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

PENGUIN BOOKS

Published by the Penguin Group

Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, U.S.A. • Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada M4P 2Y3 (a division of Pearson Penguin Canada Inc.) • Penguin Books Ltd, 80 Strand, London WC2R 0RL, England • Penguin Ireland, 25 St Stephen’s Green, Dublin 2, Ireland (a division of Penguin Books Ltd) • Penguin Group (Australia), 250 Camberwell Road, Camberwell, Victoria 3124, Australia (a division of Pearson Australia Group Pty Ltd) • Penguin Books India Pvt Ltd, 11 Community Centre, Panchsheel Park, New Delhi - 110 017, India • Penguin Group (NZ), 67 Apollo Drive, Rosedale, North Shore 0632, New Zealand (a division of Pearson New Zealand Ltd) • Penguin Books (South Africa) (Pty) Ltd, 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa

Penguin Books Ltd, Registered Offices: 80 Strand, London WC2R 0RL, England

First published in the United States of America by Viking Penguin, a member of Penguin Group (USA) Inc. 2009

This edition with a new afterword published in Penguin Books 2010

Copyright © Andrew Ross Sork in, 2009, 2010

All rights reserved

PHOTOGRAPH CREDITS

Insert page 1 ( top ): Lehman Brothers Holdings; ( center ): Hiroko Masuike/World Picture Network; ( bottom ): Scott J. Ferrell/Cong ressional Quarterly/Getty Images. Pages 2 ( top ), 3 ( top ), and 13 ( bottom ): Chip Somodevilla/Getty Images News. Pages 2 ( center ) and 6 ( top ): © Corbis. Page 2 ( bottom ): Brendan Smialowski/The New York Times/Redux. Pages 3 ( bottom ), 4 ( top ), and 10 ( center ): United States Department of Treasury. Page 4 ( bottom left ): Ethan Miller/Getty Images Entertainment. Pages 4 ( bottom right ), 7 ( center right ), and 9 ( center and bottom ): Photographer: Andrew Harrer/Bloomberg. Page 5 ( top left ): Scott Halleran/Getty Images Sport; ( top right ): Sullivan & Cromwell; ( bottom ): Magic Photography. Page 6 ( bottom ): Keith Waldgrave/Solo/Zuma Press. Page 7 ( top ); Goldman, Sachs & Co.; ( center left ): Axel Schmidt/ DDP/Getty Images. Pages 7 ( bottom ) and 8 ( top left and right ): J. P. Morgan. Page 8 ( bottom ): Yoshikazu Tsuno/AFP/ Getty Images. Page 9 ( top ): Mario Tama/Getty Images News. Page 10 ( top ): Wachtell, Lipton, Rosen & Katz; ( bottom ): Reuters. Pages 12 ( all ) and 14 ( bottom ): Morgan Stanley. Page 13 ( top ): Mark Wilson/Getty Images News; ( center ): Chester Higgins Jr./The New York Times/Redux. Page 14 ( top ): Win McNamee/Getty Images News. Page 16 ( top ): Alex Wong/Getty Images News; ( bottom ): Robert Kindler.

eISBN : 978-1-10144324-8

CIP data available

The scanning, uploading and distribution of this book via the Internet or via any other means without the permission of the publisher is illegal and punishable by law. Please purchase only authorized electronic editions, and do not participate in or encourage electronic piracy of copyrighted materials. Your support of the author’s rights is appreciated.

While the author has made every effort to provide accurate telephone numbers and Internet addresses at the time of publication, neither the publisher nor the author assumes any responsibility for errors or for changes that occur after publication. Further, publisher does not have any control over and does not assume any responsibility for author or third-party Web sites or their content.

http://us.penguingroup.com

To my parents, Joan and Larry, and my loving wife, Pilar

Size, we are told, is not a crime. But size may, at least, become noxious by reason of the means through which it was attained or the uses to which it is put.

—Louis Brandeis, Other People’s Money: And How the Bankers Use It, 1913

AUTHOR’S NOTE

This book is the product of more than five hundred hours of interviews with more than two hundred individuals who participated directly in the events surrounding the financial crisis. These individuals include Wall Street chief executives, board members, management teams, current and former U.S. government officials, foreign government officials, bankers, lawyers, accountants, consultants, and other advisers. Many of these individuals shared documentary evidence, including contemporaneous notes, e-mails, tape recordings, internal presentations, draft filings, scripts, calendars, call logs, billing time sheets, and expense reports that provided the basis for much of the detail in this book. They also spent hours painstakingly recalling the conversations and details of various meetings, many of which were considered privileged and confidential.

Given the continuing controversy surrounding many of these events—several criminal investigations are still ongoing as of this writing, and countless civil lawsuits have been filed—most of the subjects interviewed took part only on the condition that they not be identified as a source. As a result, and because of the number of sources used to confirm every scene, readers should not assume that the individual whose dialogue or specific feeling is recorded was necessarily the person who provided that information. In many cases the account came from him or her directly, but it may also have come from other eyewitnesses in the room or on the opposite side of a phone call (often via speakerphone), or from someone briefed directly on the conversation immediately afterward, or, as often as possible, from contemporaneous notes or other written evidence.

Much has already been written about the financial crisis, and this book has tried to build upon the extraordinary record created by my esteemed colleagues in financial journalism, whose work I cite at the end of this volume. But what I hope I have provided here is the first detailed, moment-by-moment account of one of the most calamitous times in our history. The individuals who propel this narrative genuinely believed they were—and may in fact have been—staring into the economic abyss.

Galileo Galilei said, “All truths are easy to understand once they are discovered; the point is to discover them.” I hope I have discovered at least some of them, and that in doing so I have made the often bewildering financial events of the past few years a little easier to understand.

THE CAST OF CHARACTERS AND THE COMPANIES THEY KEPT

FINANCIAL INSTITUTIONS

American International Group (AIG)

Steven J. Bensinger, chief financial officer and executive vice president

Joseph J. Cassano, head, London-based AIG Financial Products; former chief operating officer

David Herzog, controller

Brian T. Schreiber, senior vice president, strategic planning

Martin J. Sullivan, former president and chief executive officer

Robert B. Willumstad, chief executive; former chairman

Bank of America

Gregory L. Curl, director of corporate planning

Kenneth D. Lewis, president, chairman, and chief executive officer

Brian T. Moynihan, president, global corporate and investment banking

Joe L. Price, chief financial officer

Barclays

Archibald Cox Jr., chairman, Barclays Americas‘

Jerry del Missier, president, Barclays Capital

Robert E. Diamond Jr., president, Barclays PLC; chief executive officer, Barclays Capital