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UFPPC ( — Digging Deeper CLX: May 23, 2011, 7:00 p.m.

Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and
Washington Fought to Save the Financial System—and Themselves (New
York: Penguin Books, 2011). Updated with a new afterword. Originally
published in October 2009 by Viking.

[Thesis. The 2008 financial crisis was filing for bankruptcy (1-3). The
caused by "cheap money" and "ultra- fundamental cause of the crisis was
interconnectedness." Too Big to Fail "cheap money . . . liquidity run amok"
covers the financial crisis from Mar. 14, and "ultra-interconnectedness" (4; 5; 3-
2008, when Bear Stearns failed, to Oct. 6).
13, 2008, when nine Wall Street CEOs
accepted TARP bailout money; this Chapter 1. Richard S. Fuld Jr., CEO of
edition also contains a brief afterword, Lehman Brothers, fends off the first
dated Mar. 31, 2011. Too Big to Fail assault on the firm on Mar. 17, 2008 (9-
proposes to describe, in a Bob 17). Fuld's early career, mentored by
Woodward-style series of dramatic Lewis L. Glucksman (18-23). Traders:
vignettes, "the reality behind the scenes" "The battle between bankers and traders
(6), set in context by short background is the closest thing to class warfare on
pieces on the history of the people and Wall Street" (24; 23-24). In 1994, When
institutions involved. The spotlight in the Lehman becomes independent again
early part of the book is on Lehman after ten years of American Express
Brothers and its supremely crass CEO, ownership, Fuld takes the helm (24-28).
Dick Fuld; in the latter part the focus is Joe Gregory, Fuld's right-hand man,
on how Morgan Stanley avoided appoints Erin Callan CFO (28-30).
bankruptcy. Inside the federal Callan's conference call on Mar. 18 goes
government, Henry Paulson and Timothy well (30-35).
Geithner (but not Ben Bernanke) seem to
have been sources.] Chapter 2. On Easter Sunday, Mar. 23,
Secretary of the Treasury Henry Paulson,
Author's Note. This book is "the who secretly brokered the deal, learns
product of more than five hundred hours that Dimon wants to recut the Bear
of interviews with more than two Stearns deal from $2 to $10 a share, lest
hundred individuals who participated shareholders reject it (36-39). In 2006,
directly in the events surrounding the Paulson had been loath to leave his post
financial crisis" (xi). They "took part only as CEO of Goldman Sachs to become
on the condition that they not be Treasury secretary (39-43). Paulson's
identified as a source" (xi). This book unusual background and rise to Goldman
aspires to be "the first detailed, moment- CEO in 1998 (43-47). His character (47-
by-moment account" (xii). 49). Paulson's view of Lehman and
relationship with Fuld (49-54). Fuld &
The Cast of Characters and the Paulson encourage Warren Buffet to
Companies They Kept. 160 individuals invest in Lehman on Mar. 28, but he
listed. 8 pp. doesn't (54-57).

Prologue. On Sept. 13, 2008, Jamie Chapter 3. Apr. 2: Timothy Geithner,
Dimon, CEO of JP Morgan Chase, warns president of the New York Federal
colleagues they need to prepare for Reserve, arrives in D.C. for a Senate
Lehman Brothers, Merrill Lynch, AIG, Banking Committee hearing on Bear
Morgan Stanley, and Goldman Sachs Stearns (58-60). Geithner's background
(60-66). Treasury's Robert Steel testifies American International Group (AIG) (151-
on Bear Stearns (66-70). Jamie Dimon's 54;167). Maurice Raymond "Hank"
career, with Sandy Weill as mentor—a Greenberg, "the very model of an
relationship that eventually soured (70- imperial CEO," expanded AIG into one of
77). Dimon allows JP Morgan to be the the world's largest financial companies
conduit for a $30bn bailout of Bear but ran afoul of federal regulators (154-
Stearns (77-78). 57). AIG's "Financial Products" division
"became Ground Zero" for the
Chapter 4. On Apr. 11, Fuld attends a development of credit derivatives,
post-G7 private dinner at Paulson's collateralized debt obligations (CDOs),
invitation (79-83). At Paulson's behest, and credit default swaps whose
on Apr. 15 Neel Kashkari and Phillip implosion, despite the confidence of the
Swagel, two Treasury advisers, present "quants," caused the financial crisis (157-
to Ben Bernanke a plan for the 64).
eventuality of a "total financial
meltdown" (83-85; 90-93). Bernanke's Chapter 9. The Goldman Sachs board,
background (85-90). Steel calls Bob meeting in St. Petersburg in late June
Diamond, CEO of Barclays Capital, to 2008, discusses the possibility of
inquire about his interest in acquiring acquiring AIG and has an off-the-record
Lehman (93-95). meeting with Paulson, also in Moscow by
"a strange coincidence" (178; 168-80).
Chapter 5. Fuld and Callan to persuade
CNBC's Jim Cramer to help strengthen Chapter 10. Fuld rehires Michael
Lehman's share price (96-100). David Gelband, a trader (181-82). Paulson's
Einhorn, hedge fund manager, makes a Fourth of July weekend at his island on
mid-May speech arguing that Lehman is the Georgia coast (182-85). GSEs Fannie
overvaluing assets (100-08). Mae and Freddie Mac (185-87). Fuld
turns to John Mack at Morgan Stanley
Chapter 6. On Jun. 3, Fuld's plan to (187-89; 192-94). GSE shares collapse
attract Korean investment is leaked to after a leak about a possible government
the pres (109-11). Scott Friedman, the takeover (189-92). Fuld considers
youngest member of Fuld's inner circle, turning Lehman into a bank holding
accuses Callan (111-12). Hopes for the company or merging with Bank of
Korean deal (112-16). Employee America (194-97; 199-200). Paulson
Matthew Lee denounces Repo 105, an outraged at the idea of temporary
accounting trick used by Lehman (116- emergency authority (198). On Jul 13,
18). Growing dissatisfaction with Joe Paulson announces a plan for Treasury to
Gregory (118-26). On Jun. 9 Lehman purchase equity in Fannie and Freddie
reports $2.8bn loss (126-27). Pressure (200-01). Sen. Jim Bunning accuses
builds, and Gregory and Callan are forced Paulson of proposing "socialism here in
to resign (127-34). the United States of America" (201-02).
Paulson feeling desperate (203-04). Fuld
Chapter 7. Facing problems, John Thain is losing his self-control (204-05). Ken
at Merrill Lynch contemplates selling Wilson agrees to take a leave from
Larry Fink's Blackrock (135-38). Goldman to work for Paulson at Treasury
Frustrated at Goldman, Thain took the (205-06). Ken Lewis of Bank of America
CEO job at Merrill Lynch, replacing Stan not interested in buying Lehman (206-
O'Neal (138-50). 08).

Chapter 8. In mid-June, Bob Willumstad Chapter 11. On Jul. 29, Willumstad of
replaces Martin Sullivan as CEO of feels out Geithner's willingness to lend to
AIG (209-11). Fuld is in Hong Kong Timothy 1:7 (353-54). Fuld speechless
pursuing Korea Development Bank (355). Sept. 15: Bank of America buys
financing (211-12). Paulson hires Morgan Merrill Lynch for $29 a share (355-57;
Stanley to advise the government on 361-62). Lehman forced to file for
Fannie and Freddie (212; 212-15). Fuld's bankruptcy (357-61; 362-63; 365-66;
intervention ruins a deal with KDB that is 368-71). Banks organize $100bn
close to agreement (215-18). At "borrowing facility" for themselves (363-
Treasury, Steve Shafran (a social friend 64). George W. Bush doesn't return call
of Fuld's) is responsible for contingency from his cousin, George H. Walker IV,
planning for a Lehman bankruptcy (218- head of Lehman's investment
20). In late August, the Fed summer management unit (364). Fuld blames the
symposium at Jackson Hole debates Fed (374-75).
policy (220-23). Paulson plots the
takeover of Fannie and Freddie (224-27). Chapter 16. As Lehman files for
AIG discusses its problems with JP bankruptcy, attention turns to AIG, but
Morgan (227-29). On Sept. 5, Treasury efforts to find a private plan don't pan
presents nonnegotiable terms to Fannie out (376-92). At Geithner's initiative,
and Freddie (230-32). Fuld speaks with Treasury bails out AIG, extending an
Ken Wilson (232-33). $85bn credit line and taking 80% equity;
Geithner instructs Willumstad on Sept. 16
Chapter 12. Lehman's shares drop not to file for bankruptcy, also telling him
when KDB's withdrawal from negotiations he will have to quit: "AIG had effectively
becomes public; the president, Ken become a linchpin of the global financial
McDade, fears for the mental state of the system"; "this was the only way to avert
CEO, Dick Fuld (234-35). Political attacks a financial Armageddon" (397; 401; 395-
on Paulson in Congress (235-37). AIG 411).
appeals to Geithner for a "primary
dealer" license (238-40). Goldman calls Chapter 17. Geithner's inner thoughts
Treasury, offering to "be helpful on (412-13). Morgan Stanley's back is to
Lehman" (240). Dimon talks to Bernanke the wall (413-15; 423-26). Lehman sells
(241-43). Panic spreads over Lehman's U.S. operations to Barclays for $1.75bn
collapse (243-52). (417-18). A Wachovia-Morgan Stanley
merger explored (418-20). Sept. 17: as
Chapter 13. Because of the reaction to the credit system seizes up, Treasury
the Fannie Mae and Freddie Mac returns to its emergency plan (420-23).
takeover, a Lehman bailout is ruled out Paulson gets waiver to deal with
(253-98). Goldman Sachs (426-28). As panic
mounts, Paulson and Geithner pressure
Chapter 14. Bank of America rejects Bernanke (428-48).
capitalization of Lehman, explores Merrill
Lynch capitalization (291-341). Chapter 18. Sept. 19: Paulson
announces the $700bn Troubled Asset
Chapter 15. Sept. 14: Though U.S. Relief Program (449-50). Geithner labors
investment banks were prepared to to save Morgan Stanley and Goldman
finance it, an attempt to arrange a Sachs; ultimately succeeding on Sept.
takeover of Lehman by Barclays fails 21-22, with the government granting
because of opposition by the U.K.'s bank holding company status to Morgan
Financial Services Authority, headed by Stanley with—though the Chinese
Sir Callum McCarthy; Geithner is Investment Company was also interested
incredulous (342-53). Paulson, fearful, is —Mitsubishi providing $9bn in capital,
reassured by his wife, who quotes Goldman Sachs also becoming a bank
holding company; "The two biggest prevailing wisdom has become that [the
investment banks in the nation had 'bailouts'] worked" (553). There has
essentially declared their business model been some meaningful reform, but "big
dead to save themselves" (486; 450-86). banks are even bigger and they are still
as interconnected as ever" (554). In the
Chapter 19. As financial markets fall of 2009 John Mack acknowledged that
continue to fall, political leadership "We cannot control ourselves. You have
falters and the Mitsubishi deal almost to step in and control The Street" (555).
unravels (487-521).
Acknowledgments. This book was the
Chapter 20. Oct. 13, 2008: Paulson, suggestion of Sorkin's wife, Pilar Queen,
Geithner, and Bernanke, and Sheila Bair and written in the year following the
of the FDIC convene nine Wall Street crisis (557). Family, colleagues at the
CEOs at the Treasury Building and Times, publisher, agent, friends, and
pressure them to accept TARP money in sources (558-60).
return for preferred stock; all nine agree
(523-31). Notes and Sources. Methodology
(561-62). 41 pp.
Epilogue. "In the span of just a few
months, the shape of Wall Street and the Bibliography. 28 books.
global financial system changed almost
beyond recognition. Each of the former Index. 14 pp.
Big Five investment banks failed, was
sold, or was converted into a bank About the Author. Andrew Ross
holding company. Two mortgage-lending Sorkin is a reporter and columnist for
giants and the world's largest insurer the New York Times. He edits DealBook,
were placed under government control. an online daily financial report. He has
And in early October, with a stroke of the twice won the Gerald Loeb Award for
president's pen, the Treasury—and by business journalism, the second time for
extension, American taxpayers—became this book.
part owners of what were once the
nation's proudest financial institutions" [Additional information. Andrew
(533). Problems and political backlash in Ross Sorkin was born in New York City
the aftermath, with Goldman Sachs a on Feb. 19, 1977. He graduated from
special target (534-38). Decisions Scarsdale HS and holds a B.S. degree
remain controversial, particularly about from Cornell (1999). He has worked for
allowing Lehman to fail (538-42). There the New York Times since his senior year
is now an opportunity for meaningful in high school; he has written some 2000
reform (542-43). articles there, including 120 front-page
articles. In 2000 he became the paper's
Afterword [dated Mar. 30, 2011]. chief mergers and acquisitions editor, a
Wall Street has returned to prosperity position he still holds. His newsletter,
(545-47). Warren Buffet argues there is DealBook, has more than 200,000
no culprit responsible for the crisis, and subscribers and won the 2008 EPpy
so far none has been identified—not even Award for Best Business Blog. He has
Fuld (548-50). In April 2010 the SEC appeared frequently on TV as a talking
charged Goldman Sachs and one of its head and briefly hosted a PBS talk show.
employees, Fabrice Tourre, with Filming of an HBO version of Too Big to
securities fraud, which Goldman settled Fail began on Oct. 22, 2010, starring Paul
for $550m (550). Criticism of Giamatti as Ben Bernanke, William Hurt
government (552-53). But "the as Hank Paulson, Billy Crudup as Timothy
Geithner, and Dan Hedaya as Barney ambition are, Sorkin suggests, the sine
Frank. Release date tonight: May 23, qua non of success on Wall Street: "'Sit
2011.] down, Gordon, and shut up,' Greenberg
told him. 'I'm in charge now'" (156). A
[Critique. Too Big to Fail has one great leader breaking the law is being
merit, in addition to its dramatic and "[h]eadstrong and combative" (157). —
historical interest: it demonstrates the On technical issues, Too Big to Fail is
extent to which Wall Street financial weak. Sorkin's explanations of finance
interests dictate the policies of the U.S. are so laconic as to be unintelligible; e.g.
federal government. The author never "derivatives . . . are, in simplest terms,
articulates this concept, however, and it financial instruments that are based on
is dismissed by figures in the book as a some underlying asset, such as
"conspiracy theory." But since Sorkin residential mortgages, to weather
documents how very close the conditions" (158; it's hard to know what
relationship between business and an untutored reader will make of this,
government is, it may be simply that especially since Sorkin rendered his
participants, the author included, are explanation unintelligible by omitting the
unable to see the conspiracy, just as a words "the ability of" after "based on").
goldfish is unable to see the water in its Readers get abundant details about
bowl. — Since another recurrent theme things like office furniture, styles of
of the book is how the personal feelings dress, personality conflicts, etc.—but
of Wall Street titans play a role in their interestingly, in the midst of the
management decisions, the impression Dominique Strauss-Kahn scandal, never
that emerges from Too Big to Fail is of a about the sexual proclivities of business
dominant oligarchical class whose foibles leaders, which are never mentioned. —
play as large a role in American life as Too Big to Fail received glowing reviews
those of the emperors did in the Roman from mainstream reviewers.]
Empire. Strong passions and crude