Andrew Sorkin - Too Big to Fail - The Inside Story of How Wall Street and Washington Fought to Save the FinancialSystem--and Themselves

179 “best practices”: “Putin—No Sovereign Wealth Fund in Russia Yet,” Reuters, June 30, 2008.

CHAPTER TEN

181 rehire Michael Gelband and Alex Kirk: See Susanne Craig, “Gelband, Kirk Rejoin Lehman in Shake-Up,” Wall Street Journal, June 25, 2008; Jed Horowitz, “Lehman’s New President McDade Brings in His Own Team,” Dow Jones, June 25, 2008.

182 classmates at the University of Michigan Business School: Susanne Craig, “Lehman Vet Grapples with the Firm’s Repair,” Wall Street Journal, September 4, 2008.

182 on Little St. Simons Island: According to Paulson’s calendar, he left Dulles Airport at 8:00 a.m. on Friday, July 4, 2008, headed for Georgia, where he would “remain overnight” for three nights.

183 Paulsons bought up three quarters of the ten-thousand-acre property: Mary Jane Credeur, “Paulson’s Georgia Investment Rises as Blind Trust Becomes Joke,” Bloomberg News, January 14, 2008.

183 “The U. S. economy is … facing a trio of headwinds”: From Paulson’s speech in London on the U.S., the world economy and markets, July 2, 2008. See http://www.treas.gov/press/releases/hp1064.htm.

183 brother, Richard Paulson, worked as a fixed-income salesman in Lehman’s Chicago office: Anita Raghavan, “Paulson Brothers on Either Side of Lehman Divide,” Forbes, September 12, 2008.

184 reporting a $708 million loss: After restating its first quarterly loss since 2001 (it had mistakenly reported $393 million), Wachovia ousted Ken Thompson as chairman and—a month later—as CEO. See David Mildenberg and Hugh Son, “Wachovia Ousts Thompson on Write-downs, Share Plunge,” Bloomberg News, June 2, 2008.

184 flown back home on a private chartered jet to Dulles Airport: According to his calendar, Paulson left Georgia at 2:00 p.m. on Monday, July 7, arriving back in Washington, D.C., at 3:42 p.m.

184 Freddie tumbled as much as 30 percent: On Monday, July 7, 2008, Fannie Mae shares fell $3.04, or 16.2 percent, to $15.74, their lowest since 1992, while Freddie stock was down $2.59, or 17.9 percent, to $11.91, its lowest since 1993. See James R. Hagerty and Serena Ng, “Mortgage Giants Take Beating on Fears over Loan Defaults,” Wall Street Journal, July 8, 2008.

184 Fannie shares slid 16.2 percent: Ibid.

184 wrote that revised accounting rules might require Fannie and Freddie to raise: Harting Report released on Monday, July 7, 2008. Aaron Lucchetti, “How Fannie/Freddie Selldown Went Down,” Wall Street Journal, July 12, 2008.

185 “the closest thing I’ve seen to a holy war”: In February 2007, Paulson told the House of Representatives’ budget committee: “I feel very strongly that we need a regulator that’s independent, got more muscle, and a number of other changes… . I also know people feel very strongly on both sides of this issue. I’ve never witnessed anything quite like this. It’s the closest thing I’ve seen to a holy war.” “US House to Have GSE Bill by End-Mar,” Reuters, February 7, 2007.

186 “we are the equivalent of a Federal Reserve system for housing”: Franklin Raines, as reported by David A. Vise, “The Financial Giant That’s in Our Midst,” Washington Post , January 15, 1995.

186 55 percent of the $11 trillion U.S. mortgage market: Shannon D. Harrington and Dawn Kopecki, “Fannie, Freddie Downgraded by Derivatives Traders,” Bloomberg, July 9, 2008.

186 “In moving, even tentatively, into this new area of lending”: Steven A. Holmes, “Fannie Mae Eases Credit to Aid Mortgage Lending,” New York Times, September 30, 1999.

186 “[We] always won, we took no prisoners”: Mudd wrote this in a note to Franklin Raines in November 2004. See James Tyson, “Fannie, Freddie Retreat as Mortgage Bonds Mutate,” Bloomberg News, September 6, 2006.

187 Bush administration lowered the amount of capital: Damian Paletta and James R. Hagerty, “U.S. Puts Faith in Fannie, Freddie,” Wall Street Journal, March 20, 2008.

187 “Congress ought to recognize”: Dawn Kopecki and Shannon D. Harrington, “Fannie, Freddie Tumble on Bailout Concern, UBS Cut,” Bloomberg, July 10, 2008.

188 “You’re not going to like this conversation”: Portions of this exchange, including Fuld having heard “a lot of noise,” were first reported by Kate Kelly and Susanne Craig, “Goldman Is Queried About Bear’s Fall,” Wall Street Journal, July 16, 2008.

189 “There’s blood in the water, let’s go kill someone!”: According to a former Morgan Stanley trader, Frank Partnoy, from his book Fiasco , 99.

189 “I see that again, and you’re fired”: Michael Carroll, “Morgan Stanley’s Global Gamble,” Institutional Investor , March 1, 1995.

189 House Financial Services Committee hearing: “Systemic Risk and the Financial Markets” hearing, with witnesses Henry Paulson and Ben Bernanke, held on July 10, 8. See http://financialservices.house.gov/hearing/hr008.shtml.

189 “We’re going to need broader emergency authorities”: Ibid.

190 some confusion about tracking down Greenspan’s home phone number: First reported by Deborah Solomon, “The Fannie & Freddie Question—Treasury’s Paulson Struggles with the Mortgage Crisis,” Wall Street Journal, August 30, 2008.

191 “considering a plan to have the government take over”: Stephen Labaton and Steven R. Weisman, “U.S. Weighs Takeover Plan for Two Mortgage Giants,” New York Times, July 11, 2008.

191 It had already been a long morning for Paulson: Paulson’s calendar.

191 “Today our primary focus is supporting Fannie Mae”: Brendan Murray, “Paulson Backs Fannie, Freddie in Their ‘Current Form,’ ” Bloomberg News, July 11, 2008.

192 briefed Bush on the Fannie and Freddie situation: Later that morning, at the Department of Energy, Bush said: “I want to thank the members of my economic team for assembling here at the Department of Energy. Secretary Bodman, thank you for hosting us. First of all, Secretary Paulson came by this morning to brief me on the financial markets. Freddie Mac and Fannie Mae are very important institutions. You spent a fair amount of time discussing these institutions. He assured me that he and Ben Bernanke will be working this issue very hard.” Office of the Press Secretary, “President Bush Meets with Economic Team,” July 11, 2008, 11:38 a.m. EDT.

192 Paulson had a call with Sheila Bair: Verified from his calendar.

192 FDIC was about to seize IndyMac: On Friday, July 11, 2008, the Office of Thrift Supervision closed IndyMac Bank, F.S.B, with total assets of $32.01 billion, transferring its operations to the FDIC. “OTS Closes IndyMac Bank and Transfers Operations to FDIC,” July 11, 2008. See http://www.fdic.gov/news/news/press/2008/pr08056.html.

195 “We have a new kind of bank ”: James Surowiecki, “Too Dumb to Fail,” New Yorker, March 31, 2008.

195 “We’re giving serious consideration to becoming a bank holding company”: Fuld’s plea to become a bank holding company was first reported by Julie MacIntosh and Francesco Guerrera, “Lehman Failed to Convince Fed Officials over Survival Strategy,” Financial Times, October 6, 2008; and subsequently reported by Julie Creswell and Ben White, “The Guys from ‘Government Sachs,’ ” New York Times , October 19, 2008.

196 “As long as I am alive this firm will never be sold”: Susanne Craig, Jeffrey McCracken, Aaron Lucchetti, and Kate Kelly, “The Weekend That Wall Street Died,” Wall Street Journal, December 29, 2008.

196 he came close to buying Lazard: See Cohan, The Last Tycoons , 517-20.

196 About Greg Curl: Zachary R. Mider, “Lewis Turns to Tomato-Growing ‘Unknown Genius’ on Merrill Deal,” Bloomberg News, September 24, 2008.