Too Big to Fail

I read Sorkin’s book this weekend and found it a very comprehensive discussion about the financial meltdown. Even though I intently following this as it was unfolding in the press real time, having the recap of the sequence of events and the behind the scenes look was fascinating. I very often find myself being a witness to history but not knowing the full extent of the historical implications of the events until long after the events have passed.

I was Left with the feeling that Dick Fuld was to blame for Lehman’s demise. Having had several offers, legitimate offers to merge with worthy candidates he simply felt that each of the offers was too low. At that point he put his own self interest before that of the shareholders and his creditors. Even to the end he was disillusioned to believe that after any merger that he would not only have a role on the management team but also potentially be on the executive committee. To me, these are shocking revelations.

The description of the steps taken to save AIG by asking JP Morgan and Goldman Sachs to come up with a plan to resolve the hole in the balance sheet was interesting. I particularly found it interesting when Lloyd Blankfein left the negotiations because Jamie Dimon was not present and found it was below his pay grade to be there.

Perhaps the thing that was most impressive, when learning about all of the back door wheeling and dealing was done was how both Paulson, Bernanke and Geithner were asking the fiercest of competitors to collaborate with each other to solve these huge problems. The behind the scenes negotiations that occurred in parallel to the larger conversations (i.e. the Bank of America discussion with Merrill at the same time they were going through the motions with Lehman brothers.) The balance that these executives had to strike when they clearly mistrusted each other immensely was eye opening.

I found the book a really good read and now feel that I have a fuller understanding of the situation. On the surface it seemed that since Lehman was second to fall and not wanting to make a habit of these bailouts the government decided to play favorites and let Lehman die. However the opposite was true. The government set up multiple opportunities for Lehman to save itself however in their end their own greed and egos stood in the way.