In FED We Trust (45 page)

148
“I would be very cautious”
Senate Committee on Banking, hearing, March 4, 2008.

148
“Central banks typically”
Charles Kindleberger and Robert Aliber,
Manias, Panics and Crashes
, 5th ed. (Hoboken, N.J.: John Wiley & Sons, 2005), 237.

149
in normal times:
Brad DeLong, “Republic of the Central Banker,”
The American Prospect
, October 27, 2008.
http://www.prospect.org/cs/articles?article=republic_of_the_central_banker

150
“The bottom line is simple”
Paul McCulley, “The Paradox of
Deleveraging Will Be Broken,” November 2008.
http://www.pimco.com/LeftNav/Featured+Market+Commentary/FF/2008/Global+Central+ Bank+Focus+11-08+McCulley+Paradox+of+Deleveraging+Will+Be+ Broken.htm

151
“They’ve got a month or so”
Interview, Treasury staff.

153
“I think I’ve been around”
Interview, Treasury staff.

154
“I just never, frankly”
Senate Banking Committee, hearing, April 3, 2008.

154
Months later:
Interview, Kevin Warsh.

154
$2 billion in cash:
Securities and Exchange Commission, “Chairman Cox Letter to Basel Committee in Support of New Guidance on Liquidity Management,” March 20, 2008.
http://www.sec.gov/news/press/2008/2008-48.htm

154
The company asked Gary Parr:
Bryan Burrough, “Bringing Down Bear Stearns,”
Vanity Fair
, August 2008.
http://www.vanityfair.com/politics/features/2008/08/ bear_stearns200808

154
Schwartz followed up:
Form S-4, JPMorgan Chase.

154
“Tim, look”
Interview, Timothy Geithner.

154
quietly gave Friedman:
Kate Kelly and John Hilsenrath, “New York Fed Chairman’s Ties to Goldman Raise Questions,”
Wall Street Journal
, May 4, 2009.

156
“So what can taxpayers expect”
Allan H. Meltzer, “Keep the Fed Away from Investment Bank,”
Wall Street Journal
, July 16, 2008, A17.

157
The SEC was legally:
Kara Scannell and Susanne Craig, “SEC Chief under Fire as Fed Seeks Bigger Wall Street Role — Cox Draws Criticism for Low-Key Leadership during Bear Crisis,”
Wall Street Journal
, June 23, 2008, A1.

158
“We’ve got to make”
Greg Ip, “Crisis Management: Fed’s Fireman on Wall Street Feels Some Heat,”
Wall Street Journal
, May 30, 2008, A1.

158
“Things happened very quickly”
Senate Banking Committee, hearing, April 3, 2008.

159
“Everybody on the phone”
Interview, Donald Kohn.

159
Bear Stearns had:
Harvey Rosenbloom, et al., “Fed Interview: Managing Moral Hazard in Financial Crisis,”
Economic Letter
, Federal Reserve Bank of Dallas, October 2008.

160
“a gigantic centralization”
Herbert Hoover, “Herbert Hoover: 1932-33,”
from the Public Papers of the Presidents of the United States Web site, 1932, 308.
http://quod.lib.umich.edu/cgi/t/text/pageviewer-idx?
c=ppotpus;cc=ppotpus;rgn=full%20text;
idno=4731694.1932.001;didno=4731694.1932.001;
view=image;seq=00000364

160
After the 1932 law passed:
Howard H. Hackley,
Lending Functions of the Federal Reserve Banks: A History
(Washington, D.C.: Federal Reserve Board of Governors, 1973), 130.

160
“guiding monetary policy”
David Fettig, “Lender of More Than Last Resort,” Federal Reserve Bank of Minneapolis, December 2002.
http://www.minneapolisfed.org/
publications_papers/pub_display.cfm?id= 3392

162
“We recognized, of course,”:
Senate Banking Committee, hearing, April 3, 2008.

163
“It seems like I showed up”
Transcript posted at
http://georgewbush-whitehouse.archives.gov/
news/releases/2008/03/20080314-5.html

164
“It was just clear”
Robin Sidel et al., “The Week That Shook Wall Street: Inside the Demise of Bear Stearns,”
Wall Street Journal
, March 18, 2008, A1.

167
“It became clear that”
Senate Banking Committee, hearing, April 3, 2008.

168
“My question then was”
Interview, Kevin Warsh.

168
“The only feasible option”
Senate Banking Committee, hearing, April 3, 2008.

169
“It took some time”
Phillip Swagel, “The Financial Crisis: An Inside View,”
Brookings Papers on Economic Activity
, April 3, 2009, 24.
http://www.brookings.edu/economics/ bpea/∼/media/Files/Programs/ES/BPEA/ 2009_spring_bpea_papers/2

170
“The Primary Dealer Credit Facility”
William C. Dudley, “May You Live in Interesting Times: The Sequel,” Federal Reserve Bank of Chicago, May 15, 2008.
http://www.newyorkfed.org/newsevents/speeches/ 2008/dud080515.html

173
“This cost … must be”
Senate Banking Committee, hearing, April 3, 2008.

173
“Did the Federal Reserve”
Video posted at
http://www.charlierose.com/guest/view/420

174
“a rogue operation”
Craig Torres, “Fed ‘Rogue Operation’ Spurs Further
Bailout Calls,” Bloomberg, May 2, 2008.
http://www.bloomberg.com/apps/news?pid=20601109&sid=a1ctn1Xfq5Do&refer=home

174
“There is no question”
Interview, Frederic Mishkin.

179
“The chance”
Interview, Henry Paulson.

179
“The more complex issues”
House Financial Services Committee, hearing, July 10, 2008.

“[R]egulators are working together”
Ibid.

180
“Financial crises are extremely difficult”
Ben Bernanke, “GSE Portfolios, Systemic Risk and Affordable Housing, March 6, 2007.
http://www.federalreserve.gov/ newsevents/speech/Bernanke20070306a.htm

183
“If you’re not used”
Senate Banking Committee, hearing, July 15, 2008.

183
Fortune
magazine:
“21 Dumbest Moments in Business,”
Fortune
,
http://money.cnn.com/galleries/2008/fortune/ 0812/gallery.dumbest_moments_2009.fortune/7.html

184
“They should have wiped”
David Wessel, “Greenspan Sees Bottom in Housing, Criticizes Bailout,”
Wall Street Journal
, August 14, 2008, A1.

184
“Although it is widely described”
Stanley Fischer, “Concluding Comments,” Federal Reserve Bank of Kansas City, Jackson Hole Conference, August 2008.
http://www.kc.frb.org/publicat/sympos/2008/ fischer.09.28.08.pdf

185
While his wife rode:
David Cho and Neil Irwin, “In Crucible of Crisis, Paulson, Bernanke and Geithner Forge a Committee of Three,”
Washington Post
, September 19, 2008, A1.

187
“The troops got to Falluja”
James R. Hagerty and Damian Paletta, “Red Ink Clouds Role of Fannie, Freddie,”
Wall Street Journal
, February 27, 2009, A2.

188
The dealers jumped:
Fed’s H 4.1 report, September 10, 2008, September 27, 2008.

189
“That weekend really hit home”
Interview, Ben Bernanke.

190
“I left expecting the markets”
Interview, Henry Paulson.

191
“I just changed my mind”
Interview, Timothy Geithner.

192
AIG disclosed in early 2009:
“Attachment A — Collateral Postings Under AIGFP CDS,”
http://www.aig.com/aigweb/ internet/en/files/CounterpartyAttachments031809_tcm385-
155645.pdf

194
“We did this very unhappily”
Interview. 196
“If you are comfortable”
Interview.

196
At 4:50
P.M.:
Monica Langley, Deborah Solomon, and Matthew Karnitschnig, “Bad Bets and Cash Crunch Pushed Ailing AIG to Brink,”
Wall Street Journal
, September 18, 2008, A1.

196
At 7:50
P.M.:
Ibid.

197
Fed officials were stunned:
American International Group, Inc., Form 10-Q, September 30, 2008.
http://media.corporate-ir.net/media_files/irol/76/76115/reports/Q308_10Q.pdf

197
At one point, Barney Frank recalled:
House Financial Services Committee, hearing, February 10, 2009.

199
The Dow Jones Industrial Average:
Tom Lauricella, Liz Rappaport, and Annelena Lobb, “Mounting Fears Shake World Markets as Banking Giants Rush to Raise Capital,”
Wall Street Journal
, September 18, 2008, A1.

“It was becoming clear”
Interview.

200
When asked by CBS’s
60 Minutes:
“Paulson Warns of ‘Fragile’ Economy,”
60 Minutes
, aired September 28, 2008; taped September 26, 2008.
www.cbsnews.com/ stories/2008/09/28/60minutes/main4483612.shtml

202
“I remember sitting”
“Transcript: Charlie Gibson Interviews President Bush,”
ABC News
, December 1, 2008.
http://abcnews.go.com/WN/Politics/Story?id= 6356046

204
“I kind of scared them”
Interview, Ben Bernanke, October 14, 2008.

205
“Our political calculation”
Interview, Ben Bernanke.

207
The news triggered:
Documents released by the Massachusetts secretary of state.

207
Bruce Bent:
Securities and Exchange Commission v. Reserve Management Company, Inc, Resrv Partners, Inc., Bruce Bent Sr. and Bruce Bent II
, Civil Action No. 09-CV-4346 (S.D.N.Y. May 5, 2009).
http://www.sec.gov/litigation/litreleases/2009/lr21025.htm

212
A few months after leaving:
David Wessel, “Capital,”
Wall Street Journal
, March 28, 2009.

213
“I’d like to ask you”
Senate Banking Committee, hearing, September 23, 2008.

213
At an early-morning:
Interviews with participants.

214
“Many of these assets”
Joint Economic Committee, hearing, September 24, 2008.

215
McCain took the call:
Jonathan Weisman, “How McCain Stirred a Simmering Pot,”
Washington Post
, September 27, 2008, A1.

218
In 2003, WaMu’s chief executive:
Peter S. Goodman and Gretchen Morgenson, “Saying Yes, WaMu Built Empire on Shaky Loans,”
New York Times
, December 27, 2008.
http://www.nytimes.com/2008/12/28/business/28wamu.html?pagewanted=2

219
Bush’s initial choice:
Jim Rutenberg and Raymond Hernandez, “F.D.I.C. Post Seems Unlikely for New York Banking Chief,”
New York Times
, February 2, 2006, B4.
http://www.nytimes.com/2006/02/02/nyregion/02diana.html

221
“This is an unprecedented”
Sam Jones, “The WaMu Wipeout: Who Gets Hit?”
Financial Times
, September 26, 2008.
http://ftalphaville.ft.com/blog/2008/09/26/16384/the-wamu-wipeout-who-gets-hit

221
On Wednesday:
Affidavit of Robert K. Steel,
http://www.scribd.com/doc/6403234/Affidavit-of-Robert-K-Steel. Also, Wells Fargo Form S-4
.

225
For one thing:
Stephen L. Feldman, “Notice 2008-83: The IRS Offers Reassurance to Troubled Banks,” from Morrison Foerster Web site, October 2008.
http://www.mofo.com/news/updates/files/14544.html

226
“You cannot”
Interview, Timothy Geithner.

226
The looming November election:
June Kronholz, Sarah Lueck, and Greg Hitt, “The Financial Crisis: ‘No’ Votes Came from All Directions,”
Wall Street Journal
, September 30, 2008, A3.

227
“It became increasingly clear”
Interview, Ben Bernanke.

229
“Aggressive surgery”
Interview.

230
“Severe financial instability”
Ben S. Bernanke, “Current Economic and
Financial Conditions,” October 7, 2008.
http://www.federalreserve.gov/newsevents/speech/ bernanke20081007a.htm

231
Although heavy on the:
“Joint Statement by Central Banks,” October 8, 2008.
http://www.federalreserve.gov/ newsevents/press/monetary/20081008a.htm

233
“Why there’s been”
Damian Paletta, “FDIC Chief Raps Rescue for Helping Banks over Homeowners,”
Wall Street Journal
, October 16, 2008, A1.

233
Four or five hours:
See the June 14, 2008, communiqué.
http://www.g8.utoronto.ca/finance/fm080614-statement.pdf

235
“At one point”
Interview, David McCormick, other participants.

236
“The facts”
Neil Irwin and David Cho, “Paulson’s Change in Rescue Tactics: Plans Revamped After Scope of Bad Assets Became Clear, Stocks Plunged,”
Washington Post
, October 15, 2008, D1.

237
“Everyone said”
Interview, David Nason.

237
“The next day”
Interview, Kevin Warsh, David Nason, other participants.