In August of 2008 Jimmy Lee, J.P. Morgan's legendary financier, quietly let Blackstone CEO Stephen Schwarzman in on a harrowing truth: for three days the bluest of blue chip banks “hadn't been able to roll over its commercial paper.” And it wasn't just J.P. Morgan whose assets were no longer wholly trusted. Lee told Schwarzman that Bank of America and Citi were in a similar situation.
As Schwarzman recalls in his unputdownable memoir, What It Takes, Lee's secret admission was more than disturbing. As the Blackstone co-founder described it, “These are the loans that corporate America lives on, the most liquid kind of debt, used to run their operations.” It's a reminder of what Ken Fisher regularly reminds readers: in 2008 financial institutions weren't insolvent (their assets were to a high degree performing as banks as a rule must generally lend toward and own “sure things”) as much as they were illiquid. For a time, lenders quite simply didn't trust the assets of major U.S. financial institutions.
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