The weekend that shook the world

Washington Post

01-04-2025

American politics — and our collective future — has rarely felt as unstable and uncertain as it does this spring. Yet the foundations of the unraveling and changes that led us to here can be found in the multiple destabilizing epochal events that have marked the first 25 years of the 21st century — including the 9/11 attacks and the coronavirus pandemic in 2020. Arguably no moment or crisis more shaped modern populism and the Republican Party, specifically, than the 2008 financial crisis, an economic catastrophe that upended the housing market, jobs, the broader economy and national politics. The crisis launched the tea party, began the rapid acceleration of the rising national debt and marked the beginning of the political ascendance of Donald Trump, who started in 2011 offering regular business and political punditry on Fox News.
The first major, public-headline-grabbing moment of that crisis came with the collapse over a single weekend of the venerable investment bank Bear Stearns — a firm founded in 1923 that had famously survived the Crash of '29 without laying off any employees and grown by 2008 to be the country's fifth-largest investment bank with some $400 billion in assets and 15,000 employees. That March weekend with Bear Stearns and the crisis as a whole would have been even worse but for enormous interventions and unprecedented actions by usually risk-averse government leaders at the Federal Reserve and the Treasury Department.
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The financial crisis of 2008 fundamentally altered the way the U.S. government operates — forcing normally slow-moving institutions such as the Fed and Treasury into an operational, almost tactical, role that has in the years since become a more normal way of operating. Today, in fact, the normal operations of the federal government are in many ways the legacy of the changes wrought by the war on terrorism and the financial crisis.
This oral history is compiled from original interviews with more than 20 government and private-sector participants in that dramatic weekend, including government lawyers who were allowed to speak openly because, in the wake of the 2008 crisis, the government waived attorney-client privilege during the follow-on investigations and congressional hearings. All quotes were edited for clarity, concision and comprehension.
CAST OF CHARACTERS
Cast of characters
FEDERAL RESERVE
BANK OF NEW YORK
DONALD
KOHN
VICE CHAIR
TIMOTHY
GEITHNER
PRESIDENT
MEG MCCONNELL
DEPUTY CHIEF OF STAFF
KEVIN WARSH
TOM BAXTER
BOARD MEMBER
GENERAL COUNSEL
BEAR STEARNS
SAMUEL L.
MOLINARO JR.
CFO
ALAN SCHWARTZ
CEO
HENRY BIENEN
JACKIE TADDEI
BOARD MEMBER
ASSISTANT TO SCHWARTZ
TREASURY
DEPARTMENT
NEEL KASHKARI
SR. ADVISOR
TO PAULSON
HENRY M.
PAULSON JR.
SECRETARY
JOEL KAPLAN
BOB HOYT
DEPUTY CHIEF
OF STAFF
GENERAL COUNSEL
JPMORGAN CHASE
MIKE
CAVANAGH
CFO
JUDY MILLER
CHIEF OF STAFF
JAMIE DIMON
CEO
STEVE BLACK
BILL WINTERS
CO-LEAD, INVESTMENT
BANKING
CO-LEAD, INVESTMENT
BANKING
BLACKROCK
LARRY FINK
CHAIRMAN AND CEO
(Photos by Getty Images, Bloomberg,
and The Washington Post)
FEDERAL RESERVE
BANK OF NEW YORK
KEVIN WARSH
DONALD
KOHN
BOARD MEMBER
VICE CHAIR
TIMOTHY
GEITHNER
MEG
MCCONNELL
TOM
BAXTER
PRESIDENT
DEPUTY CHIEF
OF STAFF
GENERAL
COUNSEL
BEAR STEARNS
HENRY
BIENEN
BOARD MEMBER
JACKIE
TADDEI
SAMUEL L.
MOLINARO
JR.
ASSISTANT
TO SCHWARTZ
CFO
ALAN SCHWARTZ
CEO
TREASURY DEPARTMENT
NEEL KASHKARI
SR. ADVISOR TO PAULSON
HENRY M.
PAULSON JR.
SECRETARY
JOEL KAPLAN
DEPUTY CHIEF OF STAFF
BOB HOYT
GENERAL COUNSEL
JPMORGAN CHASE
MIKE
CAVANAGH
CFO
JUDY MILLER
CHIEF OF STAFF
JAMIE DIMON
CEO
BILL WINTERS
CO-LEAD, INVESTMENT
BANKING
BLACKROCK
STEVE BLACK
CO-LEAD, INVESTMENT
BANKING
(Photos by Getty Images,
Bloomberg, and
The Washington Post)
LARRY FINK
CHAIRMAN AND CEO
BEAR STEARNS
FEDERAL RESERVE
BANK OF NEW YORK
SAMUEL L.
MOLINARO JR.
CFO
DONALD KOHN
CEO
VICE CHAIR
ALAN SCHWARTZ
CEO
TIMOTHY
GEITHNER
HENRY BIENEN
BOARD MEMBER
PRESIDENT
JACKIE TADDEI
MEG MCCONNELL
ASSISTANT TO SCHWARTZ
DEPUTY CHIEF OF STAFF
KEVIN WARSH
BOARD MEMBER
TOM BAXTER
JPMORGAN CHASE
GENERAL COUNSEL
TREASURY DEPARTMENT
MIKE
CAVANAGH
CFO
JAMIE DIMON
NEEL KASHKARI
CEO
SR. ADVISOR TO PAULSON
BLACKROCK
JUDY MILLER
CHIEF OF STAFF
HENRY M.
PAULSON JR.
BILL WINTERS
CO-LEAD, INVESTMENT
BANKING
SECRETARY
JOEL KAPLAN
BOB HOYT
DEPUTY CHIEF OF STAFF
STEVE BLACK
GENERAL COUNSEL
CO-LEAD, INVESTMENT
BANKING
LARRY FINK
(Photos by Getty Images, Bloomberg, and The Washington Post)
CHAIRMAN AND CEO
FEDERAL RESERVE
BANK OF NEW YORK
BEAR STEARNS
HENRY BIENEN
BOARD MEMBER
JACKIE TADDEI
ASSISTANT TO SCHWARTZ
SAMUEL L.
MOLINARO JR.
DONALD KOHN
KEVIN WARSH
VICE CHAIR
BOARD MEMBER
CFO
MEG MCCONNELL
ALAN SCHWARTZ
TIMOTHY
GEITHNER
DEPUTY CHIEF OF STAFF
CEO
PRESIDENT
JPMORGAN CHASE
TOM BAXTER
GENERAL COUNSEL
BLACKROCK
TREASURY DEPARTMENT
MIKE
CAVANAGH
CFO
NEEL KASHKARI
JUDY MILLER
SR. ADVISOR TO PAULSON
CHIEF OF STAFF
LARRY FINK
JAMIE DIMON
BILL WINTERS
CEO
CHAIRMAN AND CEO
CO-LEAD, INVESTMENT
BANKING
HENRY M.
PAULSON JR.
STEVE BLACK
SECRETARY
CO-LEAD, INVESTMENT
BANKING
JOEL KAPLAN
(Photos by Getty Images, Bloomberg, and The Washington Post)
DEPUTY CHIEF OF STAFF
BOB HOYT
GENERAL COUNSEL
See characters Go back
Timothy Geithner
President, Federal Reserve Bank of New York
You could call it a classic panic — slow-moving financial panic. This had been 10 months where there had been a bunch of episodic cliffs, acceleration and panic.
Jamie Dimon
CEO, JPMorgan Chase
We weren't in a recession yet, but the credit numbers for subprime mortgages were already as if we were in a recession. People started to realize that there were problems in mortgages just about everywhere. Fannie Mae and Freddie Mac had been pushing people to do more subprime lending, get more people in homes, but the mortgage system became polluted — people buying second homes, spec homes, brokers overlooking peoples' ability to pay, and all this stuff. That was the beginning of it.
Neel Kashkari
Senior adviser to Treasury Secretary Henry Paulson
We had a call with Alan Greenspan in January 2008 and he said, 'This could be a one-in-100-year event.' That was shocking to all of us when he said that. It just kept getting more real, more severe, more serious.
Samuel L. Molinaro Jr.
Chief financial officer, Bear Stearns
Nobody knew where this was going and how bad it could get.
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Thursday, March 13, 2008
April Jarvis of Bear Wagner Specialists watches the early numbers on the floor of the New York Stock Exchange on March 13, 2008. (Henny Ray Abrams/Associated Press)
The first major signs of dire stress for Bear Stearns had appeared mid-week in what is known as the tri-party repo market, part of Wall Street's backroom financial plumbing. The tri-party repo market allows securities dealers to finance short-term, often overnight funding for both their own and their clients' assets through what are known as 'repurchase agreements,' repos for short, that are handled through two major banks, JPMorgan Chase and Bank of New York Mellon. In just a matter of hours Wednesday into Thursday, the threat to the firm escalated from whispers to existential.
Joel Kaplan
Deputy chief of staff for policy, White House
The president was actually going to New York that week to give a not entirely fortuitously timed speech to the New York Economic Club.
Henry M. Paulson Jr.
Treasury secretary
All week, I've been talking to the president about his speech, and he was going to say there will be no bailouts. On Wednesday, I had said, 'Please take that line out.' He said, 'Why — are you suggesting we should do a bailout?' I said, 'I don't want to do a bailout, but the situation is so fragile, why would you say that?'
Timothy Geithner
There's a whole bunch of other things happening across the financial system which were just symptoms of avalanching fear. We knew there was a big risk of Bear Stearns failing, but it didn't seem like it was a 24-hour thing, and I didn't think we were necessarily going to be the solution to that problem directly — we were just going to be containing the damage.
Henry Paulson
It really hit me between the eyes when I got back to the office about 9 a.m. or 9:30 in the morning on Thursday and Bob Steele, who was the undersecretary of treasury for financial markets, came into my office, and said Bear was having liquidity problems. As soon as he said it, I knew that once you know there's a liquidity problem — an investment bank in particular — panic sets in very quickly. I remember right then thinking, 'This institution is dead.'
Timothy Geithner
They were the smallest of the five independent investment banks, and they were perceived to be the most vulnerable of the five — they had made a bunch of choices that left them just more exposed to the leading edge of the run.
Samuel L. Molinaro Jr.
We started hearing about hedge funds who are prime brokerage clients who wanted to get their excess funds out of Bear Stearns. Hedge funds pulling prime brokerage balances is somewhat destabilizing from a liquidity standpoint, but not tremendously. The more destabilizing part is that it's not good for your business to be losing their balances.
Kevin Warsh
Member, Federal Reserve Board of Governors
This is not happening in a vacuum. Fannie Mae and Freddie Mac and the Federal Home Loan Banks at the time had outstanding debt greater than the debt of the United States government. Fannie and Freddie, which at the time were implicitly backed by the government but were private companies trading on the New York Stock Exchange, those share prices were also under real pressure. Our narrow question is: Do we have a Bear Stearns problem, or do we have a broader safety and soundness problem of the financial system?
Alan Schwartz
CEO, Bear Stearns
Things had frozen up late '07, and in the financing markets, we had a difficult period. We had a loss for the first time in our history in the fourth quarter. That first quarter was going to be our test case — if we had another bad quarter, they were going to be all over us. But by the beginning of March, I was breathing a sigh of relief. We had just closed a very strong first quarter at the end of February, and so were going to be able to sit back and say, 'We got through this.'
Samuel L. Molinaro Jr.
Seemingly out of the blue, there's an issue. It started to build Monday into Tuesday. There's more market noise. We're looking under every rock, but there's nothing really happening. That started to change, probably late Tuesday and Wednesday — when there's enough noise in the marketplace, people start to take action, because nobody wants to be holding the bag if there's a problem.
Alan Schwartz
We were trying to do everything we could to calm things down. But there were a lot of rumors out there. Wednesday, we had said, okay, let's get this message out to here, there and everywhere. Then by Thursday we were getting a run on the bank.
Henry Bienen
Board member, Bear Stearns
In his news conference [on Wednesday,] Alan had said, 'Well, we have something like $17 billion cash on the books so we can weather the storm.' Well, by the end of the day they did not have any money on the books. It was a classic bank run. My strong view always has been that nobody would have survived.
Mike Cavanagh
Chief financial officer, JPMorgan Chase
I was sitting in a conference room in 270 Park, which was JPMorgan's headquarters, toward the end of the day. The door opens — Jamie Dimon pops in, and he sees maybe a group of less than 10 of us in the room. He said, 'I just got a phone call from a CEO looking for us to buy them.' I pressed him: 'Who called, and what was it?' He hesitated for a second, because it was a bigger group, and then he said it was Alan Schwartz calling about Bear Stearns. We said, 'Forget it, not that interesting.' He closes the door, leaves and goes to his birthday dinner.
Judy Miller
Chief of staff to Jamie Dimon, JPMorgan Chase
That evening was the night of Jamie's birthday. He was going to the restaurant Avra — his parents are Greek, and that was one of their favorite restaurants — and he was going there with his twin brother, Teddy, obviously they share their birthday, and his wife.
Timothy Geithner
The way these institutions are structured, they have this portfolio of Treasury bills, which are the least risky asset you could have, and they're financing the borrowing against that portfolio every day, every night. Normally people say, 'Well, I'll lend against that — that's a secured loan against Treasurys. What's the risk?'
Henry Bienen
The way Bear worked — as all the big financial banks did — you were borrowing all the time in very short-term money to cover obligations.
Alan Schwartz
It was a bit shocking because we never dreamed that we would not be able to borrow overnight against our Treasury securities.
Timothy Geithner
For me, this story gets vivid and acute when — it must have been between six and seven on Thursday evening, I'd already gone home to have dinner with my kids — and I got a call from Alan Schwartz saying that they were going to file for bankruptcy the next day. I called my team, and everybody came back to the office.
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Donald Kohn
Vice chair, Federal Reserve
I have a very clear memory Thursday about seven o'clock — I was sitting in a car waiting for my wife to come out of a meeting before we went home — and being on a conference call with the New York Fed and the SEC. And the SEC being absolutely shocked that the chief financial officer of Bear had told them they couldn't open the next morning. We had an emergency on our hands.
Henry Paulson
What would happen during the crisis — and that was the beginning of the crisis — was that I would work intensely all day, then I would get home and try to relax. Often it would be reading Sports Illustrated — I'm a sports fan — for a short time and then falling asleep. And then I'd wake up in the middle of the night — you know in the middle of the night, little problems seem big, and big ones seem insurmountable, so often I wouldn't go back to sleep. But that night I got home — I remember my mind was just racing with all kinds of concerns about the market — and I saw Sports Illustrated, picked it up, and I lay back on the bed and started reading when I got the call that brought me back to reality very quickly where I was told that Bear was going to declare bankruptcy the next morning if there wasn't a solution.
Meg McConnell
Deputy chief of staff, Federal Reserve Bank of New York
We all went back.
Timothy Geithner
We were saying, okay, what can we understand about the risk that this failure might cause broader damage? Can we prevent the failure, and can we contain the damage? We were working on all those three fronts.
Samuel L. Molinaro Jr.
We needed to cut our exposure. We were fearful. We had a rough idea of how much capacity we thought we might be losing come Friday morning. That's what led to the call to JPMorgan.
Alan Schwartz
I called Jamie Dimon — they were the clearing agent for our stuff, so he could see I had all these liquid assets sitting in their accounts.
Jamie Dimon
I was at the restaurant on 48th with my parents. I carry my phone around usually for emergency purposes, not to take phone calls, but this call came in. It was Alan Schwartz — I couldn't hear — and he says the company's in trouble.
Judy Miller
He had to step outside of the restaurant because it was loud and couldn't hear quite too well what Alan was saying.
Jamie Dimon
I walked outside, and he basically said, 'Jamie, I need $30 billion before Asia opens, because we don't have it, we'll fail.' I said, 'Alan, there's no way I can get you $30 billion.' I said I assume you've told Geithner and Paulson? He said he had. I spoke to Geithner and Paulson, I called up some of our people — now it's 10 o'clock — and said, 'Guys, get dressed and get back to the office because we had a crisis.'
Judy Miller
On Thursday night, literally hundreds of people were called back into the office and really were there from Thursday night through the weekend.
Steve Black
Co-CEO, investment bank, JPMorgan Chase
I was actually in Anguilla on vacation. I was going out to dinner with my wife at the time, so I said, 'You know what, screw it, I'm going to leave my phone here.' I'm sitting at dinner along the water, and the maitre'd is working his way down the tables, talking to people. I said, 'Oh — this doesn't look good.' Sure enough, the guy comes up says, 'Are you Steve Black?' He said, 'There's a call for you. You can take it in the kitchen.' It's my assistant saying that Jamie is desperately trying to get a hold of me.
Mike Cavanagh
I get back to my house in Rye, New York. I was sitting on my couch, flipping channels, and my Blackberry is ringing, and it's Jamie Dimon. I'm guessing it's 10 o'clock at night. I pick it up and I say, 'Hey, Jamie, what's going on?' He's standing now outside the restaurant, and he says, 'I just got off the phone with Tim Geithner, and the thing we talked about earlier' — and he talked a little bit in code — 'is much worse than we understood.' He said, 'I'm going to be working with the government, Tim, Paulson, and the others over the next coming hours, I need you to focus on what needs to happen to run the bank' — JPMorgan — 'tomorrow. Do whatever you need to do,' and 'goodbye.' And I'm like, 'What the hell does that mean?'
Jamie Dimon
Paulson said, 'Jamie, you gotta buy the company.' I said, 'We can't buy a company like that — we don't know what's in it, and stuff like that.' It's not like buying a small family-run bank — it's more like buying a house on fire. He said, 'The goal should be let's just get it to the weekend.'
Henry Paulson
There were many instances in the crisis where our teams worked together all night to try to cobble together a solution that allowed us to get to the weekend to then find a more permanent way to stabilize the markets. The markets were essentially closed from 4 p.m. Eastern time on a Friday until Sunday night, when the markets in Asia opened. The idea was to get to the weekend.
Samuel L. Molinaro Jr.
We ended up ordering pizza.
Alan Schwartz
Once I spoke to Jamie and I called Tim at the end of the day, there wasn't a whole lot we could do but sit there and wait and see what happens.
Mike Cavanagh
I join in on a conference call that's been going on between the lending teams at JPMorgan and Bear. It was fog of war. It wasn't very crisp. You could hear in people's voices the stress and strain of the Bear Stearns side of what's been happening to them as they tried to portray calmness. This was my first taste of what was really going on beneath the surface of the waves. After a period of listening to all this — it's maybe 11 o'clock now — I just posed the question, 'Okay, you guys just tell us how much money you need for us to lend to you so you can open for business tomorrow, and then we can regroup on the JPMorgan side and see what's possible.'
That is when another big impression hit me — the pause when I put the question as simple as that to the Bear Stearns team on the call. So much was in motion. The pause was very long, and the answer, ultimately, was a version of 'we don't know.' There are too many unknown elements. That's when it hit me that we — the totality of Wall Street and the economy and the banking system — was in a spot.
Steve Black
Most of the night, we were up thinking and working through and trying to get something in place whereby we could end up figuring out a way to end up loaning them a bunch of money.
Meg McConnell
We were in just the blandest room you could possibly imagine — people around the table, then some people wedged in, sitting behind them to try to listen, take notes or participate. Too many people in a small room. It was way before the real fatigue of the financial crisis to come had set in, so people were very energized. This was a situation that a lot of the people in the room had thought a lot about and were like, 'let me at it — I know how to fix it.' These experts were like, 'Finally!' If you're in epidemiology, it's like you finally see the situation occurring with an infectious disease — this is the thing that I've been studying or trying to understand!
Timothy Geithner
The New York Fed is a great place with great institutional knowledge and an incredibly talented group of career people there. But the Fed had not been forced to do what we did since the Great Depression. It wasn't like there was this obvious hierarchy of escalation. There was no playbook of tools you could deploy — where people said: 'Yeah, we know how that's going to work'; 'We should wait on that'; or 'We should do that now.' It just didn't exist for me. It was like a blank slate of trying to figure out what might work, what might be feasible, without much valuable precedent.
Henry Paulson
I remember a pretty long and discouraging call — the Fed talked about things they could do in terms of flooding the market liquidity, but they've been trying to deal with that all along. In my judgment that didn't really work, but it was the best plan. Tim called that 'putting foam on the runway.'
Timothy Geithner
You want a system that can withstand the failure of consequential financial institutions, large and small. The key thing is judging what's the probability that a failure like that would cause broader collateral damage — contagion that might make the rest of the system more fragile? That's a very hard thing to know, because it's state-of-the-world contingent. What would be scary in one moment might not be scary in a different context, but that was a very fragile, scary context for the system and made the judgment harder. Then you're consumed with two questions: Can we prevent the failure with means we have available and, if not — or even if we do, because there's a lot of momentum behind the panic at that point — how can we best contain the damage?
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Tom Baxter
General counsel, Federal Reserve Bank of New York
It became clear Tim wanted to do whatever we could to try to buy ourselves additional time so that we could approach this in a much more systematic way. I suggested to Tim that we could do what's called a Section 10-B loan. Now that kind of loan has to be to a bank, but Bear Stearns was not a bank. We could lend to a bank and then the bank would lend on to Bear Stearns and receive collateral for that lending to secure the loan. That technique is called a Section 10-B, non-recourse back-to-back loan. That was the other option that I put on the table. Tim said, 'Okay, go ahead and structure the credit facility as a 10-B back-to-back, non-recourse.' I got a bunch of lawyers together, and overnight we worked on the loan docs so that we could do that loan on Friday.
Samuel L. Molinaro Jr.
Sometime in the late evening — midnight or later — they let us know what the broad strokes of the plan are looking like, that this was too big for them, and they've been speaking to the Federal Reserve. We're feeling pretty good about that.
Timothy Geithner
My colleagues found me a hotel room three blocks away, and at 1 a.m. I left knowing I was going to come back really early. I went to sleep at like 2 a.m. with the building sense that we didn't have that much confidence that the system would hold if Bear defaulted. I went to bed with deep, deep trepidation, fear and uncertainty.
Friday, March 14, 2008
A businessman runs past Bear Stearns in New York on March 14, 2008. (Mark Lennihan/AP)
Mike Cavanagh
At some time in the wee hours in the morning — maybe it's three o'clock — I get another call from Jamie, and Jamie says, 'Things are bad.' He's been spending hours on and off with Bernanke, Geithner and Paulson. Jamie said, 'Get who you need and just get to the office. Circumstances require all hands on deck.' I remember feeling like a fireman when Jamie called. I thought, 'This is just not the way this is supposed to work.' I arrived at 270 Park and I remember the sidewalk outside was normal, and I grab a coffee from the Greek woman in one of those chrome carts outside, and knowing the turmoil that was going on inside, I remember it was comforting to have that normalcy.
Bob Hoyt
General counsel, Treasury Department
In the middle of the night me and many others got calls from the White House Situation Room telling us to get on a call at five in the morning to get our arms around the situation. The desire was to make sure that they could get through Friday, so that we would have the weekend to resolve. The level of teamwork and collaboration between Paulson, Bernanke and Geithner — three radically different guys. Hank Paulson, Wall Street, gut instinct, driven to action. Geithner, the policy wonk, studies every detail, super smart, very intense, wants to work everything through. Bernanke, the academic, the big meta-high-level view, a student of the Great Depression.
Henry Paulson
The Fed was taking real risk. Ben Bernanke then said to me, 'Hank, I'm not doing this unless Treasury can indemnify me.' Well, we didn't really have authorities to guarantee loans, but we had a very creative lawyer, and I just felt there'd be some way we could do it, and I didn't have time to think about or debate it, I just simply said, 'Yes, we'll do it,' then I said to myself, my God, we have got to figure out how to do it.
Timothy Geithner
We didn't have that much time because the principal judgments about whether this stuff rolled over were going to happen in the next few hours — well before the market opened.
Henry Paulson
While they're on the phone, I got off because I had to talk to President [George W.] Bush — the president was always in his office early. So, I called him and told him what the situation was. We shared some dark humor through the crisis. I told him that morning he better take that line out of the speech that says there will be no bailouts.
Timothy Geithner
I was just focused on what are our choices. What can we do? Is that legally defensible? Plausible? Will it work? What options are we preserving if we go down that path? If we screw it up by acting, is it going to be easy to fix that mistake?
Donald Kohn
Kevin Warsh called the person who was traveling with Bush. It was clear from Kevin's conversation that the people on Air Force One were not entirely clear what was going on. I remember Kevin calling Air Force One and hearing Bush in the background say, 'What — the Fed's buying Bear Stearns?' That was not what we were doing. Kevin explained the thing, so Bush understood it.
Mike Cavanagh
Then we started writing a press release to announce the credit facility [between the Fed, JPMorgan and Bear Stearns]. Steve Cutler and I were looking at this draft press release. We realized the market's going to open up and go crazy when this is announced. How could the world not see what this really was all about and run for the exits? How could we make sure we avoided causing the very problems we were trying to avoid? If you wanted to instill some calmness, one thing that was missing was any language as to the duration of this loan. Steve and I inserted, 'Boy, it would sound better if this was a facility that could be alive for as long as 28 days.' We wrote that, everybody looked at it, we said, 'Yep, sounds good.'
Henry Paulson
The deal was announced in the Wall Street Journal.
Mike Cavanagh
The day is saved.
Henry Paulson
The market rallied briefly.
Samuel L. Molinaro Jr.
Friday, the announcement of this, of course, the market didn't react well from a stock price perspective.
Mike Cavanagh
Their stock price didn't go to zero, which is where I thought it might well go.
Steve Black
We had called the air force — the JPMorgan air force — to come get me on Friday morning, because I said this could end up being a disaster and I wanted to get back from vacation. We're packing up and the stock opened around 66, and I said to my wife, 'Mark my words, the market does not understand what just happened. By the time we land, that stock will be cut in half.' On my way back, we assembled a team. By the time I landed, I think the stock was trading in the 20s.
Alan Schwartz
It seemed like we had avoided disaster. Friday, it looked like things were under control. We were getting lots of inquiries from potential buyers and it seemed there was a very, very strong chance that we were going to, at a minimum at least, sell the company for $40 or $50.
Henry Paulson
Then it started to unravel. It really did. Neel Kashkari had been at Goldman Sachs, who I had not known, and worked in Silicon Valley, and I taken him in a junior position at Treasury, and he had worked his way into being a close partner of mine in working on foreclosure relief programs and so I asked him to go to New York to go back and forth between Bear Stearns, the New York Fed and JPMorgan.
Neel Kashkari
The other thing that is really important is we were the Bush administration. We hated intervening in financial markets — culturally, philosophically — so any intervention that we would be forced to have, we wanted to do the bare minimum that would allow the markets to then take care of the rest of it. As I look back over the arc of all of our responses, we were always a little bit late, and that's a little bit driven by our political philosophy of, 'Hey, don't intervene in markets. Let markets correct themselves.'
Henry Paulson
It was clear that the loan wasn't going to work. It was hanging by a thread, which, again, is just proof to me that when you're trying to stop a panic, even a Fed loan doesn't work. It takes capital.
Alan Schwartz
Everybody assumed that JPMorgan backstopping our credit would clearly calm the market, but it didn't. People were still confused, and so they all wanted to get their money out. There was still a run on the bank.
Kevin Warsh
It was a facility of 28 days, which was the central bank's attempt to buy time. That's really what monetary policy does — the provision of liquidity, the setting of interest rates — it's an effort to create time for the economy to improve or give time for inflation to fall. That's what matters of money are about. This is what interest rates do. They're a way of expanding or compressing time. It's up to markets, it's up to counter parties, it's up to shareholders and bondholders to see whether the 'offer' of 28 days is acceptable. What markets were saying by that close of business on Friday is you offered 28 days, and we don't accept.
Henry Paulson
Tim and I all during this, we talked dozens of times during this weekend — just on the phone repeatedly, very short calls, checking in, and then coordinating and making sure we had similar messages and we're in agreement. Then I called Jamie Dimon at 4:30 and basically said to him, 'Obviously the loan is not going to work. We need you to buy Bear Stearns. We need to get this deal done.'
Timothy Geithner
Friday night, we know that all the other options have faded away, or they're close to having faded completely.
Henry Paulson
Tim and I talked a number of times, and we realized that we didn't think Alan Schwartz really got it yet. I called him, and we said, 'You need to get a deal done. It needs to be done over the weekend.' He pushed back and said, 'Why does it have to be done so quickly?' I remember saying to him, 'You won't have a company.'
Alan Schwartz
It was Friday after the close, when I got a call from Hank. I was trying to make the case to him — I know it's not great in the markets but getting third-party capital to come in after they evaluated our balance sheet and found it to be strong. That will be a good thing for the markets to realize that these rumors are overdone. He cut me short. He said, 'No, listen, Alan, this thing isn't going past Sunday.' I said, 'But Hank, we had up to 28 days.' He said, 'Yeah, up to. We're not keeping it for 28 days. This has got to be done by Sunday. The market's not opening without this done.'
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Kevin Warsh
I remember a conversation with Alan — how angry he was, how he felt deceived, the pressure he felt.
Alan Schwartz
I always said to my clients as an adviser that I had this formula: IQ plus emotional level equals 100 percent of IQ. When your emotional level rises, the percentage of your brain that you're accessing goes down. Most of the bad decisions people ever make, they attribute to emotion at the time. I had to look and say, 'Okay, the one thing we have to do is totally focus on getting this done this weekend.' It may sound crazy, but emotionally, I just didn't have any reaction other than saying, 'Okay, how do we get this done?' That was 100 percent of my focus.
Samuel L. Molinaro Jr.
Alan got hold of me about six o'clock at night. I was in my car driving home, he gets me on my cellphone, tells me he just hung up with Hank Paulson. It didn't go well. Hank has told him that we don't have 28 days — we have until Sunday to get a deal done. That liquidity line goes away Monday morning. We've now got a gun to our head.
Mike Cavanagh
Markets closed later in the day, and I was driving home in the early evening — maybe six o'clock — after the crazy day, feeling calm, and got a call from Jamie, who had gotten a call from the government. There was no intent to let Bear Stearns open for business on Monday without having accomplished an infusion of capital or a sale transaction. We were expected to be a bidder and take a look ourselves at Bear Stearns, because it wasn't clear who else might be able to do it. Like it or not, myself, Steve Black and Doug Braunstein were to report for duty early Saturday morning. We had an appointment to go across the street to 383 Madison Ave. to Bear's executive floors.
Henry Paulson
Later that evening, my wife, Wendy, and I were going to go to a National Geographic documentary. Wendy was terrific during the crisis, but when I was home, my mind was almost never there. I was almost afraid to ask her a question, because if I did, she'd say, 'I just told that to you!' because I wasn't listening. My mind was somewhere else. I had promised her that I was going to go a program on the extinct ivory-billed woodpecker, which was called the 'Lord God bird.' It was so spectacular people would see it, they would say, 'Lord God!' We went to the National Geographic Society that night — I didn't remember anything, but I thought I deserved a gold star for going. But afterwards, she was really unhappy with me. She said, 'You didn't interact with anybody, you weren't polite, you weren't nice to any of our friends!' I said, 'I shook hands, I talked to all of them!' She said, 'No, you didn't — your mind was elsewhere.' I did not get any brownie points for that.
Alan Schwartz
I do remember from Thursday on, I went home, and my wife made grilled cheese and tomato soup. That first night I had it, and then she kept doing it. It was my comfort meal.
Saturday, March 15, 2008
A trader sits and works near the end of the trading day at the New York Stock Exchange on March 14, 2008, in New York. ()
Bob Hoyt
It was just the highest stakes anybody had ever encountered on any decision. You are literally staring into the abyss. You just thought, if we don't get this done the whole financial system could just unravel. Bear Stearns was first, and came on suddenly, but when you got to Lehman Brothers and AIG and some of the others, you actually had economists and people at the Fed trying to run rough numbers of what would happen. You're looking at things like 30 percent unemployment — real Great Depression-era type of consequences.
Steve Black
The various department heads sent like 1,000 people over there, Friday, Saturday and Sunday, to try and figure out what the actual value was.
Mike Cavanagh
At that meeting there were the three of us — Steve, myself and Doug Braunstein — and on the Bear side was Gary Parr, who was then with Lazard, and then Sam Molinaro and Alan Schwartz. The Bear Stearns guys looked a little shell-shocked.
Bill Winters
Co-lead, investment banking, JPMorgan Chase
Alan was kind of the accidental CEO. Alan was a banker and not a fixed-income and mortgage guy. So, Alan was absolutely trying to do the right thing, but neither he nor Samuel were familiar with the intricacies of their mortgage trading desk.
Alan Schwartz
It was just a normal merger process at that point — they were doing their due diligence, and we were talking about a price at about $12. That was the target we had picked out — a huge decline for us, but we had some value left. We had to have a deal signed by eight o'clock Sunday night when the Tokyo Stock Exchange opened. If we couldn't say we were solvent on Sunday night, then we would have to declare a Chapter 7, not 11. There's a dramatic difference, because under Chapter 7, you have to close down; you have to close your office; you have to tell everybody they can't come to the office unless they were essential. There's not going to be any compensation of any kind.
Bill Winters
We parked ourselves there for whatever amount of time it took. I don't think anybody slept. There was a lot of looking over each other's shoulders, because we are all aware given the kinds of decisions that we were making in real time that there was every possibility that we hadn't fully considered something.
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Judy Miller
They were literally pouring over the books line by line, but at a breakneck speed, because they knew we did not have a lot of time for any real due diligence.
Neel Kashkari
At JPMorgan, there was just a frenzy of activity around Jamie and his office and his executive floor, where people were crunching numbers and trying to get him the latest information.
Samuel L. Molinaro Jr.
We were getting pretty deep with the JPMorgan team that was sent over to do due diligence. In particular, they were digging into our mortgage portfolio. They were digging into our derivatives books. They were looking at everything. They were looking at as much as they could possibly look at over the course of 48 hours to try to get a sense of what the issues might be that they would be stepping into.
Jamie Dimon
We pretty much did two months of due diligence in 2½ days.
Steve Black
Every tire we kicked was more damaging than the last in terms of valuation — where they had the marks, the mortgage business, the mortgage marks. It was issue after issue after issue. We spent all day Saturday, and we were getting to a point where this is not even close to where their stock price is trading in terms of how we would value it. It got to a point where Doug Braunstein, who ran our investment banking coverage, called Gary Parr and said, 'If you guys are thinking that we're somewhere around where the stock closed — I think it closed around 20 or 22 — we're looking at maybe low double digits, more likely high single digits. If you want us, if you're interested, we'll keep working, but if you're thinking something completely different, tell us now. We'll quit wasting your time. We'll quit wasting our time.' And what they came back with was that they were interested in a hell-or-high-water transaction.
Neel Kashkari
I was shuttling back and forth between Bear Stearns and JPMorgan, just trying to get information at that point. The posture was that the Fed does not have the legal authority to invest in these banks. There needs to be a private sector solution with no government money. There's a big push from Secretary Paulson and [Federal Reserve Bank of New York] President Geithner and Chair Bernanke to say, 'You guys need to do this. You're on your own.'
Judy Miller
It was the first time I had really seen Jamie in action in a crisis situation for the industry. He really did want to do the right thing, but they didn't want to put JPMorgan at risk. He goes into this, like fifth gear, where he is just laser focused on everything that needs to be done, and making decisions and moving things forward and keeping the right people in the loop. He just goes into this zone where it's very focused motion. It's hard to explain or describe, but you can see it. It's a look in his eyes. It's a walk in his step.
Kevin Warsh
I remember saying to Ben, 'I worry we're going to run out of buyers before we run out of sellers.' That is, what if Bear Stearns isn't unique? How many JPMorgans are out there — and for how long — to help clean up the mess?
Neel Kashkari
On Saturday night, I'm standing in a conference room and there was a guy at JPMorgan who basically was screaming at me. He was out of control, screaming at me, essentially, 'Everybody in the government is stupid. The Fed is stupid. If you people understood what was happening, you would all be buying canned food. The economy is about to collapse, and you idiots have no idea.' I just said, 'Okay, what do you propose? Let's just accept your premise. What do you suggest be done?' I didn't know if he was having a nervous breakdown. I wasn't exactly sure how to interpret it.
Timothy Geithner
By Saturday night, I feel like we had one option to prevent failure, and that really was JPMorgan — and JPMorgan was, I would say, not completely committed to the idea.
Donald Kohn
The fact that there weren't other bidders was just indicative of how difficult and dire the situation was. No one wanted to take a risk. Goldman, Morgan Stanley, they weren't about to bid on Bear. They had their hands full staying alive.
Jamie Dimon
I probably went home at two, slept for a couple hours and went back to the office.
Sunday, March 16, 2008
The Bear Stearns headquarters, right, and the JP Morgan headquarters, left, are shown on March 24, 2008, in New York. (Mark Lennihan/Associated Press)
Mike Cavanagh
I arrived back at 270 Park about 7 a.m. Steve Black and myself, we go in and sit down with Jamie and one or two others — a much smaller group — and Steve and I say to Jamie, 'We've got a fiduciary obligation to JPMorgan, shareholders. It does not feel responsible at all for us to be stepping in to assume all the risks that go along with acquiring Bear Stearns in these circumstances. You've got to tell them that we're out.'
Steve Black
I said, 'If I was the sole voter, I would not even think about doing this.' Every rock we turn over, more bugs come crawling out. The valuations are ridiculous — that's just the stuff we know. I think we should just say, 'No, we're done,' and tell them to move on. Jamie said, 'Okay, you go call Alan,' — Alan Schwartz was a fraternity brother of mine at Duke — 'and I'm going to go call Geithner and Paulson and let them know that we're out.' I called Alan and said, 'Alan, look, you know me — this is not a ploy, it's not a negotiating tactic, it's no bullshit — we're out. If you have another alternative, you guys should go find it and go after it, because we are not going to end up doing this.'
Timothy Geithner
Jamie pretty early Sunday morning said he talked to the board, and they don't want to do it. That was very scary. We made the basic appeal that they were exposed to the unraveling of the system — they weren't doing this for noble reasons. We thought we had a big existential reason — they were going to be very exposed, like everybody else, to the risk of the rattling of the system — and they should be willing to take some risk doing this.
Henry Paulson
I got on the call with Tim Geithner, and we strategized, and we both agreed we needed to find a way to get JPMorgan to do this and that the Fed would consider providing assistance. We agreed I'd make the first call. I called Jamie. I tried pushing on, why aren't you buying? He said it was too big. They didn't want to take those mortgages, etc. then I said to him, is there anything the Fed could do to make the deal work?
Steve Black
What we got back was, basically, you guys really need to do this.
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Mike Cavanagh
We knew we were the strongest potential counterparty, and if the government had to act through someone or impose a demand on someone, given we're a regulated institution, it was going to have to be us. We couldn't put our pencils down and say, 'Pass, we're not interested. Go find someone else.' We understood the instruction was coming from a place where they didn't have a choice — nor did we.
Henry Paulson
Jamie said he would get right back, and he did — he laid out his condition that he wasn't going to take that mortgage portfolio.
Jamie Dimon
They're a little mad at me for insisting on it, but I had no choice. I told them at the time, 'Guys, you don't want to come out this weekend, not only did Bear Stearns fail, but JPMorgan is rickety. That's a really bad idea. I have to be solid as they come afterwards and confident that's true.'
Neel Kashkari
I was in a conference room with Jamie Dimon and his lieutenants, sitting around a conference table — at that point they had an open conference line to the New York Fed — and somebody just came across the New York Fed and said, 'Hey, is Neel there? Can you step out and call Secretary Paulson?' I called him from my Blackberry, and he said, 'Hey, the Fed is going to put in money and against some collateral.' The incentives for the buyer are to put the worst possible assets in that pool, and so he was very clear to me, 'Your job is to protect us, because JPMorgan is going to be incentivized to put only garbage in this pool of assets.'
Henry Paulson
The New York Fed set up a vehicle which took $30 billion of mortgages. I had Neel Kashkari there just standing right over them to make sure that they didn't throw junk in there.
Timothy Geithner
We felt we needed an independent entity to help us understand the risk that they wanted us to take. We were worried we couldn't ask another investment bank to do that, because they would have conflicts. We decided quickly that there was a universe of one institution that could do what's essentially a valuation exercise, and do it really quickly, incredibly — BlackRock. I called Larry Fink, and he sent a very talented guy named Mark Weidman to look at this stuff and help us decide what the risk in this is. Ultimately, what Larry and his team were able to do is to call me and say, 'There's a chance you could lose some money on this, and a chance you could make a bunch of money for the taxpayer on this — but there's a reasonable chance that the terms in which they're asking you to take on this stuff would be you get your money back.'
Larry Fink
Chairman and CEO, BlackRock
On Friday night, we had been hired by JPMorgan to start evaluating some of the mortgage and derivative portfolios of Bear Stearns. So throughout Friday night, all day Saturday, our client actually was JPMorgan: We were helping them to start evaluating some of the portfolios. Sunday morning, I received a call from Tim asking me to come to the Fed immediately and help them understand the risk associated with the merger. Jamie released us as a client, and then, therefore, we were then able to then work with the U.S. government.
Timothy Geithner
Larry Fink sent a very talented guy named Mark Weidman to look at this stuff and help us decide what the risk in this is. Ultimately, what Larry and his team were able to do is to call me and say, 'There's a chance you could lose some money on this, and a chance you could make a bunch of money for the taxpayer on this — but there's a reasonable chance that the terms in which they're asking you to take on this stuff would be you get your money back.'
Larry Fink
The discount for the assets was dramatic, and it was very clear that if we held the assets over time and stabilized the system, that coupon was going to be more than enough to offset any principal discount.
Kevin Warsh
We spent the weekend all huddled around Ben's desk, staring at one of those Polycom conference phones in the middle of the table. It usually included Ben, Don and me in Washington, and Tim in New York. Michelle Smith and Scott Alvarez were huddled around the table with us, with others coming and going. Michelle would secure Subway sandwiches a couple times a day, which was located pretty close to Fed. The Fed kitchen was closed on weekends, so Subway came to the rescue, meal after meal after meal. I got so sick of eating a turkey sandwich with that wet, processed meat. Haven't had one since.
Bob Hoyt
As it got down to JPMorgan doing the deal, they had a number of asks which were not unreasonable — given what they were doing, and given that we the federal government, very much wanted them to do it — basically saying, 'Look, you need to help. We're doing no due diligence. We got no one standing behind this. We can't get any of the meaningful conditions, terms, etc., that you would have in a normal acquisition of this type. We need to know that we will be protected from the federal government coming after us for historic liability issues that Bear Stearns engaged in.'
Henry Paulson
Bob is a very creative, terrific lawyer. I had talked with him after I told them we had to indemnify the Fed, and I just said to Bob, 'Think outside the box.' There's got to be some way in a crisis, some way to work with the Justice Department and some innovative way he could figure out how Treasury could step up.
Neel Kashkari
Hank was basically working from home that weekend, and so I had to keep calling him at home. He was fielding this all at home, either from his home phone or his cellphone.
Henry Paulson
I'm on the cellphone, Wendy's answering calls when they come in on the landline. She came running and saying, 'Neel Kashkari has got to get to you right away.' Neil was on with Bob Hoyt, and Bob Hoyt came back and said, 'Hey, you're not going to like this, but we've tried everything. I spent a lot of time with the DOJ. I thought creatively, and you're not going to be able to indemnify the Fed.'
Bob Hoyt
You're not allowed to spend money in the executive branch unless you have an appropriation from Congress, and if you spend money without an appropriation from Congress, it is, in theory, a criminal violation. After a lot of back and forth and hard work by us and by the Justice Department, we just couldn't come up with a way to do it that we thought really survived scrutiny.
Henry Paulson
Bob says, 'There's a very strong law — the Anti-Deficiency Act — and you're criminally liable if you spend funds that aren't appropriated.'
Bob Hoyt
Hank, in his usual way, says, 'That's terrible news, Bob!' — if you know Hank, you can just picture it — 'that's the worst news I've gotten all day, because I just got off the telephone with the president, and I told him, 'We're done.'' I remember saying, 'Well, Hank, that's really awkward.' But to his credit, Hank said, 'Okay, if you're telling me it can't be done, it can't be done now.' At the moment, it felt like that was going to be the issue that brought it all apart. For me, at least, that was a very nervous moment — having to tell Hank after all the work everyone had done on the weekend and after he had just told President Bush that we were done.
Henry Paulson
So, I immediately called Tim, and he sounded surprised and angry. He basically said, 'You committed — you've got to find a way to meet this,' and we ultimately did.
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Bob Hoyt
At the end of the day, the Fed decided they were able to move ahead without a guarantee. We instead wrote them a letter that acknowledged that any losses the Fed incurs from this loan will subtract from the profits that would otherwise be returnable to the federal government.
Henry Paulson
We jokingly refer to that as our 'All Dollars Are Green' letter.
While the government ironed out the mechanics of its unprecedented actions Sunday, JPMorgan and Bear Stearns continued to work toward setting a price for the besieged company — one that would ultimately prove to be a tiny fraction of its stock price just hours earlier on Friday.
Samuel L. Molinaro Jr.
My recollection is the first price talk from JPMorgan was $12 to $14, which we thought we were getting raped, candidly, at that price. We're certainly not happy with that. Then as the day progressed, prices were coming down.
Henry Paulson
Here I probably made a mistake, because I just felt that without a deal Bear Stearns was going to declare bankruptcy, they really shouldn't be getting anything, but you had to give the shareholders something. Jamie had been thinking $4 or $5 a share. I said, 'How about $1 or $2?' He agreed to $2.
Samuel L. Molinaro Jr.
We got told the deal is $2. Hank Paulson's view was that they really shouldn't be paying us anything, and that the shareholders had to get wiped out in the deal. Jamie told us that he told Hank, 'That's great, but you'll never get a deal done right, because there's no consideration — there will be no deal. We have to pay them something so that we can get a deal done.' They couldn't get the shareholders to approve a deal like that. Even $2 a share was a very tough pill to swallow.
Alan Schwartz
Now we had to really scramble — going back into the board and saying, 'Oh, by the way, we could get it done, but at $2,' was a real challenge. I was saying, 'There's no negotiation here. Let's everybody just get on board. There's nothing else we can do, but if we don't get this done, we're going to have thousands of our colleagues on the street tomorrow.' We worked furiously.
Samuel L. Molinaro Jr.
There was a lot of chaos, anger, emotion. The employees owned 40 percent of the stock — people had great pride in working there. The idea that we were going to basically be put out of business, and we were being raked over the coals wasn't pleasant — it was terrible. People were angry when they heard what the price was. It was very, very, very stressful, extremely stressful for everybody.
Donald Kohn
I remember feeling a little sorry for — not the risk takers at the top of the firm, because they took those risks — but all the other people employed by the firm who were going to have to find new jobs, whose lives would be disrupted by this thing.
Jackie Taddei
Assistant to Alan Schwartz
On Sunday night, [a colleague] calls me, and he told me what they had settled on for the price of the stock, and I asked him to repeat himself, because I was sure he made a mistake. They said $2. I was in shock, even though I knew the events of the week leading up to this. I wasn't prepared for that. I was in shock, and it was all starting to come together.
Steve Black
People thought $2 was a misprint, because the stock had closed at $20. This wasn't a mistake.
Jamie Dimon
A lot of people think, 'They got it cheap.' I knew I was subjecting our own people to a year of hell. I was now going to have 50,000 people stopping what they're doing to consolidate every trading desk, every system, every client, HR systems, financial systems, risk systems, lawsuits up the gazoo. I'm just breathless knowing what I'm subjecting my company to.
Samuel L. Molinaro Jr.
We had a board meeting Sunday late afternoon — the board had to make a decision whether we were taking this deal or not. It was not an easy meeting, because there were some people who had the view, basically, 'F this — this is bulls---, and we should just hit the nuclear bomb and tell them we're not taking the deal, and we'll file bankruptcy, and we'll do better in bankruptcy than $2 a share.'
Henry Bienen
There were a lot of lawyers in the room. I just didn't know what the alternatives were.
Samuel L. Molinaro Jr.
We had a lot of discussion about the pros and cons. Whether it was or wasn't a viable option at the end of the day, it really wasn't the right answer, because bondholders were going to suffer dramatically. The board would all be sued. At the end of the day, there was really only one answer; as much as we disliked the deal, we had to take it.
Alan Schwartz
I called Jamie, I said, 'We have a deal.'
In the aftermath of the weekend carnage, the final deal for Bear Stearns took a couple weeks to play out; eventually, to ensure shareholder support and clean up some problems with the initial contract, JPMorgan upped its offer to $10 a share. In the months ahead, seemingly every weekend brought another crisis — with a wavering, seemingly unflappable financial institution closing, being absorbed or being propped up by the government over the course of a weekend.
Kevin Warsh
I was thinking and saying: 'There goes the weakest of the flock.' I didn't have any particular emotional attachment to any of these firms — that wasn't our job. Our job was to salvage the financial system so further harm wasn't done to the real economy. I was frequently wondering and querying: Is this the assassination of the archduke, which seems an interesting but not hugely consequential affair, or is it the catalyst of a world war? Institutions fail all the time, and they should — this is the nature of a competitive dynamic American system. What matters is if a failing firm reveals something terrible about the broader financial system. The 'Bear Stearns weekend' is really important not principally because of Bear Stearns. 'Bear Stearns weekend' was important because it offered revealing evidence to policymakers in the U.S. and to the world that something was very, very wrong.
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Joel Kaplan
It was the first time we experienced something that felt like it became a very regular event in the fall — with the Treasury and the Fed scrambling very operationally over a weekend to avoid catastrophe and put together deals with the private sector to avoid total systemic failure. The stress of those weekends was palpable. The race against the clock feeling is what sticks with me.
Henry Paulson
Ben and I talked to House Financial Services Committee Chair Barney Frank (D-Massachusetts) to tell him that we dodged a bullet with the JPM rescue of Bear because we didn't have the authorities to rescue or wind down a failing investment bank in an orderly manner without fiscal authority from Congress. We were afraid Lehman would be next. Barney understood and said we wouldn't be able to get this authority from Congress unless an imminent disaster was apparent. And, of course, that's what it took to ultimately get Congress to act when Lehman did fail in the fall.
Bob Hoyt
One of the things you see today is the world becomes faster moving and more volatile. Over an increasing range of issues, the government needs to respond quickly and to be highly operational, and you need the right people to do that. The financial crisis probably is the dawn of an era when the U.S. government has to become very, very operational — think of FEMA during a hurricane, now on issue after issue, where everybody looks to the federal government to get things done under pressure quickly and it has to be done well. It was a great example of how to have that operational execution. It has been a real change as we get a higher number of national disasters, covid, cyberattacks going at critical infrastructure — and we've already now had another round of financial institution failures with Silicon Valley Bank and First Republic.
Topper photos by Getty Images and The Post.