435 Morgan Stanley’s unfailingly bearish economist: Sarah McBride, “Bearish Economist Roach Says U.S. Caused Global Recession,” Wall Street Journal Asia, July 13, 2001.
436 George Soros acolyte worth more than $3.5 billion: That week, Stanley Druckenmiller had been ranked 105 on Forbes’s annual list of the four hundred richest Americans, with a net worth of $3.5 billion. “The Forbes 400 List,” Forbes, September 17, 2008.
438 send out a companywide e-maiclass="underline" Author obtained copy of e-mail.
439 Congress to increase the debt ceiling: The “debt ceiling” was a political hot potato that would require Congress to vote to increase the amount of debt the country could take on, and Congress had just increased the amount to $10.615 trillion in July.
441 “The market is trading under the assumption”: “European Shares Rise after Central Bank Plan, Asia Losses,” Agence France-Presse, September 18, 2008.
441 FSA announcing temporary ban on short selling: David Prosser, “Hedge Funds’ Misery as FSA Bans Short-selling on 32 Firms,” Independent, September 20, 2008.
442 “The Star-Spangled Banner”: New York Times, October 2, 2008.
442 “Treasury, Fed Weighing Wider Plan”: Alison Vekshin, “Treasury, Fed Weighing Wider Plan to Ease Crisis, Schumer Says,” Bloomberg, September 18, 2008.
442 Charlie Gasparino of CNBC reported what he was hearing from his sources on Wall Street: “Treasury Secretary Hank Paulson is working on an RTC-type solution to the financial crisis, reports CNBC’s Charlie Gasparino,” CNBC, September 18, 2008.
443 “Mr. Secretary, … we would like to meet with you”: On September 28, Pelosi relayed her phone conversation with Paulson to CBS’s 60 Minutes anchor Scott Pelley. Pelley also interviewed Paulson on the show. “Secretary Paulson Details the Federal Bailout,” 60 Minutes, CBS, September 28, 2008.
445 The notion of becoming a bank holding company: Jon Hilsenrath, Damian Paletta, and Aaron Lucchetti, “Goldman, Morgan Scrap Wall Street Model, Become Banks in Bid to Ride Out Crisis,” Wall Street Journal, September 22, 2008.
445 to meet with the congressional leadership at Nancy Pelosi’s office: The meeting took place on the second floor of the Capitol, in a conference room beside Pelosi’s personal suite. Carl Hulse and David M. Herszenhorn, “Behind Closed Doors, Warnings of Calamity,” New York Times, September 20, 2008.
446 “I spent my career as an academic studying great depressions”: Bernanke, as quoted by Wessel, In FED We Trust, 203.
446 noticeably gulped: As Schumer himself told the New York Times, “When you listened to him describe it, you gulped.” David M. Herszenhorn, “Congressional Leaders Stunned by Warnings,” New York Times, September 19, 2008.
446 “What about the home owner?”: Wessel, In FED We Trust.
446 Richard Shelby disapprovingly characterized: “If we say ‘whatever it takes,’ that means there’s a blank check of the treasury, future generations, to pay for the mistakes of a lot of people.”
446 “If it doesn’t pass, then heaven help us all”: Deborah Solomon, Liz Rappaport, Damian Paletta, and Jon Hilsenrath, “Shock Forced Paulson’s Hand,” Wall Street Journal, September 20, 2008.
446 “Do you know what you are asking me to do?”: New York Times, September 20, 2008.
447 “I think we need to do this”: McConnell, a Republican senator from Kentucky and Republican leader of the Senate, who often spars with Reid on the Senate floor, “reached over to assure his colleague they could work it out.” New York Times, September 20, 2008.
447 put in place a ban on shorting financial stocks: The SEC issued a press release on the morning of Friday, September 19, that read: “Given the importance of confidence in financial markets, the SEC’s action halts short selling in 799 financial institutions. The SEC’s emergency order … will be immediately effective and will terminate at 11:59 p.m. ET on Oct. 2, 2008. The Commission may extend the order beyond 10 business days if it deems an extension necessary in the public interest and for the protection of investors, but will not extend the order for more than 30 calendar days in total duration.” See http://www.sec.gov/news/press/2008/2008-211.htm.
447 “While this is all politically pleasing”: Chanos, as reported by Kara Scannell, Deborah Solomon, Craig Karmin, and Gregory Zuckerman, “SEC Is Set to Issue Temporary Ban Against Short Selling,” Wall Street Journal, September 19, 2008.
447 Merrill Lynch had bought insurance covering $150 million: On September 17, Merrill bought insurance to cover $106.2 million in Morgan Stanley debt and returned the following day, September 18, to buy protection on another $43 million of debt, according to trading documents obtained by the Wall Street Journal. Susan Pulliam, Liz Rappaport, Aaron Lucchetti, Jenny Strasburg, and Tom McGinty, “Anatomy of the Morgan Stanley Panic—Trading Records Tell Tale of How Rivals’ Bearish Bets Pounded Stock in September,” Wall Street Journal, November 24, 2008.
447 Citigroup, Deutsche Bank, UBS, AllianceBernstein, and Royal Bank of Canada: Ibid.
448 Wei Sun Christianson: In December 2007, Christianson played a major role in negotiating Morgan Stanley’s $5.6 billion deal with China Investment Corp., which gave CIC a 9.9% percent stake in the company. See Jason Leow and Rick Carew, “Wei Sun Christianson and How Morgan Deal Got Boost in China—Longtime Mack Aide from Beijing Lends Stature, Ties to Region,” Wall Street Journal Asia, December 21, 2007.
448 CIC already held a 9.9 percent stake in Morgan Stanley: When Morgan Stanley announced a loss of $3.59 billion at the end of 2007, the state-owned China Investment Corp. (CIC) invested five-billion-dollars in the company, giving it a 9.9 percent stake. “China Fund Grabs Big Stake in Morgan Stanley,” AFP, December 2007.
448 he’d be interested in buying up to 49 percent of the firm: Christine Har per, “Morgan Stanley Said to Be in Talks with China’s CIC,” Bloomberg, September 18, 2008.
448 investments, in Blackstone: When Blackstone went public in June 2007, CIC invested $3 billion—giving it a 9.9 percent stake in the company. Since then shares had fallen by nearly 45 percent, to $17.13 in late August, giving CIC a paper loss of more than $1.3 billion. Allen T. Cheng, “Inside the CIC,” Institutional Investor—America, September 10, 2008.
CHAPTER EIGHTEEN
449 “the illiquid assets”: “Text of Paulson’s News Conference Friday,” Associated Press, September 19, 2008.
451 Wachovia’s $120 billion mortgage portfolio: As part of its 2006 purchase of Golden West Financial Corp., Wachovia inherited a $120 billion adjustable-rate home-loan portfolio, the bulk of which comes from California and Florida, two of the hardest-hit housing markets in the country. Dan Fitzpatrick, Alex Roth, and David Enrich, “With Wachovia Sale Looking Likely, a Makeover for Charlotte, U.S. Banking,” Wall Street Journal, September 29, 2008.
451 Bob Steel had estimated that figure at 12 percent: Speaking at the Lehman Brothers Financial Services Conference on Tuesday, September 9, Steel said Wachovia still expects losses equal to 12 percent, though he said, “it’s still early days.” See “Wachovia Keeps Mortgage Loss View,” stock downgraded, AFX Asia, September 9, 2008.
454 his firm would not be making any investments: “We won’t be investing in U.S. banks under current circumstances,” Ryosuke Tamakoshi said in Tokyo on Tuesday, September 16, 2008. Takahiko Hyuga, Shingo Kawamoto, and Komaki Ito, “Japan Banks, Insurers Have $2.4 Billion Lehman Risk,” Bloomberg, September 17, 2008.