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Two Days That Upended Wall Street
The Wall Street Journal ^ | 01-31-10 | HENRY M. PAULSON JR.

Posted on 02/01/2010 6:27:33 PM PST by GOP_Lady

Former Treasury Secretary Paulson's New Book Details Tense Hours Leading Up to Lehman Brothers' Bankruptcy

The following account of the tense 48 hours preceding the bankruptcy of Lehman Brothers is excerpted from former Treasury Secretary Hank Paulson's new book, "On the Brink."

Early Saturday morning, I left the Waldorf-Astoria Hotel in Midtown Manhattan, climbed into a car, and sped down a deserted Park Avenue, arriving at the New York Fed just after 7 a.m.

We rode the elevator up to the 13th floor, where Tim Geithner had arranged for me to work in an office just down the hall from his own suite. I called (Bank of America CEO) Ken Lewis, who reported that after closer inspection his people now believed that Lehman's assets were in even worse shape than they had thought the previous evening. It was increasingly obvious that he didn't really want to buy Lehman.

I joined Tim in his office for a conference call with Barclays at about 8 a.m. Bank Chairman Marcus Agius and CEO John Varley were on the line from London, and (President) Bob Diamond was at Barclay's midtown Manhattan offices. Varley said they were working hard on a possible deal, but had serious concerns about some of Lehman's assets, and indicated Barclays would need to leave $52 billion of them behind.

I told Varley to focus on the biggest problems first—the assets he thought were going to be the most troubled—and tell us what he needed to take care of them. If Barclays gave us its best offer that day, we believed we could deliver a private-sector consortium that would fund whatever shortfall there was. Even as we spoke, the leaders of virtually the entire banking industry were assembling downstairs at the Fed.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS: bailouts; banking; bookreview; lehman; lehmanbrothers; onthebrink; paulson; tarp; wallstreet
"What if the system collapses?" I asked her. "Everybody is looking to me, and I don't have the answer. I am really scared."
1 posted on 02/01/2010 6:27:35 PM PST by GOP_Lady
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To: AdvisorB; antivenom; Blonde; BroJoeK; Diana in Wisconsin; eddiespaghetti; Fintan; gibsosa; ...


To be added or removed from the
"The Wall Street Journal" Ping List,
FReepmail
GOP_Lady.

2 posted on 02/01/2010 6:27:59 PM PST by GOP_Lady
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To: GOP_Lady

If this doesn’t prove to you that TARP was needed, then I cannot help you.


3 posted on 02/01/2010 6:28:40 PM PST by GOP_Lady
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To: GOP_Lady

Paulson is one of the men who conned America to the brink and ushered in B. Hussein Obama and full-blown Marxism. There will be a special place in hell for him and his co-conspirators.


4 posted on 02/01/2010 6:32:25 PM PST by Jim Robinson (Join the TEA Party Rebellion!! Just vote them OUT!!)
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To: Jim Robinson

I don’t think so.

The man did his job to the best of ability and did it well.


5 posted on 02/01/2010 6:33:18 PM PST by GOP_Lady
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To: GOP_Lady

ROFLOL!!


6 posted on 02/01/2010 6:34:14 PM PST by Jim Robinson (Join the TEA Party Rebellion!! Just vote them OUT!!)
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To: Jim Robinson

The collapse of the economy is no laughing matter.


7 posted on 02/01/2010 6:34:53 PM PST by GOP_Lady
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To: Jim Robinson

Does he say who started the bank run by withdrawing 5.5B in a few hours?

Probably Russia or China.


8 posted on 02/01/2010 6:35:04 PM PST by ully2 (ully)
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To: GOP_Lady

bump


9 posted on 02/01/2010 6:35:40 PM PST by bert (K.E. N.P. +12 . Tax the poor. Taxes will give them a stake in society)
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To: GOP_Lady

But the corrupt aholes who did it did such a great job. Get real!


10 posted on 02/01/2010 6:37:19 PM PST by Jim Robinson (Join the TEA Party Rebellion!! Just vote them OUT!!)
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To: GOP_Lady
Barack Obama's first two budgets have given us $3T in deficit spending. I may be an idiot, but I maintain that the system should have collapsed back in 2008. People should have taken their lumps. That's what capitalism is all about. And after the dust settled, in late 2008 or early 2009, we could have said, "What can we spend to help rebuild? Maybe ... uh ... $3T?"

And I maintain that we'd be in better shape today as a result.

11 posted on 02/01/2010 6:38:12 PM PST by ClearCase_guy (We have the 1st so that we can call on people to rebel. We have 2nd so that they can.)
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To: GOP_Lady

Paulson I heart obama

Hank Paulson feared there would be a run on the dollar during the early phase of the financial crisis when global concerns were focused on the US. When the crisis escalated and went global with the failure of Lehman Brothers in September 2008, the dollar rallied – but Mr Paulson had to grapple with a firestorm of financial failures.

He feared Goldman Sachs and Morgan Stanley would go down along with Washington Mutual and Wachovia.

“The timing could not have been worse since we were months or weeks from the election so you had the collision of markets and politics.”

Although a Republican, Mr Paulson found it harder to deal with John McCain than Barack Obama – raising the interesting (and unanswered) question of which candidate Mr Paulson voted for.

http://www.ft.com/cms/s/0/772748d6-0e94-11df-bd79-00144feabdc0.html?nclick_check=1


12 posted on 02/01/2010 6:39:10 PM PST by FromLori (FromLori)
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To: GOP_Lady

And the same names that caused this are trying to fix the problem?

Bullshit!


13 posted on 02/01/2010 6:43:31 PM PST by Randy Larsen ( BTW, If I offend you! Please let me know, I may want to offend you again!(FR #1690))
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To: ully2

Hank Paulson is a moron.

Russians Refute Paulson Claim That They Wanted China To Help Force US Bailout of Fannie & Freddie

http://blogs.abcnews.com/politicalpunch/2010/02/russians-refute-paulson-claim-that-they-wanted-china-to-help-force-us-bailout-of-fannie-freddie.html


14 posted on 02/01/2010 6:44:01 PM PST by Blonde
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To: GOP_Lady
The "venerable" Lehman Brothers was allowed to crash and Goldman Sachs just decided to stick around for desert.

FReegards!


15 posted on 02/01/2010 6:45:12 PM PST by Agamemnon (Intelligent Design is to evolution what the Swift Boat Vets were to the Kerry campaign)
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To: GOP_Lady

So who is in a big rush to run out an buy “Daddy Yourbucks’ book?

I’ll see what Costco wants for it...


16 posted on 02/01/2010 6:52:17 PM PST by Bean Counter (Stout Hearts...)
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To: GOP_Lady

In August 2007, Secretary Paulson explained that U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades.

On July 20, 2008, after the failure of Indymac Bank, Paulson reassured the public by saying, “it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

On August 10, 2008, Secretary Paulson told NBC’s Meet the Press that he had no plans to inject any capital into Fannie Mae or Freddie Mac. On September 7, 2008, both Fannie Mae and Freddie Mac went into conservatorship.


17 posted on 02/01/2010 6:52:35 PM PST by listenhillary (FU Cass Sunstein - You are the embodiment of evil)
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To: ClearCase_guy
You are hopelessly wrong. Even the amount of smash we got out of just Lehman going down, is what pushed unemployment to 10% and capacity use below 60%, and destroyed $15 trillion in total wealth.

Active monetary policy since then has repaired between a third and half the damage, but it took 18 months.

No party or ideology that thinks about finance or economics what you think about them, will ever have responsible power in this country, and doesn't deserve any.

18 posted on 02/01/2010 7:03:30 PM PST by JasonC
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To: ully2

Who did it? Try George Soros and his cronies. The straw that broke the banks: short selling Lehman stock.


19 posted on 02/01/2010 7:09:01 PM PST by southernmomma
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To: JasonC
I agree. I'm surprised it only took 18 months to recover.
20 posted on 02/01/2010 7:13:25 PM PST by GOP_Lady
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To: ClearCase_guy

“And I maintain that we’d be in better shape today as a result. “

I agree with that. I’ve never bought the “too big to fail” theory. They should have simply declared bankrupcy like any other business that is run into the ground by idiots. It’s beyond me why the banks are pampered by Washington. Barry’s recent tough talk about the banks is laughable considering that he donated hundreds of billions of dollars to them in the first place. It’s creepy that Paulson is devoting his energies to self congratulatory memoirs in the style of Barry.


21 posted on 02/01/2010 7:35:41 PM PST by purplelobster
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To: GOP_Lady

Complete and utter crap. Paulson belongs in a very cramped prison cell.


22 posted on 02/01/2010 7:38:55 PM PST by Lurker (The avalanche has begun. The pebbles no longer have a vote.)
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To: GOP_Lady
I sorta, kinda trust Beck, and Beck was told by one of his richy rich friends "in the know" that tarp was needed and "thank God that Paulson was there"....

I don't know what that all means.....anyway you look at it, the average citizen got nothing out of this deal....we didn't have the outrageous bonuses and paychecks and stock options....we dutifully contributed to out mutual fund accounts in our 401's like good little soldiers....

did it save our banking system?....how would we know.....all the details of who got what money are hidden away.

23 posted on 02/01/2010 7:42:03 PM PST by cherry
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To: Lurker
Paulson belongs in a very cramped prison cell.

with a big, ill-tempered roomie who lost money as a WaMu shareholder.

24 posted on 02/01/2010 7:46:14 PM PST by seton89 (Use Amendment X as your email signature)
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To: GOP_Lady
Paulson will go down in history as one of the worst Treasury Secretaries ever. This little book of fantasy spin does nothing but continue to coverup the bailouts and to protect his worthless legacy. A small glimpse of the truth occured this week when it was reported that the Puget Sound Business Journal requested the communications between Paulson and the OTS over the Wamu seizure. Guess what?

Over 80% of the content of the email messages they received was blacked out. Guess we won't be hearing about the content of those emails in his book.

Given the fact that Wamu was still rated as "well-capitalized", including a 7 billion dollar cash injection from a private equity firm just a few months earlier, when the FDIC was ordered to seize them by Paulson and sell their over 300 billion in assets to JPMorganChase for 1.9 billion, this was one of the biggest bank robberies in the history of finance. All in the name of making sure one of the "too big to fails" didn't fail and to cover up their losses.

That's ok. Just tell the Wamu equity holders and bond holders who lost billions in this backdoor bailout of JPMC that it was just their time to "take one for the team" and to speed up the recovery.

Tell it to the millions who lost their jobs and savings to help speed up the recovery of the major financials "left standing".

Tell it to the US taxpayer who had to pay billions to foreign banks to bail them out too.

Don't worry Paulson. You sure sped up the recovery. Your legacy is protected. Just keep spewing out your works of fiction.

25 posted on 02/01/2010 8:01:27 PM PST by Proud_USA_Republican ("The problem with socialism is that you eventually run out of other people's money.")
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To: GOP_Lady
What if the system collapses?

The "system" is the greatest ever devised by mankind and would NEVER collapse, unless subverted by internal enemeies or overthrown by external enemies. But that's not what we are talking about is it, Henry?

Jerkwad.

26 posted on 02/01/2010 8:06:57 PM PST by PGalt
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To: GOP_Lady

Paulson and his pals unconstitutionally raided the US Treasury to prop up their floundering Wall Street casino operation. The Wall Street whiz kids with full approval and encouragement of revolving door insider government regulators and legislative overseers gambled and lost with the assets of their clients and investors and then ripped off the taxpayers for trillions and trillions to cover their losses. In doing so, they have endangered our very ability to exist and continue as a free nation.

Nowhere in the constitution can I find the authority for the federal government to put the US Treasury and the full faith and credit of the US Government at risk to prop up a private enterprise. Untold trillions have been put at risk for these clowns. Our entire future has been recklessly mortgaged.

Bush, Paulson, Geithner, McCain, Obama, et al, have basically wiped us out. TARP is a colossal failure and a disaster of historic proportions. This is far from over.

And Obama & Co. is now in the process of completing the total destruction of America. He’s putting us untold trillions of dollars into additional debt and will increase taxes to the point that he will bankrupt the rest of the economy.

Thanks a lot Bush, Paulson, McCain, Obama, et al. Great job!!


27 posted on 02/02/2010 6:27:49 AM PST by Jim Robinson (Join the TEA Party Rebellion!! Just vote them OUT!!)
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To: Jim Robinson; GOP_Lady

GOP_Lady you have a lot to learn about what happened last fall. Jim Rob has it exactly right on Paulson, Gethner, Bernake, Greenspan, the iBanks, Fannie/Fredie, GWB + every Congress critter including OBummer that voted for the Bailouts must be brought to justice. They are Thieves and/or Fools that betrayed their Constitutional duties and deserve nothing more a brief trial and a short rope!


28 posted on 02/02/2010 11:21:27 AM PST by iopscusa (El Vaquero. (SC Lowcountry Cowboy))
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To: iopscusa

I posted this article as an interesting read, not to be criticized.


29 posted on 02/02/2010 2:01:24 PM PST by GOP_Lady
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To: Proud_USA_Republican; GOP_Lady; Jim Robinson; Agamemnon; All

I contend that a major problem has been blind greed at the top. I have listed CEO salaries from “Forbes CEO Compensation” for 5/3/07, 4/30/08 and 4/22/09. Salaries are in millions of dollars.

In 07, Countrywide’s CEO salary was $142 million, in Aug. 07 it was in trouble, in Jan. 08 it was in more trouble, in April 08 the salary was dropped to a mere $103M, and in July 08 it was acquired by Bank of America. In noticeable contrast for the 3 years was BoA CEO salary: $100M, $20M, and $12.5M.

On the other hand WaMu from 07 to 08 dropped from $23M to $5M. And AIG from $18M to $11, and currently $0. Another loser was Merrill Lynch, $36M to $16M. In contrast, Lehman Brothers rose from $52M to $72M in April 08. Do you think maybe the London bankers in summer of 08 took a look and said “what is with this greedy axxhole?” And what about Morgan Stanley, $7M to $18M.

Now lets take a look at the survivers. See BoA and AIG above. Wells Fargo $72M, $13M and $1.4. JP Morgan Chase $57M, $21M and $8.5M. Bank of NY $19M, $14M and $5M. Citigroup $18M, $1M and $3M.

In virtually all cases those who kept their high salaries did not keep their companies. The notable exception, Oh my Gosh, was Goldman Sachs $37M to $74M, and most recently $26 million. Can anyone explain this? Missing from the top 14 in 07 and 08 was Hudson City Bankcorp which in 09 paid it’s CEO $42 million. Any information on them?

I will be interested to read the interpretations of others, but to me it seems those who cut early survived. Those who stayed greedy did not, with one notable exception!!


30 posted on 02/03/2010 10:31:39 PM PST by gleeaikin
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