Easy Money: The Greatest Ponzi Scheme Ever and How It Threatens to Destr oy the Global Financial System

By Vivek Kaul

The financial crisis of 2008 brought the world to a standstill. Banks and financial firms all over the world had to be rescued by governments - in effect, bailed out by the taxpayer. But have things changed post 2008? Are financial firms and banks operating more responsibly? Are they taking fewer risks than they did in the past? What will happen as and when the next financial crisis hits us? Vivek Kaul answers these and many more questions on how the global financial system is operating in the post-financial-crisis era in the third book in the Easy Money series.

• Language: English
• Publisher: HarperBusiness
• Release date: May 5, 2018
• ISBN: 9789352777587

Vivek Kaul

VIVEK KAUL has worked in senior positions at the Daily News and Analysis (DNA) and The Economic Times. He is the author of four books, including the bestselling Easy Money trilogy on the history of money and banking and how that caused the financial crisis that started in 2008 and is still on. India's Big Government: The Intrusive State and How It Is Hurting Us, his fourth book, was published in January 2017. Kaul is a regular columnist for Mint, BBC, Dainik Jagran, Firstpost, Bangalore Mirror and the Deccan Herald. He has also appeared as an economics commentator on BBC, Mirror Now, CNBC Awaaz and NDTV India. He is a regular guest on 'The Seen and the Unseen', one of India's most popular podcasts. He speaks regularly on economics and finance and has lectured at IIM Bangalore, IIM Indore, IIM Kozhikode, IIM Visakhapatnam, NMIMS and the Symbiosis Institute of Media and Communication, among others. Kaul lives in Mumbai and loves to read crime fiction in his free time.

Book preview

To

Ma and Papa, for letting me be!

Contents

Foreword

Preface

Introduction

1. Same Old Same Old!

2. Some Are More Equal than Others

3. Easter Without a Good Friday: The AAA Bubble

4. The Mad Cow Disease

5. The British Screwed US

6. Print Money, Buy Tomato Ketchup

7. The Yellowstone Effect

8. The More Things Change, the More They Remain the Same

9. Of Currency War, Inflation, and Agatha Christie

10. That Four-Letter Word Called ‘Risk’

11. Conclusion: ‘Pure Intellectual Masturbation’

12. Epilogue: Some Ponzi Schemes Are Best Left Untouched

13. Easy Money: The End?

Notes

Index

Acknowledgements

About the Book

About the Author

Also by Vivek Kaul

Praise for the Easy Money series

Copyright

Foreword

In the early twenty-first century, we tend to think of the money we know as a fact of life, as if it always existed in its current form and always will. But that is not true at all. Money changes. The ancient world’s carved stone wheels became stamped circles of precious metal which became pieces of paper that could be printed at will by politicians which became bits of data packaged into baskets of sub-prime real estate loans that could be manipulated by computers acting without human intervention.

I have been reading Easy Money from the first volume, which looked back to money’s Garden of Eden, to this volume, which sorts out, step by complex step, the global challenges facing today’s financial system. And there’s one simple conclusion a reader can reach by the end of Vivek Kaul’s series: Money is broken now and needs to change.

Money has been broken at other times in history, usually when a society and its technology stretch the existing concept of money beyond anything it can handle. This is where Easy Money finally leaves off – at today’s breaking point.

The problem with money right now is that it is dumb. In that sense, money has never evolved past its genetic origins – it has always been dumb. A US dollar, whether paper or in electronic form, has no smarts of its own at all. It does not know what it is, where it has been, or where it is going. The only reason it is effective is that the person or machine on each end of the transaction is educated enough to identify a real dollar and calculate its value. The smarts in a money exchange are in humans’ brains or computer programs. The smarts are not in the money.

Credit cards did not solve that. When banks created credit cards in 1958, the necessary electronic smarts to make the system work were extremely expensive, and the computers were the size of a room. So credit cards developed as dumb rectangles of plastic with numbers on them. The magnetic strip – which has not changed since its invention in the 1960s – carries a little more information but has no smarts of its own. Chips in cards similarly carry information that identifies the cardholder, but those chips do not know much about the transactions they are involved in. All the smarts still reside in big computers at retailers and banks.

This type of arrangement is increasingly problematic. In 2014, some seventy million customers of Target retail stores had their credit card numbers and personal information pilfered because all the data was in central computers that could be broken into by a hacker. It happened again, a few months later, to more than 100 million Home Depot customers.

Let’s not even speak of cash, which is so dumb and unable to watch out for itself that it has to be moved around in armoured trucks manned by guards carrying guns. Society has rid itself of paper correspondence, paper aeroplane tickets, paper books – but it is stuck with dumb paper money.

Towards the end of Easy Money, we are introduced to bitcoin. It is a strain of technology that promises a different way to do money. Smarts are becoming extremely cheap, small, and energy-efficient. The technology lets us outfit things such as house keys, toys, underwear and forks with tiny intelligent chips that can connect wirelessly to networks. Meanwhile, billions of us carry smartphones that have more computing power than all of NASA’s computers at the time of the Apollo moon landing.

So the smarts no longer have to stay with the end points. Money itself could be smart, whether it is a piece of paper, a card or a digital currency. Money could know what it is, its value, its giver, its receiver, and in fact its whole history – every change of hands it has ever been a part of.

Bitcoin is starting to show how that might work. There is no central clearing house, no big computer where all the data is stored, and no credit card numbers. Bitcoins are tallied and tracked by distributed computing. Essentially, everyone using bitcoin contributes processing power to help maintain it. Embedded in the digital money is an ability to know where it is and what it is worth. It has the smarts to verify itself and its value with the rest of the globally connected system.

Easy Money takes us through the dangers of governments degrading currencies for political or strategic purposes. If money itself is smart, governments could not do that so easily. They could not print money because the money prints itself. Embedded in bitcoin, for instance, is a process that allows only a certain number of new bitcoins to be generated in a given amount of time.

The dumb-money era needs to give way to something new. Kaul’s sweeping history of money helps us realize that this is not a catastrophe. It happens, and it opens up new possibilities. Reading this third volume, as it details the manipulation and abuse that led to the 2008 global financial crisis, dumb money seems to be begging to be put out of its misery. It is out of control. It is heading for more trouble. It is desperate for reinvention.

If Vivek can be patient for a couple of decades, he will be able to write a fourth volume about the emergence of new forms of money built for our ever-connected data-intensive era. The story of money will go on. But, as many wise people have said, if we do not understand the past, we will be doomed to repeat it. This book helps us understand the past we do not want to repeat.

Kevin Maney

Former Newsweek columnist and author of The Maverick and His Machine: Thomas Watson, Sr. and the Making of IBM

Preface

On Monday, 29 September 2008, I walked into the Mumbai office of the Daily News and Analysis (DNA), the newspaper that I used to work for, wondering what to write for the day. As the personal finance editor, it was my job to fill up (for the lack of a better expression) the personal finance page every day. But it was one of those Monday mornings (actually afternoon!) when one really did not feel like working. And furthermore, for once, I hadn’t a clue of what I wanted to write. I had also run out of expert columns that I used to save precisely for such dry days.

Two weeks earlier, at 1.45 a.m. on 15 September 2008, Lehman Brothers, the smallest of the big investment banks on Wall Street, had gone bust and had filed for bankruptcy. Since then, business journalists in India had turned into jargon-spewing monsters. Any random write-up on the ‘financial crisis’ that was unfurling in the United States would have words such as sub-prime, securitization, collateralized debt obligations (CDOs), alternative A-paper (Alt-A), slice and dice and what not.

Going through one such article on that day, I wondered whether people writing this stuff actually understood the terms they were using so liberally. But more than that, I found it rather embarrassing that I did not understand most of these ‘terms’ except securitization, on which I had written now and then, from the time I started writing full-time in late 2004.

That gave me my idea for the day. I thought, ‘Let me write a piece which tries to explain some of these terms that were being used.’ It was an act of pure self-indulgence. By then, I had realized that if one really wanted to understand something complicated, the best way to do it was to write about it.

And so I did. But as soon as I had started writing I realized that there were chances that the article would turn out to be one of the most boring ones that I had written. All I was trying to do was explain a series of terms to myself and hopefully the reader. The trouble was that there was no integrating theme or even a context for that matter. And all said and done, I was writing for a newspaper and not compiling a dictionary.

Just as I was about to give up, another brainwave saved the day. I wove a fictional story around the financial terms I was trying to understand, to build some overall context and at the same time to be able to explain all the terms that I wanted to. And that is how I came up with two unnamed characters, a man and a woman, in conversation.

The article was headlined ‘Why Is the Wall St Resting in Peace?’ and was scheduled to appear the next day, on 30 September 2008. It started with a woman calling a man to ask, ‘Why is the Wall Street going bust?’ And during the course of the ‘flirtatious’ duologue that takes place at an ungodly hour, 2.30 a.m., the man explains the trouble erupting at Wall Street and elucidates the meaning of several esoteric terms that had been troubling me, the writer of this piece.

I was very happy at the end of the day to have been able to write something different and more importantly, to have been able to fill up the ‘space’. Thankfully, I worked with editors who did not have fixed notions about what a newspaper should carry. Therefore, they let it go.

When I came to office the next day I was in for a surprise. My mailbox had some twenty-five emails from readers saying that they had loved the piece. This had never happened before; even what I thought were my best pieces would get no more than five to ten reader emails, spaced over a couple of days. But more importantly, what I understood from the response was that I was not the only one who had not been able to comprehend the pecuniary parlance. There were others like me out there. What the feedback also told me was that this whole concept of readers being more interested in what was happening in their own city and country was not always entirely true.

People wanted to know and understand what the ‘subprime’ crisis, as the financial crisis in the United States had been termed then, was really all about. This encouraged me to write a second piece and then a third and so the series of conversations between the anonymous man and woman continued. The feedback was tremendous. As I kept writing, more and more complicated terms like negative amortization, option adjustable-rate mortgages (ARMs), quantitative easing and so on were thrown up. I tried explaining those terms and the role they had to play in the financial crisis.

Now, nearly five years after I first started to write on the financial crisis, I have produced around a hundred and fifty pieces on the topic. And still continue to do so. The rate at which things are currently unfolding, writing about the economic meltdown should help provide my daily bread-and-butter for the next few years, perhaps even a decade.

***

Some five weeks after I wrote my first piece on the financial crisis, I went to interview William (Bill) Bonner, an ‘unconventional’ economist, and the president and CEO of Agora Publishing, one of the world’s largest financial newsletter companies. The one hour I spent talking to Bill, opened up a whole new world for me. My first question to Bill was, ‘When did the current financial crisis start?’

‘That depends on how far we want to go back. I put the beginning of the crisis back to 15 August 1971. On that day Richard Nixon closed the famous gold window at the treasury,’ he replied.¹

After the Second World War, central banks around the world could convert the American dollars they held as a part of their foreign exchange reserves into gold by presenting them to the United States of America. The United States had committed to converting its paper dollars into gold at the rate of $35 being worth one troy ounce (roughly 31.1 gm) of gold.

President Richard Nixon had suspended this conversion on 15 August 1971, as America was running very low on its gold reserves.

Bill’s reply startled me. How could something happening in 2008 have its origins as far back as 1971? In early 2009, a couple of months after meeting Bill, I started reading the first lot of books stemming from the financial crisis. I also started to read books which had been published (by William Bonner and several other authors) since 2000, predicting the slump brewing in the United States of America. The more I read, the more questions I had and that led to even more reading. Gradually, I started reading books about the history of money, finance, and economics which eventually culminated in me poring over research papers published over the last 300 years.

And after all this heuristic, fact-finding exploration that lasted for nearly two-and-a-half years, some sort of a bigger picture started to emerge in my mind. I realized that Bill was right. A lot of what has happened over the last four to five years has been primarily on account of a lot of things that have happened since 1971. However, a lot of it is also on account of things that occurred before 1971.

Various experts have come up with various reasons behind the financial downturn. Some feel the crisis was because Wall Street was greedy. But then the question to ask here is: When was Wall Street not greedy? And given this, why didn’t financial crises happen all the time? Some others feel that securitization of home loans turned out to be a very risky thing to do. Still some others feel that Alan Greenspan, the then chairman of the Federal Reserve of the United States, kept interest rates too low for too long, leading to a housing bubble and then the financial crisis.

Yes, these were reasons behind the financial crisis. But then there was a lot more to it. The real reason behind the crash is an agglomeration of these reasons and many more reasons.

It is about how the concept of money and the financial system have evolved over a long period of time. It is about commodity money giving way to silver and gold and finally to paper.

It is about Marco Polo travelling to China and discovering that under the rule of the Mongol king Kublai Khan, paper notes issued by the king were being used as money instead of gold and silver coins as was the case in Europe.

It is about Columbus setting out to sea to discover India and ending up discovering San Salvador and thus helping the Spaniards discover huge mines of gold and silver.

It is about the merchants of China, Italy and London, who first started using paper money as a scam.

It is about the rise of banks and bankers who soon realized that profits are inversely proportional to the amount of capital they maintain in the business.

It is about Charles I seizing the gold deposited by London merchants at the Tower of London and thus encouraging them to move on to paper money.

It is about the need of the British monarch to constantly raise money to meet his expenses, something that finally led to the formation of the Bank of England and the concept of a central bank. It is about a single decision made by Isaac Newton, famous physicist, but also the master of the British Mint, way back in 1717.

It is about the American and French Revolutions which gave more legitimacy to paper money.

It is about the bankers of Genova buying annuities issued by the French government and then selling bonds against them and thus coming up with what we now know as securitization.

It is about financial firms and banks being rescued by the governments starting in the nineteenth century and thus creating a moral hazard. This encouraged firms to take on more risk in the years to come, confident that the government and the central bank would come to their rescue whenever another crisis happened. It is about the socialization of risk.

It is about the close relationship between the American government and Wall Street, something which has held true for more than a hundred years now.

It is about seven individuals who had close associations with Wall Street getting together and putting forward the idea which finally led to the formation of the Federal Reserve of the United States in 1913, the American central bank.

It is about Hitler destroying Europe and helping America emerge as a global superpower.

It is about Winston Churchill, who, as the British Chancellor of the Exchequer, refused to listen to the pleas made by John Maynard Keynes and took Britain back to the gold standard in 1925 at an exchange rate which simply did not make sense. This destroyed the British pound as the leading international currency of the world.

It is about the United States agreeing to exchange gold for dollars after the Second World War at the rate of $35 per ounce and largely sticking to its promise until 1971.

It is about the Al Saud dynasty of Saudi Arabia agreeing to price oil in terms of dollars and thus helping the dollar overtake the pound as the international reserve currency.

It is about politicians bastardizing the theories of Keynes and giving too much importance to those of Milton Friedman.

It is about French president Charles de Gaulle launching a spirited attack against the dollar in the mid-1960s, which set in motion events that led to a pure paper-money system coming into existence in the early 1970s.

It is about countries around the world which had doubts about holding dollars backed by gold in the 1950s and the ’60s, but were totally at ease while holding paper dollars not backed by anything else in the 1970s and the ’80s.

It is about Penn Central, America’s largest railroad, going bankrupt in 1970, leading to companies which wanted to be rated having to pay rating agencies for it.

It is about the Organization of the Petroleum Exporting Countries (OPEC) deciding to continue pricing oil in dollars in the late 1970s, after almost deciding against it.

It is about Alan Greenspan deviating from the wisdom of his mentor Ayn Rand and coming up with the Greenspan put, which made the world believe that come what may, the economy will always keep doing well.

It is about America, the doyen of capitalism, becoming a great welfare state.

It is about communist China becoming the most capitalistic country in the world, earning billions of dollars doing so, and using those dollars to help finance the great American fiscal deficit.

It is about right decisions made at one point of time, which had negative implications at another point of time.

It is about one thing leading to another and then another and finally culminating with the financial meltdown that started in mid-September 2008 after the investment bank, Lehman Brothers, collapsed.

All this and more were responsible for creating humongous Ponzi schemes which are now unravelling.

W.G. Sumner wrote in a research paper titled ‘Shall Silver Be Demonetized?’ in June 1885 that even though money is ‘one of the oldest human inventions, and one of the most important, there is none that has been perfected so slowly’.²

What Sumner wrote nearly 130 years ago, largely remains true to this day. Money and the financial system are still work in progress. They are still evolving. And anything that is still evolving has its share of problems.

Vivek Kaul

Introduction

Dear reader you are about to start reading the third volume in the Easy Money series. This volume discusses what the world now calls the global financial crisis.

At the very beginning, I would like to quote Alan S. Blinder, a former vice chairman of the Federal Reserve of the United States, the American central bank. As he writes in After the Music Stopped – The Financial Crisis, The Response, and the Work Ahead: ‘While it is natural to crave simple explanations, complicated events are, well, complicated. It is hard to imagine how something as sweeping and multifaceted as the financial crisis could have stemmed from single cause or had a single villain.’¹

In this volume, we will try and understand the various causes behind the financial crisis and also identify the different villains behind it.

Alan Greenspan, the then chairman of the Federal Reserve, rapidly cut interest rates after the dot-com bubble burst. The federal funds rate or the interest rate at which one bank lends funds maintained at the Federal Reserve to another bank, on an overnight basis, was cut to as low as 1 per cent in mid-2003. The easy money policy that had created the dot-com bubble was continued with.

The low interest rate regime created conditions that were ideal for a bubble; the only difference this time around was that real estate replaced stocks as the medium of speculation. Loans were easy to get, as the entire banking system concentrated on simply giving out loans rather than finding out the credibility of the borrower. This was because the fundamental way in which banks operated had changed. Earlier, when a bank gave out a loan, the loan remained on its books, till the borrower completely repaid it. Hence, the risk associated with the borrower not repaying the loan was taken on by the bank.

By the time the dot-com bubble burst, banks could securitize their loan. Banks pooled together similar kinds of loans, such as home loans or mortgages. Against these loans, they sold bonds to investors. These bonds paid a rate of interest, which was slightly lower than the interest that the borrower was paying on the loan.

By selling bonds, the banks got back the money immediately, unlike earlier, when the money was stuck for the period of the loan. This money could be used to give out more loans. When the borrower of the loan repaid it through an equated monthly instalment (EMI), the banks passed on a major portion of this to the investors who had bought the bonds.

The difference between what the borrower paid as interest and what the bond investor got as interest was money the bank made. It also got a commission on selling these bonds. Since the loans no longer remained on the bank’s books, it wasn’t interested in checking out the repayment capacity of the borrower any more. In fact, the more loans the bank gave out, the more bonds it could securitize, and hence, the more money it could make.

Gradually, banks started giving out loans to even those who had poor credit ratings. This section of the loans came to be referred to as sub-prime loans. A prime loan was a loan that a bank gave to its best customers. Investors bought bonds securitized against the sub-prime loans because rating agencies offered the best AAA ratings to these bonds.

Nevertheless, as is the case with such bubbles, things started to unravel after a point of time. Housing prices stopped going up and borrowers started defaulting on their mortgages. This meant the investors who had bought bonds issued against mortgages were also in trouble. Losses were huge on the sub-prime bonds that had been issued against sub-prime mortgages. The investment bank Lehman Brothers, which was a big investor in sub-prime bonds, went bust in mid-2008, and the US government had to come to the rescue of various financial firms such as Fannie Mae, Freddie Mac, AIG and even Citigroup. This was done to ensure that the financial system did not come to a standstill.

Gradually, the world started to realize that the United States wasn’t the only country in trouble. Like the Americans, the Europeans had also gone around buying real estate by taking loans. Several European governments were also in trouble for taking on a lot of debt that they were in no position to repay.

A major reason for the crisis was the increasing financialization of the global economy. In 2007, the world had financial assets worth $202 trillion. This was 3.6 times the total annual global economic output. By comparison, the ratio of the financial assets to the total global output had been at 2.6 in 1990. The United States was leading this race. Securitization of all kinds of loans, from credit cards to student loans, to corporate loans, to mortgages, had become very popular. In 2007, $11 trillion worth of financial securities had been created through securitization. The number had stood at $2.6 trillion in 2000.²

In the early 1970s, the total amount of financial assets and liabilities in most countries did not exceed four to five times the national income. By 2010, the total amount of financial assets and liabilities was ten to fifteen times the national income in the United States, Japan, Germany and France and twenty times the national income in Britain.³ This ultimately created havoc with the financial system.

Ironically, the solution central banks and governments the world over have found to counter the global financial crisis was what caused the problem in the first place. An era of easy money has been unleashed again. Central banks are printing more and more money and financing government expenditure. Interest rates have been engineered to be close to zero per cent. All this in the hope that people will start borrowing and spending money again. Once this happens, the economies that have slowed down in the aftermath of the global financial crisis will start growing again. But a lot of this easy money is now going into speculation and has driven up stock markets around the world. It also drove up commodity prices for some period. As analyst Dylan Grice put it: ‘If the overdose of monetary medicine made us ill, we don’t understand how more of the same … will make us better.’⁴

By doing more of the same, the politicians of the Western world have been trying to tell us that all is well and that the worst of the financial crisis is behind us. As François Morin writes in A World Without Wall Street?: ‘Since August 2007, our leaders have been telling us (at intervals of around three weeks) that the worst of the financial crisis is behind us.’⁵

The politicians are reacting like they always do – by trying to set things right in the short term. The short term here being as long as the current electoral term lasts. And it might even make sense for them to be ‘perceived as over-reactive’.⁶

A small industry has sprung up over the last few years, whose job is to keep telling us that things have improved. As Anat Admati and Martin Hellwig warn in The Bankers’ New Clothes – What’s Wrong with Banking and What to Do About it: ‘Do not believe those who tell you things are better now than they had been prior to the financial crisis of 2007–2009 and that we have a safer system that is getting even better as reforms are put in place.’⁷

As we shall see during the course of this book, a lot of fundamental problems with the way money and the financial system work still remain. Many Western nations are in a financial mess. As the author Satyajit Das puts it:

A crude measure of sovereign net worth is the present value of tax revenues and government assets and investments less debt and the present value of liabilities such as pensions, healthcare etc. As a percentage of the GDP, this measure shows the United States at minus 800 percent, Germany, minus 500 percent; France, minus 600 percent; and the United Kingdom, minus 1,000 percent. Italy is at minus 250 percent; Spain minus 1,100 percent; Ireland, minus 1,400 percent; and Greece, minus 1,600 percent.⁸

Meanwhile, another era of easy money has been unleashed. As former German finance minister Peer Steinbruck put it, ‘When I ask about the origins of the crisis, economists I respect tell me it is the credit financed growth of recent years and decades. Isn’t this the same mistake everyone is suddenly making again?’⁹

In short, the world has not learned from its past mistakes. As Stephen D. King puts it in When the Money Runs Out – The End of Western Affluence: ‘It is foolish to pretend that our economic difficulties can be solved with a bit of extra quantitative easing [i.e., printing money] or an extra dose of government spending. Our problems are more deep rooted than that.’¹⁰

Also, it is worth pointing out here that rapid economic growth is a very recent phenomenon. In a 2012 research paper titled ‘Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds’, American economist Robert Gordon found that before 1750 there was next to no economic growth. In fact, it took nearly 500 years, between 1300 and 1800, for the standard of living to double, when measured in terms of per capita income, i.e., the average income of every individual. The per capita income doubled again between 1800 and 1900 and has increased five or six times since then.¹¹

So, rapid economic growth has been a recent economic phenomenon and one of the major reasons for this has been governments running an easy money policy over the years. Given this, the question arises as to whether the rapid economic growth of the twentieth century will continue into the twenty-first century as well.¹²

As the American playwright Arthur Miller put it, ‘An era can be said to end when its basic illusions are exhausted.’ The fact that politicians felt that the economists could control the economy and ensure rapid economic growth come what may, was the basic illusion of the last century. The financial crisis that broke in late 2008 has clearly shattered it.

To conclude, I would like to state that this is not a definitive history of the financial crisis that erupted in late 2008. It is more of a conclusion to the first two volumes in the Easy Money series. Also, this book looks at the crisis more from the American point of view than the European (that would be a separate book in itself). For those looking for a definitive read on the financial crisis, the two books that I would definitely recommend are Alan S. Blinder’s After the Music Stopped (for a macroeconomic perspective) and Satyajit Das’ Extreme Money (for all that went wrong with Wall Street).

It is worth remembering that some of the best books on the Great Depression came decades after it started. John Kenneth Galbraith’s The Great Crash, 1929, which remains one of the most popular books on the Depression was first published in 1954, twenty-five years after the Depression started. Milton Friedman and Anna Schwartz’s A Monetary History of the United States, 1867–1960, which dealt with the Great Depression in considerable detail, came out only in 1963.

Given this, I feel the best books on the current financial crisis are yet to be written. They will probably start to get published by around 2033 (twenty-five years after the current crisis started). Meanwhile, you, dear reader, could read and hopefully enjoy the Easy Money series.

Vivek Kaul

1

Same Old Same Old!

On 6 September 2001, Alan Greenspan, the then chairman of the Federal Reserve of the United States, had a special visitor. This was Bob Woodward, the ace journalist from The Washington Post, who was one of the two journalists (the other being Carl Bernstein) who had exposed the Watergate scandal, which had ultimately led to the resignation