Key Financial Crisis Player Looks for 2008’s Lessons

By: Linda Brandt Myers
Key Financial Crisis Player Looks for 2008’s Lessons

Thomas A. Russo, MBA ’69, JD ’69, author of The 2008 Financial Crisis and Its Aftermath: Addressing the Next Debt Challenge

Thomas A. Russo, MBA ’69, JD ’69, is perhaps best known for the time he spent, in his words, “strapped into one of the lead cars during the great economic rollercoaster ride of 2008–15.”

He was chief financial officer and general counsel at Lehman Brothers from 1993 through 2008, when the global financial crisis hit and the venerable 158-year-old bank was forced to declare bankruptcy after the Federal Reserve declined to rescue it.

In 2010 Russo was named executive vice president and general counsel at AIG, a company that the government did bail out, and he helped lead the successful effort to restore it to financial health while repaying the government’s $182 billion loan and making a profit of $22 billion.

“Tom’s resilience and ingenuity in being able to advise Lehman through the financial crisis and then to ‎guide AIG through its post-crisis resurrection is nothing short of remarkable,” says Andrew Levander, who represented Lehman Brothers in post-bankruptcy litigations and is now a partner at Dechert.

The back story: a year before Lehman’s bankruptcy, Russo warned the Group of Thirty— an international consultative group on economic and monetary affairs — about a possible credit crunch that might cause a financial crisis, but his concerns weren’t heeded.

In fall 2008, he told the Fed that if Lehman were forced to go under, the impact would cascade through the financial markets, affecting all investors, and the global economy would deteriorate at unprecedented levels.

Lehman’s collapse certainly contributed to the global financial crisis, he says. But he praised the government for its bailout of AIG.

“[Through] my experiences at Lehman and AIG, I have seen the worst and best of government,” Russo now comments. “The Fed was the only one that could take and hold those assets long enough to recognize the value. It’s what it was created to do.” Not doing it for Lehman worsened the crisis, he believes.

A talent for complex, real-world finance

Russo’s talent for the analytical aspects of economics prompted him to enroll in Cornell’s business school. He chose Cornell’s joint-degree program in business and law because both subjects interested him and “I thought it was a good deal,” he says.

After graduating, Russo joined the Security and Exchange Commission’s division of market regulation. “I had the great opportunity of learning about securities law from the inside out,” he comments.

In 1971, Russo joined Cadwalader, Wickersham & Taft, where he became interested in how to regulate subsidiary markets. In 1975, he was named deputy general counsel of the Commodities Futures Trading Commission and first director of its Division of Trading and Markets.

At Johnson, he impressed Finance Professor Seymour Smidt (now emeritus), who later invited him back to campus as a guest speaker. “He brought complex, real-world finance issues to life,” says Smidt.

In 1978, Russo returned to Cadwalader, where he eventually rose to partner, but the long hours and seven-day-a-week demands of the job left him little time for family and volunteering, so he sought other opportunities that he thought would, joining Lehman in 1993.

“To be successful in anything, you must figure out the allocation of time that brings you the greatest happiness,” explains Russo, who has shared his “Ingredients for Success” work-life balance strategy with today’s business students at Columbia Business School, where he is an adjunct professor.

Regarding lessons learned, Russo’s book, The 2008 Financial Crisis and Its Aftermath: Addressing the Next Debt Challenge (with co-author Aaron Katzel, Group of Thirty publication, 2011) warns that “debt is growing, growth has been slow, and the tools we had [for averting a future monetary crisis] are diminished — and there’s always a crisis,” he says. Perhaps this time we should listen.

Russo now chairs the executive committee of the Institute of International Education, which administers the Fulbright Scholarship Program. He and his wife have twin daughters, now grown, and a son, Tyler Russo ’18, who is a Dyson student in Cornell’s SC Johnson College of Business.

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