New York Times journalist talks about his book Too Big to Fail, which gives a behind-the-scenes look at how decisions made on Wall Street led to the greatest financial crisis since the Great Depression.
Tavis: Andrew Ross Sorkin is a widely read business reporter and columnist for “The New York Times” and the author of the best-selling new text, “Too Big to Fail: The Inside Story of how Wall Street and Washington Fought to Save the Financial System and Themselves.” He joins us tonight from Washington. Andrew, nice to have you on this program, sir.
Andrew Ross Sorkin: Thank you for having me, Tavis.
Tavis: Let me start with how, if these banks are too big to fail, you even get your arms around the story. It’s not just the banks are too big to fail, but how do you get – this is a rather dense text, but how do you get your arms around what has happened economically in the last couple years in this country.
Sorkin: Right. Well, hopefully it’s not too dense. I like to think it’s like Danielle Steele. (Laughter) This story is as much, frankly, about institutions that are too big to fail as it is about people who think that they’re too big to fail, and that’s really what I’ve tried to do with the book in terms of really trying to bring you behind the scenes so you could actually see these people, see what they were saying to each other, see the decisions they were making so that the reader could actually make a judgment about what mistakes were made and what was done, perhaps even correctly, occasionally.
Tavis: And some of the players we’re talking about include?
Sorkin: Hank Paulson, Dick Fold. The book starts, you’ll start with Dick Fold at his house, 5:00 a.m. in the morning the day after JP Morgan buys Bear Stearns, and it takes you all the way through the spring and summer into that cataclysmic fall.
It’s almost set up like if you’ve ever seen – you’ve seen the movie “Crash,” where you’re sort of following four or five different plotlines – the government, Lehman Brothers, AIG, Merrill Lynch, et cetera, and they all seem like they’re happening almost independently of each other, but of course as you can imagine they’re all interconnected, almost incestuously so, and the whole story sort of cataclysmically comes together in that fateful September week.
Tavis: Your word “incestuous” pretty much answers the question. Let me ask it so we can dig a little bit deeper, though. Now that you’ve had a chance to cover all this and to write the text, what do you make of all these lines, these parallels, these trajectories, around these different storylines?
Sorkin: Well, that’s the most remarkable part for me as a reporter, who thought that I was covering it from – not the inside, but I thought I was pretty close and then I realized how far I really was from the story.
Because there really were 10 or 20 or maybe 30 people on the outside who were interconnected the entire time, who had previous relationships, petty jealousies, all sorts of things that ended up infusing and infecting the decision-making process, and so much of what we saw – we all woke up in September of 2008 and it seemed like a grand surprise, but when you start peeling back the curtain and peeling back the onion, you see something very different, which is you see the government trying to intervene behind the scenes before we ever knew it.
So TARP, the famous TARP plan, the $700 billion plan we all heard about in September? Well, this is almost eerie, but they wrote that plan in April – April 15th. There was a meeting at the Federal Reserve where the Treasury presents this plan to Ben Bernanke, and I’ll tell you, you read that plan, it’s about 11 pages, and you go, “Oh, my God, they saw it coming.”
So you see all of these people throughout the story, they see the train barreling down the track and yet everybody’s trying to get out of the way in their own way, but sadly, of course, they don’t.
Tavis: I want to go back to something you said a moment ago, because it really got my attention, and this is not casting aspersion on you, “The New York Times,” or anybody else who’s trying to do his or her job covering what was a huge – what is, in fact, a huge economic mess.
Sorkin: Fair question – I know where this is going.
Tavis: You know where I’m going. But the question, though, is if you thought you were on point, if you thought you were on track or on target and you get a chance to write this, to really spend time digging into this, and you find out by your own admission, Andrew, how far off, how much you really – how little you really did know, what’s that say about what we the American people are being really informed about?
Sorkin: Well, I’ll tell you. I agree with you – when you get an opportunity to peel back the curtain, when you get an opportunity to really delve into this and get people to open up in ways, frankly, that I don’t think anyone was prepared to do for the paper and specifically at that time, I don’t want to say we were being lied to, but there was a lot of things that the government and some of these companies were doing throughout this period which we did not know.
So to the extent that we didn’t blow the whistle, when you talk about the media being responsible or not responsible, I think we actually wrote a lot of good stories, fair stories that did blow the whistle that talked about the subprime crisis, that talked about housing prices getting out of control, but to the extent we’re supposed to blow the whistle, we clearly didn’t blow it loud enough.
So to that extent I think we can put it on our shoulders, but there is unfortunately so much that we don’t get to learn contemporaneously, in part because nobody wants us to learn it and that’s why it takes almost some of this type of digging after the fact to really even get at some of the things that frankly even as I was reporting people were giving me a very hard time to get there.
Tavis: I don’t want to put words in your mouth, but what is the most egregious thing that the reader is going to find out that his or her government did or did not do in this process? Government specifically?
Sorkin: I think the egregious part is going to be that people did see this coming. It’s this idea that they wrote the TARP plan; it’s this idea that there was these intervention efforts to save Lehman Brothers. You’ll see a very interesting meeting where the government’s basically trying to put Bank of America together with Lehman Brothers not in September of 2008 but in July.
You’ll see a period where the CEO of AIG goes to Tim Geithner in August and says, “We may have a problem coming up here, and we may need you to turn us into either a bank holding company or one of these other types of entities, and Tim Geithner doesn’t move on that.
So there’s a lot of things that we end up doing later, like turning Goldman Sachs or Morgan Stanley into a bank holding company, and yet Dick Fold, the CEO of Lehman Brothers, asked for that in July and they thought that wasn’t necessarily the best idea.
So there’s questions about whether the government could have mitigated this better, and I’ll tell you one other thing, and I don’t know if it’s egregious or not, but optically it doesn’t look good, I will admit.
There was a meeting – people talk about the Goldman Sachs conspiracy theories, and I have to tell you, having reported out, I’m not sure I believe in the conspiracy theory, per se. But there is a scene in the book in June of 2008 in Moscow, Russia, in the hotel room of Hank Paulson, where the entire board of Goldman Sachs shows up, and it is one of those moments as a reporter, when you hear about it you go, “Oh, my God, I can’t even believe this is happening.”
Having said that, I reported it out and I can’t tell you that anything particularly untoward happened in the meeting itself, but it does raise questions about some of the judgments some of these people were making during that period.
Tavis: With regard to solutions, you argue in the book – no surprise here – that regulations need to be changed radically. Do you find it at all ironic that the folk who are now running the team for Obama are the same folk who did that deregulation in the first place?
Sorkin: Well, right, the people at the scene of the crime are still on the police force, so you’re going to have a hard time (laughter) with that. But I think there’s a regulatory portion of this which is you need to be minding the store, and we were not minding the store properly, and then you have Wall Street, by the way, and let’s not let them off the hook because clearly they were taking advantage of the rules, to the extent there were rules left.
So you have this combination of things, but – and we’ve talked about this before, Tavis – the thing that needs to change more than anything is we need to make sure that the banks are regulated in a way where they actually have money in the bank. One of the problems that happened over all of these years is that for every dollar they were handing out they were able to keep less money in the bank.
So there was no rainy day fund, there was nothing like that, and what we need to do is require them to keep more capital so that there is a cushion. By the way, that would solve a lot of other problems. You hear about these bonuses on Wall Street, huge profits on Wall Street – huge disconnect, by the way, in America about this, because how is it possible that we just saved these people and now they’re making all this money?
Well, if you told the banks that they needed to take that profit and take that bonus money and put it back in the bank, it would make the bank safer, it would make the system safer, and it would also mean that these bonuses that we’re talking about that seems so egregious wouldn’t exist.
Tavis: So now that Wall Street is jumping up and down again, rejoicing, speaking in tongues, celebrating, they got their money back, have been bailed out at taxpayer expense, the point you’re raising now, Andrew, where do you see evidence that Geithner is stepping up, making these kind of suggestions, Volcker, former Fed chairman, making these suggestions is being laughed at, nobody wants to take him seriously inside the administration. So you lay it out in the text, but where do you see inside the administration these kinds of suggestions being taken seriously?
Sorkin: It’s funny, Treasury is pushing for some of these things – capital requirements, that’s on their list. They have a couple of other things on their list. But the real thing and the real change that has to happen is it’s got to be the ethos. The ethos on Wall Street has not changed, and that’s not going to come from the corner office. That’s going to come, for better or worse, from Washington, and the whole idea of greed is still good, that is still pervasive.
I think you’re going to have to change the mind-set, it’s going to take a very long time to get there because so many of these people on Wall Street, CEO, managements, today they think of themselves not as being rescued, but they think of themselves as survivors. That is something that I think it is going to take a very long time to really change.
Tavis: I’ve got a couple more questions for Andrew Ross Sorkin. I’m out of time here now. Go to our website at PBS.org and you’ll hear Andrew and I continue our conversation with a few more items I want to cover regarding his new book that everybody’s talking about, the “New York Times” best seller – “Too Big to Fail: The Inside Story of how Wall Street and Washington Fought to Save the Financial System and Themselves.” Andrew, always good to have you on this program, sir.
Sorkin: Thank you for having me.
Tavis: It’s my pleasure.
Last modified: April 26, 2011 at 12:28 pm