Bear Stearns had long been sold to JPMorgan Chase, Lehman Brothers had already fallen and the American International Group had been all but privatized by an unprecedented government rescue. But the final months of Henry M. Paulson Jr.’s tenure as Treasury secretary were almost as tense as the weeks during the height of the financial crisis.
In his new memoir, “On the Brink,” Mr. Paulson retraces his tenure as President Bush’s third Treasury secretary, describing — and defending — the efforts he undertook to halt the global financial collapse in the fall of 2008. Much of what he has written has been told before. But the book makes a little progress in humanizing an official who, at the time, was largely impassive and unreadable.
To be clear, it’s only a little. Mr. Paulson makes a few things explicit about himself: his Christian Science faith, which led to an oft-recounted struggle over whether to take a sleeping pill in the midst of the crisis; his devotion to his family and to his environmentalism; and his aspirations to a nonideological approach to leading Treasury. His 28-year career at Goldman Sachs, culminating as its chief executive, however, is boiled down to a fraction of the second chapter, with little explanation of his firm’s own role in helping foment the financial crisis he admits he didn’t entirely foresee.
The bulk of the book is focused on a tick-tock of his leadership during the financial crisis, making gut decisions on little sleep. (He didn’t take the sleeping pill.) Even after the lows of the market turmoil, however, things didn’t improve that much.
By mid-November, Mr. Paulson makes it clear that despite having pushed the $700 billion financial rescue package through Congress, his work wasn’t done. Citigroup — then Bank of America and the auto makers — were still on the brink of catastrophe.
On Nov. 19, Mr. Paulson briefed President Bush on Citi’s suddenly calamitous position, a development the Treasury secretary writes took even him by surprise. The pressing need was to get Congress to release the second half of the Troubled Asset Relief Program, $350 billion that was urgently needed to prop up the bank.
Here’s the conversation Mr. Paulson recounts having had with Mr. Bush.
“It’s politically difficult, but we’re going to have to figure out how to do it,” I told him.
“Just don’t let Citi fail,” he replied.
But there were problems to overcome, including the entreaties of Robert E. Rubin, Mr. Paulson’s predecessor as both Treasury secretary and Goldman chief executive; Democrats skeptical of bailing out another financial institution; and Republicans leery of that money then going to a lifeline for the automakers. Then, in a bit of bittersweet news, Timothy F. Geithner was picked by President-elect Obama as Mr. Paulson’s successor, rallying the markets but depriving the government of a crucial negotiator.
One of the striking things about Mr. Paulson’s memoir is that he’s awfully nice in recounting his tale. Whereas other accounts (including “Too Big to Fail,” by DealBook’s Andrew Ross Sorkin) detail tensions between Mr. Paulson and the likes of J. Christopher Flowers, the memoirist here remains at the least cordial. So during a conference call to discuss Citi, here’s the harshest Mr. Paulson has to say about Sheila C. Bair, the chairman of the Federal Deposit Insurance Corporation:
I respected Sheila who improved most programs we worked on together. But sometimes she said things that made my jaw drop. That morning she had said she wasn’t sure that Citi’s failure would constitute a systemic risk. She … spoke as if Citi were just another failing bank and not a world leader — with $3 trillion in assets, both on and off its balance sheet — imploding in the midst of the worst economic conditions since the Great Depression.
(He later goes on to say that Ms. Bair faced her own skeptics at the F.D.I.C. and needed to press as hard as she could. So much for the internecine strife.)
Within a matter of days, the government fashioned what amounted to a massive insurance policy for Citi, rallying the markets. But while Mr. Paulson took roughly a week’s rest, kayaking with his wife and watching a bald eagle with his granddaughter Willa, the auto makers again loomed as a problem. Again the problem was mainly political: Democrats wouldn’t release the final portion of TARP money without aid for General Motors and Chrysler; Republicans would fight tooth and nail to withhold government assistance for the car makers. (President Bush, he writes, was none too pleased either, but appreciated the devastation the companies’ failure would wreak.)
As if that weren’t enough, by Dec. 17, Bank of America chief Kenneth D. Lewis called with second thoughts about his $50 billion deal for Merrill Lynch, with predicted losses at Merrill standing then at $18 billion. At an impromptu meeting at Treasury, Bank of America sought a “Citi” sort of backstop, a move that would tax the government’s resources if it didn’t get the second tranche of TARP money. Otherwise, it was studying the possibility of invoking an escape hatch, in the form of a material adverse clause in the merger agreement.
By Dec. 19, the Bush administration scrounged up enough money from the existing TARP funds to supply emergency financing to G.M. and Chrysler. On Dec. 21, Mr. Paulson got a call from a “shaken” Mr. Lewis, who again warned that Bank of America was still pondering walking away from Merrill. After some jostling, including the implied threat of removing Bank of America’s management and board, Mr. Lewis backed off.
“Let’s de-escalate,” he told Mr. Paulson.
By Jan. 1, the Merrill deal had closed.
Go to “On the Brink” from Amazon.com »
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Bear Stearns had long been sold to JPMorgan Chase, Lehman Brothers had already fallen and the American International Group had been all but privatized by an unprecedented government rescue. But the final months of Henry M. Paulson Jr.’s tenure as Treasury secretary were almost as tense as the weeks during the height of the financial crisis.
In his new memoir, “On the Brink,” Mr. Paulson retraces his tenure as President Bush’s third Treasury secretary, describing — and defending — the efforts he undertook to halt the global financial collapse in the fall of 2008. Much of what he has written has been told before. But the book makes a little progress in humanizing an official who, at the time, was largely impassive and unreadable.
To be clear, it’s only a little. Mr. Paulson makes a few things explicit about himself: his Christian Science faith, which led to an oft-recounted struggle over whether to take a sleeping pill in the midst of the crisis; his devotion to his family and to his environmentalism; and his aspirations to a nonideological approach to leading Treasury. His 28-year career at Goldman Sachs, culminating as its chief executive, however, is boiled down to a fraction of the second chapter, with little explanation of his firm’s own role in helping foment the financial crisis he admits he didn’t entirely foresee.
The bulk of the book is focused on a tick-tock of his leadership during the financial crisis, making gut decisions on little sleep. (He didn’t take the sleeping pill.) Even after the lows of the market turmoil, however, things didn’t improve that much.
By mid-November, Mr. Paulson makes it clear that despite having pushed the $700 billion financial rescue package through Congress, his work wasn’t done. Citigroup — then Bank of America and the auto makers — were still on the brink of catastrophe.
On Nov. 19, Mr. Paulson briefed President Bush on Citi’s suddenly calamitous position, a development the Treasury secretary writes took even him by surprise. The pressing need was to get Congress to release the second half of the Troubled Asset Relief Program, $350 billion that was urgently needed to prop up the bank.
Here’s the conversation Mr. Paulson recounts having had with Mr. Bush.
“It’s politically difficult, but we’re going to have to figure out how to do it,” I told him.
“Just don’t let Citi fail,” he replied.
But there were problems to overcome, including the entreaties of Robert E. Rubin, Mr. Paulson’s predecessor as both Treasury secretary and Goldman chief executive; Democrats skeptical of bailing out another financial institution; and Republicans leery of that money then going to a lifeline for the automakers. Then, in a bit of bittersweet news, Timothy F. Geithner was picked by President-elect Obama as Mr. Paulson’s successor, rallying the markets but depriving the government of a crucial negotiator.
One of the striking things about Mr. Paulson’s memoir is that he’s awfully nice in recounting his tale. Whereas other accounts (including “Too Big to Fail,” by DealBook’s Andrew Ross Sorkin) detail tensions between Mr. Paulson and the likes of J. Christopher Flowers, the memoirist here remains at the least cordial. So during a conference call to discuss Citi, here’s the harshest Mr. Paulson has to say about Sheila C. Bair, the chairman of the Federal Deposit Insurance Corporation:
I respected Sheila who improved most programs we worked on together. But sometimes she said things that made my jaw drop. That morning she had said she wasn’t sure that Citi’s failure would constitute a systemic risk. She … spoke as if Citi were just another failing bank and not a world leader — with $3 trillion in assets, both on and off its balance sheet — imploding in the midst of the worst economic conditions since the Great Depression.
(He later goes on to say that Ms. Bair faced her own skeptics at the F.D.I.C. and needed to press as hard as she could. So much for the internecine strife.)
Within a matter of days, the government fashioned what amounted to a massive insurance policy for Citi, rallying the markets. But while Mr. Paulson took roughly a week’s rest, kayaking with his wife and watching a bald eagle with his granddaughter Willa, the auto makers again loomed as a problem. Again the problem was mainly political: Democrats wouldn’t release the final portion of TARP money without aid for General Motors and Chrysler; Republicans would fight tooth and nail to withhold government assistance for the car makers. (President Bush, he writes, was none too pleased either, but appreciated the devastation the companies’ failure would wreak.)
As if that weren’t enough, by Dec. 17, Bank of America chief Kenneth D. Lewis called with second thoughts about his $50 billion deal for Merrill Lynch, with predicted losses at Merrill standing then at $18 billion. At an impromptu meeting at Treasury, Bank of America sought a “Citi” sort of backstop, a move that would tax the government’s resources if it didn’t get the second tranche of TARP money. Otherwise, it was studying the possibility of invoking an escape hatch, in the form of a material adverse clause in the merger agreement.
By Dec. 19, the Bush administration scrounged up enough money from the existing TARP funds to supply emergency financing to G.M. and Chrysler. On Dec. 21, Mr. Paulson got a call from a “shaken” Mr. Lewis, who again warned that Bank of America was still pondering walking away from Merrill. After some jostling, including the implied threat of removing Bank of America’s management and board, Mr. Lewis backed off.
“Let’s de-escalate,” he told Mr. Paulson.
By Jan. 1, the Merrill deal had closed.
Go to “On the Brink” from Amazon.com »
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