Five Years From the Brink

Hank Paulson on the crisis that changed the world.

“On Sept.14 there were four major standalone investment banks and they were considered essential for the flow of capital to and investment in American business. Within a week, there were none…I believe to more forward, we first need to accurately understand how we got here” – Dick Fuld, testifying before the House three weeks after the collapse of Lehman Brothers.

People weren’t taking Dick Fuld’s calls the weekend before Sept. 15, because Dick had been in denial for a long time. As the CEO of Lehman Brothers, he had asked the New York Fed and the Treasury weeks earlier to put capital into a pool of nonperforming illiquid mortgages that he wanted to put in a subsidiary he called SpinCo and spin off. We had explained that we had no authority to do that. He thought somehow there was something the government could do to help. How could it be that no one would want to buy his company? He just couldn’t believe it.

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