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

447 “While this is all politically pleasing”: Chanos, as reported by Kara Scannell, Deborah Solomon, Craig Karmin, and Gregory Zuckerman, “SEC Is Set to Issue Temporary Ban Against Short Selling,” Wall Street Journal, September 19, 2008.

447 Merrill Lynch had bought insurance covering $150 million: On September 17, Merrill bought insurance to cover $106.2 million in Morgan Stanley debt and returned the following day, September 18, to buy protection on another $43 million of debt, according to trading documents obtained by the Wall Street Journal . Susan Pulliam, Liz Rappaport, Aaron Lucchetti, Jenny Strasburg, and Tom McGinty, “Anatomy of the Morgan Stanley Panic—Trading Records Tell Tale of How Rivals’ Bearish Bets Pounded Stock in September,” Wall Street Journal, November 24, 2008.

447 Citigroup, Deutsche Bank, UBS, AllianceBernstein, and Royal Bank of Canada: Ibid.

448 Wei Sun Christianson: In December 2007, Christianson played a major role in negotiating Morgan Stanley’s $5.6 billion deal with China Investment Corp., which gave CIC a 9.9% percent stake in the company. See Jason Leow and Rick Carew, “Wei Sun Christianson and How Morgan Deal Got Boost in China—Longtime Mack Aide from Beijing Lends Stature, Ties to Region,” Wall Street Journal Asia, December 21, 2007.

448 CIC already held a 9.9 percent stake in Morgan Stanley: When Morgan Stanley announced a loss of $3.59 billion at the end of 2007, the state-owned China Investment Corp. (CIC) invested five-billion-dollars in the company, giving it a 9.9 percent stake. “China Fund Grabs Big Stake in Morgan Stanley,” AFP, December 2007.

448 he’d be interested in buying up to 49 percent of the firm: Christine Har per, “Morgan Stanley Said to Be in Talks with China’s CIC,” Bloomberg, September 18, 2008.

448 investments, in Blackstone: When Blackstone went public in June 2007, CIC invested $3 billion—giving it a 9.9 percent stake in the company. Since then shares had fallen by nearly 45 percent, to $17.13 in late August, giving CIC a paper loss of more than $1.3 billion. Allen T. Cheng, “Inside the CIC,” Institutional Investor—America , September 10, 2008.

CHAPTER EIGHTEEN

449 “the illiquid assets”: “Text of Paulson’s News Conference Friday,” Associated Press, September 19, 2008.

451 Wachovia’s $120 billion mortgage portfolio: As part of its 2006 purchase of Golden West Financial Corp., Wachovia inherited a $120 billion adjustable-rate home-loan portfolio, the bulk of which comes from California and Florida, two of the hardest-hit housing markets in the country. Dan Fitzpatrick, Alex Roth, and David Enrich, “With Wachovia Sale Looking Likely, a Makeover for Charlotte, U.S. Banking,” Wall Street Journal, September 29, 2008.

451 Bob Steel had estimated that figure at 12 percent: Speaking at the Lehman Brothers Financial Services Conference on Tuesday, September 9, Steel said Wachovia still expects losses equal to 12 percent, though he said, “it’s still early days.” See “Wachovia Keeps Mortgage Loss View,” stock downgraded, AFX Asia, September 9, 2008.

454 his firm would not be making any investments: “We won’t be investing in U.S. banks under current circumstances,” Ryosuke Tamakoshi said in Tokyo on Tuesday, September 16, 2008. Takahiko Hyuga, Shingo Kawamoto, and Komaki Ito, “Japan Banks, Insurers Have $2.4 Billion Lehman Risk,” Bloomberg, September 17, 2008.

456 Gao reiterated his interest in buying 49 percent of Morgan Stanley: Christine Harper, “Morgan Stanley Said to Be in Talks with China’s CIC,” Bloomberg, September 18, 2008.

457 the sale of Lehman Brothers to Barclays: Ben White and Eric Dash, “Barclays Reaches $1.75 Billion Deal for a Lehman Unit,” New York Times, September 18, 2008.

457 “You may approach ”: The dialogue between Judge Peck and Harvey Miller was taken from the official court transcript, dated September 19, 2008.

463 Merging the “Houses of Morgan”: Chernow, The House of Morgan, 591 .

464 “URGENT and Confidential ”: Author obtained copy of e-mail.

466 chose Roger Altman: Morgan Stanley’s independent board members chose to hire Roger Altman as their adviser, but he only narrowly won the assignment over Christopher Lawrence, a banker at Rothschild.

468 “Decisions by the Secretary pursuant to the authority”: “Text of Draft Proposal for Bailout Plan,” New York Times, September 20, 2008.

472 “You know, there’s a chance I could lose the firm”: Mack later recounted this story to Bloomberg: “I said to my wife, when things were really crazy, ‘You know, there’s a chance I will lose this firm. But I would rather be doing this than sitting on a beach reading a book.’ ” See Lisa Kassenaar and Christine Harper, “Mack Tells Wife He May Lose Firm Before Brokerage Bid,” Bloomberg, January 26, 2009.

473 the headline “King Henry”: Newsweek , September 29, 2008.

473 a quote from Governor Jon Corzine: “There hasn’t been a consistent pattern… . We save Bear Stearns but not Lehman. The market is going to have a hard time sorting through what the underlying principle is.” Daniel Gross, “The Captain of the Street; Treasury Secretary Hank Paulson Has a Radical Game Plan for Beating America’s Financial Crisis,” Newsweek, September 29, 2008.

474 “If you were in your old job”: Tom Brokaw , Meet the Press, NBC, September 21, 2008.

476 “He understands Berkshire far better”: Buffett, from his 2003 chairman’s letter. See the annual report at http://www.berkshirehathaway.com/2003ar/2003ar.pdf.

477 it had used Morgan Stanley as an adviser: “MUFG’s unsolicited bid, arranged by Morgan Stanley as its financial advisor, also illustrates how conservative Japanese companies are adapting to the cut and thrust of U.S. M&A.” Yuka Hayashi and Alison Tudor, “MUFG offers to buy UnionBanCal,” Wall Street Journal Asia , August 13, 2008.

485 Mitsubishi agreeing to buy up to 20 percent: Louise Story, “Morgan Stanley Secures Japan Deal; Mitsubishi UFJ to Pay $9 billion for 21% Stake in U.S. Firm,” New York Times, October 1, 2008.

486 At 9:30 p.m., the news hit the wires: On September 21, 2008, the Federal Reserve released the following: “The Federal Reserve Board on Sunday approved, pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.” See http://www.federalreserve.gov/newsevents/press/bcreg/20080921a.htm.

CHAPTER NINETEEN

488 “It would be a grave mistake”: Representative Barney Frank, appearing on Face the Nation, CBS, September 21, 2008.

488 Trott called Buffett again: Chris Blackhurst, “Billionaire Buffett and the Only Banker He Trusts,” Evening Standard (London), September 25, 2008.

489 Buffett buying $5 billion in Goldman Stock: Susanne Craig, Matthew Karnitschnig, and Aaron Lucchetti, “Buffett to Invest $5 Billion in Goldman,” Wall Street Journal, September 24, 2008.

490 Winkelried’s salary: Joseph McCafferty, “Goldman Execs Earn $70M Plus,” Directorship .com; Joseph A. Giannone, “Goldman Buys $58 mln Winkelried, Palm Fund Stakes,” Reuters, March 30, 2009.

490 Winkelried selling Nantucket property: According to the Town of Nantucket’s tax assessor’s office, Winkelried purchased 4.18 acres for $5 million in January 1999 and another 1.7 acres for $1.95 million later that September. Peter B. Brace, “Goldman Sachs Executive Selling 5.9 Acres on Nantucket for $55 million,” Daily News Tribune , October 10, 2008; Christine Harper and Sharon L. Lynch, “Goldman’s Winkelried Lists Nantucket Estate for $55 Million,” Bloomberg, October 10, 2008.