Panic: The Untold Story of the 2008 Financial Crisis (2018) – Transcript

VICE on HBO looks at factors that led to the 2008 financial crisis and the efforts made by then-Treasury Secretary Henry Paulson, Federal Reserve Bank of New York President Timothy Geithner, and Federal Reserve Chair Ben Bernanke to save the United States from an economic collapse. The feature-length documentary explores the challenges these men faced, as well as the consequences of their decisions.
Panic: The Untold Story of the 2008 Financial Crisis



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Timothy Geithner: Nice to see you. Good to see you. Thanks for coming All the usual suspects. It’s a pretty good concentration of talent.

Barney Frank: Are you in the middle of the China mess now? Oh yeah, I’m in the middle of the China mess. I’m going back on forth on that. It is a mess. -Professor. Tycoon. -Good to see you. Hi, Janet. How are you? It’s nice to see you, Barney. Can you imagine putting different administrations… -No, it’s amazing. Franklin Roosevelt told Herbert Hoover, -see you in March. -Go fuck yourself. Yeah. -Exactly! Great.

Ben Bernanke: How come I got Paul Giamatti to play me, and you got Billy Crudup or somebody? I changed my view, after going through all this, about housing. It’s hard to keep people in their homes, you know, if they can’t afford to stay in their home.

Andrew Sorkin: This dinner is a remarkable moment. It brought together all of the players from the financial crisis of 2008. The people who were actually in the room, in the moment, to have a conversation about what went right and what went wrong. In the 2008 financial panic, there’s no playbook for this stuff, there’s no road map, there’s no… instruction manual on what to do.

Bernanke: We’re trying to think of the most hated moment in the crisis.

Geithner: Yeah, there’s a lot… of candidates. -I think the most hated program was AIG, by far.


Sorkin: But when you think about this group of people, Hank Paulson, Ben Bernanke, and Tim Geithner, and you think about their different experiences, their sensibility, how they approach life… -Oh, my God!

Sorkin: In Hank, you have the dealmaker. His word is his bond. If he says he’s good for something, he’s good for it. We’ve come up with a whole bunch of policies, which are about jobs and growth.

Sorkin: Ben Bernanke, he was an economics professor at Princeton. He had spent his whole career thinking about and studying the Great Depression. He was built for this moment. I have a research paper that I’m giving on Thursday at the Brookings Papers fall meetings on the crisis.

Sorkin: And then there’s Tim Geithner. You know, some people thought he looked too young for the job or he looked like he worked on Wall Street. But he was a government guy. He had spent his whole career in government working on global financial panics. Geithner: I remember McConnell saying to me in January, “We’re against almost everything you’re doing, and we’re gonna fight you on all of it, and it’s working for us.”

Sorkin: It’s pretty remarkable to think about how they came together, and what ultimately happened. The 2008 financial crisis was far beyond the confines of Wall Street. The good news is that the economy rebounded. The bad news is how the public understands and thinks about what happened. Because of the financial crisis, today there is distrust in government. There’s distrust in the big institutions. There’s distrust in this idea of elites. It has lead to the populism that we see in our politics today.

♪ ♪ It’s a straight line. ♪ ♪

Newsman: Big trouble for millions of American homeowners as a slowing housing market has turned some mortgages into time bombs.

Newswoman: One failed mortgage might not threaten the whole financial system, millions of them could. : …millions of them… …millions of them…

Newswoman 2: Thirty-four subprime mortgage companies have gone bust in just the last few months.

Newsman: Bear Stearns is hurting. The stock cut in half, investors, in general, cutting out.

Newswoman: Fannie and Freddie may not have enough money on hand to stay in business. Paulson: If you’re used to thinking about the issues, it is very intuitive that if you’ve got a bazooka, and people know you’ve got it, you may not have to take it out. Jim Cramer: Bernanke needs to open the discount window. He has no idea how bad it is out there! He has no idea! Newsman: The Dow tumbled more than 500 points after two pillars of the Street tumbled over the weekend. Lehman Brothers filed for bankruptcy.

Newsman 2: The Dow Industrials finished with their worst one-day point loss in history, down 777 points.

George W. Bush: If our nation continues on this course, the economic damage will be painful and lasting.

Barack Obama: For this is no longer just a Wall Street crisis. This is an American crisis, and it’s the American economy that needs this rescue plan.

Rick Santelli: How many of you people want to pay for your neighbor’s mortgage, that has an extra bathroom and can’t pay their bills?

Raise their hand. President Obama, are you listening? : …listening? …you listening?

Man: We are tired of the one percent of the one percent and what they have done to the country, what they’ve done to the world. Government is finished. Donald Trump: This American carnage stops right here, and stops right now. Bush: Good morning. Welcome to the White House. In the first quarter of 2006, the US economy grew at an annual rate of 5.3%, the fastest growth in two and a half years. We added 5.2 million new jobs since August of 2003.

Josh Bolten: When I became chief of staff at the beginning of 2006, the president gave me a mandate to refresh the cabinet. I felt strongly that the president needed a secretary of the treasury who was experienced in the markets, and whom the markets would respect, and Hank Paulson really stood out. He is the leader of Goldman Sachs, perhaps the most successful financial institution in the history of the world at that time. Josh Bolten, who was the chief of staff to George Bush, called and made a pitch. I talked with people around me, and no one advised me that that was the right thing to do. First, he said his family would be against it. His wife was a friend and classmate of Hillary Clinton.

Paulson: My wife, Wendy, clearly didn’t want to, and I… didn’t want to. So, I turned it down a couple of times. Wendy’s reticence came largely from the work years ago, when I was in the White House. I went to the Nixon White House. Great sense of timing, six weeks before the Watergate break-in. And what Wendy didn’t like had to do with the whole political scene. But a few weeks later, they came back. It had occurred to me, the reason I was turning this down was, you know, due to fear of failure. And I tell you, as soon as that hit me, I just reversed on a dime.

Bush: Hank came up to the Treaty Room, there, in the White House. He was reluctant, but he wanted to serve the country. And I assured him of one thing that I think was important to Hank, and that is when he picked up the phone and called me, I’d answer it. In other words, he wouldn’t have to battle his way through a lot of layers of staff. He agreed to come, and one of the best decisions I made in my presidency. Good morning. Welcome to the White House. I’m pleased to announce that I will nominate Henry Paulson to be the Secretary of the Treasury.

Paulson: Our economy’s strength is rooted in the entrepreneurial spirit and the competitive zeal of the American people, and in our free and open market. It is truly a marvel, but we cannot take it for granted.

Bernanke: I didn’t know Hank before he came to Washington. It was customary for the Fed chairman and the Treasury secretary to meet at least once a week, over breakfast or lunch. We both liked oatmeal, so we used to have an oatmeal breakfast, either in my dining room or in the Treasury dining room. Hank was a markets person. He had been very successful on Wall Street. He’s very high-energy. He and I are very different people. I tend to be, personally, kind of quiet. I was an economics professor, full stop. I liked being an economics professor, and I never expected to be at the Fed or in government. But in 2002, I got a call from the White House: They needed to fill a slot on the Board of Governors at the Federal Reserve. Would I be interested? I recognized that I had been spending my academic career studying monetary policy and financial markets, and that maybe I could put some of that to use. And moreover, it was just a few months after 9/11, and I was kind of feeling that it was important for me to do some public service. Today, I’m honored to announce that I’m nominating Ben Bernanke to be the next chairman of the Federal Reserve.

Geithner: You could say Ben was the academic who grew up studying the mistakes made in the Great Depression, why financial systems matter to economies. You know, Hank had spent his life in markets, and I had spent my life in the policy world, really dealing with financial crises. I first met Tim when he became the president of the New York Fed. Well, the New York Fed is, probably, the most important of the 12 Federal Reserve Banks, and the president of the New York Fed has traditionally been the Fed’s eyes and ears on Wall Street.

Geithner: I think we all had something in common, which is, you know, anybody who had grown their life in markets understands that markets aren’t always self-correcting. So, I think we all shared a view about this tenuous fragility of the system. And we really did trust each other.

Paulson: When I arrived in July of 2006, I thought there was a very good chance that in the two and a half years I was in Washington, we would be facing a financial crisis. But the things that I was concerned about turned out not to be the biggest problem.

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Jamie Dimon: It was March 13th, which happens to be my birthday. I was at Avra, this Greek restaurant, which is down here, with my parents, my family. The CEO of Bear Stearns called me, it was maybe nine o’clock at night, and said, “Jamie, I need $29 billion before Asia opens, or we’re gonna have to declare bankruptcy.”

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And I said, “Alan, I can’t possibly lend you $29 billion overnight.”

Newsman: Bear Stearns, one of the most admired firms in America, now one of the most in danger.

Newsman 2: The firm has been buffeted by constant rumors of a looming liquidity problem.

Sorkin: What happened at Bear Stearns was the first true demonstration of what the crisis looked like, because it was a crisis of confidence. Bear Stearns owned a huge piece of the housing business, and they had taken on some of the worst risk. All of a sudden, all sorts of investors on Wall Street said, “I don’t think that Bear Stearns is good for the money. “And not only do I not think they’re good for the money, I gotta get my money out of there immediately.”

Newsman: Bear Stearns is the biggest casualty yet of the nation’s mortgage mess.

Newsman 2: The company has become a poster boy for the real estate bubble.

Paulson: We knew that there were excesses in housing, and we missed it totally. ♪ ♪ Homeownership went, very sadly, from shelter to an investment. When I had joined Goldman Sachs in 1974, the industry was growing in many ways. You saw an evolution in modern finance. You began to see different forms of securitizations.

Bethany McLean: Mortgage-backed securities really came into being in the 1980s. They had started as a really good idea, which made a lot of sense, which was a way to take mortgages, package them up, and sell off the cash flows. So, an investor would buy a portion of all these mortgages, and the mortgages would pay that investor. And the idea was that made investing in mortgages much less risky because instead of investing in just me, you were investing in a thousand people.

Austan Goolsbee: As we moved to securitization, we had cheaper mortgages. If you could afford 20% down, fine, but if you couldn’t, let’s say you have five percent, let’s say I had one percent, let’s say you had zero percent– we came up with all these ways to get loans to more people. You know, it certainly felt exciting at the time that we were gonna spread the American dream all over the place.

Newsman: It’s a record year for housing and it shows no signs of abating. In the early 2000s, the price of borrowing to finance a house was very low, very attractive.

Newswoman: These exotic loans have exploded in the last three years: interest-only loans, adjustable-rate loans, no down payment options.

McLean: People who were earning like, a thousand dollars a month, working as a gardener, or working as a hair stylist, saying they were making $10,000 a month, because you could do these things called stated income loans, which came to be known as “liar loans,” where you could just say, “Here’s what I make,” and nobody would check. And so, you could get away with murder.

Newsman: Demand for these million-dollar-plus homes has outpaced supply. You’ve got speculators buying multiple houses, people are flipping. Your neighbor, who’s not as smart as you are, but nevertheless, went out and bought a couple of houses and flipped them, is now driving a better car than you are, and you say, “Yeah, that does make pretty good sense. I wish I’d started earlier.”

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Sheelah Kolhatkar: As the housing market heated up, there were asset management firms around the world that all wanted a way to benefit.

McLean: Most things on Wall Street start with a concept that makes a lot of sense. The thing about Wall Street is they take everything to an extreme.

Goolsbee: They take thousands of mortgages and staple them together. And they go to investors and they say, “What do you want? You want safe? You want risky? We got all these mortgages!”

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Sorkin: There was an incentive to chop up these loans because along the way, there was a profit, a fee to take for each institution that somehow touched every piece of the loan.

Newsman: Goldman Sachs, with quarterly profits up 93%…

John Mack: Everyone was making a lot of money because of the housing market, the liquidity of globalization.

Newsman: Top executives will earn as much as 20 to 50 million dollars each.

Dimon: There’s the booming 2000s. People are making so much money. I can make 10, 15, 20, 30, 100 to 200 million dollars, and so there was this competition, which was ridiculous.

Sorkin: Chuck Prince was the CEO of Citigroup, and he had an amazing line, which was, “While the music’s playing, you gotta dance.”

Newsman: Big bonuses are driven simply by profits and competition. Everybody was looking at the success of Goldman Sachs, and of Morgan Stanley, and of Lehman Brothers, all of whom are making more and more profits.

Newsman: The company will distribute a record high $16.5 billion in compensation. And so there was this remarkable pressure on everybody to keep dancing.

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McLean: Another part of what drove this was belief that home prices would never go down.

Newsman: The shaky housing market’s starting to crack at the foundation.

Newswoman: Particularly hard-hit markets: Miami, Vegas, Northern Virginia, and right here in DC. Historically, house prices have been somewhat disconnected across different parts of the country, but this housing bubble did end up being national, and it did have implications for the whole economy.

Newswoman: The real estate bubble, everybody knows, has burst.

Newswoman 2: This is the hangover after the great frat party you went to. House prices started to fall, economies started to slow.

Newswoman: Those adjustable-rate mortgages are now coming due.

Geithner: People who had bought these adjustable-rate mortgages, when they started to reset, they couldn’t afford to make the higher payments. They tried to refinance them, but their house prices declined in value, so they couldn’t refinance them.

Newswoman: Foreclosures are up over a thousand percent. Some people start defaulting on their mortgage payments, and now, that begins to ripple through.

Bernanke: It was very, very bad. A lot of people lost their homes. A lot of people lost their savings.

Newsman: Those falling home prices are like an infection, now spreading throughout the US economy.

Goolsbee: The system’s not designed to function in an environment where house prices are going down. So, these mortgage-backed securities start to unravel, and you got problems.

Newsman: Investor confidence in the mortgage financing space is not doing well.

Paulson: There was so little transparency, and so little confidence in these securities, that financial institutions were struggling.

Buffett: I looked at one offering of mortgage-backed securities. I would’ve had to read over 300,000 pages to analyze that mortgage.

Bush: I had some of the smartest people in America who couldn’t explain to me what some of these instruments meant. And it was just like inventing more and more product in order to achieve higher and higher returns. It was taking bigger and bigger risks.

Mack: Unfortunately, maybe this is the weakness of the Street back then…

Man: How aggressive does he wanna be? Maybe a lot. …I think discipline was kind of lacking. It was ourselves, Lehman, Goldman, Bear Stearns, others, the amount of risk we were taking was out of control.

Newsman: Today, Bear Stearns’ stock dropped nearly 50%, a loss of three billion dollars.

Newsman 2: The rapid change in Bear Stearns over the past 48 hours, it reintroduces anxieties about what’s not known.

Newsman 3: The complete lack of confidence in Bear Stearns, a run on the bank. The Fed’s job is to prevent a catastrophe.

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Paulson: This was a four-alarm fire. It became very clear to us that Bear Stearns wasn’t gonna exist on Monday if there wasn’t a solution. The markets were so fragile and so interconnected, that we were gonna have to do some pretty repugnant things if we were gonna save the American economy for the American people.

Bush: Hank came in and said, “Bear Stearns is failing, and we got to do something about it.” And my first reaction was, “Why? “They made bad investments, Hank. “And, sadly, the people that invested in Bear Stearns, “and sadly, those who worked for Bear Stearns “are gonna have to pay the price of working for an entity-made bad investment.” He said, “You don’t understand. “If they fail, it’s gonna affect the international financial system.”

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Paulson: I had been told there was no authority for the Fed, or anyone else, to guarantee the liabilities of a failing non-bank. There is nothing more terrifying than feeling a great sense of responsibility and not having the authorities you need. You know, we had each other, in some sense, to talk through options and strategy, and that helped a lot.

Paulson: Ben, Tim, and I, we talked multiple times a day.

Bolten: We always treated the three of them kind of as one entity, and the president always wanted to know when he was getting a recommendation from Hank, what do Ben and Tim feel?

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Bernanke: I remember having a conference call where Hank and Tim and I talked about what the implications might be for the financial system if Bear Stearns failed, and what we could do. What we decided that morning was to buy some time, to get through the weekend.

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Congress had given the Fed this emergency tool that we could use in extreme crisis to lend… to an institution that was not a bank. So, we had authority to lend, but the Fed had not done something like this since the Great Depression.

Paulson: Ben Bernanke made a really bold decision to extend a loan for 28 days. The Federal Reserve agreed, basically, to help finance about $30 billion of Bears’ risky assets. This was the first important intervention that we did, and it was a tough call. I was a registered Republican. I, um, believed in market solutions to economic problems. But I was a student of the Great Depression.

♪ ♪

When I went to graduate school, I knew I wanted to do economics, but I didn’t know what area. And I said to myself, the Great Depression was one of the most important events of the 20th century. About a third of all the banks in the United States failed, and that, in turn, created a tremendous contraction in the amount of credit available to ordinary households and businesses. My grandfather’s drug stores kept going out of business in the 1930s, and it created enormous hardships for many, many years. Later on, when I was a policy maker, I took to heart the idea that allowing the financial system to collapse, and the credit system to collapse, was going to be extremely dangerous for the whole economy, and that was why it was so important to make the loan.

Newsman: Bear Stearns was forced to take an emergency loan funded by all of us. The taxpayer bailout prompted investors to dump Bear Stearns’ stock.

Paulson: As Bear Stearns was going down, President Bush was scheduled to be in Wall Street, to make a speech at the New York Economic Club.

Man: …the 43rd President of the United States.

Mr. President, the floor is yours.

Paulson: He had showed the speech to me, and he had a line in it that said that there would be no bailouts. I started off by saying, “You can take that line out about no bailouts.”

Newsman: President Bush tried to make light of a grim situation. Seems like I showed up in a… -interesting moment. I was unhappy about it, you know? I was a free marketer. I told people that, you know, and firmly believed it, and still do, by the way. But Hank is a persuasive guy, and I trusted him.

Paulson: Then what became apparent was a loan that was permissible for the Fed to make, no way was it gonna stop an investment bank from disintegrating. And fortunately, JP Morgan was a buyer.

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Dimon: It’s a really risk thing, buying a big investment bank. It was a house on fire. It was collapsing. Hank and Tim were, “I want you to buy it. You wanna buy it. You should buy it.” I said, “We’ll do anything we can to help. “I can’t be irresponsible to JP Morgan. I can’t end up being a teetering giant after this.”

Paulson: He wanted to own Bear Stearns. There’s no doubt about it. I had gone to bed on Saturday night, thinking we had a deal.

Dimon: At one point, on Sunday, I called up Hank and said, “Hank, we can’t do it. It’s a bridge too far.” And then, we started working on, well, what could you do to do it? Which is why we had this idea, well, if the Fed could finance this 30 billion, we can handle the rest of it.

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Sorkin: Bear Stearns has a bag, let’s say, of garbage, let’s just say it’s trash. And nobody wants to buy all of Bear Stearns and the trash. Jamie Dimon says, I’ll buy Bear Stearns but you guys are going to have to share the trash with me. You, Tim Geithner, and Ben Bernanke, and Hank Paulson, you got to take the trash out.

Newsman: It would be like Fox bailing out NBC. JP Morgan Chase joins the Federal Reserve in a frantic attempt to rescue Bear Stearns. That was very controversial because that was, in essence, the first proto-bailout.

Protesters: Main Street, not Wall Street!

Sorkin: People woke up on Monday and thought that it was the heist of the century.

Protesters: Main Street, not Wall Street!

Sorkin: People thought Jamie had stolen Bear, and people thought that Hank had basically given away the store by taking on $30 billion of terrible crapola.

Protesters: We want Dimon! We want Dimon!

Sorkin: And that was the beginning of this debate in the country about what was happening, how bad it was gonna be, and whether we should be doing any of this.

Protesters: We want Dimon! CEO! CEO! CEO! Communication was a really tough issue during the crisis. None of us were able to convince the public that what we did was not for Wall Street, but it was for the American people. Bail out working women and men, who worked hard to buy their homes! That’s why we say, Not Wall Street…

Protesters: But Main Street!

Paulson: We should’ve done a better job of explaining the financial system was so concentrated and so intertwined, that if you wanna stop the bleeding, you’ve gotta go to the source, and the source is Wall Street. And if you don’t stop the bleeding at Wall Street, you kill the economy. ♪ ♪ This was an extraordinary period. There was this presidential election going on. We had these two candidates, both running against President Bush because he was very unpopular. We need to bring real change to Washington and we have to fight for it! That was a bad period for President Bush. Remember, we’re still in the midst of the war in Iraq, and President Bush was generally unpopular in the public, partly as a result.

Bush: When you’re president, you don’t make decisions based upon your personal popularity. You don’t have to be a PhD to know it’s unpopular to spend taxpayers’ money on Wall Street. That may be okay in New York, but you get out to Midland, Texas, it’s not okay.

Paulson: You know, it was pretty clear what the public wanted to hear. It’s very easy to tap into that populist strain, and be against bailouts and putting government money in anything. Mismanagement and greed became the operating standard, while regulators were asleep at the switch. I won’t let banks and lenders off the hook when it was their greed and irresponsibility that partially got us into this mess. We should not be bailing out just Wall Street. We should be restoring opportunity on Main Street. It was a bum deal for people. You got folks out there, teachers and construction workers, small business people, single moms, and they’re working hard. They’re acting responsibly. To the extent that they were involved in any of this, it’s that some mortgage broker tells them they can afford a house, that they don’t know. It looks like they can afford it. And suddenly, folks are getting wiped out. Good. What’s your name? -Karen.

Obama: And the problem you had, the dynamic you had at that juncture, is that the actions that are necessary to save the financial system are, by any definition, bad politics. Thank you, man. I appreciate you. I describe it as a clash between politics and markets, and of course, both are important, but, at the end, markets win.

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Brian Williams: The housing market, in plain English, is coming apart.

Paulson: As 2008 progressed, the crisis intensified. We were all concerned about Fannie and Freddie, but we didn’t know how bad it was.

Newswoman: Fannie Mae and Freddie Mac are the backbone of the US mortgage market, holding roughly half of all US mortgages.

Newswoman 2: Fannie and Freddie may not have enough money on hand to stay in business.

McLean: The first thing you have to understand about Fannie and Freddie is that they are so important to the machinery of everyone’s everyday life. Any person who has a mortgage, it’s pretty likely that Fannie and Freddie touches you. ♪ ♪ They were publicly traded companies, like any company you would invest in, like Starbucks, like Apple, like Google, and yet they were known as government-sponsored enterprises because there was this idea that the US government stood behind their debt. So that, if they ever couldn’t pay their debt, the US government would step in.

Goolsbee: They got a government money-printing machine, in which the government implicitly says, “If everything goes wrong, we’ll foot the bill.”

McLean: That was a guarantee. It was written nowhere on paper. It didn’t actually exist, and so it came to be known by this term called, the “implicit guarantee.”

Paulson: There was no guarantee, but the market assumed that there was. So, you had management teams and shareholders making money off a government guarantee.

Bernanke: They insured something on the order of five trillion dollars. Something close to half of all the mortgages in the United States were insured and resold by Fannie and Freddie.

McLean: The fear was if Fannie and Freddie defaulted, that would throw the global financial system into chaos.

Newswoman: The companies’ stock prices off more than 85% since the credit crisis began last August.

Paulson: They’ve announced huge losses. Their stock is diving. So I needed to ask Congress for enough money to calm the markets.

Chris Dodd: Thanks Secretary Paulson, and the Chairman of the Federal Reserve. We thank Chairman Bernanke for his involvement.

Paulson: This was a tough political ask with the members of Congress. I felt we needed… expansive authorities. One of the proposals that you’ve suggested is an increase in the Treasury line of credit for Fannie and Freddie. I have some concerns, and I suspect my colleagues do, too, about having no cap, no limit at all.

Paulson: If I asked for 100 billion, it wouldn’t be enough, and I certainly knew I couldn’t ask for a number that started with a T, trillion. How much money are you contemplating here? I would ask for it to be unspecified. For some of us, it sounds a little bit like a blank check.

Congressman: You’re talking about potentially spending a trillion dollars here. We’re a little skeptical.

Bernanke: One of the tough things about testimony was that you had multiple audiences. So, you’re sitting at this table with a glass of water, you’re looking up at the senators, and so you’re trying to answer their questions, but you know at the same time that you’re talking to the TV camera, which is going out to American public, and then your staff member behind you gives you a piece of paper which says, “Dow Jones down 180 points.” So, you’re also talking to the markets.

Paulson: I looked at those hearings as largely theater. I was worrying about saving the financial system for the American people. These guys wanted to save the financial system, but they wanted to get elected. But I really believed what I said when I was testifying. I said, you know, if you give us unspecified authorities, it’ll be so powerful that we won’t have to use them. If you’ve got a squirt gun in your pocket, you may have to take it out. If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out. You’re not likely to take it out. By having something that is unspecified, it will increase confidence, and by increasing confidence, it will greatly reduce the likelihood it will ever be used.

Geithner: You know, he had this tremendously valuable skill, which is how to convince people to do something they did not think was in their interest.

Bernanke: It was Hank in that instance, and in others, who kind of laid down the law and said, “This is what’s gonna happen.” I’m about getting something done that can get done, that will make a difference, and, in my judgment, is in the best interest of the taxpayer. The sense of urgency is something, I think, all of us, at least most of us, here appreciate.

Dodd: Look, we’re in the middle of this thing, and it’s getting worse, and the secretary of the Treasury says, I need some of these tools. We’re in the eye of the hurricane at that point.

Paulson: I got the bazooka, and I didn’t think we were gonna have to take it out, but the most aggressive investors get very quickly to where the most fearful investors are faster than you can imagine. And so, it was only a matter of time till we had to use the bazooka.

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Bernanke: The takeover of Fannie and Freddie was like a military operation. Hank was the general.

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Paulson: Congress had no idea we were thinking of nationalizing them, and so, we needed to keep this quiet.

Bush: Fannie and Freddie were politically powerful entities, I mean, really powerful. They made people rich. Most of them were very well connected.

Bernanke: We had to do it in a way that they didn’t anticipate, otherwise they would have used political and other forces to prevent it. I remember talking to President Bush about this, and he was asking, “How can you possibly get this done without them knowing and fighting?” And I remember– it just came out of my mouth, “The first sounds they’re gonna hear is when their head hits the floor.”

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This is the full Paulson.

Paulson: There were some bitter pills. The CEOs were replaced. They were gonna lose their golden parachutes.

Lester Holt: History was made when Washington took the reins at the two organizations that back or guarantee nearly half of America’s home loans. Today’s action should accelerate stabilization of the housing market, ultimately benefiting financial institutions. Naively, I thought, maybe we’ve brought down the hammer. As I told President Bush, maybe this is what it’s gonna take to put out the fire.

Newswoman: It began with a more than 300-point bounce. Fannie Bang, we called it.

Paulson: On Saturday night, I was sound asleep. It was an optimistic sleep. My phone rang. It was Barack Obama. How are you, sir? What’s your name?


Nice to see you, Fred. Thank you so much. I wanna give you some hometown favorites– Man, I gotta have my John Deere hat.

Paulson: On that call, he said, “Look, I know I’m going to be President of the United States.”

Obama: Yeah, at that point, I was fairly confident I was going to win the election, and I already felt as if I had some responsibilities for, um, an economy that I was going to have to manage, um, fairly soon. This is a company from my home state.

We make these tractors.

All right.

Obama: To Hank’s credit, he was consistently straightforward and honest and transparent with us, and I ended up developing a good relationship with him and trusting him. And it had been impressed upon me that if this thing went sideways, we could have a depression. And whatever short-term political advantage I might gain from it, it was not something that I was going to be interested in playing.

It’s very nice to meet you. I’m proud of you.

Thank you, sir.

Paulson: He very nicely warned me. “You better take care of the Republican candidate “because if I start hearing populist, “anti-bailout rhetoric from him, I’m going to have to start talking that way.” Two years ago, there was one man who stood up and warned us about the problems at Fannie Mae and Freddie Mac. It was John McCain!

Paulson: The next day, I talked with John McCain and Sarah Palin. I encouraged everybody to call me Hank. I did not want to be Mr. Secretary. But, somehow or other, I don’t know what it was on that first call, the way she immediately started saying Hank, the tone of voice, it just… it rubbed me a little bit the wrong way.

Palin: People in Florida are, and should be, outraged. Huge financial institutions going under because of their own bad practices, and now asking the public to bail them out. Despite what her other failings may or may not have been, she certainly understood where the public was with regard to bailouts.

Protesters: Main Street, not Wall Street! Main Street, not Wall Street!

Geithner: Early September, there was so much bailout fatigue, there was so much opposition, not just to what we’d done in Bear Stearns’ case, but to the Fannie Freddie receivership. People had no sense for the perils of what was happening.

Newswoman: The economy is like a house of cards. The bottom could still drop out, sending markets into a free fall.

Geithner: I’d grown up in the Treasury in a series of crises that happened to other countries– beginning in, really, ’94 with the Mexican financial crisis. I then lived through a whole wave of really devastating emerging market financial crises in Thailand, Korea, Brazil, Indonesia…

Newswoman: In Indonesia, fears of financial disaster hit the streets, with long lines formed outside supermarkets.

Geithner: I could see, you know, how deep the depressions were, how tragic were the costs, and how hard it was for people to figure out a way to navigate their way through it. It had a huge impact on me, of course. Panics are different from all other crises, and in a panic, you have to use overwhelming force because you have to convince people it’s safe not to run, not to panic. And to do that, you have to muster a wall of money. Newswoman: Lehman taking a beating right now, down about 35%. It hasn’t traded this low since 1998.

Sorkin: Lehman, in particular, both was leveraged, but more importantly, had taken on a huge amount of real estate. And that real estate, every day was being marked down even more.

Newswoman: Another tough day for shares of Lehman Brothers today. CEO Dick Fuld is actively shopping the entire brokerage firm.

Buffett: Dick Fuld was looking for capital. He contacted us. I had talks with him. I came down on a… Friday night, I remember, and looked through a 200-and-some-page 10-K and scribbled a lot of notes on it. I still have the 10-K. And by the time I got all through, I knew we weren’t going to make a deal.

Geithner: By that week in September, they were close to out of options.

Newsman: The debate now is the role the government will play in all of this.

Newsman 2: Treasury Secretary Hank Paulson and Fed Chief Ben Bernanke are behaving like socialists and “should resign.” That is what Kentucky Senator Jim Bunning says. They both should be fired. First, for Bernanke not watching the store, and Paulson because he didn’t tell the banking committee the truth. Hank, in particular, was taking a lot of the heat for, quote, “being the bailout king,” and the like.

Newsman: If it’s $200 billion for this bailout, it was $300 billion for the housing bailout, it was $30 billion for Bear Stearns. I mean, where does it end?

Newsman 2: Now there are rumors that Lehman might be in trouble, the government would obviously come to rescue Lehman.

Paulson: I made frequent calls to Dick Fuld. We had told him repeatedly that the government can’t put in capital.

Newsman: Sources close to Treasury Secretary Hank Paulson, saying there will be, quote, “No government money in the resolution of this situation.” He puts the word out to the street. “We are not in the bailout business.”

Geithner: I did call Hank saying, you’re gonna regret that ’cause it’s not gonna get solved without more public money. He said, “I understand that.” This was a tactic, plain and simple. If we didn’t communicate that, all the other Wall Street banks would believe that the Fed, you know, would be there to put capital in. We had two potential buyers for Lehman. The first was Bank of America. The second potential acquirer was a British bank called Barclays. We assumed that there would be some bad assets. The hope was to keep the Fed out of it, if possible, and to get the CEOs from the other Wall Street firms to get involved in, in buying those, or holding those assets in some way.

Newsman: Wall Street titans and top government officials have been huddled in emergency meetings, scrambling to prevent the collapse of the giant investment bank Lehman Brothers. I convened the heads of the major firms in New York that evening.

Newswoman: The best financial brains in the world are in pressured negotiations to resolve the fate of Lehman Brothers.

Sorkin: This is like the Five Families. Every major character on Wall Street. This is Jamie Dimon of JP Morgan. This is John Thain of Merrill Lynch. Vikram Pandit of Citigroup. Lloyd Blankfein of Goldman Sachs. John Mack of Morgan Stanley.

Mack: I thought it was exactly the right thing to do. They had a problem to solve, and their problem was my problem.

Paulson: These CEOs were all scared, and they were scared about what Lehman going down might mean.

Geithner: I said, you know, you’re all exposed too. We don’t have the means to protect you from this.

Sorkin: And they were effectively being given an assignment. Hank and Tim are the school teachers telling the children, you’re gonna be broken up into groups to come up with a deal to ring-fence these assets. No one’s saying, “Oh shit, I don’t wanna do this.” But it was complicated. I mean, all of a sudden, you’re looking at all this data.

Newswoman: The banking crisis forcing another long weekend of work in both Washington and New York.

Newswoman 2: Top executives of rival banks met under tight security to discuss plans to buy Lehman whole or in parts. It turns out that one of the potential buyers really had no interest in Lehman.

Newswoman: Bank of America is now reported to be to be in advanced talks to buy Merrill Lynch.

Newsman: A shotgun wedding arranged in two days. The fact that Bank of America purchased Merrill Lynch took another serious problem off our hands.

Paulson: But Barclays sure seemed very interested, and identified the assets that need to be left behind, and I think the banks were largely on board to step up and take it.

Mack: We were all under the impression that this was gonna go through.

Sorkin: There’s one major hitch, which is the British government. Tim Geithner and Hank Paulson get a phone call.

Bernanke: There were several people they spoke to, including the bank supervisor… -…but the decision maker was the chancellor of the Exchequer, the secretary of the Treasury, essentially, of the UK, who was named Alistair Darling. And the British said that for Barclays to buy Lehman would be like importing the US cancer.

♪ ♪

Bush: Hank called and said, “The British will not allow, “you know, the British bank to take over Lehman, and it’s gonna fail.”

Paulson: I was very angry. It was a very unpleasant surprise.

♪ ♪

Sorkin: Hank told the staff, he said, “The British grin-fucked us.”

♪ ♪

And Hank walked into the other room, and said to the CEOs, it’s over.

Newsman: Wall Street in crisis mode this morning. Lehman Brothers says it will file for Chapter 11 bankruptcy today. The Journal and The Times editorial on Monday morning, I would say, expressed relief that the Fed hadn’t intervened.

Paulson: I’ll tell you, none of the three of us looked at that as a positive event. We didn’t know how bad it was gonna be, but we knew it was bad.

Paulson: Good afternoon, everyone, and I hope you all had an enjoyable weekend. Yeah. Monday afternoon, I was standing in the White House, in front of the press corps, you know, putting the best face I could on Lehman. As you know, we’re working through a difficult period in our financial markets right now. Lehman was a massive mistake, and I think… maybe those who were involved in that decision will still defend it, but I think when you look at the tremors afterwards, I think that goes down as one of the most colossal mistakes ever.

♪ ♪

Bernanke: There’s a lot of retrospective analysis and so on. I think people need to appreciate that all these decisions had to be made in real time, in very, very time-pressured situations. We could have lent money to Lehman, but it would not have been enough or sufficient to prevent the company from failing. There was a broad-based run going on throughout the entire company, not just on its short-term funding, but on its derivatives, and on many other aspects of its business, and so, the company was not savable.

Goolsbee: For the people who believe that if they had just saved Lehman, then there would be no financial crisis, you’re being naive. If it weren’t Lehman, it would’ve been Morgan Stanley. It would’ve been somebody, because the fundamentals were so bad.

Newswoman: The Dow fell by 4.4% today, more than 500 points, the worst one-day point drop since 9/11.

Dimon: After Lehman, I remember I called my management team and said, you’re gonna see the worst week ever in the financial history of the United States.

Paulson: It was a huge liquidity problem. The bank interlending market was drying up.

Geithner: You know, any institution across the United States– Caterpillar, GM, Ford, Chrysler, Harley Davidson– anybody whose existence depended on the ability of your customers to borrow or your ability to borrow, at that point, I think people thought that, you know, it was dire. We were a few days away from the ATMs not working.

♪ ♪

Paulson: I could see the crisis spreading very, very quickly, from Wall Street to Main Street.

Sorkin: That week, one of the largest McDonald’s franchisees in the country calls Ken Wilson, who’s working for Hank Paulson in the Treasury, and literally says to him, “I don’t think I’m gonna be able to make payroll next week.” Think about that. And you might say to yourself, why couldn’t McDonald’s do this? Well, guess what? They rely on Bank of America to roll their paper, and they’re worried that Bank of America’s not gonna do it!

♪ ♪

Dimon: The markets were affecting the real economy. The markets were closing down. People were cutting back hiring, cutting back investing, cutting back spending to protect themselves. And you were looking at what looked like could be a Great Depression.

♪ ♪

I described it as an economic Pearl Harbor. The 1929 panic was nothing like this. The system had stopped.

Newsman: A day after the failure of Lehman Brothers and the fire sale of Merrill Lynch, attention turned to AIG.

Newsman 2: The world’s largest insurance company, American International Group, is seeking emergency funding as it struggles to stay afloat.

Sorkin: AIG, effectively, was insuring all the other Wall Street banks.

Goolsbee: Wait a minute! All your insurance is from an insurance company that’s about to go bankrupt! Now, you see how the fire spreads from one company to the next company, and then everybody looks and says, “Ooh!”

Newsman: AIG must raise at least $40 billion and fast.

Paulson: AIG, the situation kept worsening. And then we got told that they weren’t gonna make it through the day. You know, the need had ballooned, so it was $85 billion. Imagine that.

Bernanke: The Fed can lend against collateral. And we essentially decided that even though the loan to AIG would be very large, that there was enough value in all these insurance companies that we could take it as collateral.

Ali Velshi: AIG may not have been too big to fail, but it was certainly too interconnected to the economy to fail. By Tuesday night, the AIG saga is, at least temporarily, over. They stuff the turkey with $85 billion, and they fire the CEO.

Newsman: Volatility does continue in a big way today…

Newsman 2: I think it may be that the whole AIG bailout is not enough for the market in its entirety. Now, we’re talking about Morgan Stanley going under. If Morgan goes under, Goldman goes under.

Geithner: The two remaining and independent investment banks, Goldman and Morgan Stanley, are acutely vulnerable.

Paulson: We worked quite aggressively with financial institutions. I was on the phone, jawboning, urging them to raise equity.

Mack: Hank and Tim, and mainly Hank, was pushing, at least Morgan Stanley, to figure out a way to get external financing. Tim said, “Pick up the phone and call Jamie. He’ll buy your bank.” I said, “Tim. Yeah, he’ll buy it, for two dollars a share.” He said, “I don’t care what he pays for you. I want you to do it.” And I said, in one of my more stupid moments, “Well, I won’t do it. I’ll take the firm down first,” and I hung up on him. Who the fuck does that?

♪ ♪

On Thursday, Hank came in with Bernanke, with Geithner, and started talking to the president about, we’re gonna need some legislative authority. We’re kind of out of ammunition.

Bernanke: We needed to put capital into the banking system, but Hank’s concern about capital injections was that it would look like the government was nationalizing or taking over, the banking system. And so, his idea was to buy troubled assets. That’s why it was called the Troubled Asset Relief Program, the TARP.

Bolten: About halfway through the conversation, the president interrupted Hank, and directed a question at Ben.

Bush: I asked, are we headed for a Great Depression? And Bernanke… said, you know, it looks that way. And you have to make up your mind, you know? Do you care? And what I cared about was people that would be hurting. ♪ ♪ They were already starting to hurt. People getting run out of their homes. Payrolls couldn’t be met. And I just could envision what a Great Depression would mean. If it’s bad now, imagine how bad it would really get?

♪ ♪

Bolten: As we left that meeting, the president turned to us and said, “If this is Hoover or Roosevelt, for damn sure I’m gonna be Roosevelt.”

♪ ♪

Nancy Pelosi: Usually, the secretary of Treasury keeps me posted on the markets, but I haven’t heard from him in a couple of weeks. In that amount of time, we’ve had Lehman Brothers, Merrill Lynch, and then AIG. So I called him, it was three o’clock in the afternoon, to say, can you be here nine o’clock the next morning? To which he said, “Madam Speaker, tomorrow morning will be too late.” So, we planned a meeting for five o’clock that day.

♪ ♪

Hank Paulson and, uh, Chairman Bernanke came in. And Chairman Bernanke said to the group, “If you don’t give Hank Paulson what he needs, “within 72 hours, “the entire banking system of the United States will fail, and then the world banking system will fail on top of it.” One of the most sobering periods I’ve ever experienced. You’ve gotta be kidding? I mean, why are we first meeting now, we’ve got 72 hours?

Bernanke: If anything, I think I might’ve understated in my predictions how bad things were actually gonna get.

Pelosi: The secretary described what they wanted to do. He said, “We’ve tested many models, and we have what we call our break-the-glass plan.”

Bush: We were gonna buy troubled assets. You know. I’m not sure how, but we were gonna buy troubled assets.

Pelosi: About every 15 minutes, Majority Leader Reid would say, “How much is this going to cost? A hundred billion dollars?” “No, no, no,” Hank said. “No, no, no.”

Paulson: We knew it couldn’t start with a T. I couldn’t ask for a trillion. I wasn’t gonna be able to get unspecified again, and so the biggest number we thought we could get was $700 billion. And we thought, you know, $500 billion sounds… sounds big, but $700 billion, $500 billion, $700 billion– many people don’t know the difference. Basically, we wanted it to be as big as we could get without spooking Congress, so it blew up in our face. I said, “We need the authorities immediately,” and Harry Reid says, “Congress doesn’t do anything immediately.” And so, it was after that where we all walked out -and, late at night, had a presser. We reached a bipartisan agreement to work together to try to solve this problem, and to do it in an expeditious manner. I am very impressed with Chairman Bernanke, Secretary Paulson, I’ve said that on a number of occasions. We look forward to working with them, and we’re anxious to see their proposal, which we hope to receive in a matter of hours, not days. We’re coming together to work for an expeditious solution, which is aimed…

Paulson: And, of course, that was the best thing that happened for the next… …the next week. Because after that, it was one difficult process.

Newswoman: Today on behalf of Main Street, Congress had a chance to ask some hard questions about the $700 billion bailout of Wall Street. Why are we asked to put $700 billion to keep CEOs in their office, while families get kicked out of their homes?

Jon Tester: Why do we have one week to determine $700 billion that has to be appropriated, or this country’s financial systems go down the pipes? I share the outrage that people have. It’s… It’s embarrassing, uh, to look at this, and I think it’s embarrassing for the United States of America. Their view is, right, same as all of our view is: If you take risk and you make money, that’s fine, great for you. But if you lose money, we don’t expect the United States of America to be there to save you. Anything that looks like a bailout is unpopular. Too many people on Wall Street have been recklessly wagering, instead of making the sound investments we expected of them.

Goolsbee: The other crazy thing about this, this whole thing is happening in the middle of a presidential election! If you give me your vote on November 4th, then together, we won’t just win Florida, we will win the general election, and you and I together, we’re gonna change the country, and we’re gonna change the world. God bless you. -God bless America. Thank you.

Obama: Not only have I assured Paulson that we are not gonna play politics with this, I actually reach out to McCain, and suggest to him, that we should make a statement expressing confidence that we can get through this difficult period, that now’s not the time for politics. He asks me on the phone, “What would you think about potentially suspending the campaign?” And I say, “Well, I’m not sure that it’s a good idea “for you and me to be in Washington. That’s just gonna politicize the situation.” Maybe, half an hour passes? Maybe less? Uh, before David Plouffe, my campaign manager, gets a call, saying, “Listen, uh… “John’s gonna be going out in two minutes to announce that he’s suspending the campaign.” I said, “No, no, no, that can’t be right. I just talked to McCain half an hour ago.” Well, sure enough.

Newsman: This afternoon, John McCain dropped a political bombshell. -Tomorrow morning, I’ll suspend my campaign and return to Washington. I’m directing my campaign to work with the Obama campaign to delay Friday night’s debate. So, there was some cursing that took place, uh, in the room. Um, that was… irritating… to say the least.

Paulson: McCain had called Bush, and said he was going to interrupt his campaign and wanted to come back and help solve the problem.

♪ ♪

And the president said, “That is just the stupidest thing I ever heard.”

Newsman: There was a flurry of dramatic developments today, as economic policy and power of politics collided. So I’m sitting there saying, “Oh my gosh! “If he comes out against what we’re doing, “we’ll lose the Republicans, “we may lose the Democrats, “and there goes our economy, “there goes our financial system, here comes another Great Depression.” It appears to me that John McCain is trying to divert attention to his failing campaign. It reminded me of Andy Kaufman as Mighty Mouse. Oh, here’s McCain! Here he comes to save the day!

♪ ♪

Barney Frank, the chief Democratic negotiator, said it was the longest Hail Mary pass in the history of football and Marys.

McCain: I’m calling on the president to convene a leadership meeting from both houses of Congress, including Senator Obama and myself.

Bush: Hank’s dead set against the meeting. He doesn’t want the meeting. But, you know, if I’d have said no, it would have really hurt his campaign. I called Senator Obama at the time and said, “I’m having a meeting at the White House, and I’d like for you to come.”

Obama: President Bush was almost apologetic. He’s saying, “Look, I don’t know how well this is gonna work. We’ll try to make it as serious and constructive as possible.” I say, “Well, I appreciate that, Mr. President. I’ll be there.”

Security: Keep moving, please. Keep moving.

♪ ♪

It was high-stakes drama.

Paulson: It was the most bizarre meeting. You know, sometimes history is stranger than fiction. Okay, let’s go.

♪ ♪

I want to thank the, uh, leaders of the House and the Senate for coming. I appreciate our presidential candidates for being here as well. We are in a serious economic crisis in the country, and we know we’ve got to get something done as quickly as possible. President Bush, ever gracious, defers to me as speaker, and I say, “Thank you, Mr. President. “Leader Reid and I have decided “that we’re going to yield our time to Senator Barack Obama.” He was very wise about it. He said, “Listen, “I’ve been in touch with Hank Paulson, and I’m watching this crisis very closely.” I had, at that point, been pretty steeped in these issues, and was pretty familiar with ’em. And I made my pitch. “Mr. President, we want to act responsibly. We think it’s important that taxpayer money isn’t wasted.” He had a well-crafted presentation. The president then called on McCain, and McCain said, “I’ll wait my turn.” And there’s sort of a deflation around the room.

Obama: John didn’t have much to say. The problem was, I think, John still hadn’t really thought through what exactly his approach would be at that point.

Paulson: I knew that that campaign was staggering. I knew he couldn’t possibly have developed another plan.

Frank: McCain doesn’t wanna talk, and finally he said, “Well, I think the Republicans have a perfect right to offer their plan.” Someone said, “No one doubts that, but what do you think about it?” ♪ ♪

Pelosi: And it was so, shall we say… just not there.

Bolten: I didn’t believe he had a plan. They thought it was a really cool campaign gambit. They were playing checkers, not chess. They had only thought one move ahead.

Obama: It was a situation where I felt that he hadn’t been served well. His team needed to make sure that he had an agenda that he was bringing to bear, um, and he didn’t, and the meeting sort of descended into a little bit of chaos.

Paulson: Barney Frank started shouting at him. “Where’s your plan? Where’s your plan, McCain?”

Frank: McCain would not say what he thought about the plan.

Paulson: The meeting broke down into a shouting match. It was chaos and disarray.

Bush: This thing turned into a food fight. Barney Frank yelling at some Republican guy. And it got out of control, and I basically said, the meeting’s over.

Pelosi: It brought the meeting to an end. It brought the meeting to an end.

♪ ♪

Bolten: It was the most horrifying and dispiriting meeting in the White House that I– I ever experienced.

Bush: I asked him not to use the White House as a political backdrop. I said, “Because we’re gonna spook the markets. “You walk out of here, and you start giving people “what happened in the meeting, and this, that, and the other, “the markets are shaky as it is, and we don’t wanna be a part of making ’em shakier.” I think you’re waiting on bigger game than me.

Paulson: Richard Shelby went running out and told the press that our plan was a disaster, and there was no support for it. We hadn’t got an agreement. There’s still a lot of different opinions. Mine is, it’s flawed from the beginning. And the Democrats all went running into the Roosevelt Room.

Frank: We’re talking about what Obama is gonna say in the press conference afterwards.

Paulson: I was a little naive because I thought, jeez, these are all my friends, I’ve been working with them, I’ve been talking with them regularly. And I was concerned that they were gonna run out and what they were gonna say to the press. So I came barging right in, like I shouldn’t have, and they’re all huddled around Barack Obama, and I went right up to him like I was one of them, and they looked at me. They said, “Get out of here!”

Obama: This is the famous meeting at which Hank Paulson, and only half in jest, gets down on one knee and begs Nancy Pelosi not to torpedo the TARP legislation.

Pelosi: Hank knelt down and said, “Madam Speaker, please bring the bill to the floor.” And I said, “Well, you know, it’s not us. We want a solution. You have to get the votes on your side.”

♪ ♪

Paulson: The financial crisis was a life-altering experience for me. I would wake up in the middle of the night, and I’d look into the abyss, and I would see food lines, and I would see millions and millions of people unemployed. It gave me, really, a new appreciation for fear that comes from trauma and, you know, the impact on people’s lives when they go through prolonged periods of stress.

♪ ♪

This was a really tough period personally. It went on not just a few days, but really for months. For Lehman weekend, I basically was in the office the entire weekend, slept on the couch. Tim essentially lived in the Federal Reserve Bank of New York for quite a few weeks, as I understand it.

Geithner: We all had this crushing burden of responsibility and this deep fear of whether the size of the problem exceeded our grasp, the reach of our tools, the reach of our knowledge or our competence. That was a hard and terrifying time then because, uh… we were not certain whether it would work, and the world was pretty confident it wouldn’t. And you know, the fate of, you know, the fate of many things hung in the balance.

Paulson: I was at Treasury, and President Bush came over to see me.

Bush: Part of the leadership is to kind of recognize what’s happening on your team. And it was pretty clear that Hank was working himself to near-exhaustion.

♪ ♪

So, I tried to go to Wendy, his bride, and said, “Wendy, you gotta get him to rest.” I don’t know if it had any effect, but at least he had a friend, me. I said, “Well, if you really want to know what I’m concerned about, I don’t want to be Andrew Mellon.” You know, Andrew Mellon was Herbert Hoover’s Treasury secretary during the Great Depression. And he laughed, and I said, “Well, what’s so funny? I mean, no one knows him. They know about Hoover.” The country has got to have confidence… in the government’s ability to stave off a crisis. I learned that firsthand on 9/11, that one of the jobs of a leader during a crisis is to not only project calm, but project confidence that we’ll deal with the situation. And lo and behold, my administration started with a crisis and it ended with one.

Bush: There will be ample opportunity to debate the origins of this problem. Now is the time to solve it. In our nation’s history, there have been moments that require us to come together across party lines to address major challenges. This is such a moment.

Paulson: In terms of getting the TARP, there were three or four sticking points, but one that was very big was compensation. You know, Congress said, if you’re going to do something for Wall Street, they should be willing to sacrifice. The issue was, are people gonna keep their bonuses, while we’re bailing them out? There had to be some Old Testament justice for the sins you committed that we’re all asked to pay for.

Paulson: When you go that way, no bank will take capital or take help from the government, unless they’re ready to fail.

Emanuel: They couldn’t get their head wrapped around the idea, there’d be some public say in private sector pay. “What do you mean you would tell the private sector who can get paid?” And we looked at Hank and Ben Bernanke like, “What do you mean you want $800 billion?” “You know, we’re not the ones that said “that Lehman should go belly-up. “When you needed that $30 billion for Bear Stearns, “you figured out where it was. What do you mean you want $800 billion?” The pay was an acknowledgment that you had messed up. ♪ ♪

Bolten: Hank’s first job was to work out a deal on what the parameters of the TARP legislation would be that we put on the floor. Some time well after midnight in one of those sessions, I recall receiving a call from Leader Reid, who said that Hank had just thrown up into a, uh, into a wastebasket.

Paulson: I was in a little cubicle, and I got the dry heaves. And I make a lot of noise. And so, Rahm Emanuel immediately came in.

Emanuel: He has, you know, I wouldn’t call it chest pains, anyway, whatever. I think it was, uh, he had some breathing issues. Senator Gregg and I are with him. Rahm and I didn’t know if this was real or not. And I said or Rahm said, “Well, let’s get the doctor.” Hank Paulson said, “No doctors! No doctors. I know. I’ve been through this before. It’s okay.”

Emanuel: I looked at Gregg and I… we both said the same thing, which is, this is never gonna come out of the room because if it ever got to the market that the secretary of the Treasury… was– I don’t know if it was a panic attack or whatever, but it had, basically, a challenge breathing. The market couldn’t handle it, psychologically. So, it was a blood oath between Senator Gregg and I. I never told Nancy, never told Steny, never told anybody.

♪ ♪

Gregg: Rahm said, “We’ve gotta solve this, quickly.” The implication being if we didn’t solve it, we’d have the secretary of the Treasury maybe passing out or something worse.

♪ ♪

Paulson: It was not a tactic, but if it had been, it was the best thing that could’ve happened, because it was amazing how quickly we got together and had a deal.

Pelosi: Good evening. For the last several hours, the chairs of our committees have worked with Secretary Paulson, and others from the administration to resolve our differences, so that we can go forward with the package to stabilize the markets, most importantly, to protect the US taxpayers.

Pelosi: We write the bill, and we’re bringing it to the floor, and we’re coming up to the day before the vote, and I said, “I never lose a vote ’cause I know– I have my names. I want to see your names.” The president said, “They have to vote for it. “Of course they’ll vote for it. This is an emergency. They have to vote for it.”

♪ ♪

Ted Poe: Small businesses, mom-and-pop grocery stores don’t get this break when they make bad financial decisions. They go out of business. But the rich and famous Wall Street, New York City fat cats expect Joe Six-Pack to buck it up, and pay for all this nonsense. It’s pretty clear Republicans weren’t for it. I mean, there was a lot of anger, and… “I didn’t come to Washington to bail out Wall Street!” You know, I didn’t either, but, you know, it’s necessary.

Ben Hensarling: Under this plan, ultimately the federal government will become the guarantor of last resort, and, Madam Speaker, that does put us on the slippery slope to socialism.

Bernanke: I remember talking to Senator Kyl and asking him how his constituent calls were going on the TARP. And he said, “Well, it’s about fifty-fifty. Fifty percent no, and fifty percent hell no.” If I didn’t think we were on the brink of an economic disaster, it would be the easiest thing in the world for me to say no to this. John Boehner had warned me. He had said, “Hank, “when you’re looking at the House Republicans, “you’ve got to remember “one-third of them are knuckle-draggers. “Another third of them “are in danger of losing their seats at this election, “and believe they’re likely to lose their seats, “and don’t wanna take an unpopular vote. So you’re fishing in a small pond.”

Mike Pence: Stand up for the American taxpayer. Reject this bailout and vote no.

Michele Davis: I went into Hank’s office and said, you know, “Look, the Speaker brought this up for a vote. They wouldn’t do that if they didn’t have the votes to get it over the top.” And so, we’re watching it and watching it and watching it, and nothing’s moving, and it’s 212 to– you know, just hovering.

Gregg: It was a classic political vote. It was a bad vote if you were a conservative. It was a bad if you were a liberal. So the rank-and-file members went in, assuming that their leadership had the votes to pass it. They went in early, and they voted no, they left, and they couldn’t be found.

House Member: The yeas are 205. The nays are 228. The motion is not adopted.

Newsman: The stock market has moved lower. The Dow Jones Industrial Average down almost 500 points.

Bernanke: I was watching the vote on television, and watching, at the same time, watching the stock market falling and falling and falling, and saying to myself, the whole US economy is at risk, and Congress can’t get it together to take the necessary action to help us stop this crisis. I was very unhappy, very disconsolate.

Newswoman: We knew it was gonna be a close vote, but Wall Street is extremely upset. The Republicans abandoned Bush. I don’t think Boehner and Blunt knew that they couldn’t deliver. But I do remember walking over to ’em, and putting my finger right in John Boehner’s chest. I said, you’d better fix this, and you’d better fix this fast. I said this is your problem, not ours. We tried to help. We need everybody to calm down, and relax, and get back to work.

Newsman: The primary issue for the market right now is fear.

Paulson: I always thought I planned for the worst, but I just assumed with all the leaders on board– naive me, I’ve been in Washington for a couple years, but I assumed it would pass. Part of that was also every step of the way, that we would have half the votes, and they would have half the votes because we believed that this had to be bipartisan. It was very, very deflating.

Geithner: I remember Hank called me that night, and his voice broke. And he apologized to me, for, you know, he owned this sense of failure ’cause he was unsuccessful that first vote. And I remember saying to him, I said, “Hank, you’re… “you’ll get this passed, you know. We’re the United States. We’ll figure out a way through this.”

Paulson: We need to work as quickly as possible. We need to get something done, and I’m going to be continuing to consult with Congressional leaders, to find a way forward to get something done as soon as possible. We need to get something done.

Newsman: The Dow Jones Industrial Average lost 777 points. That is the biggest point value loss ever.

Bush: The first iteration of TARP goes down, and the market corrects by $1.4 trillion, which is kind of the ultimate focus group.

Newsman: Facing increasing pressure from shaky markets, Senate leaders pledge to pick up the pieces of the $700 billion bailout.

Bush: Josh and the team came up with a different strategy, and ran it up to Congress again, the Senate the first time.

Obama: The time to act is now.

McCain: If we fail to act, the gears of our economy will grind to a halt. The Congress started to hear from their– from their constituents. “What’s happening to my 401K? What’s happening to our economy?” Then that lead to a reversal.

House Member: The yeas are 74, and the nays are 25. The amendment is agreed to. If the second vote had gone down… I might’ve found myself a cave some place and hid for a while.

Emanuel: We literally passed a bill to send a signal to the markets and the financial world. “Here’s $800 billion. We’ll figure it out later.”

Newswoman: So, how did Wall Street react to the big bailout? The Dow actually closed 157 points lower.

Paulson: So then, while we were getting this legislation in Congress, the situation worsened.

♪ ♪

We had the two biggest bank failures in US history, with Wachovia and Washington Mutual, WaMu.

Newsman: In the last five days, the Dow has fallen more than 1,800 points and 18%, the biggest weekly decline in its entire 112-year history. We needed something that was going to work much quicker and be more powerful. We had various capital program ideas to put capital in the banks. And we had our teams working around the clock figuring out what would work. So, as we were working this through on Saturday night, I was exhausted, I fell sound asleep. My phone rang and I answered the phone, and he said, “Hank, this is Warren.” And… my mom has a handyman named Warren. I’m saying, “Why is he calling me?” But it was Warren Buffet. He laid out the idea, which was a germ of what we did.

Buffett: I made a suggestion around the beginning of October of a way to do it where I thought the government would come out doing very well. I actually thought that it might make more sense to try and put, just put more capital into the banks than it would to try and buy these assets. So, I actually sent that along to Hank.

Bush: Hank came to me and said, “What we just passed in Congress isn’t gonna work.” I said, “You gotta be kidding me, man!” “Now you tell me!” His plan was now to give the money directly to Wall Street. He said, “It’s the only shot we got.” I said, “We’re going for it.”

♪ ♪

Newswoman: Mr. Mack, time for a comment?

Newswoman 2: Will you tell us what you’ll be discussing today?

Newswoman: Do you have some time to chat with CNBC?

Newswoman 2: You wanna tell us you’re here to meet with the Treasury secretary? Nope.

Sorry. ♪ ♪

Newswoman: Could you tell us what you’ll be discussing today, sir? Sir, can you tell us why you’re here today? -Can you tell us… why you’re here?

Geithner: Columbus Day weekend, after TARP had passed, Hank convened the heads of the major US banks at the Treasury.

Dimon: I walk in and there’s, you know, nine of us lined up there, and on the other side, there’s Hank, Ben, Tim, you know, a bunch of other officials, and they said they have an idea. They want us to take this TARP money. You know, “You’re $25 billion, you’re 10 dol–” On this basis, they calculated roughly two percent, I think, of risk-grade assets. They also fully knew that some people did not need it, and there were a couple of people in that room who needed it.

Goolsbee: Nobody wants to publicly take the money. Because if anybody takes it, then the market says, “Well, they must be terrible! Let’s pull everything out!” So, it actually was quite an important decision to twist arms and force everybody to take it. He was, at the very top, he said, “If you don’t take it, “and you need it later, “it won’t be at six percent preferred. You know, I’m gonna take your firstborn.” And I fully understood.

Paulson: I don’t like to be heavy-handed. I abhorred some of the things I saw people in government do that I thought was abusive. I really believed we needed to do this for the good of the system.

Mack: He had this document, and I said, “Well, give it over here.” And I signed it, and flipped it back across the desk.

♪ ♪

And Vikram said, “Aren’t you gonna go to your board?” I said, “No. “When the secretary of the Treasury tells me “that if we don’t do this and we get in trouble, I’ll get punished, that’s all I need to know.” And I said, “Look, if I get lucky, my board will fire me. I’ll get out of all this craziness.”

♪ ♪

Newsman: How’d the meeting go, gentlemen? Gentlemen?

Newswoman: How was the meeting? Did it work for you? We’re doing fine.

Assistant: He can describe it to you later, okay?

Newsman: Try not to steal any more money.

Dimon: The press had been all over the place. The mistake we made is in walking out. When they tried to talk to us, every one of us, you know, brushed them off a little bit.

Newswoman: Did it go well?

Newsman: How’d it work out in there, man?

Dimon: And so the headline the next day said, not only were they bailed out, they were ungrateful.

Protesters : Not bailout! No bailout! Trust your banker. Give us your blank check.

Man: I’m here to oppose the bailout plan because it’s a massive transfer of wealth from working Americans to elite institutions and the super wealthy. Give us for your firstborn and your blank checks!

Bush: Hank called, and said, “I got ’em to take all the money. “Plus, I’ve got 700 other banks around the country.” So, probably the greatest financial bailout ever. The intervention, I think, saved a depression, but I can’t prove it. I mean, I can talk till I’m blue in the face at the Rotary Clubs in the heartland of America and say, “Man, we stopped a depression.” And they’ll look at me and say, “No, you spent our money to bail out Wall Street.” How many times will we have to dig in our pockets? Fannie Mae, Freddie Mac!

Protesters: Give us our houses back!

Bernanke: I think there’s still many people who believe that we bailed out companies and helped Wall Street because we were trying to help our friends in the financial industry, and not out of our interest in defending the US economy. That’s absolutely not true, but, you know, I think I have to live with that.

Protesters: Bailout over my dead body. Bailout over my dead body.

Security: Okay, if y’all do not get up…

Geithner: I met the then-Democratic nominee Obama in New York, in late October, maybe a week or two after the TARP thing, and I remember saying to him, you know, we’d broken the back of the panic, but it wasn’t over yet. It’s gonna take a bunch more stuff still.

Newsman: Barack Obama will become the 44th President of the United States. It’s been a long time coming. But tonight, because of what we did on this day, change has come to America.

♪ ♪

Let us remember that if this financial crisis taught us anything, it’s that we cannot have a thriving Wall Street, while Main Street suffers.

Obama: A fever plateaus, but it doesn’t break. We didn’t know how fast the economy was contracting. The foreclosure rate is skyrocketing and there’s no end in sight, so we’re going to have to have a housing strategy.

Obama: For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime.

Obama: We’ve got at least five institutions that are bombs, ready to go off at any time. Welcome to the White House. I had been talking to Barack Obama on a daily basis, and the TARP had become stigmatized. My credibility was going fast. You seem to be flying a $700 billion plane by the seat of your pants.

Paulson: I was looking forward to after the election to hearing from him, and getting support and backing and so on. And instead, I heard from one of his, uh, transition team members. “Guess what, Mr. Treasury Secretary, you’ve had your last conversation with the president.”

♪ ♪

Newsman: More big-name companies made plans to shed workers. The bank that got billions in free money from the taxpayers then turns around, cuts off credit to a local business, and then won’t authorize workers to get a penny upon leaving, with three days’ notice. We’re outraged. The nine weeks between the time that Barack Obama was elected president and when he was sworn in, it was holy hell.

Newsman: Circuit City will go out of business, cutting 30,000 jobs.

Newswoman: The nation’s unemployment rate bolted to a 14-year high.

Geithner: We did slow the panic, or stop the panic, but the system was very broken at that point. Completely frozen.

Newswoman: Automakers are back on Capitol Hill today, seeking a $34 billion bailout.

Paulson: What was looking at the deed to keep the auto industry from imploding.

Man: We pray that you would remove the veil between the people of this nation and the people in authority.

Paulson: But Barack Obama had the political courage to do what was right, and do what the public didn’t wanna hear. All the money came back, and came back with a $50 billion profit, the money they put in the banks and the insurance companies. So, when you look at how the US economy recovered, you know, growing at two percent for the third-quarter of 2009 on, our system worked really well. So, the TARP capital program is the most successful program that is broadly hated in the history of mankind.

♪ ♪

Bernanke: We had a dinner at the Federal Reserve for, you know, to say goodbye to Hank. It had been a really tough time for him, and I’m sure he was relieved that he no longer would have the responsibility. But we knew that we could still count on him, and that we could call him and talk to him.

Paulson: As stressful as working for 18 months during the crisis, the first year I was out of government was the hardest period, by far, for me. I sort of sat on the sidelines with my heart in my throat, but I look at it now and I say, “Wow.” You know, policy continuity.

Geithner: President Obama, we first met in late October, and he, at the end of our meeting, he said, “I might need to ask you to come work with me in Washington.” And I was deeply reluctant to do it. He encouraged me not to do it. He said, “Mr. President, you don’t want to bring me on. “I’ve been on the front lines on this thing. Maybe what you need is a clean break.” But I trusted Tim as someone who was a technician, who was not ideological. -He was my best bet. -Good morning.

Geithner: You know, ultimately, if the president asks you to serve your country, and you believe in him or her, it’s a hard thing not to do. Today, Vice President-Elect Biden and I are pleased to announce the nomination of Timothy Geithner as Secretary of Treasury. We did a whole range of things to keep the mortgage markets open, lower interest rates, help people refinance, help people stay in their home.

Newswoman: President Barack Obama is rolling out the next step in his multi-pronged plan to revive the US economy. A $75 billion program to help struggling homeowners. But if you remember the public debate, there was a huge opposition to bailing out the homeowner too.

Santelli: This is America! How many of you people wanna pay for your neighbor’s mortgage, that has an extra bathroom, and can’t pay their bills? -Raise their hand. President Obama, are you listening? There was a famous rant by Rick Santelli, which a lot of people view as the, you know, beginning expression of what became the Tea Party.

Protesters: You work for us! You work for us!

Palin: Let’s stand together, let’s stand with honor. Let’s restore America!

Goolsbee: The Tea Party begins with the announcement of the housing program. And they say, “This is all for deadbeats “and rewarding people who don’t deserve it! We should form the Tea Party.”

Protesters: You work for us! You work for us!

Obama: I was not surprised by the public backlash. Because a year after, we’ve spent a trillion-plus dollars, people are still going to feel worse. And all they see is that there’s a whole bunch of money going to the folks who perpetrated some of these terrible things.

Bernanke: Financial crises are often followed by populist reaction, but I think it’s important to understand though that there’s some very long-term trends in the United States, including the stagnation of wages, the reduction in upward mobility for people, lack of opportunity. There’s a whole number of things which have contributed to the present moment. The financial crisis didn’t help that, but it obviously exacerbated some underlying tensions in the United States.

Newswoman: Two of AIG’s former CEOs were grilled about a retreat, where only a week after being bailed out by taxpayers, its executives spent $440,000 on oceanfront rooms, rounds of golf, and trips to the resort spa and salon.

Elijah Cummings: They were getting their manicures, their facials, their pedicures, and their massages, while American people were footing the bill.

Bernanke: One of the worst days I had came when we learned that AIG was contractually obligated to pay bonuses to some of the people in the– in the financial products division. And I knew that was a catastrophe, and there was gonna be a huge problem politically.

Don Manzullo: The American people had to bailout AIG, but most Americans still lost 40 to 50% of their retirement plans. If we’d not made that action, they would’ve lost 70%.

Geithner: I think it was clear it was gonna be fraught. At the core of the challenge was, again, is this basic thing about fairness and morality. How do you figure out a way to protect the public interest without creating a whole bunch of private beneficiaries? Did the people who took out insurance with AIG to insure their retirement plans get reimbursed 100%, so they suffered very little loss? Yes or no? Not one of you three can give me a yes on that answer! -Or no!

Bernanke: Because it’s a– it’s a poorly posed question. The fact that the American public hates what we did is– is not surprising because, in many ways, it’s un-American.

Protesters: Occupy Wall Street all day!

Newsman: Several hundred people packed into Bowling Green Park in Lower Manhattan, for what they’re calling an Occupy Wall Street demonstration. People are definitely getting screwed over right now, getting hurt by a lot of the powers that be, and we wanna see it change in that.

Emanuel: People struggling to pay their mortgages. Incomes that haven’t gone up, all this strain, and people at the very top walking off…

Protester: You should go to jail! …acting like their shit doesn’t stink.

Henry Waxman: Since 2000, you’ve taken home more than $480 million. Are these figures basically accurate? I would assume they are.

Emanuel: In that whole attitude, is that people think that there are two rule books. One for the elite, and one for everybody else. And that started off a populist revolt.

Announcer: Ladies and gentlemen, please welcome the President of the United States, Mr. Donald J. Trump!

Steve Bannon: The fuse was lit in 2008, and Donald Trump was the explosion. He’s the result of the financial crisis.

Trump: There’s a lot of Washington lobbyists, bureaucrats, politicians, who don’t want to see things change. That’s because everybody’s making a fortune, and people outside of that area, are paying for the money they’re making. We’re not gonna have it.

Obama: The crisis awakens people to that sense that the game is rigged, this economy is not working for me.

Trump: This is a sick system from the inside. We have a lot of sickness in some of our institutions. And in that kind of environment, if you’ve got irresponsible politicians who want to take advantage that and start scapegoating people who don’t look like you, or start trafficking in conspiracy theories, yeah, there’s going to be more of an audience for that.

Protesters: Build that wall! And it tests our democracy in ways that, um… are troubling. We’re going to take care of this country for our children and our grandchildren and our great-grandchildren, and we’re not gonna let people come into our country who are gonna destroy our country. Crises breed populism. And, yes, economics go along with politics. And if one is broken, the other gets… it gets broken. And it’s going to take very strong leadership to bring this country together because we’re very polarized.


♪ ♪

Paulson: Those of you who know me, you don’t have to worry. I’m not gonna read a prepared speech. -I… It’s funny, but not that funny, right?

Paulson: I think perhaps because we were so different in our own ways, we had different skill sets, we had different personalities, we had different experiences, but we trusted each other, and so I, you know, to me, I look back and I don’t know how we would ever got through it, if I hadn’t– if I hadn’t had these guys as– as partners.

Geithner: I remember looking at my wife’s face in the morning when she’d read about something we’d done… …and like watching how I could not convince her… …that really that was as best we could do. That was the best we could do. We designed a strategy that was effective in getting the economy growing, and quickly, and people thought we gave hundreds of billions of dollars away to the banks, which they paid themselves in compensation, and the country lost those resources. But in effect, we designed a strategy where we forced them to pay for that, and the taxpayer earned a significant direct profit. But I don’t think that’s enough for people.

Bernanke: At one point, Michelle Smith came to me, said, “You need to have a town hall with the staff. “People are coming up to them in the grocery stores saying, ‘What the hell are you doing?'”

Bernanke: I guess the thing that makes me a little optimistic is that… we’ve shown in the past that when there’s a real threat, whether it’s a 9/11 or a financial crisis, or a war, or whatever it might be, that we can come together, and I think we will, if that– if that does happen.

Geithner: And remember we were lucky, too. You know, we had financial resources large enough to really do anything. Not many countries have that privilege. And it’s really fun to see you all again, although it’s kind of painful too.

♪ ♪


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