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Too Big to Fail: Inside the Battle to Save Wall Street

By Brenda Carpenter,2014-11-04 17:21
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Andrew Ross Sorkin, the news-breaking New York Times journalist, delivers the first true behind-the-scenes, moment-by-moment, account of how the greatest financial crisis since the Great Depression developed into a global tsunami. From inside the corner office at Lehman Brothers to secret meetings in South Korea, Russia and the corridors of Washington, Too Big to Fail is the definitive story of the most powerful men and women in finance and politics grappling with success and failure, ego, greed, and, ultimately, the fate of the world's economy.'We've got to get some foam down on the runway!' a sleepless Timothy Geithner, the president of the Federal Reserve of New York would tell Henry M.Paulson, the Treasury Secretary about the catastrophic crash of the world's fin Published by Allen Lane on 2009/10/28

Too Big to Fail

TOO BIG TO FAIL

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    The Inside Story of How Wall Street and Washington Fought to Save the Financial System fromCrisis—and Themselves

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    Andrew Ross Sorkin

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    VIKING

    VIKING

     Published by the Penguin Group Penguin Group (USA) Inc., 375 Hudson Street, New York, New York10014, 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 (adivision of Penguin Books Ltd) • Penguin Books Australia Ltd, 250 Camberwell Road, Camberwell,Victoria 3124, Australia (a division of Pearson Australia Group Pty Ltd) • Penguin Books IndiaPvt 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 NewZealand 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 2009 by Viking Penguin, a member of Penguin Group (USA) Inc.

Copyright ? Andrew Ross Sorkin, 2009 All rights reserved

    ISBN: 1-101-13480-1

    Without limiting the rights under copyright reserved above, no part of this publication may bereproduced, stored in or introduced into a retrieval system, or transmitted, in any form or byany means (electronic, mechanical, photocopying, recording or otherwise), without the priorwritten permission of both the copyright owner and the above publisher of this book.

    The scanning, uploading, and distribution of this book via the Internet or via any other meanswithout the permission of the publisher is illegal and punishable by law. Please purchase onlyauthorized electronic editions and do not participate in or encourage electronic piracy ofcopyrightable materials. Your support of the author’s rights is appreciated.

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

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    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 themeans through which it was attained or the uses to which it is put.

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

    CONTENTS

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    AUTHOR’S NOTE

    THE CAST OF CHARACTERS AND THE COMPANIES THEY KEPT PROLOGUE CHAPTER ONE CHAPTER TWO CHAPTER THREE CHAPTER FOUR CHAPTER FIVE CHAPTER SIX CHAPTER SEVEN CHAPTER EIGHT CHAPTER NINE CHAPTER TEN CHAPTER ELEVEN CHAPTER TWELVE CHAPTER THIRTEEN CHAPTER FOURTEEN CHAPTER FIFTEEN CHAPTER SIXTEEN CHAPTER SEVENTEEN CHAPTER EIGHTEEN CHAPTER NINETEEN CHAPTER TWENTY EPILOGUE ACKNOWLEDGMENTS NOTES AND SOURCES BIBLIOGRAPHY ?

    AUTHOR’S NOTE

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    This book is the product of more than five hundred hours of interviews with more than twohundred 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 documentaryevidence, including contemporaneous notes, e-mails, tape recordings, internal presentations,draft filings, scripts, calendars, call logs, billing time sheets, and expense reports thatprovided the basis for much of the detail in this book. They also spent hours painstakinglyrecalling the conversations and details of various meetings, many of which were consideredprivileged and confidential.

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

    Much has already been written about the financial crisis, and this book has tried to build uponthe extraordinary record created by my esteemed colleagues in financial journalism, whose workI 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 individualswho propel this narrative genuinely believed they were—and may in fact have been—staring intothe economic abyss.

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

    THE CAST OF CHARACTERS AND THE COMPANIES THEY KEPT

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    FINANCIAL INSTITUTIONS

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    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

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    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

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    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 Michael Klein, independent adviser John S. Varley, chief executive officer

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    Berkshire Hathaway Warren E. Buffett, chairman, chief executive officer Ajit Jain, president, reinsurance unit

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    BlackRock Larry Fink, chief executive officer

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    Blackstone Group Peter G. Peterson, co-founder Stephen A. Schwarzman, chairman, chief executive officer, and co-founder John Studzinski, senior managing director

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    China Investment Corporation Gao Xiqing, president

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    Citigroup Edward “Ned” Kelly, head, global banking for the institutional clients group Vikram S. Pandit, chief executive Stephen R. Volk, vice chairman

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    Evercore Partners Roger C. Altman, founder and chairman

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    Fannie Mae Daniel H. Mudd, president and chief executive officer

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    Freddie Mac Richard F. Syron, chief executive officer

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    Goldman Sachs Lloyd C. Blankfein, chairman and chief executive officer Gary D. Cohn, co-president and co-chief operating officer Christopher A. Cole, chairman, investment banking John F. W. Rogers, secretary to the board Harvey M. Schwartz, head, global securities division sales David Solomon, managing director and co-head, investment banking Byron Trott, vice chairman, investment banking David A. Viniar, chief financial officer Jon Winkelried, co-president and co-chief operating officer

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    Greenlight Capital David M. Einhorn, chairman and co-founder

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    J.C. Flowers & Company J. Christopher Flowers, chairman and founder

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    JP Morgan Chase

    Steven D. Black, co-head, Investment Bank Douglas J. Braunstein, head, investment banking Michael J. Cavanagh, chief financial officer Stephen M. Cutler, general counsel Jamie Dimon, chairman and chief executive officer Mark Feldman, managing director John Hogan, chief risk officer James B. Lee Jr., vice chairman Timothy Main, head, financial institutions, investment banking William T. Winters, co-head, Investment Bank Barry L. Zubrow, chief risk officer

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    Korea Development Bank Min Euoo Sung, chief executive officer

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    Lazard Frères Gary Parr, deputy chairman

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    Lehman Brothers Steven L. Berkenfeld, managing director Jasjit S. (“Jesse”) Bhattal, chief executive officer, Lehman Brothers Asia-Pacific Erin M. Callan, chief financial officer Kunho Cho, vice chairman Gerald A. Donini, global head, equities Scott J. Freidheim, chief administrative officer Richard S. Fuld Jr., chief executive officer Michael Gelband, global head, capital Andrew Gowers, head, corporate communications Joseph M. Gregory, president and chief operating officer Alex Kirk, global head, principal investing Ian T. Lowitt, chief financial officer and co-chief administrative officer Herbert H. (“Bart”) McDade, president and chief operating officer Hugh E. (“Skip”) McGee, global head, investment banking Thomas A. Russo, vice chairman and chief legal officer Mark Shafir, global co-head, mergers and acquisitions

    Paolo Tonucci, treasurer Jeffrey Weiss, head, global financial institutions group Bradley Whitman, global co-head, financial institutions, mergers and acquisitions Larry Wieseneck, co-head, global finance

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    Merrill Lynch John Finnegan, board member Gregory J. Fleming, president and chief operating officer Peter Kelly, lawyer Peter S. Kraus, executive vice president and member of management committee Thomas K. Montag, executive vice president, head, global sales and trading E. Stanley O’Neal, former chairman and chief executive officer John A. Thain, chairman and chief executive officer

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    Mitsubishi UFJ Financial Group Nobuo Kuroyanagi, president, chief executive officer

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    Morgan Stanley Walid A. Chammah, co-president Kenneth M. deRegt, chief risk officer James P. Gorman, co-president Colm Kelleher, executive vice president, chief financial officer, and co-head, strategic

    planning Robert A. Kindler, vice chairman, investment banking Jonathan Kindred, president, Morgan Stanley Japan Securities Gary G. Lynch, chief legal officer John J. Mack, chairman and chief executive officer Thomas R. Nides, chief administrative officer and secretary Ruth Porat, head of the financial institutions group Robert W. Scully, member of the office of the chairman Daniel A. Simkowitz, vice chairman, global capital markets Paul J. Taubman, head, investment banking

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    Perella Weinberg Partners Gary Barancik, partner Joseph R. Perella, chairman, chief executive officer

Peter A. Weinberg, partner

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    Wachovia David M. Carroll, president, capital management Jane Sherburne, general counsel Robert K. Steel, president and chief executive

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    Wells Fargo Richard Kovacevich, chairman, president, chief executive officer

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    THE LAWYERS

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    Cleary Gottlieb Steen & Hamilton Alan Beller, partner Victor I. Lewkow, partner

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    Cravath, Swaine & Moore Robert D. Joffe, partner Faiza J. Saeed, partner

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    Davis, Polk and Wardwell Marshall S. Huebner, partner

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    Simspon Thacher & Bartlett Richard I. Beattie, chairman James G. Gamble, partner

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    Sullivan & Cromwell Jay Clayton, partner H. Rodgin Cohen, chairman Michael M. Wiseman, partner

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    Wachtell, Lipton, Rosen & Katz Edward D. Herlihy, partner

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    Weil, Gotshal & Manges Lori R. Fife, partner, business finance and restructuring

    Harvey R. Miller, partner, business finance and restructuring Thomas A. Roberts, corporate partner

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    NEW YORK CITY

    ? Michael Bloomberg, mayor

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    NEW YORK STATE INSURANCE DEPARTMENT

    ? Eric R. Dinallo, superintendent

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    UNITED KINGDOM

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    Financial Services Authority Callum McCarthy, chairman Hector Sants, chief executive

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    Government James Gordon Brown, prime minister Alistair M. Darling, chancellor of the Exchequer

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    U.S. GOVERNMENT

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    Congress Hillary Clinton, Senator (D-New York) Christopher J. Dodd, Senator (D-Connecticut), chairman of the Banking Committee Barnett “Barney” Frank, Representative (D-Massachusetts), chairman of the Committee on

    Financial Services Mitch McConnell, Senator (R-Kentucky), Republican leader of the Senate Nancy Pelosi, Representative (D-California), Speaker of the House

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    Department of the Treasury Michele A. Davis, assistant secretary, public affairs; director, policy planning Kevin I. Fromer, assistant secretary, legislative affairs Robert F. Hoyt, general counsel Dan Jester, adviser to the secretary of the Treasury Neel Kashkari, assistant secretary, international affairs

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