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

397 Federal Reserve Act, Section 13, point 3: www.federalreserve.gov/aboutthefed/section13.htm.

398 “regulatory capital relief ”: From AIG’s 10-Q filing, August 6, 2008: “Approximately $307 billion of the $441 billion in notional exposure on AIGFP’s super senior credit default swap portfolio as of June 30, 2008, was written to facilitate regulatory capital relief for financial institutions primarily in Europe.”

398 AIG’s vast insurance empire: A “strictly confidential ” AIG presentation draft, dated February 26, 2009, entitled, “AIG: Is the Risk Systemic?” states that “AIG has written more than 81 million life insurance policies to individuals worldwide” at a face value of $1.9 trillion, with more than $12 billion in claims paid in 2008.

400 he knew the top people in the industry: Susanne Craig, “In Ken Wilson, Paulson Gets Direction From the Go-To Banker of Wall Street,” Wall Street Journal, July 22, 2008.

400 telling the press that he planned to mount a proxy contest: “Hank Greenberg: Plans Fight for Control or Buyout of AIG,” Dow Jones Newswires, September 16, 2008.

400 Dear Bob: The full text of Hank Greenberg’s letter to Robert Willumstad, dated September 16, 2008, can be viewed online at http://online.wsj.com/public/resources/documents/AIG09162008.pdf.

403 He and Ben Bernanke had scheduled a meeting with President Bush: According to the Wall Street Journal, this meeting took place at 3:30 p.m. See Monica Langley, Deborah Solomon, and Matthew Karnitschnig, “Bad Bets and Cash Crunch Pushed Ailing AIG to Brink,” Wall Street Journal, September 18, 2008.

404 “Well, you finally get your chance”: Richard Beattie’s remarks to Robert Willumstad, as first reported in Fortune magazine. James Bandler, “Hank ’s Last Stand,” Fortune, October 7, 2008.

404 the government was taking a large ownership stake—79.9 percent: Matthew Karnitschnig, Deborah Solomon, Liam Pleven, and Jon E. Hilsenrath, “U.S. to Take Over AIG in $85 Billion Bailout,” Wall Street Journal, September 16, 2008.

404 “Paulson is handling this the same way he did Fannie, Freddie, and Bear”: Monica Langley, Deborah Solomon and Matthew Karnitschnig, “Bad Bets and Cash Crunch,” Wall Street Journal, September 18, 2008.

404 the London Interbank offered rate: Known as LIBOR, this is the average interest rate charged when banks borrow unsecured funds from one another, whether it’s an overnight or a long-term loan. In the United States, LIBOR maturities used in pricing loans most commonly include one, three, six, and twelve months. On Wednesday, September 17, 2008, the three-month LIBOR jumped 19 basis points, to 3.0625 percent, its biggest jump since September 1999. Lisa Twaronite, “Three-Month Libor Marks Biggest Jump in Nine Years,” MarketWatch. com, September 17, 2008.

406 “I won’t be working for the federal government”: Willumstad, as quoted in Bandler, “Hank’s Last Stand,” Fortune.

407 a Maine insurer that had fought off an effort by Allstate: Laura Jereski, “We Understand Risk ” (UNUM Corp.), Forbes, March 20, 1989.

407 AIG had invested $1.35 billion in Blackstone: Peter Truell, “AIG Will Put $1.35 Billion into Blackstone,” New York Times, July 31, 1998.

407 Greenberg’s office on Park Avenue: A year after his ouster from AIG in 2005, Greenberg relocated his office to the seventeenth floor of Citigroup’s headquarters, at 399 Park Avenue. See Diane Brady, “Hank at War,” BusinessWeek , March 27, 2006.

407 “He’s going on Charlie Rose to talk about AIG”: During that week, Hank Greenberg appeared on two consecutive episodes of Charlie Rose. The first was simply to discuss AIG’s crisis, and the second to speak about the federal bailout. See The Charlie Rose Show, “More Crises on Wall Street,” September 16, 2008, and “Former AIG Chair Discusses Bail Out,” September 17, 2008.

409 The gathering had been hastily organized: Langley, Solomon, and Karnitschnig, “Bad Bets and Cash Crunch,” Wall Street Journal .

410 had sent him an e-mail: A facsimile of Herzog’s e-mail appeared in Fortune, where this was first reported . Carol J. Loomis, “AIG’s Rescue Has a Long Way to Go,” Fortune, December 29, 2008.

CHAPTER SEVENTEEN

412 “Reserve Primary Fund, had broken the buck ” : It was the first time in fourteen years that a fund’s net asset value had fallen below $1, or “broken the buck.” Particularly unsettling was the fact that the Primary Fund ’s owner, the Reserve Management Corporation, invented the money fund in 1970. See Christopher Condon, “Reserve Primary Money Fund Falls Below $1 a Share,” Bloomberg, September 16, 2008.

413 4.04 percent annual return: According to Morningstar Inc., the Reserve Primary Fund posted a return of 4.04 percent over a twelve-month period, versus a 2.75 percent average among more than twenty-one hundred money market funds it tracks. See Binyamin Appelbaum, “Beyond Wall St., Losses Spill Over,” Washington Post, September 18, 2008; Eleanor Laise, “Market Rescue: Money Funds Offer More Detail,” Wall Street Journal, September 20, 2008.

413 $785 million in Lehman paper: Steve Stecklow and Diya Gullapalli, “A Money-Fund Manager’s Fateful Shift: Bruce Bent Shunned Corporate Debt for Years—Then Bought Some of Lehman’s,” Wall Street Journal, December 8, 2008.

413 “Goldman, Morgan Now Stand Alone”: Aaron Lucchetti and Robin Sidel, “Dow Industrials Take a 504.48-Point Dive—Goldman, Morgan Now Stand Alone; Fight On or Fold?,” Wall Street Journal, September 16, 2008.

415 “For seven years, I’ve said”: Lewis, during a conference call that Monday to discuss the Merrill merger. Joseph A. Giannone, “Goldman, Morgan Stanley Face Biggest Market Test,” Reuters, September 16, 2008.

415 had been given a big promotion by Mack: Pandit joined Morgan Stanley as an associate in 1983. Seventeen years later, with Mack at the helm, he became president of investment banking. Joe Hagan, “The Most Powerless Powerful Man on Wall Street,” New York, March 9, 2009.

415 With $62.6 billion in assets: On Friday, September 12, 2008, the Primary Fund’s assets had been about $62 billion. Diya Gullapalli, Shefali Anand, and Daisy Maxey, “Money Fund, Hurt by Debt Tied to Lehman, Breaks the Buck,” Wall Street Journal, September 17, 2008.

416 “They pretended they were drawing a line in the sand ”: Nouriel Roubini, quoted in Emily Kaiser, “After AIG Rescue, Fed May Find More at Its Door,” Reuters, September 17, 2008.

417 Wachovia’s 2006 acquisition of Golden West: On May 7, 2006, Wachovia announced plans to purchase Golden West Financial Corp., based in Oakland, California, for $25.5 billion. Investors, however, failed to embrace the merger, and Wachovia’s shares took a dive. Jonathan Stempel, “Wachovia CEO—No More Big Mergers After Golden West,” Reuters, June 14, 2006.

417 “The past several months have been”: Serena Saitto and Yalman Onaran, “Fuld Tells Lehman Employees He Feels ‘Horrible’ for Their Pain,” Bloomberg, September 17, 2008.

418 “the war situation has developed ”: Broadcast at noon on August 15, 1945, Hirohito continued with, “while the general trends of the world have turned against her interest.’ ” Andrew Roberts, “The Debt Japan Owes These Men,” Daily Mail (London), September 17, 1993.

418 graduates of Duke and members of the university board: Steel retired from the board in May 2009. See http://trustees.duke.edu/.

419 “One Firm, One Team, Bribe a Leader”: See http://www.dealbreaker.com/robert_kindler/.