Too Big to Fail - Misunderstanding of Crisis Management in Legislation
Jim Wilkinson:
They're blowing it up.
Neel Kaskhari:
What happened?
Jim Wilkinson:
McCain wanted to swoop in and save the day, but doesn't have any idea how to do it.
Neel Kashkari:
It's a 100-page piece of legislation we've been carefully negotiating for days. What, did he think they were gonna sit around and spitball?
Jim Wilkinson:
Yeah, when McCain got here and found out that the deal was basically done, he went apeshit. The Republicans fell in behind their guy. They wanna start all over again. Democrats flipped out. Republicans dug in.
Jim Wilkinson/Neel Kashkari:
Clusterfuck.
Quotes sourced from Wikiquote (© Wikiquote contributors), licensed under CC BY-SA 4.0. Modified for formatting/length.
Too Big to Fail - Crisis Communication Amid Financial Turmoil
Michele Davis:
I hate to do this right now, but I'm going to have to have a press call first thing, and I really don't know what I'm going to tell them.
Neel Kashkari:
Tell them Lehman exacerbated AIG. The simultaneous payouts of CDOs and credit default swaps put catastrophic pressure...
Henry Paulson:
Go back further.
Neel Kashkari:
The global pool of investment capital...
Henry Paulson:
She has to do this in English! Start with the homeowners.
Jim Wilkinson: [clears throat; [w:mortgage-backed securities|mortgage-backed securities]
Okay, okay, here's how you explain it. Wall Street started bundling home loans together - ] - and selling slices of those bundles to investors, and they were making big money. So they started pushing the lenders saying, "come on, we need more loans.
Henry Paulson:
The lenders had already given loans to borrowers with good credit, so they go bottom-feeding, they lower their criteria.
Neel Kashkari:
Before, you needed a credit score of 620 and a down payment of 20%; now they'll settle for 500, no money down.
Jim Wilkinson:
And the buyer, the regular guy on the street assumes that the experts know what they're doing. He's saying to himself, "if the bank's willing to loan me money, I must be able to afford it." So he reaches for the American Dream, he buys that house.
Neel Kashkari:
The banks knew securities based on shitbag mortgages were risky...
Henry Paulson:
You'll work on "shitbag"...
Neel Kashkari: [[w:Credit default swap|Default swap]
...So to control their downside, the banks started buying a kind of insurance. If mortgages default, insurance company pays. ]. The banks insure their potential losses to move the risk off their books, so they can invest more, make more money.
Henry Paulson:
And while a lot of companies insured their stuff, one was dumb enough to take on an almost unbelievable amount of risk.
Michele Davis:
AIG.
Jim Wilkinson:
And you'll work on "dumb.
Michele Davis:
And when they ask me why they did that?
Jim Wilkinson:
Fees!
Neel Kashkari:
Hundreds of millions in fees.
Henry Paulson:
AIG figures the housing market would just keep going up. But then the unexpected happens...
Jim Wilkinson: [[w:Subprime mortgage crisis|Housing prices go down]
].
Neel Kashkari:
The poor bastard who bought his dream house? The teaser rate on his mortgage runs out, his payments go up, he defaults.
Henry Paulson:
Mortgage-backed securities tank. AIG has to pay off the swaps. All of them. All over the world. At the same time.
Neel Kashkari:
AIG can't pay. AIG goes under. Every bank they insure books massive losses on the same day. And then they all go under. It all comes down.
Michele Davis: [horrified; Wilkinson nods]
The whole financial system? And what do I say when they ask me why it wasn't regulated?
Henry Paulson:
No one wanted to. We were making too much money.
Jim Wilkinson:
You'll work on, "we were making too much money.
Quotes sourced from Wikiquote (© Wikiquote contributors), licensed under CC BY-SA 4.0. Modified for formatting/length.
Too Big to Fail - Navigating Difficult Decisions in Business
Neel Kashkari:
Look, I'm just speaking for myself here, but I think you need to do what's right for the firm.
Dick Fuld:
Do what's right? What is that supposed to mean?
Neel Kashkari:
If your stock price keeps sliding, you may get an offer at a price that doesn't look all that compelling, but you may have to take it just to keep the company intact.
Dick Fuld:
What kind of price are you talking about?
Neel Kashkari:
Could be... I mean, it might be low single digits.
Dick Fuld: [[w:Lehman Brothers|Lehman Brothers; [w:Bear Stearns|Bear Stearns; slams down the phone]
Last February, we were at 66 a share. ] is not ]. We have a great business. Real estate will come back. I am not fucking giving this company away!
Quotes sourced from Wikiquote (© Wikiquote contributors), licensed under CC BY-SA 4.0. Modified for formatting/length.