In The New Yorker this week, James Stewart has written a 25-page behind-the-scenes look at the events of September 2008. With the cooperation of some of the major players — the Wall Street CEOs and government officials involved in the workings behind the biggest government intervention in financial markets in history— he gives a vivid picture of how things went down in Washington and on Wall Street during that uncertain, freaky time, and in painstakingly reported detail presents an account that is, against all odds, Hollywood-movie-level exciting.
We say against all odds because the financial crisis itself was not at all like a Hollywood movie — for one, it was painfully real and therefore not at all enjoyable. Secondly, it was about math and giant numbers and mind-brutalizing concepts. And most importantly, there was no hero, no one person you could feel good rooting for. But in Stewart's story, there kind of is. Of the many enjoyable characters, one comes off best.
Who is it?
Here are the contenders:
Jamie Dimon: "Stop pussyfooting around," the JPMorgan CEO urges AIG president Bob Willumstad early on, when the latter is waffling about how to keep the company out of bankruptcy. He then gives him Warren Buffett's phone number. Dimon's status as a team player is cemented on September 13, when he reminds the group of CEOs who have been called upon by the government to help save their competitor, Lehman Brothers, that helping one another is the best way to help themselves.
Dimon spoke up. "Look, we're all in a fix. This is something we have to do in the best interests of the financial system."
Still, Dimon does not win the article, because his part, while memorable, is small. If he had burst into "Working Together (We Can Make a Change)" in the previous scenario, we might feel differently.
Christopher Flowers: The founder of private equity firm J.C. Flowers & Company has described himself as a "grave dancer," but his presence here is more like that of the Grim Reaper, or the guy the hospital sends in to pick up the organs of the about-to-be deceased: a thin, bespectacled, no-nonsense man who gets called to look over at both AIG and Lehman as they hover near death. We particularly enjoyed this exchange between Flowers and then–Treasury Secretary Hank Paulson after he is called to weigh in on Lehman.
When Flowers was leaving, he turned to Paulson. "By the way," he said. "Have you been watching AIG?"
"Why, what's wrong with AIG?" Paulson asked. Geithner had mentioned there were some liquidity issues, but Paulson had heard that the New York State insurance commission was stepping in, and that a private-sector solution was taking shape.
"Well, you should take a look at this," Flowers said, and pulled out the spreadsheet he got from AIG the day before.
"Oh my God!" Paulson said.
Despite being colorful, Flowers is too minor — and too creepy — to win the article.
Hank Paulson: Former linebacker Paulson favored bold, decisive action, even when it seemed kind of nuts, like when he spur-of-the-moment decided the government should guarantee $4 trillion in money-market funds, "some people were aghast." But although another anonymous "someone" pegs his intelligence at USA Today–level, Paulson impressed us again for the simple reason that he seems to actually listen to people in a bi-partisan, non-egotistical way. And oddly, we found his empathy for his former boss, George W. Bush, kind of moving:
"There were plenty of people around the president who just wanted the free market to work. He freed me from all that. He wanted there to be a free market left for all of us to work with. They don't like him. They want to see him as disengaged. But he was very focused on what was best for the economy."
Well, maybe you have to see it in context. Anyway, Paulson still does not win the article, because the Lehman thing really did not need to go down the way it did.
Tim Geithner: Does anyone think that maybe the reason Geithner often "punctuates his remarks with profanity" is to make up for his youth, lack of experience, and (inevitably mentioned) babyface looks? We kind of do, after reading this piece. Maybe it's a holdover from childhood or something, like he developed a potty mouth to compete with the kids on the playground who had bigger muscles. Anyway, despite the fact that Stewart thinks the four-letter words have a way of "injecting some blunt common sense into the debates," we think that, ultimately, his spastic anger undermines him. For instance, when he tells the Wall Street CEOs they've brought in and separated into groups to try to brainstorm a way to save Lehman, "You guys have got to try harder!" they mock him:
Throughout the day, when members of the various groups passed in the Fed corridors, they asked one another, 'Are you trying harder?'
Ouch. Geithner's impatient hotheadedness may have also been a contributing factor in Barclay's decision not to take over Lehman Brothers; the failure of that deal seems to have hinged largely on communication problems. Although "the various calls between the British and the Americans remain a point of contention," at one point Geithner yells at the British chairman of the financial authority, "Are you going to approve this, or not?" "It was not a high point for Anglo-American relations," one person familiar with the conversations says. As you may have guessed, Geithner does not win the article.
Ben Bernanke: When White House officials first interviewed Bernanke, they were worried that he "lacked assertiveness," Stewart tells us. He definitely seems to have proved them wrong. Although we liked the part where the former Princeton professor gave Chris Dodd "a short tutorial" on the Fed's authorizing statute, it was the scene where Paulson tries to convince Bernanke to authorize that $750 billion rescue package where he really shone:
Bernanke was growing agitated. Hank! Listen to me," he interrupted. "We are done!"
It was the first time Federal officials had heard him raise his voice. The Fed is already doing all it can with the powers we have," Bernanke continued.
One participant recalled, "Ben gave an impassioned, linear, rigorous argument explaining the limits of our authority and the history of financial crises in the U.S. and abroad. That history showed that efforts to resolve such crises are successful only when overwhelming force from all parts of government is brought to bear," the participant said. "It was a tour de force."
It was as though Bernanke were the professor and Paulson was the student. Bernanke's comments lasted for about 15 minutes, and Paulson was uncharacteristically silent until near the end.
"Got to go," he said, and hung up.
If this we're a movie, we'd cheer at this scene. Bernanke, needless to say, wins the article.
Eight Days [NYer, subscription-only]