Within an eight cent margin of error.” He looked at me and said, “This job is not
about being partially correct, it’s about being exactly correct. So you go find those eight cents.”
I had to spend the rest of the day looking for eight cents, which I found.
I enjoyed field work. It was probably the better part of my career. I liked going to
different locations week to week. We always had a Monday morning start. That meant you had
to prove the cash back to Friday evening at three o’clock, which was the last time the books were
in balance. So if the bank was open on Friday night and Saturday during the day, you had to take
out all the entries and work them back to Friday. It was a modest pain in the neck. Somebody
said, “Why do we have to have examinations start on Monday? We could do them Tuesday or
Wednesday.” So all of a sudden you would get your assignments and you’d be in a bank for
Monday, Tuesday, and then you’d start something else on Wednesday. The worst thing you
could possibly do was to start early at a bank, to walk into the bank before the examination
actually was starting. For that, you would be automatically fired. You didn’t even go into the
office. You just went home and waited for your final salary check. Sometimes people made
mistakes because they thought that they were supposed to be there on Tuesday. Now it’s
Wednesday, I can’t remember, and they would walk into a bank and start an examination and
realize, “Oh, no. It’s tomorrow.” That always was a fear to me. I can remember sometimes
laying in bed at night, wondering about where I was supposed to go the next day, jumping up,
and going into my office to make sure it wasn’t Albany or somewhere else I was supposed to go.
International Examinations
MR. RYBACK. We used to do international examinations. New York was a big hub,
and Washington liked to have names put in three buckets. The first bucket included very

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experienced people. The second bucket was those that had some modest experience. The third
bucket was those who had no experience. You had to volunteer. You couldn’t just be assigned
to do these international examinations.
My first one was in Belgium. I remember going with an examiner who was fairly weak
and unassertive. It was Citibank. We went to the bank in the morning for the examination. The
head of the branch said, “We’re very pressed for space. We couldn’t possibly accommodate
bank examiners. We have some room in the cellar.” So we sat in the cellar with all these old
files and dust coming down every time you turned around. Every night I’d go to the hotel and
have to send my suit to the cleaners because it was just filthy. I remember thinking to myself,
why on earth would I ever want to do this again?
The next time around, they cajoled me into doing it again. I had to go back to the same
bank with a different examiner-in-charge. It was déjà vu all over again. The same branch
manager started with sitting us in the cellar again, but this examiner looked at the branch
manager and said, “I fully understand this, but if you think I’m sitting in the cellar, you’ve got
another thing coming. I’ll tell you what I’m going to do. I’m going to go next door. There’s a
hotel. I’m going to rent the ballroom and you can bring the files that we need to look at over
there.” He starts to walk out. The branch manager said, “Wait a minute.” All of a sudden,
we’re sitting in these luxurious digs with coffee in china cups every five minutes. You have to
be careful how you let people treat you in the banking side. You can be a weak examiner or a
strong examiner; it’s never good to be a weak examiner.
As time went on, and I started to rethink whether I ever wanted to do these international
examinations, we got a letter from the New York office about signing up for these exams. I
thought, having worked in the international area for years, why do I have to beg to go on these

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international exams? They’re not that great, anyway. I didn’t have a good time. So I didn’t put
my name in. The people that I worked with in my group asked me why I didn’t put my letter in.
I said, “If the agency wants to send me overseas, that’s part of the business, I’ll go. But why do I
have to volunteer? This is stupid.” So I refused to send my letter in. With that, a lot of my
colleagues followed suit. The boss was wondering why nobody who had experience was putting
in to volunteer to go overseas. He was told, “Bill Ryback’s not doing it so we’re not doing it.” I
remember that he came into Chase Manhattan where we were and said, “The deputy-in-charge
wants to see you in his office.” I walked across the street and went into the office. The deputyin-charge said, “I’ve had my secretary type this. You’re volunteering for these overseas exams.
Just sign this.” I said, “I'm not going to do that,” and I told him my reasons. He said, “It’s your
view that we have the right to send you anywhere?” I said, “That’s right. I work for this agency.
If you want to send me to Brussels, you send me to Brussels; you want to send me to Albany—”
We always got our assignments in the mail on Thursday. I went home that Thursday and
opened up mine and I looked for the next week. It was to assist an examiner in Puerto Rico. On
Tuesday, I had to go to Albany. On Wednesday, I was in Riverhead, Long Island. On Thursday,
I was in South Jersey. I thought, “There’s no human being alive that can do this.” I called the
office and I said, “Alright you win. I’ll send the letter in and then everything will be fine. Now I
don’t have to do these assignments next week, right?” I was told, “Oh no, you should do it. Just
so you remember.” That week was probably the worst week of my life. I was so confused by
the end of the week about where I was supposed to be.
When I first went into international examining, we had a hierarchy in the field. The
domestic examiners were king. If you couldn’t make it there, they would probably send you to
international. If you couldn’t work there, they sent you down into trust. And if you were a real

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idiot, you went into EDP—Electronic Data Processing—examinations. The next step was out
the door. So while the office would never admit that this was a hierarchy, everybody knew that
the way you got ahead was being a domestic examiner. I happened to like what I was doing.
And I thought I’d consider making it a career. So I stayed on the domestic side.
I remember the fateful day. I was in Broadway National Bank in Bayonne, New Jersey.
I got a phone call from the office indicating that I had been reassigned to be an international
examiner. I said, “Why?” I was told that I volunteered. I said, “No I didn’t. Tell me when I
volunteered.” He said, “The first day you came on the job. We had a form that you filled out.
You checked that you’d work international.” I said, “Everybody checks the box. You want to be
like Mr. Eager Beaver guy? I’ll do whatever the agency wants me to do, but you can’t hold me
to that. He said, “Well, we are.”
Monday morning, I was told to report to Bob Malay, who I ended up learning a lot from.
He had never been to college, but this man knew his business. I walked into this room in
Citibank and there were two examiners dueling with umbrellas in the corner. There was another
guy, very huge. He was lying on the heaters. He had his fingers interlaced. He was like the
Great Gilderserve, and he said, “Ooh, here comes the newbie.” There was another guy whistling
at 10 decibels above normal hearing range. Two people were in the back calling each other
names and throwing their leave slips around. I thought, “This is the slow slide out the door.”
Next I’ll be a trust examiner, then an EDP examiner, and then I’m gone.
The rule was that examiners always went to lunch at 11:30 a.m. I looked up at 11:30 a.m.
and realized that everyone was gone and no one had asked me to go to lunch. I thought, oh man,
this is not good. After lunch, I walked up to Mr. Malay and said, “Bob, I’ve only been here half
the day. You don’t know me very well, but would you help me get back into the domestic side?

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Look at this. It’s like the applied science class at high school. All of the bums get into that class.
They go wild during the day, and nobody gets anything done.” He said, “All right, I’ll help you.
But how many people are you competing with on the domestic side?” I said, “I’m competing
with maybe 200.” He said, “How many are you competing against on the international?” I said,
“Only you, as far as I could tell.” He said, “You want to compete against 200 or 1?” I said,
“Okay, I like those odds. I’ll stick around.”
Little did I realize that efforts were being made to reinvigorate the international side.
Every time we started Citibank, the upstate examiners that assisted us were placed in the
international division. Otherwise, if you let them do the branches in New York, they’d get lost
and everybody would have to stop at 10 o’clock and go find somebody that was stuck in
Brooklyn somewhere and save them. So they said, “Just let them do the international.”
International was growing by leaps and bounds. In Washington, it was decided that we needed
people to be specialists. So I was one of the “founding members,” if that’s the right term, to
reconstitute the field staff working in international. And, indeed, you were discriminated
against. The people on the domestic side thought that there was the same hierarchy that had
always been, that some blemish in your career led you into international. But I happened to like
it, and I stayed there for the next three or four years.
I remember getting a phone call from Billy Wood. He was a pretty important guy at the
OCC. He called me the Thursday before Labor Day and said, “I want you to come to
Washington tomorrow to interview for a job I have.” I said, “It’s going to be Labor Day. I
won’t be able to get a flight down. Can we do it next week? He said, “No. You get your behind
down here tomorrow. I don’t care how you do it. You rent a car, you take the train, you take the
plane, or you take a boat. I really don’t care. But I expect you in my office at 10 o’clock.” And,

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indeed, I was correct; there was no way to get an airline ticket on a regularly scheduled flight. I
took the shuttle down because you didn’t need a ticket for it. He sat me in his office and talked
to me for about an hour. He told me there was this new division called the Multinational
Division that I should consider volunteering for. I said, “I need some time to think about it. I
have a wife and two children.” He said, “Call me Tuesday morning at 9 o’clock.” I said, “I may
need a little more time.” He said, “No. Call me on Tuesday at 9 o’clock. Yes or no, that’s all I
need to know.”
I eventually ended up working for the man. I don’t know why I ever did because he was
a brutal boss. He was one of those people that liked to keep tabs on everything. When I finally
moved down there, he was going on leave. I was only about two weeks into the job. He said,
“Make sure you call me.” I said, “Billy, I’ve done this for a while. I know what’s going on. I
can handle things. If something comes up that I think you need to be involved in, I’ll call you.
Otherwise, you’re on vacation.” He looked at me and said, “If you don’t call me, I’ll call you. I
want to hear from you every hour.” [Laughter] That was my life for the next couple years.
Franklin National Bank Failure
MR. RYBACK. Franklin National Bank failed. That was the departure point for a lot of
things that followed in the international arena. Franklin National Bank was a domestic bank that
operated out of Long Island. The bank management wanted to compete with the big boys and
they thought having a charter in Garden City, Long Island, didn’t get you in the door. It couldn’t
operate out of Manhattan, so it changed its charter to Brooklyn. State law at that time allowed
banks to branch in contiguous counties so they could have a branch in Manhattan, which
Franklin National did. This developed into the international division. Franklin was eventually
purchased by Michele Sindona, an Italian who operated a number of banks in Italy. He

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embarked on an aggressive expansion program in international markets and also got the bank
involved heavily in foreign currency transactions. As things developed, that area of business
wasn’t getting the returns that the bank wanted. So it became more aggressive and started to
open up its positions more and eventually got to the point where it threatened the solvency of the
bank.
We had to do one last examination. We had to go in over the weekend and take a look at
all the books and records. That was its final death knell. We had to eventually close Franklin
National Bank. It was my first bank closure. We were all brought together into this room. The
FDIC is responsible for unwinding failed banks. But it needed assistance because this was the
first bank failure in quite a while, and it was certainly the first large bank failure. The FDIC told
us that we would be given a code name to use. The code name would be repeated at 3 o’clock on
Friday if the FDIC was going to fail the bank. We were told to assemble near the branch that we
were assigned to at 2 o’clock, and at 2:30 p.m. [to] call a number and we would be given the
code word. After getting the code word, we would go in and close the bank. I should have just
kept quiet, but I said, “I’ve been working in the international division for the last couple of
months going over their books and records. Am I supposed to go into the bank as usual, or do
you not want me to go in the bank?” They said, “Have you been going in every day?” I said,
“Yes, I go there every day.” They said, “Then the bank will know that they’re going to be closed
so you better go to work that day.” So I did.
There were rumors floating around the bank. You could hear the bank people talking.
“He would be here if they were closing,” “No, he wouldn’t.” When the anointed time came at
2:30 p.m., I called the number, which I thought was the right number. As it turned out, it was
never hooked up. So we got a recording that said this is not a working number. It’s now getting

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down to 3 o’clock and I have to sit there and go through my mind—am I going to be the only
one that closes a branch in Franklin National Bank and what would that mean? Or I’d be the
only one that won’t be closing the branch and what does that mean? Finally, at one minute to
three, I said, “What the heck. What’s the worst that could happen?” So I went in, closed the
bank, and started the normal closure routines that they gave me on a list. Then I started to sweat
because it was 3:30 p.m. and no FDIC person is coming on board. I thought, “Oh man, I
screwed this up.”
Finally, this FDIC examiner from Los Angeles, Fointaine Storm, arrived. I thought,
“That’s just like a movie actor’s name—Fontaine Storm—coming all the way from L.A.”
Fontaine thought he was an international expert. He was in charge of unwinding and doing
whatever the FDIC does. As he’s talking to these people, I was trying to tell him that back at the
telex room they were telexing like crazy. I said, “You may want to cut the wires from the telex.
I don’t know anything about closing banks, but it seems to me, we ought to be shutting the whole
place down.” So he put me in charge of that. I had to go in, take a huge clamp, and undo
everything. Then the bank manager came running up and said, “Can I keep one open because we
need to settle books?” I said, “It’s up to Mr. Storm.” We finally got through that day. The bank
was closed.
A European consortium called European American Bank that had an office on Broadway
in New York ended up absorbing Franklin. As it unfolded, it created one of the impetuses to
begin to think about whether or not we had a global structure of supervision that was working. I
remember the Comptroller asking if anyone knew anybody overseas because Franklin had a
branch in London. It would be improper to close the bank without coordinating with someone in
the United Kingdom. One of the research people said he had the name of someone he met at a

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cocktail party that he thought worked for the Bank of England. The Comptroller just shook his
head and said, “Never mind. I’ll talk to the Federal Reserve and we’ll get some coordination on
this.” But what it led to was this Herstatt risk.1 We closed Franklin at what we thought was an
appropriate time, and therefore left all the foreign exchange contracts to be settled. But
contemporaneous with this, there was another bank in Germany that was undergoing difficulties
for the same reason, engaging in foreign exchange transactions. And the Germans ended up
closing the thing in the middle of the day. What happened is that you lost your whole foreign
exchange contract, where before there was always a rule of thumb you couldn’t lose more than 5
percent on any given movement of foreign exchange overnight. Here, the bank actually lost the
whole counterparty amount because they paid out in the morning. New York banks paid out in
the morning. They telexed all of their settlements out in the morning. In the afternoon, they’d
go out for a hot dog, go to a movie, or go bowling for a while, and then they’d come back at
about 2 o’clock and wait for the settlement from the other side. And all they had heard was
silence. So it created this “Herstatt risk,” which still is a problem as we talk today. It’s never
fully been resolved and it’s a difficult one to resolve since it requires international coordination.
That incident, coupled with Franklin National Bank having an overseas branch, led
people to start to question whether or not there was some interest in putting together a committee
to look at whether or not bank supervision can be better coordinated. George Blunden from the
Bank of England was put in charge. He set up a meeting at the Bank for International
Settlements [BIS]. He made the infamous remark at the beginning that he wondered if there was
enough interest in this topic to keep the discussion going to lunchtime. If we adjourned before

1

Editor’s note: Bankhaus Herstatt, a German bank, failed in June 1974 during the period it was supposed to settle a
contract after having received payment from a counterparty. That failure caused a string of cascading defaults in a
rapid sequence, totaling a loss of $620 million to the international banking sector.

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lunch, it would be a shame because the BIS has the best wine cellar in Europe and we wouldn’t
be entitled to dig in if we didn’t have lunch. So whether there was enough interest or whether it
was the enticement to have a good bottle of wine, I don’t know. Nonetheless, those
conversations led to the creation of the Basel Committee on Banking Supervision, which still
exists to this day, about the 125th or the 130th meeting, whatever it is.
So there indeed was some interest. We put together a document called the Concordat. It
wasn’t a public document, but it was a document that road-mapped how we could coordinate
supervision of banks that operated cross-border. What it essentially said was that solvency in
capital was the responsibility of the home supervisor, and that liquidity and other things were the
responsibility of the host supervisor. The important element embedded in that document was
that there should be coordination. Everybody should understand who’s doing what to whom,
under what circumstances, and why. That still remains our guiding principle today. The word
seems simple enough, but actually undertaking such an initiative is not easy and coordination
still remains, in my view, one of the weaknesses in global supervision. We could also use a
healthy dose of coordination domestically, but we’ll talk about that in a while.
Setting Up the OCC’s Multinational Division
MR. RYBACK. Let’s talk about setting up the Multinational Division, how we
coordinated, what led to coordination with the Federal Reserve. The Multinational Division in
the OCC was put together to address the problem of differing standards nationwide. The way in
which we examine banks in New York was nowhere near the way they did in [it] California, and
Chicago had a different set of rules. This led the banks to great angst about how some loans
could be criticized differently among financial institutions even though they were the same loans.
And it seems to hinge on the examiner’s whim of the day. This didn’t make banks very happy.

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The Multinational Division was put together to address that, and certainly within that, the top 10
banks were the ones that did 90 percent of the international transactions.
There was also a group that looked at international. The reason that they pushed me to
come to Washington was that the OCC, at that time, used to go through periods of having the
same region control Washington. When I first went down it was the Ohio Region. That was
actually how my boss got transferred from Cleveland to New York, with no understanding of
what was going on in the big banks. He was transferred as part of this “Ohio mafia,” we used to
call it. Then it turned around to Texas. And all of a sudden everybody from Texas was in
charge. Billy Bob, Frankie Bob, Sammy Bob, everybody with these Bobby names came up to
rule Washington. We used to confuse the Europeans because my boss’s name was Billy Wood,
and they used to insist on addressing him with letters William C. Wood, and that would
aggravate him to no end. He said, “Didn’t these people ever hear of the name Billy?” I said,
“No, I don’t think they did, Bill. Maybe you’d want to consider changing your name.” Of
course, he would not.
We got a lot of responsibility to deal more and more in the international arena. And the
Congress, in its wisdom, passed the International Banking Act of 1978 and gave the OCC the
responsibility for chartering federal branches [of foreign banks]. This was a new item for the
OCC. It never had to deal with foreign banks before in a direct context. Patterned after the state
of New York, all states treated most of these applications from foreign banks in the same way.
Reciprocity was a huge issue. If you didn’t allow New York banks to come into Brazil or
Australia, for example, then Australian and Brazilian banks wouldn’t be allowed into our
markets. So it was kind of a stand-off. When the Act was passed, creating the authority to set up
a federal branch as well as a state branch for a foreign bank, the OCC had no one that had any

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dealings with foreign banks. So they had to import some talent. This is why the OCC recruited
me to come down and write the regulations on how to deal with a federal branch of a foreign
bank. One of the early decisions that was made after much discussion was to reject this notion of
reciprocity since the Act itself had embedded in it the principle of national treatment, which
implied that foreign banks were to be treated the same way as domestic banks. They had the
same rights and privileges. They were also subject to the same constraints, but not mentioned in
there was anything about reciprocity.
So, after much discussion, it was decided that reciprocity was not an element to be
considered in applications from foreign banks to establish a federal branch. What that did was
effectively allow Brazilian banks and Australian banks to come into New York where,
heretofore, they had not been allowed a branch office. This created great tension between the
states and the OCC about who had the right to charter these things, et cetera, et cetera. But once
that bridge was crossed, you couldn’t contain it anymore. There was a huge explosion of foreign
banks wanting to have a license in the United States, either a federal branch or a state branch. To
their credit, the states came to the realization that they may have these strong views about
reciprocity, but all that was going to happen is they were all going to be federal branches at the
end of the day. So they might as well get into the game.
It used to amuse me because I would be asked to talk a lot at these international
conferences with foreign banks in the United States. Wilbert Baskin was the head of the
Division of Foreign Banks for the state of Florida. I would always get up first and talk about
federal branches and what rights they had, that we were there to welcome them, and all that stuff.
Wilbert would go always right after me. He would stand up and said, “I like Bill Ryback. He’s

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a nice guy, but he’s a liar.” Then he’d go on with all of the things where he believed we
wouldn’t be able to deliver. It was amusing.
We had an application from the Bank of China. China wasn’t allowed to operate
anywhere in the United States because its market was closed to foreign banks. Bank of China
thought it could get a license through a federal branch. I was naïve even though I grew up in
New York—I’d just take things at face value. I don’t look at conspiracy and all these kinds of
things. There was a great political backlash against the Bank of China wishing to operate in the
United States. It was the only time I ever got a phone call from the White House. The person on
the other end said, “The President is interested in the progress of this application. He wants to
make clear that he’s not interfering with the process. He doesn’t want you to decide anything in
his favor, but he is interested in knowing what was going on.”
Well, I was born at night but not last night, and I realized right away that there was
intense political interest in all of this. Looking at it from the purest standpoint, whether or not
they were eligible to come into the United States, it seemed to me that the factors were in their
favor. In those days, you could have FDIC insurance as a companion ticket, which is part of the
reason the Bank of China decided to try to get a license in the United States. If it could have
insurance, it could have a retail presence in New York City. And they had lots of reasons to
want to get Chinese citizens living in New York to deal with the Bank of China.
We received a message that the president of the Bank of China was coming to the United
States. The president of the Bank of China was also very high in the Communist hierarchy. So
when he visited the United States, he was going to stop by the Comptroller’s office to talk about
the progress of their branch application. Being stupid and naïve, I thought, “This man is
important and he has limited time. I should have everyone that has an interest in this in the room

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at one time. Why go visit the FDIC after they visit the OCC? We’ll just do it all one-stop
shopping.”
It was pretty impressive. We were at L’Enfant Plaza. There was a long parade. Up
came the policemen on motorcycle cars, followed by three Cadillac cars with the Chinese flags
in the front, and more motorcycles at the tail end. It was really quite a show. The Comptroller
himself was downstairs to greet them. We occupied the first six floors. Above that was a Lowes
hotel. The Comptroller brought them up to the conference room where I was, introduced the
head of the Bank of China to me, and said, “Bill will take care of you.” He left because he didn’t
want to be in the line of sight no matter what happened. I started the meeting by telling the Bank
of China president that things were going in train and there was no reason to think that they
wouldn’t have a license. It would take us maybe another 30 days. There was some information
pieces that we needed to put together, but it seemed to be reasonably on track.
I turned it over to the FDIC, and the person from the FDIC said that he was concerned
because the bank didn’t have enough entries on its balance sheets; it only had four or five asset
classifications and two or three liability classifications. The president of the Bank of China
responded, “That's the way we’ve done business in China.” Then the person from the FDIC said
they’ll need an audited report and he suggested that they go down to Hong Kong and hire
Pricewaterhouse to come and audit the Bank of China, who has over 12,000 branches. That
wasn’t very feasible. Then he said to the head of the Bank of China that he was worried about
political stability. I wrote him a little note saying, “They’ve had the same government since
1947. We change every four years. Maybe you shouldn’t worry about this.” Nonetheless, he
was signaling his displeasure about the FDIC having to authorize insurance if we authorized the
branch. There was no way they could turn down insurance if we gave them the branch license.

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By the time that he got back to his desk, the Chinese government had filed a formal
complaint with the State Department about the way they were treated. They wanted to make
sure that they understood the OCC people treated them nicely, but the FDIC was a little bit
erratic in its behavior and this was not the way negotiations should happen, and blah, blah, blah.
That poor person from the FDIC never did get farther in his career. He was lucky he kept his
job. He told me that the chairman of the FDIC at the time said, “I have to keep you on board, but
I don’t want to ever look at you. So if you see me coming down the hallway, turn towards the
wall,” because he had embarrassed the FDIC.
MS. CARTER. This was the late 1970s, when James “Jimmy” Carter was President.
How much longer was it before you came to the Fed?
MR. RYBACK. I came to the Fed in 1986.
MR. MARTINSON. I met [William] “Bill” [Taylor]in 1978, when we did that dog and
pony show in New York.
MR. RYBACK. Right, and Kathleen O’Day was there. God, those were the days.
MS. CARTER. So you continued in international at the OCC, the multinational group?
MR. RYBACK. Well, I had other responsibilities. I started out being the director of
International Activities in this Multinational Division. Then I was in charge of multinational
policy, which meant you would form policy implementation for all large banks. But I had to
keep the international stuff. And while we had a separate division that dealt with that, they
reported in through me. I was dealing with the Basel Committee, the evolution of the Basel
Committee, as well as this explosion of foreign banking in the United States. At the same time,
U.S. banks were very aggressive in wanting to expand overseas, especially with respect to
getting a brass plate kind of operation in the Caymans or the Bahamas because it allowed them

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entrée into the offshore market, an alternate form of deposit gathering or liability underwriting.
So there was a lot of activity going on in those days.
Mike Martinson was in charge at the Board level. We had conducted an examination of
Citibank. It was the first time I had to formally deal with Bill Taylor at the Federal Reserve.
The OCC had done an examination of the subsidiary of the bank in Brazil. And apparently
intramural squabbles always go on with these things. The people at the Fed had some interest in
looking at this examination, and the guy in charge wouldn’t let them have it because it was part
of the bank, not the holding company. All of this stuff I thought was nonsense. Nonetheless, to
some, it was important to preserve the dignity of these lines. I had known who Bill Taylor was.
I got a phone call late at night, about 7:00 p.m. I should have been home, but I never was—I was
always working. I picked up the phone and I heard, “It’s Bill Taylor at the Federal Reserve.” I
said, “Yes sir.” He said, “You know who I am?” I said, “Yes I do.” He said, “Your people have
done an examination in Brazil. I need to see that.” I said, “Okay.” He said, “You’ll allow me to
see it?” I said, “Sure, you can have it.” So he said, “Can I have it tonight?” I said, “That I
don’t know. I have to go back and see the person who handles this thing, whether or not he’s got
it at his desk. If it’s not on the desk and it’s locked up, there’s not much I can [do to] help.” I
went back and it was lying on the desk, and I said, “I’ll make you a copy if you want.” He said,
“You’ll give me a copy?” I said, “Yes, sure, you want a copy? Take a copy. It’s all the same
stuff.” I made a copy, and I called him and I said, “It’s done. I’m on my way home. What do
you want me to do with it?” He said, “Go to the Federal Reserve. There will be somebody
standing there. Give it to him.” So I drove by the Federal Reserve building and sure enough
somebody was standing out there. I didn’t know him, but I found out later it was Bob Lord,
Bill’s executive assistant at the time. I rolled down the window and said, “Are you here for Bill

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Taylor?” He said, “Yes.” I gave him the envelope and off I went. Then, when I was probably
halfway home, it occurred to me that I might have violated some law or code at the OCC that I’m
not supposed to give the Fed an examination report. But to me, as I said, the whole preservation
of these lines of responsibility for supervision was just never in my mind in all my 36 years in
supervision; it never really made any sense.
MS. CARTER. So it was before all these information-sharing agreements that—
MR. RYBACK. Well, there’s a funny thing about information-sharing agreements. I’m
probably turning myself in, but I think the statute of limitations has probably gone by. We used
to handle things differently in, quote, “the old days.” If we got a phone call from the Bank of
England and they were worried about a U.S. bank that was operating in their market, there’s no
exclusion under the law that allows us to transfer information to a foreign supervisor. It’s a
shame, but that’s the truth. So the way we used to do it is they used to call up and say, “We’re
interested in what’s going on in Bankers Trust in the United Kingdom. We need some
information.” I would say, “You know I can’t give you any information. But if someone’s in
town from the Bank of England within the next week or two have him give me a call.” Sure
enough, somebody called me from the Bank of England and said, “I’m going to be in town” on
such and such a day. And I tell him to come into my office and meet with me, and I arranged for
a time for that. So, they’d show up and I’d say to them, “I’m sorry I got you here, but I now
have something to do. Why don’t you sit here at my desk.” And on my desk was always the
report of [the] exam. I said, “I’ll be back in around 45 minutes.” I’d go out and have a smoke,
joke, and a coke somewhere. I would come back and I’d say, “Do you have what you need?”
He would say, “Yes.” And off he would trundle.

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The first Memorandum of Understanding [MOU] that we ever did at the Federal Reserve
was with the Bank of England, which subsequently transferred to the FSA [Financial Services
Authority], and it was again because of their concern about Banker’s Trust and other banks
operating in their markets. They wanted much more information than we were willing to give.
After the document was signed by Virgil Mattingly [the Board’s General Counsel] and by their
chief counsel, they called and said, “We’d like to look at this examination report. Can we come
take a look at it?” I said, “I can’t do that.” They said, “Why not? You used to do that.” I said,
“We used to do that, but now we have a formal arrangement. Look at who signed the MOU; it’s
Virgil Mattingly and he’s a lawyer. You have to talk to the lawyers. And they were always
ticked because their information flow was shut down even after these formal arrangements were
put in place. That’s the way we used to deal with it, and that’s still the way it is. I was a host
supervisor in Hong Kong for five years after I retired from the Federal Reserve, and it used to
tweak me that you still can’t get any robust information flows from anybody. These MOUs, or
however they’re so named, don’t do justice to the need to have transference of information.
It struck me when I was in Hong Kong and in Korea that the U.S. financial system’s
falling apart, and you’re moving from a market crisis to a valuation crisis, into a credit crisis, into
a solvency crisis—and I heard nothing from the Federal Reserve, nothing from the OCC. And
I’m thinking, how am I supposed to deal with this? I’ve got Citibank operating in my markets.
How do I know whether you’re stabilizing them? What am I supposed to do? All of these
information flows are hugely imperfect. Hopefully, this latest turmoil will underscore once
again the need to have a global supervision network.
Moving from the OCC to the Federal Reserve Board
MR. MARTINSON. Would you talk now about how you came to the Federal Reserve?

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MR. RYBACK. Yes, that’s an interesting story. Bill Taylor called me up one evening
and asked me to dinner. He took me to the Prime Rib, which was a pretty ritzy and expensive
place. He said, “I won’t cut your pay, but you guys at the OCC get paid a lot more than we get
paid at the Fed. I want them to understand here at the Board what it costs to have a good
supervisor. It’s not a free good. If you come, that means you won’t get a raise for a couple of
years while your colleagues do because it’ll take a while for them to catch up.” He said, “I’m
bringing back the old international team. I’m bringing back Mike Martinson. Jim Houpt will be
there. We have to do this because the Fed’s going to have a lot more responsibility in the foreign
area.”
He proved to be right. Maybe he had some insight I wasn’t aware of, but clearly the Fed
was getting more and more responsibility for more of the foreign banking activities in the United
States and responsibility to supervise it. And Bill Taylor was trying to put together the
organization that could deal with that. He would bring me in at the deputy associate level.
The OCC likes to play mind games, and it was refreshing when I came to the Fed and
found out that such games were not played over here. The OCC was always sending you off to
seminars and training exercises, all of which I thought were fairly juvenile. Nonetheless, the
OCC thought it was an important element of your training and career development. There were
career development ladders. There was a career development level for young people that were
being brought into Washington with some aspirations to move up higher in the organization. If
you wanted to get to a senior level, you had to go through the career level two development
program. Most of the people who graduated from the program never were able to find jobs
because the people who had to do the work didn’t think much of the people that were selected to
go through the career development. All of a sudden they decided, at my level, to create a career

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development ladder level three for those who were going to end up being deputy comptroller or
higher. So we went through this exercise.
I am a person that believes in the organization’s work and supports its work, or I feel
obligated to go somewhere else. At that time, we had what we called the hierarchy of risk. The
multinational banks were our highest risk. Foreign banking was our second highest risk and it
trailed down to small, local [or] regional banks that on the scale of things weren’t very important.
Although the law of numbers will get you: If you have enough small bank failures, somebody
obviously will pay attention. At that time, the OCC was run by the deputy comptrollers out in
each one of those regions. So for them, supervising small banks was important work. To me,
this was superfluous and distracting. And when I went for my interview for the career
development level three, the panel consisted of deputy comptrollers from the regions and we got
into this discussion about where the OCC should be spending its time. I said that I thought the
organization had already decided how it was going to spend its time and asked why we were
sitting there talking about that. If you’re not doing what you’re supposed to be doing, don’t
confess it to me. Maybe you want to rethink your career choices. That, of course, didn’t sit well
with the people around the table.
I went back to my office, and later in the day my boss came in, shut the door, and said,
“You obviously know you weren’t the star today at the table. They decided to punish you by not
having you go into career development level three.” I thought that wasn’t punishment. I really
didn’t care. So I said fine. “You're still going to get my job when my job is available”—blah,
blah, blah. He said, “We already talked about that.” Coincidentally, he walks out of my office
and five minutes later the phone rings and it was Bill Taylor. He said, “I just went to the Board.
If you want to come on board, we’ll have you.” I said, “Fine, consider it a deal.” I wrote up a

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letter of resignation to my boss, gave it to him, and went to work for the Federal Reserve. Part of
it was spite; I had no idea what I was getting into.
So, it was a happenstance of timing that got me into the position where I came to the
Federal Reserve. Once I did, it really enlightened me. First of all, Bill Taylor, as everyone has
come to recognize, was probably the best supervisor the world has ever produced. He also was
one of the most demanding bosses I’ve ever had. On any given day, I’d either want to stab him
to death or take a bullet for the guy. That’s just the way he was. He taught me a lot of things,
although he never was purposely trying to teach you anything. That wasn’t Bill Taylor’s way.
But you started to realize why you were doing bank supervision, why supervision makes sense.
That was because the people at the Federal Reserve have a need to know what’s going on, on the
ground, in the banking system. If you don’t, you can’t make the right calibrations about
monetary policy. All the other things we were doing at the OCC, as good as they might be, at
the end of the day have to feed into this huge information flow that goes into the Board to help
calibrate monetary policy.
At the OCC, I had a division of probably 45 to 50 people. Every year you had to go
through the budget exercise and explain how much money you needed to support the division
and the work that you did. And you had to provide a list of objectives that you would
accomplish during the year. And maybe for the fifth objective, they said, “We don’t want you to
do this objective. We want you to do this instead. Go back and re-price the budget.” You went
back and came up with a budget request. The budget that I had when I left the OCC was about
$4.5 million to run my portion of the Multinational Division.
The second day that I was at the Federal Reserve, while I was unpacking my books, a
woman came in and said that she was from the Board’s staff and needed my signature. She

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presented a book like I used to see in the banks where I had to write my signature three times and
write my initials three times, and I did that. She said, “You can approve expenses and this is to
make sure your signature matches.” I asked what I could approve. She said, “$74.99; for $75
you have to go see the big boy, Bill Taylor.” So I came from running a $4.5 million shop to
being allowed to buy donuts on a good day on my own signature, if I didn’t have too many
people.
MS. CARTER. What year was this?
MR. RYBACK. This was 1986.
International Agreement on Money Laundering
MR. RYBACK. The Board was under some pressure to secure international
arrangements in a number of areas. One was dealing with money laundering. Every time a
Board member went up to the Hill, they were increasingly getting beat up on about a lack of
international consensus on dealing with money laundering. Those that were smart knew that you
can’t deal with this in isolation. It was a global problem that needed global cooperation. After
one particularly brutal session up on the Hill, Bill Taylor came into my office and said, “I’m
tired of this. I want you to go overseas and secure an arrangement that makes us proud that bank
supervisors are going to be involved in this money laundering addition. Get the Germans, the
French, the Italians, and the Swiss on board. I’ve already got the United Kingdom on board.”
He gave me a one-way ticket and said, “There is no return. If you don’t get this agreement, don’t
even bother coming back. You get the other half when you call and tell me you’ve got it done.”
So off I went. The Italians balked the most. The French agreed to go along if I got others
to go along, and the Germans went along. The Swiss were the most vocal advocates of getting
something organized to deal with money laundering. So, in 1987, we were able to secure a

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statement from the international community that the responsibility of bank supervisors is to
ensure that banks aren’t wittingly or unwittingly used as conduits of illegal and immoral
behavior, including money laundering. That doesn’t sound grand in today’s terms, but in those
days it was an important initiative to get the Basel Committee to issue a document that said bank
supervisors need to concentrate on money laundering and need to look at this area.
Capital Accord
The other was a capital accord. The Board was getting increasingly concerned about
allowing Japanese banks in particular and foreign banks in general to operate within our borders
where their capital arrangements weren’t consistent with the United States and that looked, on
paper, to be less than the United States. We had gone through our crisis earlier in the late 1970s,
early 1980s when our banks started to let their capital adequacy ratios drift. At the time, no one
was smart enough to figure out what the capital ought to be, but everyone was kind of smart to
say, 3 percent or 2.9 percent doesn’t sound good. So that legislation passed the required 5
percent capital for banks and 5.5 percent for holding companies. But we had to make
adjustments for foreign banks. They had the same capital requirement, but they had different
ways in which different things were considered capital, and different assets were counted
differently. So you had to make these arrangements.
I remember coming to the Board with a Japanese bank application. The Board members
were particularly feisty. They started saying, “Why should we give all these Japanese banks
credits for all these securities—they are undervalued—and allow them to count these in their
capital adequacy ratios?” We made an argument that it’s just a different way of accounting for
this stuff, and this can be considered consistent with some forms of capital that doesn’t parallel
ours as deeply as one would like, but nonetheless, it does have some capital elements to it. But

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the Board members weren’t content with that and they said, “If they had to sell these securities to
build capital in their banking system, wouldn’t this stress the markets and therefore those values
wouldn’t be consistent with what they are on the balance sheet?” We said, “Yes.” So we left
and put our heads together. Then we went back to the Board with the application and said that
even if we do some haircut, say a 40 percent haircut, and only allow 60 percent of these
securities, they still meet the 5 percent requirement. The Board said, “If they sold them,
wouldn’t there be some tax effect?” We said, “Yes, but we don’t know what that is.” So we had
to withdraw the application and come back and tell the Board what the tax was. Then one of the
Governors raised this prefecture tax. If there was a national tax—it just got to be very, very silly.
At the same time, I could understand the pressures on the Board members because, as they went
on to these banking conferences, their dinner partner would certainly get aggravated about the
fact that Japanese banks were coming and competing in our markets without adequate capital.
Volcker had a strong interest in having an international capital arrangement. After much
pressure at the governor’s level at the BIS, they challenged the Basel committee to deal with this.
It’s very slow-going in international negotiations. It takes a long time because not everyone,
obviously, will agree. Everyone will come to the table with their own national interests involved
and try to negotiate those national interests into a normal arrangement, and it’s difficult to make
progress. Finally, I don’t know who called who, but it was decided that the Bank of England
thought it would be good if we had a bilateral arrangement that dealt with capital adequacy in
New York and London. Well, the Japanese found out about this and they weren’t very happy to
be left outside, so they asked to join. By then, we were pretty far along with having a bilateral
arrangement with the United Kingdom.

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The Japanese sent a delegation over here; they were in New York trying to deal with this.
They put a list of demands on the table, and finally Jerry Corrigan said to them—he was
president of the Federal Reserve Bank of New York at the time—“Look if you want to join, you
join. If you don’t want to join, you don’t join. But you don’t come in the middle of the process
and put demands on the table. You have one decision to make and that’s whether or not you
want to go along with the arrangements that we’ve already negotiated with the United Kingdom.
Some allowance for some small, minor modifications, but we’re not restarting the whole
negotiations.” So they spent that evening talking to Tokyo, and Tokyo finally agreed that it’s
better to be inside the tent than outside the tent.
So we had this tri-party arrangement which would have taken care of Tokyo, New York,
and London to have common capital arrangements for banks operating in each other’s markets.
Well, you can imagine how the French, the Germans, and the Italians, and the Swiss felt that
they were left out in the cold. So there was intense interest to allow a fuller international
negotiation to extend further. I remember being in Volcker’s office—it was just Volcker, Peter
Cook, the head of the Basel Committee, and me. Peter was kind of begging Volcker to allow the
Basel negotiation to continue. It was very dark in the room. Volcker was sitting on the couch.
The light from a lamp cut off his head, and all you saw was his tie downward. He had this roll of
quarters that he kept playing with and stacking up and listening to Peter argue why an
international arrangement is preferable to a tri-party arrangement. Peter Cook kept leaning into
him further and further. Volcker wasn’t saying anything. Finally Volcker says, “I don't have a
strong preference one way or the other. What I do have a preference for is having some
beginnings of a common capital arrangement between markets. I’ll give it to the end of the year.
You can come up with an international arrangement or we go with the U.K. arrangement.”

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That’s when Bill Taylor and others went to Gerzensee, Switzerland, got locked in a castle
owned by the Swiss banking authorities, and negotiated the 1988 Accord. The Accord was a
very useful document that sprang us ahead in so many ways. First of all, it was ingenious to base
this whole thing on common stock arrangements, which everyone had, everyone could
recognize, and everyone could utilize as the fundamental block, and then allow all of these
nationalistic impurities count as tier-two capital to get up to [the] 8 percent level. It allowed the
Japanese banks time to get their capital adequacy up to where it should be, but they’ve wasted
that way through the 1990s and still aren’t where they need to be. Capital arrangements were
renegotiated to the Basel II Accord, which still has, probably, some infections that need to be
addressed in light of today’s events. But it’s a giant step forward. You don’t have to argue
about individual nationalistic tendencies and try to face them off to a U.S. framework in order to
get applications approved.
William “Bill” Taylor
MR. MARTINSON. Would you talk about the differences or changes from Volcker to
Greenspan?
MR. RYBACK. Volcker in my view—and I have to say I only worked with him for
about 18 months before Greenspan came on board, but Paul Volcker was very hands-on. He
liked to get involved with the nitty-gritty stuff. One of the days supervision had one of its finest
hours, I think, was when the chairman of the First National Bank of Chicago came in to
complain to Volcker that bank examiners weren’t perfect in determining where credits were
weakest, and how they categorized them into substandard doubtful loss. If you look at it over
time, some of those decisions are right, some of them are wrong. But things were fluid, and bank
examiners were taking much too rigid a view of asset quality in these large banks. To his credit,

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Paul Volcker said, “Look you’re in the wrong office. I pay a gentleman across the street”—who
is Taylor—“a lot of money to give me advice on the condition of the banking system. He thinks
you’re a bad bank so you really belong over there.” So once word got out in the market the
Chairman of the Federal Reserve Board is not sympathetic to listening to complaints about the
way we conduct and execute supervision, I think it did a long way toward making the banks
understand that the problems that we were trying to address were real and substantive and
needed to be addressed.
You know, they used to say, “In the history of U.S. banking, more capital was raised in
Bill Taylor’s conference room than any time in its history.” I don’t know whether the figures
bear that out, but certainly I think he did a lot. I can remember two instances, one where the
foreign banks came in right after the Basel Accord was done—that required a minimum 8
percent capital ratio—and they brought a whole group in with some of their lawyers to inform
the Federal Reserve of what their plans were now to be more aggressive in the U.S. market. And
Bill Taylor reminded them they would need substantively more capital than they currently had to
be able to engage in those activities. And they said, “Well, you know, there’s the new capital
arrangement, its 8 percent. We could do this.” I remember Bill Taylor telling them, “You mean
the minimum requirement? The minimum of 8 percent. I don’t remember that word being
maximum.” He said, “Given that you’ve got the minimum, there’s no way that you can execute
that business plan in the United States.” So at least he set off in the right tone, I think, this
understanding that the foreign banks weren’t going to come in and go back to the old days of
being able to compete aggressively, unless they had a similar capital requirement as the U.S.
banks.

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The other thing was, I remember when we first came out with the 1988 Accord, there was
a lot of interest by the banks to do a lot of these novel instruments, and Bill Taylor was not at all
interested in hearing anything about this. But there was a little bit of pressure put on Bill to at
least hear the banks out. I remember Chase Manhattan came down, and they gave a slideshow
with their $5,000 suit people. They came in and had all these exploding graphs on the screen,
and they got finished, and Bill Taylor said, “Let me get this right,” he said, “you got something
that quacks like a duck, it walks like a duck, it swims like a duck, it looks like a duck. But you
want to tell me it's a dog.” They said, “No, no, no. We wouldn’t say that.” And he said, “Oh, I
understand you wouldn’t say that,” he said, “I’m saying that.” And he says, “What does your
board think about all this?” And they said, well, they hadn’t been to their board and at that point
he said, “Oh I get it. You want to come down here and put this on the table of the Federal
Reserve,” he says, “we’re going to have a silent ‘yes,’ that is, we’re not going to say anything.
We’re just going to say thank you for coming in. Then you’re going to go back to your board
and tell them the Federal Reserve said it was okay.” So he says, “I resent that. You’re wasting
my time. I’m going to see your board tomorrow. Not on this, but I’m going to bring this matter
up—that I’m concerned that they’re wasting our time at the Federal Reserve when the directors
can’t even address their own capital adequacy issues.”
Well, those people couldn’t wait to get out of that office quickly enough. They were
practically tripping over themselves to get the elevator to get back home. And word went out,
that don’t even bother to go down there with these unique kinds of instruments, because if they
weren’t pure capital, Bill Taylor wasn’t interested in hearing about it or even listening about it.
He would let staff do it, but he was not interested.

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So clearly, he set the tone, I think, for the introduction of the ’88 [Capital] Accord, or at
least the way the U.S. would apply it on both the foreign banking side as well as the domestic
side. Kind of fun.
MS. CARTER. So he really was going to a board meeting the next day?
MR. RYBACK. He was. He was actually going to see the management of the bank.
MS. CARTER. That’s very coincidental.
MR. RYBACK. Bill Taylor and Jerry Corrigan, in my view of history, did more to
stabilize the U.S. banking system during an unstable time than anybody else. They took it on
themselves. The OCC wasn’t being very aggressive. The FDIC was being more aggressive than
they should have been, if you ask my view. But I think it fell upon Bill Taylor and Jerry
Corrigan to call up these large banks and say, you have several problems that you’re not
addressing. There’s asset quality problems that need to be aggressively dealt with. You have
capital adequacy issues and you have management issues.
And Jerry Corrigan once did this presentation—it was called the five-year life cycle of a
problem institution—where the first two years the bank doesn’t recognize it as a problem.
Examiners are telling them there’s a fire in the basement, smoke is coming up through the
elevator shaft, but they’re totally disinterested. They’re saying, our earnings are good, our
outlook is robust, the economy looks good. Why should we listen to some $35,000-a-year
bureaucrat? And then finally what we’ve been telling them comes to pass and it starts to show
up on their balance sheet, they start to get resistance in the market.
I remember one particular incident when Bank of America was going through their
second tranche of having to report to the market that they were having difficulties and that they
were going to have to increase their loan loss reserves. I was over at the OCC, and we were

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trying to convince them that they were going to have a negative market reaction. And their view
was, they’re the Bank of America. So they made the announcement and surely enough, the
market started to turn against them and they had funding difficulties. And I called the West
Coast at about 6 o’clock—it was probably about 5:30 p.m. I said, “You’re going to close in a
half hour out there, you got all the funding you need out there, are you going to get it all? The
examiners said, “Oh yes.” I said, “Really?” They said, “Yes.” Well, you got me because I
would have bet you a steak dinner that we would have had to have gone to the Fed [discount
window] tonight. So I said, “Now it’s all in the house. I can tell the boss that you’re funded for
the day.” The examiner says, “Well we don’t have it all.” I said, “What do you mean you don’t
have it all?” He said, “Well, there’s still the Federal Home Loan Bank Board. The guy is
supposed to give us $1 billion [in short-term funding], but he’s out on the golf course.” I said,
“Yeah, he’s out on the golf course and you’re never going to find him because that’s why he
doesn’t want to be found, because he’s not going to sign a piece of paper that turns over $1
billion. And sure enough, the bank started to panic. They started to pay up for funds, and then
the word got out in the market, and J.P. Morgan called and said, “Look if you got a problem on
the West coast we can get a group of banks together to stabilize this thing.” We even got a
phone call from Panama, of all places, that they were destabilizing the market down there by
bidding aggressively for funds, et cetera.
So, you know, trying to convince a bank that supervisors actually do have some
experience about knowing what a bank goes through when it’s weak is very difficult to do. But
Bill Taylor and Jerry Corrigan got very aggressive. I could remember Bill Taylor calling up
John Reed [Citicorp] and telling him he’s going to send him a bunch of 10 loans that are
randomly selected, and they’re not ginned in any way—they’re not geared in any way—they

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were just selected as a random sample of 10 loans that were extending globally from different
branches around the world. And he wanted his own opinion, John Reed’s opinion of what he
thought the value of these loans was. About 10 days later, Reed called up and said he had no
idea these were the kind of loans the bank was making. And it was a very similar pattern to
today. They weren’t making any sensible loans or making loans based on judgment of future
value somewhere down the road that may or may not occur, that may or may not be likely, but
didn’t allow the bank to collect against the fullness of its collateral. So you had a very similar
pattern in the late 1980s and early 1990s to the destabilization that goes on.
It kind of struck me, you know. When we went through this last crisis in late 1980s,
early 1990s, it was kind of similar, although I’m sure it’s worse today. I mean, we worked six
days a week, we insisted on taking one day off. I used to take Saturday off; I always worked
Sunday. And you worked from, you know, 6:30, 7:00 a.m., until 9:00 or 10:00 p.m. And it was
like being in the ocean where wave after wave just hits you. You couldn’t catch your breath. No
matter what you did, something new was coming over the transom that you had to deal with.
And it was pretty depressing because Congress was getting on the bank examiners for allowing
the problem to fester in the first place, that they should have been more aggressive in
supervision. And then the tide always turns, and then bank examiners get blamed for not
allowing the economy to recover because they’re creating a credit crisis by classifying
everything that moves.
And I had a guy who, when I left New York, was just retiring, and he was a Grade 15
then, and in those days they were supermen. And he did all the large banks. The guy’s name
was Ed Langden. And he sent me a brochure from the 1930s where President Roosevelt had
called the bank examiners to Washington to discuss this very problem, that they were part of the

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problem going in and part of the problem of resolving the economy by being too pig-headed in
their classifications. And it was an actual brochure, it wasn’t somebody’s memory. And I
looked at this thing and I realized, well, this is just part of being a bank supervisor. You’re never
going to get a hero’s badge for doing the job right. You’re always going to get criticized for
reacting too slowly [or] acting too quickly, and there’s never a perfect way in which it’s done.
But I think we could’ve had our banking system really go off the deep end if it weren’t
for aggressive supervision from the Federal Reserve by making the banks—I remember a Barnes
from Philadelphia National Bank—this was before first Pennsylvania—it was Pittsburgh
National. Anyway, he took the bank from being a very conservative organization to being very
aggressive right at the wrong time. He had a very forceful personality. And I always realized
when I was out examining banks—if all you ever heard around the board table was one voice,
you could pretty well bet that bank was going off in oblivion because people were afraid to
discuss anything. They just listened to the Chairman. But I remember him complaining—and he
was a complainer—vocally about aggressive supervision, and Bill Taylor told him, “There’s no
magic to this thing,” he said, “none whatsoever.” He says, “We’re not the brightest people on
the planet, nor are we the dumbest.” And he said, “I could give you a new exam if it makes you
happy, but I think you got a pretty good exam. But if I do that, I’m going to bring in the best
credit people the Federal Reserve has to offer around the U.S.” And he said, “If they find more
loans, there’s no crime. And they well could find more loans that are even worse.” So he said,
“But, no complaints. You have to live with those results.” Barnes didn’t like that. And he said,
“Well, you could do it yourself.” So they said, “What do you mean?” He said, “Look, why
don’t you take your portfolio, why don’t you stress it to tell me what you think is going to
happen if the real estate values go down another 10 or 20 percent and the interest rates go up

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another 1 or 2 percent.” And they call back a well later and said, “We’re busted.” And he goes,
“That’s exactly right. You’re busted.” He said, “Now you need to have aggressive action to fix
this.” So there was a lot that went on to deal with that banking crisis that, of course, never gets
reported and appropriately so. But they could have made this much worse.
MS. CARTER. You mentioned a little earlier about Bill and Jerry Corrigan. Is it your
view that they were working independently on parallel paths or were they working in concert on
some of these issues?
MR. RYBACK. I don’t know the dynamics. I was not a fly on the wall. And I can’t
imagine that the strong personalities that Corrigan and Taylor had, that there wasn’t some
barking going on back and forth. But I think eventually they realized they had to get the
Chairman’s blessing. I mean, Volcker wanted this done and Volcker liked—in my view—liked
to have this stuff go on, have it done on [the] staff level and just be done with it. So I can
imagine how he encouraged Taylor and Corrigan to move aggressively, because the OCC wasn’t
doing it. The OCC, I think, was still probably denying that they had a problem, that the problem
was as massive as it was. And there was quite a bit of concern about macho supervision. We all
like to think we’re better supervisors. The OCC thinks they’re better than the Fed or the Fed
thinks that—and the reality is that we’re all bank examiners, we all think the same. And there’s
not a whole lot of difference between the two, but you can’t tell that to the people in the
organization that they work for, that we’re all the same underneath the skin.
Classification of Foreign Debt
So there was a lot of moaning and groaning about the Fed orchestrating the bailout of the
banks when the LDC problem—the Less Developed Country debt problem—occurred, and ways
in which to deal with that. You know, it’s easy to sit out in the field as a field examiner and call

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these dud loans because that’s your job. But then you have to go through the various layers of
bureaucracy, the various layers of your institution who have different views on this thing. I don’t
know how others may explain history but, clearly, one of the problems we had as I talked about
earlier was whether or not there was equal treatment in these banks. And that was especially true
in the foreign area, loans to foreign governments. I mean, as an economist, one might go up the
wall, and I’m sure some here in the Federal Reserve did, but you know, if you’re looking at how
they’re going to get cash flow to pay those debts, et cetera, et cetera, one could take a dim view
of that. But what really was happening was they were being viewed differently in all these
institutions, and they were basically the same loans. A country’s debt classified as substandard
in one bank; it would be special mentioned [in another]; and in another, it wouldn’t even be
criticized in at all.
So the OCC put together this group that had to deal with the common classification of all
foreign debt. And we really were unprepared to do that. We were unprepared because we didn’t
have the fullness and richness of what would go on in the State Department. We didn’t know
what’s going on at the Fed—we were trying to deal with this in isolation and you start to look at
it from a bank examiner’s perspective and it looks pretty ugly. And one thing you learn in
Washington: The three agencies can give you good cover when you need it. So instead of being
criticized at the OCC, as we were, in reality what was happening is foreign ministers were
coming up to Washington, and instead of seeing the State Department first, they were going over
to the OCC to plead their case. That doesn’t make the State Department feel good. We then
thought it in our best interest, as did the Fed, to do this international country review—
MS. CARTER. ICERC?

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MR. RYBACK. ICERC, Interagency Country Exposure Review Committee, and to set
this up in a more uniform way. Because while we might have been doing it uniformly in the
OCC, that didn’t mean to say there was uniformity throughout the system, because the Federal
Reserve would take a different view on some of these loans. So there came a time that it seemed
wise for us all to sit together in one room.
Volcker had an intense interest in this ICERC stuff. Before the committee actually met,
we would have to go into his office, we’d have to explain where we thought the classification
was coming out, we’d have to explain why and he’d have to agree with it. And if he disagreed,
you know, we got to have more discussion.
And I remember, one time during the second banking crisis, he was particularly
concerned that the government’s initiatives could be undermined by the bank examiners taking a
harsher view of a country’s credit than they might, and that there was a possibility it would be
classified; if it was classified there was no way any of these broader U.S. government initiatives
were going to work. And we were sitting here discussing a country’s debt with the Chairman,
and he made his views known that he thought it would be a pity if ICERC examiners were to
classify this as substandard. He could accept it. It might be a criticized loan, but he couldn’t
understand why they would want to go and classify the loans because it would undermine one
[of] these other initiatives. Michael Martinson told him that he wanted to remind him that we
were only a committee of three votes—[a] dime-person committee—and that all he could deliver
was three votes. And I remember Volcker looking up at him and saying, “Do you think that I
can’t fire you? So, you do what needs to be done.” So that’s an extra layer of incentive when
you know you’re going to ICERC with the Chairman saying, “Don’t come back with this if you
can’t deliver.”

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MS. CARTER. This whole idea of country risk and things—that hadn’t been done
before. Was that considered politically sensitive? Or how—
MR. RYBACK. In my view, we became more visible on the radar scope in the first
Mexican banking crisis. It was back in 1983, Michael? 1981?
MR. MARTINSON. End of 1981-82.
MR. RYBACK. Yeah, ’82. I remember I was going on vacation in August. I had
packed up the family, and we always go to the New Jersey shore—that’s where I grew up, that’s
what I know, so that’s where the kids would spend their summer vacations. Going in and out of
the house, packing the car, I kept missing the phone calls. Although by the time I got up to the
shore house, Washington finally got a hold of me and said, you know, there’s this crisis going on
in Mexico. I said, “Do you want me to come back?” They said, “No.” But I ended up spending
two weeks at the beach sitting in the beach house going through this whole thing. It was the first
time we ever had this problem with foreign debt because Walter Wriston [Chairman and CEO of
Citigroup, 1967-1994] used to run around the world, telling everybody that, you know, loans to
foreign countries don’t default.
MS. CARTER. Because countries don’t fail.
MR. RYBACK. Right, countries don’t fail. They just fail to pay their debts.

[At this point, the recording malfunctions; see second day of interview.]

MR. MARTINSON. Okay. Well, I think we pretty much covered BCCI. There were a
few other sorts of similar incidents in the mid-’90s: Barings, Daiwa, the Sumitomo copper
situation. Would you like to say anything about these events?

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MR. RYBACK. Yeah. You know, if you look at Barings, you look at Daiwa, and you
look at Sumitomo copper, they have some very, very common elements, which underscores,
once again, that if bank examiners are paying attention to the banks, these problems should not
get as far as they get—especially when they’re life-threatening to financial institutions. If you
look at the Barings event, and Sumitomo copper, and Daiwa—with [Toshihide] Iguchi’s illicit
and bad trading activities—there were about four or five elements of good prudent management
that were violated that bank examiners should have recognized going into the situation. First of
all, there was the fact that none of the individuals were responsible for the losses in those
institutions or took any vacations—very simple things, like taking the two-week vacation that
used to be religiously enforced when I was a younger examiner. And in Mr. Iguchi’s case, he
hadn’t taken a day off in 10 years. And one might scratch one’s head. We always used to put in
a report of exam that 22 people didn’t follow the two-week vacation rule. But you could not tell
from reading that report whether they were board members of the institution or if they were
lower level clerks. So we didn’t do enough follow up.
The other thing that comes to mind with all three of these institutions is that in all three of
these cases, the problem area provided the predominant share of earnings to the financial
institutions or the industrial company that went unquestioned. They just thought, “Oh gee, they
must be doing a wonderful job.” And if you’re producing more than normal average return,
somebody in management, you think, and somebody in the bank supervisory field, you think,
would kind of come up without the question of how is this being done. What do they know that
the market doesn’t know? Daiwa was particularly unfortunate because they probably would
have escaped without their harsh punishment of being expelled from the United States if they
had ’fessed up early on that they had a situation in play and that they were embarrassed and they

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were putting the proper controls in place. That usually gets you a lot of sway with the
supervising authorities. But they attempted to hide this up, cover it up; they hid it from
examiners, and they hid it from senior officials at the Board and senior officials at the state of
New York banking department to the point at which you had to come to the conclusion that it
wasn’t very good having them operate in our financial markets in the U.S. So they were
expelled even though there was no harm done to any of our financial institutions, no harm done
to the financial markets—truth be told—other than it severely weakened Daiwa.
And I think these events happened in a time frame in which there was this interest in
redoing the [Basel] Capital Accord. Quite frankly I think it disrupted the Basel Committee from
doing more in the operations context, especially with regard to concentration, which is always
the underbelly and the soft spot in all of these financial institutions. So I think we sat trying to
perfect something that can never be perfected in revising the Capital Accord to produce Basel II,
but at the sacrifice of these operational glitches that perhaps should have been studied better and
a way found in which to deal with this national or global supervision problem. If you look at the
accidents that happened, especially with respect to foreign banks, they usually happened way
away from the head office, which means that the controls are weaker the farther you get away
from the home base. So it struck me always as never being able to put together true global
oversight, no matter who you are, whether you’re the Federal Reserve, whether you’re the Bank
of England, whether you’re the Japan[ese] FSA.
And I moved further along in my career, I became the deputy chief executive of the Hong
Kong Monetary Authority, and as a host supervisor, it always struck me that I never had a
request from a foreign supervisor to do any test checking in my market of whether or not proper
controls were in place or whether or not there was rigorous underwriting. Any of the problems

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that later proved to be severe within a financial institution, never did I hear from the home
supervisor that they wanted to test check these controls on a global basis and therefore ask our
input. And I can assure you that the Hong Kong bank examiners are more like the examiners of
old; they went and checked every little thing from top to bottom. And that may or may not be
wrong, but nonetheless they still had those skill sets, whereas we’ve lost those skill sets in the
U.S. So I think when we look at all of this in calmer times and look at the present turmoil that’s
going on, we’re going to find out how weak global supervision really is. And I don’t really
know how to address it, but I do think that all of these examples we’ve been talking about are
manifestations of all of that, which puts a heavy burden on the Federal Reserve, because you
can’t just assume that a foreign bank has the proper controls and oversight responsibilities, which
means we’ve got to do more work than we probably should have to do with respect to keeping
stability in our markets and making sure that financial institutions are operating in our markets
with proper controls.
The Foreign Bank Supervision Enhancement Act
MR. MARTINSON. Well, this brings up the enactment of FBSEA [Foreign Bank
Supervision Enhancement Act] in 1991, which gave the Fed a lot more control and power in this
area. You oversaw the implementation of a new supervisory program that was actually adopted
by all the agencies. Do you have much recollection of that?
MR. RYBACK. Yes, you know, Bill Taylor was very pushy in that respect. I mean, he
understood that, unquestionably, the Federal Reserve was going to have much more
responsibility for foreign banks given their growing presence in our markets and our interest in
ensuring that they operate in good form. It’s not surprising that when we would begin to think
about how we could bring foreign banks into a stronger circle of supervision, Mike Martinson—

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and many others—did a lot of work on the rating system, which I think was a major
advancement. Before that we really didn’t have a rating system that was consistent with the
domestic side or enough alike where you could just transfer people back and forth from foreign
to domestic. And I’m not quite sure that the old system actually did as reasonable a job as we
would’ve liked it to. We had to revise the country exposure report to reflect reality better. We
had to get much more active.
I remember in the early days where the Federal Reserve was given responsibility to make
sure that any foreign bank making a license application in the U.S., whether it’s a federal branch
or a state branch of a foreign bank, that the parent institution had consolidated comprehensive
supervision. And nobody in the world knew what comprehensive consolidated supervision
really was or what examples you might have to point to that. And we set out some guidelines
that could get us reasonably close to making that determination, but we were not very
comfortable in doing that since the U.S. was the first to have a law that mandated us to give
consideration to the fact of whether consolidated comprehensive supervision actually existed.
And it proved to be much too harsh a standard, and we had to have the law changed subsequently
to say a country had to be moving towards comprehensive consolidated supervision to make it a
little more squishy. And you know, you could fit many elephants under that tent where you
couldn’t beforehand. But it put us in the unfortunate point of having to make absolute decisions
on the supervision of other countries and whether or not they were doing a poor or good or
reasonable job of that supervision. It’s not something that any agency feels comfortable doing—
I think the Federal Reserve more than anyone.
When I first got to the Board, as a courtesy—there was no legal requirement—every state
would write to us and tell us that a foreign bank has put an application in for a branch in the

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United States and we’re notifying you because you should be notified and if you have any
comments, we’d appreciate them. I used to write back to, say to Florida, for example, and tell
them that this bank that they were thinking of licensing was from a jurisdiction that didn’t
practice good supervision and that it had weaknesses, that it was too small of a bank, all this
litany of reasons why they shouldn’t do this. Which they would dutifully write back and say
thank you for your comments and go ahead and approve it anyway.
Bill Taylor used to get a little annoyed with me. He said, “You shouldn’t be writing
those letters.” I said, well, if you don’t, then they’re going to imply that we didn’t care. Either
that we didn’t care or that we approved this thing—either way that can’t be good. So he let me
do this, but I know he was not happy. Although he did later come to me and said he thought it
was good that we were writing these letters because they really were just poor choices on behalf
of the state of Florida. Of course all that changed. In two months, we became legally
responsible under the law for having to make formal decisions on whether or not we would allow
these banks to operate. So you got a different character of financial institutions coming in to the
U.S. To be sure, I think the state of Florida lost a lot of business as they would view it.
That may or may not be unfortunate. I think it’s fortunate for them, for the state banking
system, and fortunate for the U.S. banking system that these characters weren’t allowed in. But
this stimulated another area where the Fed was not used to getting involved in—and that was that
if we were going to mandate requirements on comprehensive consolidated supervision, don’t we
have some obligation to teach people what that’s all about? And there was a heavy discussion
within the Board of how we should be supporting training activities, and up until that point, our
training contribution was in the context of large multinational institutions like the IMF and the
World Bank. But we never held our own training programs. I can remember the bank

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supervisor from El Salvador coming up to the Fed and asking for assistance, and since I had no
authority by the Board to commit to anything, you get a little bit elusive in your response. And
he reminded me, “You know, the last time I was here you admonished me because El Salvador
doesn’t have a bank supervisor that lasts more than six months, which means there’s no
professional supervision and this bank supervision is just a stepping stone to higher government
positions. And the Federal Reserve has no desire to get involved in countries that don’t want to
help themselves.” And he said he’d been a bank supervisor now for two years, and asked if that
was sufficient enough for us to change our views. So after much discussion it was decided that
we should indeed be helping in training programs for Latin America and Asia.
I think we did a lot of good work in training a lot of supervisors, both at the elementary
level, as well as the intermediate level, as well as the advanced levels. If for no other reason than
we were able to bring their level of sophistication up to the level at which we think it needs to be
or should be. This, again, led us in different areas. The more you get involved, the more you
have to get involved. And again after much discussion, and I could tell you there was, at first, a
lot of opposition, we got involved in a group of Latin American supervisors that eventually
banded together as a group to try to improve supervision on the continent.
MS. CARTER. That’s ASBA?
MR. RYBACK. ASBA, Association of Bank Supervisors in the Americas. And we were
there first in an advisory capacity, but as things would develop, jealousies arose in those
countries that make it difficult for them to effectively have leadership changes. And every
leadership change involves a big debate on who did the last favor for whom and who was going
to vote for whom. That was underscored when I was down in Mexico City for one of the
meetings of the directors of ASBA. I was there in an advisory capacity, but I found it curious

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that before I even put my bags on the floor, my phone rang and it was from the Mexicans who
were hosting the meeting in Mexico City and began going through this long litany of why we
shouldn’t encourage or allow or permit the Brazilians to be in charge of ASBA. Then you heard
from the Chileans who said they’d be glad to be a compromise candidate. And I realized, gee,
I’m not a State Department employee. I have no diplomacy skills, I just don’t want to get
involved in all of this. But you can’t help becoming involved. So the decision came up that
well, maybe, the way forward is to have the Federal Reserve be the Chairman of this committee.
I can tell you that this did not make the Board happy. It did not make the Chairman happy. It
did not make anyone here happy. And I think there was always some residual feeling that I got
the Federal Reserve involved in something I shouldn’t have, but as I look at it, it was a natural
evolution of where ASBA was going.
But you began to understand that the only way you were going to be able to move South
America forward was to have an outside body encouraging that change like the Federal Reserve.
It didn’t become as painful as first thinking might bring you to. So the Fed took over the
Chairman of the Association of Bank Supervisors of the Americas, brought in the Caribbean and
eventually, I think 35 or so countries became involved in this Association. But I think, if it did
nothing else, it incented these countries to give a serious look at where they wanted to be and to
quit ASBA reforms running to the country with the slowest reform pace. And that’s what you
used to hear at the beginning, that we can’t undertake these reforms because this country can’t do
it. And we’d finally have to say, “Why don’t you drop out for a while and rejoin us when you
take this more seriously?” And I think there’s now more commonality, there’s more exchange of
information. These people now think that they’re dealing with professional bodies instead of
personalities. So there’s a lot of reforms that went on.

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Asia is just in the process of those kinds of reforms. They don’t have the capacity to
band together, and it is still very much run by two or three persons—I won’t even say
organizations—persons that drive the agenda and just are against any kind of rigorous kinds of
reforms. And that means that Asia doesn’t have much of a contribution to make in the
discussion of evolving issues because they can’t agree amongst themselves. I think at least you
can say that ASBA did that.
So I think we’ve gotten a lot of benefit from foreign banks activities here in the U.S,,
certainly financially. As I said before, at one time foreign banks had 25 percent of commercial
industrial loans and took lots of losses on this. If you look at the latest round of losses, plenty of
foreign banks have contributed by taking some of these securitized products and CDOs
[collateralized debt obligations] and other kinds of things on their balance sheets that would've
normally been left to the U.S. to absorb, which would have meant we had a much larger
problem.
But there’s lots of reforms that are going to need to take place, I think, and the Basel
Committee—and I’m not convinced that the Basel Committee is a good forum for such reforms
primarily for the reason they’ve changed their stripes. When the Basel Committee first started,
there were two people that were asked to come. One was the bank supervisor and the other was
the head of the foreign exchange activity, whether it be the central bank or someone else, but
usually the central bank. And that created a perfect opportunity for the Federal Reserve to join,
because the way this discussion between who should represent the Board and who should
represent the Federal Reserve Bank of New York didn’t become such an issue. But I can
guarantee you from the papers I have read, it was a rather significant discussion. Each arguing to
be the representative, but given that there was one supervisor, we took the role of supervisor and

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the Federal Reserve Bank of New York took the role as market observer. As the Basel
Committee began to change from one that was primarily looking at market turmoil to a bank
supervision body, the market people had less and less to say in the deliberations that went on.
And the heads of supervision, or their deputies, were primarily present at these meetings.
But eventually when development of Basel II began, these discussions became way too
complex for the average bank supervisor. As a matter of fact, my version of history is that even
early discussions here within the Board fragmented the group on the third floor into supervisors
and policy wonks. And bank examiners thought the Basel II stuff was too ethereal and refused to
get involved with it, which wasn’t right. It clearly wasn’t right. But as it got more complex and
more complex, and the colors of the patterns got gray and dark gray and light gray, and gray with
white speckles, and gray with black speckles, and you couldn’t tell what pigeon belonged in
what hole, the more the examiners just resisted all of this. So the result was you had a product
that was five miles deep and two inches across and had little connectivity. And consequently,
the people that went to the Basel Committee during this time were not bank examiners but
primarily policy wonks or policy people—I shouldn’t say wonks. Wonks is a negative word—
that’s not meant to be negative. And therefore, there were fewer and fewer bank examiners
sitting around the table directing the outcome.
And that’s the risk you run going forward, that the Basel Committee turns to become a
policy debate as opposed to a supervisory debate. And you will need rigorous leadership. I’m
not sure the current leadership is very good, but the BIS certainly will have to give some thought
to how all these issues are connected and what changes need to be made. It’s all going to get
back to where we began, which is there are a lot of operational weaknesses that have been
pointed out. These are the same operational weaknesses that have existed for some time.

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There’s been no movement to get bank supervisors to become bank examiners once again, and I
think that at least merits a half-hour debate. Are we doing the right thing, and where have we
gone wrong? Part of our job is to make sure that the people in the bowels of the bank are doing
their job; we’ve gotten away from that. We can never go back to surprise exams, but I do think it
would be useful to at least consider whether all of this intense focus on policy is the right thing.
MR. MARTINSON. We’ve gone through a lot of topics today. Are there some others
you’d like to talk about?
MR. RYBACK. Well, I consider myself a citizen of the world. The Fed’s given me the
opportunity, and early on in the OCC, to get exposed to different cultures. I think in my career I
visited close to 100 countries. What struck me all this time is that supervisors in every country
face the same challenges. It’s no different here than in Asia, than in Russia, than in the middle of
Europe. We all face the same problems and have to deal with the same issues. We all get the
same negative feedback when things don’t go the way in which those people in power think they
should go, which brings us back to this commonality; which means there should be a lot of
reforms that need to be put in place, both domestically in the U.S., with its Byzantine system,
and globally. I mean, the fact is bank supervisors don’t talk to one another as often as we should.
I think the blueprint that was put on the table by Henry Paulson to strengthen supervision in the
U.S. clearly has some merits, because I think the three-peaks model makes a lot more sense than
anything I’ve seen. The only thing I know is that the one-peak model like the FSA in the U.K.
makes absolutely no sense. There’s too much competition for resources between market
oversight and prudential supervision. And if you look what happened to the FSA over that
period of time, prudential supervision got totally neutered. And more and more effort and
energy was put into market supervision. Why? Because it’s the most visible to the public.

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MR. MARTINSON. Of the bunch?
MR. RYBACK. Prudential supervision is sometimes behind the scenes. Market
supervision—whether some customer got screwed by his local bank, becomes the five o’clock
news topic both here and overseas. So it’s easy to see what the temptations are, where to put
your resources. But this introduction of a third peak, which is a financial stability oversight, I
think, has to have a very intense period of debate and discussion because, as I mentioned before,
the reason we do bank supervision is, at the end of the day, to keep policy leaders informed of
the true condition of the banking system. I think we failed to do that over the last three or four
years because examiners got into looking at policies as opposed to what’s really going on in the
basement. Are the banks stable? Are they underwriting good loans, are they underwriting bad
loans? No one could have predicted the magnitude of this, but you certainly had to be
unconscious if you didn’t know that banks were making poor decisions and poor underwriting
choices. And that’s okay as long as you have proper capital against the risk. But concentration
risk over and over again causes bank failures.
There’s always two elements in every bank failure. One is a concentration of business
risk, the second is poor underwriting and fraud. Those two things combine to fail every bank
that’s ever failed in the history of mankind going back to the Phoenicians. And supervisors have
failed to properly deal with it. We just never deal with it. I think we should give some careful
consideration to making sure that if a bank wants to take an aggressive market share, they’re
going to keep not 12 percent capital, but 24 percent capital to guard against the problem that
they’ve taken on a lion’s share of bad loans. So hopefully we’ll get serious with that.
I’ve spent a lot of time in Asia; I believe that Asia deserves a stronger voice in whatever
reforms are going to take place. If you look at Asia, they haven’t had as heavy an influence and

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have no first round effects of the current crisis, which means Asian bankers were too
conservative to take any of these financial instruments on board directly.
I thought at first we would have a huge problem with the branches in the U.S. taking on a
big share of these collateralized debt obligations or subprime mortgages, but that proved not to
be the case. They pretty well stayed away from them because they didn’t understand them, so I
think that was a benefit. But the second round effects are being clearly felt in Korea and
elsewhere, like China, where withholding of credit is becoming an issue and a problem, and
uncovering weaknesses in the banking system that perhaps were there but certainly are
exacerbated by this second-round effect. But all in all, I think Asia needs to give some careful
thought about how they stitch together all of the disparate interests into a singular voice, because
the Basel Committee is not going to listen to them as 23 separate voices. They will only listen if
there’s one of them, this is the Asian platform like it or not, this is what we’re going to do. Then
they can deal.
As I look back on my 40-year career as a bank examiner, it’s a choice I never made
willingly. It’s a choice I accidentally got into, but it certainly wasn’t a boring career. And it
certainly led me to places I never thought I’d be. Sitting in Catholic schools listening to the nuns
rap me on the head, I never thought I’d even go outside of the U.S., even on vacation. But
having the opportunity to visit all these countries, talk to all of these people, recognize that we all
deal in this singular world, all trying to get by, all having the same common problems, I think is
very heartening. Who’s going to take up the next leadership role? We always used to think in
Washington that in each one of the three agencies, someone would be there to provide leadership
through any financial crisis. Now it’s not clear that that exists now for a combination of reasons,
perhaps. But I think it is time that we ended up with a single prudential supervisor. The FDIC,

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being an insurer, they won’t agree to this. And I think the Federal Reserve has to take its
responsibility for financial stability seriously, which means you don’t have time to tinker around
with everyday supervision of small banks, it’s too serious.
MS. CARTER. You’ve talked a lot about capital and the importance of capital. Any
thoughts about “risk-focused supervision?” That approach by supervisors—do you have any
comments about that or thoughts about that?
MR. RYBACK. Steve Hoffman used to say when we introduced risk-focused
supervision, “You know what ‘risk-focused supervision’ means here at the Board? It means,
show us a risk and we’ll focus on it.” And he was absolutely right. I mean, we still are paying
attention to things we don’t belong paying attention to. Even when small banks would fail and
someone from the Board would call and say, why did such and such fail—I had no idea. “Well,
you better find out.” Well, no, I better not find out. That’s not risk-focused supervision. So we
introduced the world to risk-focused supervision. It has not been perfected. We don’t do it very
well here—we do it very poorly actually. We have no hierarchy of risks, we concentrate on
everything that comes over the transom. Today’s world is a manifestation of that. Every single
thing that happens, the Federal Reserve thinks they have to know about it, they have to deal with
it, and they have to take the monkey on their back. And that’s because you don’t have risk
focused [approach] here. It’s a word. We have exported this disease overseas. I remember
going to Korea and them saying they wanted risk-focused supervision. They had no idea what it
was; it just was a term that sounded good. It sounds like smart people are doing smart things and
not wasting government revenues. But at the end of the day, if this is what risk-focused
supervision is, and the Board’s example is the mantra for the world, or the example to the world,
we’ve done a great harm to the world, a great harm.

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So it sounds good, nice concept. Doesn’t work in practice—doesn’t work for practical
reasons. I objected strongly when I was at the OCC to the resident examiner concept, I still do. I
think it’s horrible. I think it’s the worst concept anybody ever thought up. I mean, here were
these examiners operating everyday in these financial institutions, and not one of them had a clue
what was going on and how serious this was, and what might be happening. So they’re
conducting supervisory exercises for the purpose of conducting supervisory exercises. Once you
start going to work every day in a bank—I mean, I always had a rule—when the OCC made us
put full-time on-site examiners, I used to have a rule. Anytime a person said to me, “My bank,”
the next day he was changed because it’s not your bank. You’re getting too close to the financial
institution. There has to be a lot more coordination of what’s being done, what’s being looked
at.
You know, I think simultaneous examinations conducted on business lines—we did them
back in the 1970s—for example, we used to look at the shipping loans. Around the globe, if they
were in London, that’s where we went; if they were in L.A., that’s where we went. Horizontal
exams you could call them—whatever you want to call them. At the end of the day those are
very, very productive because they point out those banks that are taking on abnormal risk, those
banks that are poorly underwriting risk. They stand out so glaringly. But you can’t tell that if
you’re sitting there working at Citibank. You have no idea what’s going on at J.P. Morgan, how
things are changing. Underwriting rules are changing and new risk management techniques are
put on board. You hear about them way too late, and that’s usually through the Wall Street
Journal having some article about it. So I don’t think this on-site full-time exam thing was ever
productive. I mean, I don’t know why we keep it.

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Now with that said, I do believe 100 percent that some large banks, many large banks
need full time supervision, but that doesn’t mean you have to have people parked in them every
day and sit in there and go in there. It just doesn’t make sense; it still doesn’t make any sense to
me.
MS. CARTER. Any thoughts about the Gramm-Leach-Bliley legislation [in 1999] that
repealed Glass-Steagall-era restrictions?
MR. RYBACK. Well, I’ll give my version of history. When it was pointed out to the
Chairman that Gramm-Leach-Bliley produced an inferior result with respect to supervision,
Greenspan’s retort was that he wanted financial reform. He thought financial reform was
important institutionally; he thought financial reform was important for the industry. And then if
you start introducing this arcane topic of bank supervision, and how to perfect bank supervision
into the mix of ingredients up on the Hill, this bill is not going to go anywhere. And he said,
what we do is accept the imperfect, we wait for the accident to happen, and once we pull all the
bodies out, we can have re-regulation. Well, this is exactly the way it will happen. He was right.
There’s bodies all over the place. More cars and trucks slipped on this road than anybody could
have ever imagined, and if you even mentioned that you thought Armageddon was coming,
nobody would have believed you. So now we’re going to have re-regulation. So now we’re
going to have perfection.
I remember Greenspan getting annoyed with me because one time I went to a retirement
thing at the FDIC, and Gramm-Leach-Bliley was just passed, and people wanted to know what
umbrella supervision was. And I said, “Well, I'll tell you what umbrella supervision is to me.” I
said, “You know how you have this handle and then you have a shaft, and then there are all the
ribs. But when you open it up, there’s no canvas over this thing.” I said, “So I’m standing here

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with this umbrella thing getting poured on.” So Greenspan personally called and told me to shut
up. [Laughter]
So he was not happy with that characterization. But I think it’s exactly an apt
characterization of exactly what the Fed got handed. It was an impossible task. The head of
supervision has only two choices: You could try to stitch this thing together into whole cloth,
which was never going to happen, or you could live with it. There were too many vested
interests that would not let the Fed act the heavy—to say, “I am the supervisor in town, I am the
Sheriff, you all are deputies, you report to me.” And that’s not the Fed’s personality. So
consequently, you had to try to convince members what is in their best interest. Well, that
doesn’t work well in this town. The SEC wanders off on their own, and we never had a clue in
hell what went on in the insurance area. Nobody has any clue what goes on in that opaque
industry. So I think so far it proved to be a failure. Except for Citibank there was no other
organization that took on any seriousness to try to have a financial holding company, and that
proved not to be good. Citi had to eventually get rid of the insurance part of it because they
couldn’t manage it properly—too many conflicts.
MS. CARTER. I often wonder if Bill Taylor had still been here, if we would’ve operated
differently.
MR. RYBACK. Oh, I definitely think he would have. Either that or he would have been
dragged out of here and fired, I guess. I think he would’ve chosen alternative A—let’s put it B,
because alternative A is a conscientious decision. Alternative B, which he would have said,
“I’ve got a responsibility here; we’re going to take this seriously. We’re going to have weekly
meetings. The SEC is going to sit in this building; they’re going to sit in the Board Room.” He
loved the Board Room because he thought it was the best home court advantage the world had.

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He said to sit in that Board Room, it gives you an aura beyond just a mere mortal. So I think we
would’ve had a lot more coordination. And that doesn’t mean to say it was handled wrongly at
all. I’m not trying to be critical here. I think we were dealt a hand we could never win at all.
When I was at OCC, you had the policy group—okay. You had seven wise men sitting
around a table. And there were a number of debates, and there were lots of people that were a lot
smarter than I, and you know, every time you went in there you had to make sure you were in
your A game, because if you were in your B game, they kind of told you to go home and take
some time off because you’re too tired, because you’re not making any sense. But because of
the Freedom of Information Act that developed that, in my view, tarnished or inhibited the Board
from being able to have robust discussions from a lot of different areas. You ended up having
channeled discussions that weren’t very helpful—and the lawyers, who made it clear from day
one, they were here to protect the Board, not the organization. Now, I think you can make a
differentiation between the two. But it was always very, very difficult to try to convince the
Legal Division that you had a problem that needed to be discussed.
I remember one incident, for example, where a bank in New York wanted to open up a
subsidiary in Luxemburg, and we in Supervision [BS&R] were adamantly opposed. We said,
“We can’t supervise this thing.” And they said, “Well, you know you have consolidated
supervision. I said, “That doesn’t mean to say I’m going to get the information I need from
Luxemburg. It’s a secrecy jurisdiction. The banks were trying to get a license. So they said,
“Well, they’ll fly this information to Gibraltar,” and I had just had it. And I finally said, “Look,
if we’re going to take this application to the Board, I want the Board on record to know that I
cannot supervise this branch, this subsidiary. I cannot supervise it.” They said, “Oh, you can’t
say that to the Board.” I said, “I can and I will.” And eventually they called up the bank and

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told them you couldn’t deal with the license, to take it away. I’m not saying I was right. But I
wasn’t going to go up there and capitulate because I think the Board should have discussed this.
And I feel there are better ways to do this where the Board felt comfortable; despite these
differences, you have to work around them. That was fine, I had no axe to grind one way or the
other. But it was these kinds of things that never got to the Board, I think, that should have been.
Because I believe there should be a lot of robust discussion. I think we should have a lot
more discussion on Basel II. I think we should have a lot more discussion on some of these other
issues. But, you know, the Board wasn’t particularly interested in dealing with these boring
things, and therefore the guidance that you received had to be going to individual Board
members, which was never perfect because you can’t put it all together. A doesn’t agree with B
or C’s got a whole different view on this. So it’s a little bit easier to operate under the OCC
structure.
Before I came to the Federal Reserve, there was a guy named Neal Sausse, he used to be
Chairman Volcker's deputy assistant. I don’t know what official context he had. But I once
asked Neal at a cocktail party, I said to him, “Neal, you know the Board always seems so bright
and everything.” And I said, “The OCC, we go through periods. Sometimes I believe we’re
invincible, we’ve got so many smart people working. Then I turn around, and people have
wandered off and we got’ve some idiots running the organization and you kind of scratch your
head and say how you’re going to survive at the end of day.” And he said something to me that
made a lot of sense. He said, “You know, when you have an agency of the government like the
OCC, it takes on the persona of the head of the agency. So if the person is a curious guy, the
organization is going to be curious and there’s going to be a lot of debate [and] discussion.” He
said, “If he has a different personality, which is to say he’s disinterested, kind of interested in his

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own limelight, it’s not going to induce the finest and brightest people to come to work at that
organization.” He said, “The Board is never going to have these high peaks. But it’s not going
to have low valleys either. It is a steady organization that goes through, it has its own history, it
has its own institutional memory, and because you have a Board of seven people, you know,
you’re never going to have these kinds of vacillations.”
And when I came over here I found out that was very true. In 14-year terms of the Board
members, you have a lot of stability that you don’t have at other organizations. I used to hate
that at the OCC. Every four years, despite having a five-year term, they always resigned when
the new President came in. You had a new Comptroller, which was fine, you could deal with
that. But then they brought all the political apparatus that went with it. And you had to retrain
everybody every four years to tell them, “Yes. I think your goals and objectives are very good
ones, but they’re not realistic.” And you had to be careful how you said that.
The first year, the first transition that I went through when I was down here, John
Heimann was the Comptroller and he had brought in a very limited number, but nonetheless
there were five or six appointees, if you will, that he put in high positions. And when it was time
for them to leave, they were all scampering around trying to get permanent jobs in the agency
because they happened to like the OCC and probably figured out they aren’t smart enough to
compete in the outside world, so staying in the government is not so bad.
MS. CARTER. I did have an organizational question. Mike asked you about your
observations when the Fed chairmanship changed from Volcker to Greenspan. You were also
here for a large period under two different bank supervision [BS&R] directors. Any thoughts
about the changes in the Fed and dynamics under different directors?

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MR. RYBACK. That’s really a tricky question. You know, it’s what you grow up with
and what you’re taught within your working world, I think. You know, in the OCC, bank
examiners were king. The examiner-in-charge was the examiner-in-charge. And that word “in
charge” meant in charge. Even the Comptroller himself couldn’t change a word on that report of
examination, not a word without the examiner-in-charge saying, “I agree to that change.” But I
got over to the Federal Reserve, and I’m used to that kind of discipline. And I’m here a couple
months, not very long, and I get a phone call from the Philadelphia Fed. It was contracted by the
New York Fed to assist in overseas exams because the New York Fed had manpower issues and
Philadelphia could lend it examiners. So they contracted out some of the overseas exams. And
the Philadelphia Fed was relating the fact that they conducted an examination in Argentina of
J.P. Morgan, and they considered it a weakened institution. And they noticed when the report
went back to the bank, the rating did not reflect that. I said, “Oh, that can’t be. It must be a
mistake. You know, are you sure?” He sent me out the report of exam, and it sure sounded like
a weakened institution. If you ask me, I would have put in an even weaker rating, but whatever.
I called up the New York Fed and talked to a guy named Tom McQueeny, and I said,
“Tom, I’m a little bit confused.” I said, “I’ve got this report down here from the Philadelphia
Fed. They sent it to you guys in New York.” And I said, “When it went to the bank, it’s a better
rating!” He said, “Oh yeah, that’s right.” I said, “What do you mean that’s right?” He said,
“Well, we gave all the subsidiaries the same rating as J.P. Morgan.” I said, “Well then I’m
curious, why do we go through this supervision thing? Why do we play this charade if you’re
not going to listen to what these people are telling you that there’s some fire going on in
Argentina?” I said, “It just doesn’t make any sense to me.” I said, “Can you do that?” “Sure,”

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he said, “nothing the field ever does is finalized until we say it is.” I said, “So everything is
filtered through your eyes?” He said, “Well yeah.” I said, “Okay, I was just curious.”
My point of telling that story was that, you know, you grow up at the OCC—and I have
to be honest, I spent a half a day working and a half a day watching my back because we’re all
from the same socioeconomic background. Most of us went to state schools—we didn’t have
any Harvard or Yale’s running around at the OCC—and the way people thought you got ahead
was by calling your competency into question. So when you walked out of the room, somebody
would say, “You know, gee, you really think Bill is right? I don’t know.” It seems there was a
reorganization almost every other week at the OCC, there was always somebody reorganizing
something. And there was a big reorganization going on, and they had not talked to any of the
staff about it. But they announced it on Friday that a reorganization was going to be announced.
I got back to my desk, I don’t know where I was, and there was an envelope. And I open up the
envelope and the envelope said, “Your position has been upgraded one level.” And I thought, it
makes sense because it’s a lot of responsibility. And it said, and the new director of the division
was me. It means I kept my job. I didn’t think anything of it until I walked to get a cup of coffee
and somebody says, “Congratulations on surviving.” And then you realized that not only was
your position being revaluated, but all the people with it. And that would happen lots of times at
the OCC. You had to reapply for jobs. I remember the way in which we dealt with problems in
New York was you got sent to Montana, to one of the offices out in Montana for “retraining,”
they called it. To get your attitude right.
MS. CARTER. So, re-education?
MR. RYBACK. Re-education camp, you know. And that was pretty brutal. Two years
in Montana was not fun. My point of this is that I got brought up in an atmosphere where

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independent actions were rewarded; that’s how you got ahead in the organization, by standing
out against your peers by [being] willing to take risks. You come over here, that’s not that way.
And that’s got some favorable attributes to it. I mean, I was really genuinely surprised when one
of the first things I worked on, somebody from the International Finance area called me up—it
was Larry Promisel. He said, “Bill, I read this thing. I think it needs some enhancement in these
areas. We’ll give you some wording,” blah, blah, blah. It was actually all working together to
achieve the same result. And I thought, boy, this is bizarre, because at the OCC you husbanded
this stuff, you know, and you always kept that last 10 percent of information for the big meeting
with the boss.
I remember getting punished at the OCC because when the interest rates were going up
under Paul Volcker, we had what we called the 20 percent prime committee, and we had to give
advice to the Comptroller on what would happen if prime hit 20 percent. And you had a meeting
everyday at 3 o’clock, I remember it was in the Chief National Bank Examiner’s office. And if
you had an outside meeting, you had to be back by 3 o’clock. If you were outside the building
you had to call in, but all those that were in that committee had to be present at 3 o’clock. The
inevitable happened—the prime rate reached 20 percent. So the Chief National Bank Examiner
said, “What should we do?” And I said, “Well, first of all, you have to rename the committee.”
He said, “What do you mean?” I said, “Well, it’s the 20 percent prime committee. The world
didn’t fall apart, so let’s move it to 25 percent. Let’s call ourselves the 25 percent prime
committee. So I got sent away for being inappropriate and being disrespectful to the Chief
National Bank Examiner.”
But anyway, when I got here—and it was a pleasant surprise to see that everyone was
working together. But there were rigorous debates between (Bill) Taylor and (Michael)

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Bradfield and Ted Truman about ways forward. Kind of the Holy Trinity that ran this place. But
I felt better under Volcker. Under Greenspan, he would elliptically allude to what he liked or
didn’t like. And it’s harder, I think, to operate under those kinds of contexts. So I always liked
Bill Taylor. On any given day I’d want to kill the man. Literally go into his office and throw
him off the roof because he could aggravate you. Other times, you would want to take a bullet
for the guy.
MS. CARTER. Oh, they were going to California?
MR. RYBACK. For example, when BNL, an Italian bank, was introduced here in the
States, I was supposed to take a vacation in California. And I called my wife and said, “I can’t
make it, maybe your father can go with you.” And the kids and my wife didn’t speak to me for a
good while after I got back.
And to make up for it, I said I would take them to Hawaii for Christmas—which I did, I
got the tickets, I got all the arrangements. And Bill Taylor believed you worked for the Federal
Reserve Board 24/7, and if you had a family thing, he didn’t care whether your wife was dying
of cancer or whatever, you had an obligation to be where you had an obligation to be! So off we
go to Hawaii that Christmas, and I just get into the hotel room and we had adjoining rooms.
Kids had one room, and my wife and I had another. And they got the room switched, and my
son comes through the doorway, and he said, “The telephone is for you—it’s Bill Taylor.” Now
Bill Taylor, as I said, he worked 24/7, and if you were somewhere and you were on vacation and
he needed you to do something, well you were going to go do it. And I could remember him
calling up people and saying they had to go do something. And they’d say they don’t have their
passport, and he says, “It’s on its way as we speak. It will be down there tomorrow morning.
You just got to go!” So my wife said to me, as I’m going to the phone, she said, “Look, I’m

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telling you right now. If he’s sending you somewhere, I’m getting a divorce.” So I’m going to
the phone, going, hmmm job, divorce—wow, what a decision to make in what, six seconds? I
got to make this?
So I got on the phone, not sure what I was going to answer, but on the other end of that
line is Bill Taylor. He says, “You know, I wanted to say Merry Christmas to my favorite
international supervisor. I couldn’t leave without saying Merry Christmas to the Rybacks.” He
had Lolly, his secretary, call every hotel in Hawaii until they eventually got me. And he said, “I
just want to wish you a Merry Christmas. Pass it on to your family.” Click! That’s the kind of
guy you take a bullet for. I mean, you really would. I mean, who would care? You’d think he’d
say Merry Christmas when you got back, but that was quintessential Bill Taylor. You know?
MS. CARTER. That’s a great story.
MR. RYBACK. Then the next minute he was aggravating the hell out of you, and you
really wanted to stab him in the head with a pencil. But on balance he was a great supervisor, he
was a good man, he was a good leader. We lost a lot when he left.
MR. MARTINSON. Well, it’s been very enjoyable, and I think we’ve all learned a lot
from this.
MS. CARTER. Anything else? Any last parting words?
MR. RYBACK. No.
MS. CARTER. Great, thanks.
MR. MARTINSON. Thank you very much.

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April 15, 2009 (Second Day of Interview)
MR. MARTINSON. This is Mike Martinson. It’s Wednesday, April 15. We’re at Bill
Ryback’s house, and we’re interviewing him to cover some of the parts that got accidentally
deleted from the tape. Bill, I think one of the parts was BCCI. Do you want to start with what
you remember about that?
MR. RYBACK. Yeah, Mike, that’s a very interesting tale for the Fed. The Fed had been
interested for a quite a while in determining whether there were any real ties between BCCI and
First American. Our mission in life was to spend considerable amounts of examination time to
uncover any evidence or indicia that there was a controlling interest, or more than a passing
interest, than the benign investment that BCCI said they had in First American. And we never
could quite come up with any gun, or smoking gun, or close to a smoking gun. And then fortune
gave us a case where the DEA [Drug Enforcement Agency] was trying to do a sting for money
laundering, and every time they tried to approach a bank to launder some dirty funds in Florida,
they kept getting the answer, “Well, we don’t do that, we go to BCCI.” So the DEA did an
undercover operation, hooked in a lot of the Boca employees to blatantly launder money through
the Boca Raton office. And the interesting part of that was, as the DEA came to close its
investigation and make arrests based on the evidence they had, they ended up throwing an
engagement party. There were two DEA agents—one male, one female—that were supposedly
engaged, and were laundering this money. And they threw a party at a Miami hotel and invited
the Boca Raton employees most associated with the money laundering incident. And as they
came off the elevator on the top floor of this Miami hotel, they arrested them, one by one, and
took them to jail. And some of the staff of BCCI thought this was part of the games going on,
with the engagement party. Didn’t realize until next morning they were really in deep trouble.

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That opportunity gave us—that incident gave us an opportunity to get BCCI into the
Board, and to tell them that we don’t allow felons to operate in this country, and clearly, that
[the] money laundering case was going—a felony charge, which they ultimately pleaded guilty
to. And given that, they had to unwind their offices in the U.S. Now, I should say, at this point,
BCCI was a dollar-based bank operating out of the Middle East and London. And they needed a
dollar clearing mechanism, and that would’ve severely damaged their ability to operate. But we
allowed them time to have an orderly unwind, and eventually, they closed all but the Los
Angeles and New York offices.
And we were in the process of monitoring that unwinding when one of the investigators
who worked at the Fed came to me and told me that there was this report in London from an
audit firm—a well-known audit firm—that connected the BCCI investors, through BCCI, to
direct ownership of First American. Exactly what we had been looking for all these years. And
with that, we called in the audit firm [and] told them we needed to see that report. And much to
my surprise, the audit firm claimed that, while they operated a worldwide franchise under one
banner name, that all of these were, in fact, independent companies operating worldwide, and
they had no authority to tell their office in London to give us anything. Well, we threatened, if
they didn’t, that we would take action to make sure they never audited a U.S. financial
institution, and I think that changed their minds. And they made a compromise, which was that
someone could go over to London to look at this report.
And I was elected to do so; and off I went. And I had to stop in Germany the week
before, and on the way back I stopped in London to go to the offices of BCCI on Leadenhall
Street, and to take a look at this audit report. And interestingly, I got into London Sunday night.
And I stayed at the Thistle Hotel at St. Catherine’s Wharf. I was unpacking, and I heard this

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rustling. And I looked up, and there was a piece of paper stuck under my door. I went to the
door and I opened it up, and no one was in the hallway. And when I looked at the note, it asked
if I would stop by the Bank of England after I finished looking at the report—which surprised me
because I hadn’t told the Bank of England I was there. But obviously, word had spread. So the
next morning, I went to BCCI’s offices on Leadenhall Street and they gave me this report that
was all in code. There were no borrowers listed—there were no names. In fact, all in the report,
they were all “XYZ,” or “ABC” or “STV Corp,” but it didn’t take me long to realize that this
loan, XYZ, to a financial institution in the U.S., was, in fact, the smoking gun that undermined
all of the untruths that BCCI had been telling us for all these years that there was no direct
association from BCCI to First American. And in fact, all the capital that had come, had actually
come from BCCI. And that the shareholders of record of First American were, in fact, straw
persons. They had never put a dime into the bank. It was all furnished by BCCI.
I went to the Bank of England afterwards and they so much as acknowledged that they
were aware of things, but they weren’t quite sure, and that they didn’t want to make allegations.
But it was kind of clear to me that, although we’d asked the question many times, and in many
different ways, the Bank of England, for some reason, chose to deny that there was this
connection, or that they knew of this connection, or they were aware of a connection. So that
end remains a little bit of a mystery as to why they wouldn’t have conducted a more robust or
fuller investigation, since we had told them for years we were interested in the conduit of BCCI
to First American.2

2

Editor’s note: Additional detail is provided in Senator John Kerry and Senator Hank Brown (1992), “The BCCI
Affair,” A Report to the Committee on Foreign Relations, United States Senate, 102d Congress 2d Session Senate
Print 102-140 (December).

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About a week after I got back, and had informed the General Counsel that there indeed
was this report, and what were the next steps to be done, there was a law firm—Patton Boggs—
who called up and asked to make an appointment to see us. And when they came in, they had
with them their little black book which detailed all of the ownership: how it was tied to BCCI,
how loans were made, and how all of this operated—and gave us the code names that were in
this report and said that the government of Dubai wanted to settle whatever case they could,
whatever damages needed to be done, because they had larger interests than dealing with BCCI.
This created a problem for the U.K., because it uncovered, once and for all, the nefarious
activities that BCCI had undertaken. Not only there, but elsewhere. And forced the U.K.’s hand
to move to close BCCI, and of course that was a very difficult and serious undertaking. You had
to get all of the various offices on board—at least notify them a few hours before the event. And
the story’s told (I don’t know how true it is) that the day they actually tried to close the
operation, which had to be closed first in Belgium—
MR. MARTINSON. Luxembourg, maybe?
MR. RYBACK. —Luxembourg. It happened to be Judge’s Day, and the judges were all
out at a picnic. And no one was there to sign an order closing BCCI. And the story’s told that
the head of supervision in Luxembourg had to get on the back of a motor scooter, going around
from park to park, looking for the judges that were necessary to give the liquidation order for
everything else to proceed entrain. They eventually got the signature. Everything began to close
worldwide. The only office that remained open was in Hong Kong, who contested that their
subsidiary in Hong Kong was still viable and still solvent. And they called the Fed and said that
they were going to keep that office open, and we kind of told them that what’s going to happen is
everybody from all over the world is going to fly in to attach those assets. And indeed, that’s

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what began to happen on Saturday—we closed it on Friday. And by Monday, they had to also be
the last office to close. But many supervisors heard about the closure of BCCI driving to work
that morning and weren’t very happy with the way in which that was conducted globally. But
one can appreciate that there was some nervousness that if you had too much of a lead time,
funds could disappear, things could happen. And it was a very, very difficult global kind of
closure event. But BCCI was a very interesting chapter in the Fed’s history.
MR. MARTINSON. What I sort of remember is that they closed it sort of mid-day in
New York time rather than [at] the end, so a lot of money was trapped in New York, which the
U.S. got access to, that—
MR. RYBACK. Yeah, there was rather—that’s correct. They closed it, if I remember,
right in the beginning of the workday, because it would’ve been some time in the afternoon in
the U.K. And I think we never allowed them to open that day, that’s my recollection. But a lot
of it got trapped, absolutely, in New York.
And there were still billions in the pipeline that hadn’t quite settled, that we were able to
attach, and the rest of the world—most of the rest of the world—operates on a single office
liquidation theory: You’re supposed to move all of these assets to that office and then they can
distribute pari passu, or some other magic way, globally. But in the U.S., the laws are such that
each individual state has claim to those assets. So New York State was sitting on a pile of
money, which we eventually trapped and fined the bank heavily—BCCI—for their behavior. I
think it was about $450 million, which we eventually turned over to the liquidators in
Luxembourg. But, nonetheless, it was a very hefty fine.
[Robert] Altman and Clark Clifford, which protested that they were innocent and
unaware of any of this, eventually went to trial and were not found to be guilty, which I think

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upset the government to no end. But it was all the tricky means, I think, that BCCI took to
obfuscate all of this. And various steps that no one, perhaps, except one or two of the top
management at BCCI, actually knew what was going on. So it’s an event that lives on—still
haven’t resolved all of those issues—on how one closes a global institution, and how do you
reconcile all of that. Various committees and various academic interests have looked into all of
this, but you’re never going to get an international treaty that allows some kind of orderly
resolution of—especially the orderly resolution of an errant bank.
MR. MARTINSON. Yes, that was quite an experience. I guess this was our first time
dealing with Bill Taylor and those flip charts.
MR. RYBACK. Yeah, for whatever reason, Bill [Taylor] always had things on his mind
of how he wanted to do things, and they weren’t always apparent to staff. But the decision was
made that I needed more domestic experience, so I was told to be the head BCCI person in the
U.S. And Steve Schemering, who was the head domestic guy—Bill Taylor thought he could be
exposed more to international, so he told Steve, he says, “I want you to get on a plane. I want
you to go to the U.K. and I want you to help out the Bank of England. And, by the way, keep us
informed of what’s going on.” So that was earlier in the morning, around 10:00 a.m.
He told me to get the war room ready, and set up, which consisted of putting lots of
phones in a room, manning the thing almost 24/7, making sure we had all these information
flows. And Bill Taylor liked to have everything on a flip chart. And, later in the day, about 1:00
p.m., he comes out of his office and he sees Schemering, and he says, “I thought I told you to get
to London.” And Schemering explained to him that the planes didn’t leave until the afternoon.
He says, “When I said to go to London, I meant now.” He says, “Find a way. There’s ways, I’m
sure, you can get to London.” So he was banished out of the office.

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I set up the war room and got the telephones manned, and I thought, “Well, this is a—I
can improve upon this.” Instead of having a flip chart, where we made comments and notations
of every phone call, what time they came in, who said what, so that there was a running narrative
of what we knew when, and who we knew it from, I thought it would be better to have one of the
secretaries come in, take all this in shorthand, and keep the notes flowing. Therefore someone
could just take them; if they needed to go the men’s room, they could look at them in the men’s
room, and they didn’t have this flip chart. And later that evening, Mr. Taylor comes in, he looks
around, he goes, “Where’s the flip chart?” I said, “Well, I’ve got this improved method, that we
have almost, within 15 minutes, everything on a printed form.” And he comes up to me and he
looks at me, and he says, “What word is it that you don’t understand—flip or chart?” So
[laughs] I had to go running around, rummaging around, making sure I got a flip chart. And
after that, I figured, there’s no sense improving the process—that’s what he wants, that’s what
he’s going to get. So we kept our flip charts rolling, where he could come in any moment and
just flip through them. And it actually is—we learned all of this, setting up a war room, through
the Butcher banks and other events that had proved that particular mechanism to be particularly
good. So I learned after that, I do literally what Mr. Taylor tells me—not figuratively.
MR. MARTINSON. And I think the other piece that we somehow lost on the tape was,
sort of, some examples of the difference between Greenspan’s involvement and supervision, and
Volcker’s. You had one story in particular that was pretty humorous.
MR. RYBACK. Well there were lots of differences, obviously, between Greenspan’s
and Volcker’s approach. Volcker was very committed and very interested in managing the
events in supervision, and being kept fully informed. And he was a real hands-on kind of
Chairman. And I remember, we had set up this International Country Exposure Review

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Committee, which you yourself—and that Committee was responsible for looking at whether or
not any of these loans to various government and government entities around the world should
be classified in some way, shape, or form, or criticized. And it was a very elaborate process that
took lots of resources to deal with. One had to do a lot of economic, kind of underpinning, work.
And the Committee itself was made up of three individuals from the Federal Reserve,
three from the OCC, and three from the FDIC. But before the Committee even met, Volcker
would take an intense interest in knowing what was on the agenda, what were our recommended
positions, how were we going to deal with that. And he had some strong views on how we
would, should, deal with each one.
And I remember one occasion, where we were all in the room, including you, Mike, and
he was particularly interested in ensuring that a country, which was having its financial
difficulties, didn’t get classified. He didn’t care whether we criticized that, which would be
special mention, but he wanted to make sure that it wasn’t classified. Because if those loans
were classified, it would undermine the ability of the government to provide additional
financing, both of the banking system and through the government itself. And there were
resolutions underway that would be affected. So, as he went on, he said “You know, now, it’s
your job, Mike, to make sure that these loans don’t get classified.” I remember you commenting
to the Chairman that you were only one of three votes, and you clearly thought we could control
three votes, but that left six votes that they could vote however way they wanted. And it was a
majority rule. And if it came out five to four, there wasn’t much we could do about it. And I
remember Volcker looking up, he says, “Are you under some misapprehension that I can’t fire
you?” [Laughs] So, kind of focuses your attention and your mind to get your job done.

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So you went from this rather intense interest in supervision—and I can remember, I think
the credibility of the Fed as a supervisor was enhanced immeasurably when we were going
through the problems of late ‘80s and early ‘90s. And banks were complaining about examiners
being too tough and too rigid, and not having a good understanding of the credits and classifying
them, because they were nervous that, if they didn’t, and they eventually ended up turning out to
be sour loans in the future. And banks just didn’t want to acknowledge then that they have a lot
of bad loans, and a lot of lousy loans, and a lot of loans with imperfected collateral that were
going to cost them money in loan losses.
And I remember the Chairman of First National Bank of Chicago, Barry Sullivan, came
in to see Volcker. And he complained that—he thought the examinations were much too
negative, and that the Bank knew its customers best, and they should be in charge of determining
what was a bad loan and what wasn’t. He had all the normal kinds of excuses or reasons,
rationale, a bank would give for not having to absorb these loan losses. When he finished, I
remember, Volcker stood up and he said, “Look.” He said, “I pay the guy across the street, Mr.
Taylor, a lot of money to give me his advice on what banks he thinks are weak or—and need to
undertake remedial measures.” He says, “You’re in the wrong office. You have to go see him.
And if you change his mind, then you’ll have changed mine.” And I think the words spin very
quickly through the banking sector, “Don’t go see the Chairman of the Federal Reserve. He’s
only going to refer you to the head of bank supervision.”
So there was a credibility that began under Volcker, I think, that allowed the Fed—Bill
Taylor and Jerry Corrigan, specifically—to direct a lot of initiatives in the banking system that,
in my view, saved a number of the very large banks from teetering off into oblivion. You know,
they were quite frank with a lot of the large banks, and told them that their only course of action

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would be to find merger partners, augment capital, get rid of the bad management, and do a lot of
these things that we didn’t want to have to do through enforcement orders because they become
public. So I think Volcker did quite a bit for enhancing the reputation of bank supervision and
making it clear that you had to satisfy the bank supervisors before the Board would be satisfied
on whether or not you were cured or you were a fixed bank.
Greenspan never gave that impression that he was much interested in what went on in
bank supervision. I think, clearly, he needed, wanted, and desired the information flow that
came from the banking supervision process. Having a very close birds-eye view of what was
going on in credit underwriting standards, et cetera, and I believe—I don’t know, but I have to
believe—that it was very useful in setting monetary policy and calibrating monetary policy. But
the routine and the mechanics of supervision, he never liked to tinker with.
I remember one time, we were over there, the Japanese banking system was going
through an unstable period, and eventually the markets, as they always do, began to adjust and
they started to teeter the market between the Japanese banks and the rest of the global
institutions, which are all just a polyglot. Collateral could be substituted globally, and pricing
was always the same for the large multinational financial institutions. And the market began to
differentiate whether they’d take Japanese collateral—Japanese short-term notes as collateral.
And then, inevitably, that led to tiering within the Japanese banking system. The market was
making a lot of differentiation between Japanese banks and other global institutions, as well as
the Japanese banks themselves. And Japanese banks had very, very large U.S. dollar positions,
and if their liquidity was unstable, it could disrupt the market. So we thought it best to begin a
regimen of having much more granular, much more enhanced liquidity information on a daily
basis. And, of course, as we’re wont to do, we had to go tell the Chairman this is what we’re

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doing. And I remember it particularly well, it was one Friday night—and I should’ve been home
with my family, but I wasn’t—sitting in the Chairman’s office, and it was raining, and lightning,
and I’m explaining to Greenspan this method that we’re going to use to continue to look at
Japanese liquidity. And we had decided that, instead of doing it directly, we would do it
indirectly through the Bank of Japan. They would report those figures to the Bank of Japan who
had an office in New York. And they, in turn, would give it to us. So it was kind of intergovernmental sharing as opposed to direct looking at Japanese banks. I explained this to
Greenspan, and he looked up at me, and he said, “Do I have to tell you what’s going to happen to
the world markets if they start finding out the Federal Reserve’s looking at Japanese liquidity
much more intensely?” So I said, “No, you don’t have to tell me.” And that, kind of, would be a
signal that the Chairman wasn’t enamored with the course of action that we were taking. But
that was all you were going to get. But then he stood up, and he came over to me, and he looked
down at me and he said, “On the other hand,” he said, “if you allow the Federal Reserve to have
their pockets picked, I’m going to thank you personally.” So, as we walked out into the hallway,
my boss looked at me and he says, “What did he mean?” And I said, “Well, the only thing I got
out of that conversation was, if this doesn’t turn out the way we hope it does, then I’m fired.” I
said, “And I think you’re fired too, because you’re in his line of sight.” So, it was these nuances
you had to deal with, with Greenspan, that you didn’t have to do with Volcker, because he was
quite direct as to what he wanted you to do. I remember him telling me once, he wanted me to
call the Senator, and to tell him this—and he says, “And, by the way, when you hang up, he’s
going to call me, and he’s going to complain,” and he says, “And I’m going to make you look
like an idiot because I’m going to tell him that you had no authority to speak for the Federal
Reserve, et cetera.” He says, “But I want him to know that there are things on the table.”

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MR. MARTINSON. Do you want to tell the socks story? Or can we leave that?
[Laughter]
MR. RYBACK. No. I’ll tell the story. One of the first times we were exposed to
Chairman Greenspan, Bill Taylor—well, first I should tell you, the first exposure I had to Alan
Greenspan was—he was there about a week (my boss was on vacation), he came in July,
sometime during the summer. My boss was on vacation. Bill Taylor called me up and he said,
“Look.” He said, “You have to go over at 1:00 p.m. and brief the Chairman on this matter.”
And he said, “Now, this is the first time Bank Supervision is going to be in front of the
Chairman.” So he says, “I don’t want you to screw this up. I don’t want the Chairman to
complain to me, he thinks you’re an idiot.” So he says, you know, “Make sure you know what
you’re doing, blah, blah, blah. Give him good advice.” So at about two minutes before 1:00,
I’m in the men’s room across the hall from the Chairman’s office. I’m straightening my tie, I’m
grooming myself. This is what you’ve worked for your whole career, a one-on-one with the
Federal Reserve Board Chairman—mano y mano—talking high resolution finance and
international global supervision. And I was waiting in his outer office, and he finally told
Catherine Mallardi, his secretary, he says, “You can send him in.” So I go in, I start to pull up a
chair to sit down, and Greenspan looks at me and he says, “Going to take so long you have to
sit?” So I kind of realized, “Well, he’s not wanting this briefing. This is my boss trying to force
a briefing on him.” So I just went ahead and did whatever I had to do. But anyway, a little bit
later, we had to go over on another matter, and we’re briefing the Chairman. It’s late at night
and he had finished a tennis match, I guess, or—in any event, he was going to a grade-A kind of
event afterwards. And he’s sitting in his chair, and he’s got on this white fluffy robe and he had
just taken a shower, and we were trying to brief him, whatever we were doing. And all of a

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sudden, he leans down, he takes a ruler, and he leans under his desk, and he’s moving the ruler
around, and then he looks up, he says, “Are my socks over there?” So I said, “I didn’t see them.”
My boss, Bill Taylor, he pounds me in the leg, and he says, “Give the Chairman your socks.
You give him—you wear those long socks. He likes those long socks. Give him your socks.” I
said, “No, I’m not going to give up my socks.” So we went on a sock hunt and we eventually
found the socks. [Laughter] But I clearly thought this man was not too interested in what we
were having to say. And, to be fair, you really had to be on the ball for Greenspan, because you
had to come out within the first couple sentences with something that was going to connect the
dots for him, to make it useful. Otherwise, as far as I was concerned, you know, much of the
time we were wasting, because he just wanted us to do our job without having to know the nittygritty granular details. Bank supervision’s an ugly business, it really is.
MR. MARTINSON. I think that covers the points that got lost on the other tape. Is there
any other thing that you’ve thought about in the interim, that—
MR. RYBACK. I had 36 years in the government. I spent 18 years at the Comptroller’s
Office and 18 years at the Federal Reserve Board. And, when you’re at the Comptroller’s
Office, all we do is bank supervision. That’s what the mission is. Whereas the Fed has a much
broader responsibility, to be sure. And, at the OCC, you went out and you examined banks, you
tried to do that in a professional manner, you had to make judgments as to which banks were
going to survive, and how to grade them, and rate them. But it took me a couple years at the Fed
to understand and see that the Federal Reserve really was a better supervisor—not in the
technical aspects of the job. You can debate that all you want, as to who’s more technologically
proficient. But I admire Bill Taylor and Jerry Corrigan and others, for resolving the banking
problems in a very, let me say, adult way. They took it upon themselves to pressure the banks to

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do the right thing [so as] to not have to undertake formal actions—to not have to precisely, with
a great degree, nth degree, of analysis determine how much loan loss was. They just told the
banks, they said, “Look. You know these loans are underwater. We’re not going to have any
forbearance.” You have to undertake a very aggressive reserving program to reserve against
these values that we don’t know. They’re unknown. Who knows what the value of an empty
building is on Madison Avenue in New York. It should be north of zero, but you could calculate
that it was zero—there was no rent. There was no nothing. And the OCC would take that view,
and say, “Well, you have to take up half a loss, and you have to put another quarter of doubt, and
the rest is substandard, and the very heavily reserved,” where the Federal Reserve said, “I don’t
know. There’s some loss. You tell me what you think that loss is. You take that loss, and then
you begin to build your reserves.” And pressured the bank to make changes in management.
I remember Bill Taylor calling up John Reed, at Citibank, and we were having a
particular aggressive discussions with the bank, trying to make them understand that their loan
portfolio was built on sand—that there may be payments coming in, but those payments weren’t
going to be there forever. And much of this was very aggressive lending on future values that
didn’t appear to be realistic. Even though you could get some quant, which they did, from MIT
to demonstrate on a computer model that the values of a certain brewery were realistic, the
problem was they didn’t control stock, they didn’t control the company, so all of this was
imaginary values. But they were convinced that that lending was sound. And we were not
having particular success into making the senior management understand the severity of these
problems. And Bill Taylor, for example, he called up John Reed, he says, “I’m going to send
you 15 loans.” He says, “They’re not biased, they’re not skewed in any way.” He said, “They’re
loans we’ve taken out of a sample of your global loan portfolio.” And he said, “You tell me

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whether I’m wrong.” He said, “I think these are pretty crummy loans.” And he said, “But you
tell me what you think.” And he called—he, John Reed—called a couple days later, and said he
really had no idea that that’s how bad the loan portfolio was. And he started to take aggressive
action to turn that institution around.
So things like that made me understand that there’s ways in which you can conduct and
undertake bank supervision that’s less stressful on the banking system, but yet gets the objective
done. And I realized at the end, that I much prefer the Federal Reserve because of those reasons.
They just took a much more holistic view of having to get the job accomplished: doing it behind
the scenes; doing it non-aggressively; doing it through persuasion and common sense. I thought
my career was particularly blessed by making that transition. I never understood why the Fed
hired me, because I certainly don’t have the pedigree that most people have coming into the Fed.
They had degrees I could only have wished for, hoped for. I only graduated from Seton Hall, a
college in New Jersey. But I think I did—was helpful at the Fed. Because the one thing I knew
[from] working in New York was how the markets worked, and how they’re going to react, and
what things were going to be done. So I think that was helpful in its own way—understanding
that everything has a consequence, of course, and here’s what the markets would do.
I remember, after the Russian crisis, there was intense interest at the Federal Reserve—
throughout the U.S. government, for that matter—to find a way in which everyone would
undertake the same degree of losses, both the public and the private sector. And those losses
would have to be forced upon the private sector. And we were in Greenspan’s office, and the
economists were going on and on about this, that, and the other thing—and different models you
could use, and different variations of the [inaudible], and then finally Greenspan looked at me,
and he said, “Does Bank Supervision have a view on this?” And I said, “Well, I can’t compete

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with this argument.” But I said, “I’ll tell you what the market’s going to do.” And I said, “As
soon as you start to enforce losses into the banking system, the banks are going to be forced to
move all of their loans to New York, and all of the deposits to New York, create a huge offset,
and then move against—aggressively—any collateral that’s available worldwide.” And one of
the economists pointed out that this would be a government initiative, and I said, “Well, you
know, the funny thing is, that these are private companies. They owe their shareholders.” And I
said, “They’ve got to make some attempt at recovering these loans, irrespective of what the
government thinks, unless the government is going to make them whole,” et cetera. And I think
that at least had an impression that while I was totally agreeing with the philosophy of wanting to
move in that direction, the realities were quite different. So I had a good career.
MR. MARTINSON. Yep, it was a good—
MR. RYBACK. It was a good run.
MR. MARTINSON. —time to be there.
MR. RYBACK. And I always had Mike by my side. Mike always, was a sense of
practicality. I can remember when Mike would bring me a letter we were supposed to write, and
I’d tell him, I said, “My God, this sounds like you’re asking your Aunt Susie to pick you up at
the train station.” And I’d take a draft at it, and Mike would just look up at me. He says, “You
can’t say that.” But somewhere in the interim, we got the tone just about right.
MR. MARTINSON. After a few drafts, we’d—[laughter]—okay, well, it was—
MR. RYBACK. Thank you, Michael.
MR. MARTINSON. Nice talking to you.

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