Published by EH.Net (December 2018)

James Freeman and Vern McKinley, Borrowed Time: Two Centuries of Booms, Busts, and Bailouts at Citi. New York: Harper Business, 2018. xiv + 365 pp. $35 (hardcover),
ISBN: 978-0-06-266987-2.

Reviewed for EH.Net by Thomas L. Hogan, Baker Institute for Public Policy, Rice University.

Freeman and McKinley’s Borrowed Time provides a history of Citibank and its central role in the evolution of the banking system in the United States. Since its founding in 1812, Citi (originally City Bank of New York) has been among the largest commercial banks in the country. As such, it has been inexorably entwined with developments in the banking system as well as the major cycles, crashes, and crises faced by the U.S. economy.

Two major themes stand out in the book. First, Citi’s risk profile was highly dependent on the personalities of its managers and oscillated over time between the extremes of risk-avoidance and risk-loving. Presidents Moses Taylor (1856-1882) and James Stillman (1891-1909), for example, pursued “ready money” policies of high reserve and capital ratios, while others such as Frank Vanderlip (1909-1919), Charles Mitchell (1921-1933), Walter Wriston (1967-1984), and Charles Prince (2003-2007) steered the bank through periods of massive expansion and greater risk appetite. Freeman and McKinley construct the narrative of Citi’s history around biographical sketches of these men and how their backgrounds guided the bank’s path.

Second, and perhaps more important, were Citi’s persistent ties to the government. Several of its early directors were former politicians. Vanderlip, who would become Citi’s president, was hired directly from the Department of the Treasury, as was recent executive and board member Robert Rubin. Jack Lew left Citi in 2008 to join the Obama administration, eventually becoming Secretary of the Treasury, while John Dugan, former Comptroller of the Currency, became the chairman of Citi’s board of directors in 2017. Through direct and indirect political influence, Citi helped craft the Federal Reserve Act and influence other important legislation.

While Citi did participate in, and often led, bank risk trends in the United States, it did not, according to Freeman and McKinley, play a causal role in the Great Depression or in the 2008 financial crisis. Depression-era politicians blamed Citi affiliate National City Company for encouraging stock market speculation and excessive leverage. While National City’s lending may have fueled the growing market, the Fed was the source of monetary contraction that crashed the stock market and ultimately the banking system (pp. 149-154). Similarly, Citi in the early 2000s was a proponent and facilitator of collateralized debt obligations (CDOs) that “triggered billions of dollars in losses” (p. 267), but losses were even greater on its own “bread-and-butter commercial banking activities” (p. 269), including subprime and consumer loans. The book attributes the broader housing crisis to a combination of economic factors including federal housing policy, the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and unduly low interest rates from the Fed.

While not a cause of the crises, Citi has repeatedly, according to the authors, been instrumental in pushing for government bailouts of U.S. banks. Citi “accepted one of the biggest bailouts of the Great Depression” (p. 166), and it played a part it organizing loans to Mexico and other Latin American governments to which Citi was a creditor. Freeman and McKinley argue that in the recent crisis many of the government’s assistance programs were aimed to protect Citi, which was deemed by some regulators as “systemically important” and vital to the function of the banking system. As Federal Deposit Insurance Corporation (FDIC) chair Shelia Bair later wrote, “I frequently wonder whether, if Citi had not been in trouble, we would have had those massive bailout programs” (quoted on p. 288).

Freeman and McKinley use Citi to illustrate a variety of economic concepts such as the problems created by restrictions on branch banking, regulatory capture, and the political economy of the Fed, as well as the causes of the Great Depression and 2008 financial crisis. While these explanations are readable and concise, I worry that casual readers will fail to appreciate the sophistication of such arguments due to the brevity of their descriptions. Given that the book is published by a business press, such summaries may be ideal for its intended audience, but I found the economic reasoning to be elegantly stated and would have liked to have seen it fleshed out in greater detail for the benefit of readers not familiar with such concepts.

Similarly, while many of the anecdotes are entertaining, I would have preferred greater historical detail. In addition, some statements in the book deserve a higher degree of critical examination. For example, the authors accept Jamie Dimon’s assertion that JP Morgan Chase had a “fortress balance sheet” (p. 263). That claim, however, seems more rhetoric than reality considering that the company’s market value fell by more than 70% during the financial crisis. The authors repeatedly state that few large banks today have equity ratios of 10% or more. In fact, because banks with more than $250 million in total assets are subject to additional regulations, most of the largest U.S. banks have capital ratios above 10%. As of the end of 2017, for example, the average capital ratio of the top 10 largest banks was 10.9% (measured as a percentage of total assets, not the currently popular method of risk-weighted assets). These limitations, however, do not detract from the book’s main theses or its readability.

I found Borrowed Time to be an interesting and entertaining read. The authors do an excellent job of blending history and economics with the personalized story of one of America’s oldest and most important financial institutions.

Thomas L. Hogan is a fellow in Rice University’s Baker Institute for Public Policy. His research has been published in academic journals such as Economic Inquiry, the Journal of Regulatory Economics, and the Journal of Money, Credit and Banking.

Copyright (c) 2018 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (December 2018). All EH.Net reviews are archived at