Posted on 10/21/2009 12:31:38 AM PDT by CutePuppy
In the summer of 2008, two months before Lehman Brothers filed for bankruptcy, Richard S. Fuld Jr., the firm's chairman, was continuing his desperate efforts to find a lifeline. They had begun in March, shortly after the demise of Bear Stearns, when Mr. Fuld called the legendary investor Warren E. Buffett seeking a capital infusion, to no avail. Lehman had raised money elsewhere, but that didn't help for long, and its condition again was worsening.
Adapted from "Too Big to Fail: How Wall Street and Washington Fought to Save the Financial System — And Themselves." The book, being published Tuesday by Viking, reveals how officials in Washington, worried about the impact of Lehman's possible failure on the financial system, for months helped orchestrate efforts by Mr. Fuld to seek a solution for the firm and stave off its collapse. The conversations recounted are based on hundreds of hours of interviews with dozens of participants, many of whom agreed to speak on the condition that they not be identified as sources.
“I know it’s not true, you know it’s not true.”
Richard Fuld, as tightly wound as ever, was raging in his office on the morning of Thursday, July 10, 2008, to one of his lieutenants. Lehman Brothers’ stock had opened down 12 percent, to an eight-year low, in response to a rumor that the Pacific Investment Management Company, the world’s biggest bond fund, had stopped trading with the firm. Speculation also was swirling that SAC Capital Advisors, Steven A. Cohen’s hedge fund, was also no longer trading with Lehman. “You’ve got to call these guys and get them to put out a statement,” Mr. Fuld said.
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(Excerpt) Read more at cnbc.com ...
The story of a company that was too big to fail - until it did.
The sad part, and a larger lesson of this financial crisis, is that this is a story of more than just one company.
Lehman found itself not at all alone in this position, but almost any institution in TBTF category could turn up on the chopping block, and some, in addition to and bigger than Lehman, actually did.
I say “almost” because Sorkin has pulled off a rare feat. He has turned more than 500 hours of interviews and documentary evidence ranging from e-mails to call logs into an engrossing fly-on-the-wall account of one of the most tumultuous years in U.S. history. “In the end,” he writes, “this drama is a human one, a tale about the fallibility of people who thought they themselves were too big to fail.” ..... As chapter one opens, we see Richard S. Fuld Jr. of Lehman Brothers Holdings Inc. shuffling out the front door of his mansion in Greenwich, Connecticut, and into the back seat of a chauffeured black Mercedes. It’s 5 a.m. on March 17, 2008, and there’s talk of a run on the bank. From there, Sorkin traces the full arc of the crisis as it unfolded in executive suites, corporate jets and government Suburbans that year. He shows how U.S. Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and Timothy Geithner at the New York Fed brokered ad hoc deals in an attempt to halt the conflagration as it engulfed one institution after another -- Fannie Mae and Freddie Mac, Lehman, Merrill Lynch & Co., American International Group Inc. Take the Money The story closes on the chilling day last October when Paulson seated the leaders of nine banks -- including Jamie Dimon of JPMorgan Chase, Vikram Pandit of Citigroup Inc. and Richard Kovacevich of Wells Fargo & Co. -- around a 24-foot-long mahogany table and effectively ordered them to take billions of dollars in government cash injections in exchange for preferred shares. When Kovacevich protested that his San Francisco-based bank didn’t need its $25 billion slug -- “I’m not one of you New York guys with your fancy products,” he’s quoted as saying -- Paulson responded with a none-too-subtle threat of a regulatory crackdown, according to this account. “You’re going to get a call tomorrow telling you you’re undercapitalized and that you won’t be able to raise money in the private markets,” Paulson is quoted as saying. ..... Other anecdotes are less familiar, especially when it comes to Geithner’s often inept attempts to play matchmaker between a dizzying array of banks. His “insta-merger strategy” became so unpopular that executives started calling him “eHarmony,” after the online dating service, Sorkin says. ..... Sorkin resists editorializing until the epilogue, where he poses a key question about Paulson: Did his work help mitigate the crisis -- or make it worse? Paulson gets a passing grade. “A year later, it appears that many of the steps he took in the midst of the crises laid the groundwork for the market’s stabilization,” Sorkin writes. The danger now, he adds, is that Washington will squander a “once-in-a-generation opportunity” to fix our broken regulatory machinery, including tougher limits on leverage. “Relieved that the worst is supposedly behind us, the Obama administration seems to have moved on to other priorities,” he writes. That is a monumental mistake. Andrew Ross Sorkin’s “Too Big to Fail” is almost too big to read: 600 packed pages recounting, blow by BlackBerried blow, how Wall Street and Washington struggled to save the financial system (and their own skins).
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