221 “It is not the responsibility of the Federal Reserve”: Ben Bernanke, “Housing, Housing Finance, and Monetary Policy,” Federal Reserve Bank of Kansas City’s Economic Symposium, Jackson Hole, Wyoming, August 31, 2007. See http://www.federalreserve.gov/newsevents/speech/bernanke20070831a.htm.
222 One day a little Dutch boy: Alan S. Blinder, “Discussion of Willem Buiter’s, ‘Central Banks and Financial Crises,’ ” Federal Reserve Bank of Kansas City’s Annual Economic Symposium,” Jackson Hole, Wyoming, August 23, 2008. See http://www.kc.frb.org/publicat/sympos/2008/blinder.08.25.08.pdf.
222 “statutory resolution regime for nonbanks”: Ben Bernanke, “Reducing Systemic Risk,” Federal Reserve Bank of Kansas City’s Annual Economic Symposium,” Jackson Hole, Wyoming, August 22, 2008.
223 Moody’s cut its ratings: Jody Shenn, “Fannie, Freddie Preferred Stock Downgraded by Moody’s,” Bloomberg News, August 22, 2008.
224 having shorted subprime before anyone else: Andy Kessler, “The Paulson Plan Will Make Money for Taxpayers,” Wall Street Journal, September 25, 2008.
224 Paulson had heard rumors when he was in China: Paulson, On the Brink, 161. Paulson’s account was later denied by a Russian spokesman. “Russia at that time was a country that invested huge funds in these organizations and was not interested in rocking these institutions,” Dmitry Peskov reportedly said to the Russian state-run news agency RIA Novosti.
228 analyst report issued by Goldman Sachs raising questions about the firm: Hugh Son, “AIG Falls as Goldman Says a Capital Raise Is ‘Likely,’ ” Bloomberg News, August 19, 2008.
228 As the company had warned in an SEC filing: Figures are from AIG’s 10-Q filing on August 6, 2008.
229 AIG owning seventy-one state-regulated insurance subsidiaries: AIG issued a press release on September 18, 2008, assuring policyholders that their protection was a top priority. “The 71 state-regulated insurance companies within AIG did not receive a bailout; they are financially solvent,” it said. “The federal bailout of the non-insurance portions of AIG does not negatively change the solvency strength of its insurance subsidiaries.” http://www.aig.com.
231 “rather than letting these conditions fester”: “The result has been that they have been unable to provide needed stability to the market. They also find themselves unable to meet their affordable housing mission. Rather than letting these conditions fester and worsen and put our markets in jeopardy, FHFA, after painstaking review, has decided to take action now.” “Fhfa Director Lockhart Issues Statement on Safety and Soundness Concerns,” U.S. Fed News, September 7, 2008.
231 Treasury’s takeover terms: Rebecca Christie and John Brinsley, “U.S. Takeover of Fannie, Freddie Offers ‘Stopgap,’ ” Bloomberg News, September 8, 2008.
232 “any action we take”: As Obama told reporters in Indiana on September 6, 2008. See http://www.msnbc.msn.com/id/26577811/.
CHAPTER TWELVE
234 Reuters headline: Kim Yeon-hee and Chris Wickham, “Eyes on Lehman Rescue as Korea Lifeline Drifts,” Reuters, September 8, 2008.
234 had held a briefing with reporters: Ibid.; Susanne Craig, Diya Gullapali, and Jin-Young Yook, “Korean Remarks Hit Lehman,” Wall Street Journal, September 9, 2008.
234 Shares of Lehman dropped precipitously: Joe Bel Bruno, “Lehman Shares Plunge 30 percent on Report that Talks with Korea Development Bank Ended,” Associated Press, September 9, 2008.
234 annual banking conference: The Lehman Brothers Global Finance Services Conference was held at New York ’s Hilton Hotel from September 8-10, 2008. Wachovia CEO Robert Steel presented on Tuesday, September 9, according to the press release: “Wachovia CEO Robert K. Steel to Present at Lehman Conference,” PR Newswire, September 3, 2008.
234 “Here we go again”: Fuld, as quoted in an article by John Helyar and Yalman Onaran, “Fuld Sought Buffett Offer He Refused as Lehman Sank,” Bloomberg News, November 10, 2008.
234 “Time Running Out for Lehman”: “Stocks to Watch,” CNBC, September 9, 2008.
235 “We’ve got to act fast”: John Helyar and Yalman Onaran, “Fuld Sought Buffett Offer He Refused as Lehman Sank,” Bloomberg News, November 10, 2008.
235 meeting with Jamie Dimon: According to official calendars obtained from the Department of the Treasury, this meeting was scheduled for 8:30 a.m. on September 9, 2008, and was one of several listed on Paulson’s calendar.
236 “[A]ll he wanted was the bazooka”: Alison Vekshin, “Dodd Plans Senate Hearing on Fannie, Freddie Takeover,” Bloomberg News, September 8, 2008.
236 “Secretary Paulson knew more than he was telling us”: From a statement issued by Bunning on September 8, 2008, titled “Bunning Rips Bailout of Fannie and Freddie.”
238 Lehman’s stock had plunged 38 percent: Joe Bel Bruno, “Lehman Shares Plunge 30 Percent on Report That Talks with Korea Development Bank Ended,” Associated Press, September 9, 2008.
239 AIG’s lawyers and advisers: Scott Pegram, “Davis Polk, Weil Gotshal, Sullivan, Simpson Work on AIG Restructuring,” New York Law Journal, March 5, 2009.
239 including Rodgin Cohen: Matthew Karnitschnig and David Enrich, “A Lawyer for All Wall Street Navigates Tempestuous Times,” Wall Street Journal, October 9, 2008.
239 Two documents given to Geithner: Obtained by author from confidential source.
240 Jester hadn’t been required to sell all his Goldman stock: Greg Farrell and Stephanie Kirchgaessner, “Goldman links to US Treasury Raise Questions,” Financial Times, October 12, 2008.
240 $3.9 billion loss: On the morning of Wednesday, September 10, Lehman announced its preliminary third-quarter earnings and an estimated net loss of $3.9 billion. See “Lehman Brothers Announces Preliminary Third Quarter Results and Strategic Restructuring,” PR Newswire, September 10, 2008.
241 “‘I would much rather have partners that are really, really smart motherfuckers than guys that I like’ ”: Mr. Briger confirmed making such an observation but disputes using the word “motherfucker” despite the accounts of several other sources who either heard it directly or in the retelling from Alex Kirk after he ran down the hall.
247 “The stock is coming down”: Dick Bove to Erin Burnett, Streets Signs, “LEH Shares Down,” CNBC, September 9, 2008.
248 “This is coming directly from Paulson”: This quote is one of only a few that caused confusion and consternation among various sources. All the sources for this scene agree that this was the comment that McDade made at the time, based on his conversation with Fuld. It is also clear that Paulson spoke to both Blankfein and Fuld about how the two firms should talk to each other and about a sale of Lehman’s real estate assets. It is also clear that David Viniar, Goldman’s CFO, placed a call to Dan Jester earlier in the day seeking help to orchestrate negotiations, which is detailed in an earlier scene. Paulson’s calendar cites a series of phone calls between Paulson and Fuld and Paulson and Blankfein that day, with at least one in rapid succession back to back from each other. Furthermore, multiple sources privy to both of those conversations say that Paulson suggested that Fuld hold discussions with Goldman, as one of many options. So far, nothing is in dispute. What is confusing is why Fuld is under the impression that Goldman is working for the government. There is no evidence that was the case and no evidence that Paulson said so directly. What appears most likely is that there was a miscommunication, with Fuld making certain assumptions and Goldman, during its phone calls with McDade and Kirk, doing little to disavow these views until Wednesday morning, when clarity was required to execute the confidentiality agreement to begin due diligence.