- Ben Bernanke: I spent my entire academic career studying the Great Depression. The depression may have started because of a stock market crash, but what hit the general economy was a disruption of credit. Average citizens unable to borrow money, to do anything. To buy a home, start a business, stock their shelves. Credit has the ability to build a modern economy, but lack of credit has the ability to destroy it, swiftly and absolutely. If we do not act, boldly and immediately, we will replay the depression of the 1930s, only this time it will be far, far worse. We don't do this now, we won't have an economy on Monday.
- Michele Davis: I hate to do this right now, but I'm going to have to have a press call first thing, and I 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: Okay, okay, here's how you explain it.
- [clears throat]
- Jim Wilkinson: Wall Street started bundling home loans together - mortgage-backed securities - 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: ...So to control their downside, the banks started buying a kind of insurance. If mortgages default, insurance company pays. Default swap. 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: 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] The *whole* financial system?
- [Wilkinson nods]
- Michele Davis: 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.
- [Paulson gets up and goes into the washroom]
- Jim Wilkinson: You'll work on, "we were making too much money."
- Phone caller: Why didn't you guys head off this situation six months ago?
- Michele Davis: Because the requisite magic wand wasn't available, Doug. But if we do find one, you will be among the very first to know.
- Henry Paulson: The Fed can lend to non-banks under "unusual and exigent circumstances". We're thinking of taking over 80% of the company.
- Jim Wilkinson: Hank, we can't! This morning we were lecturing the entire country on moral hazard.
- Henry Paulson: AIG has collateral, they have assets, Lehman didn't. We couldn't lend into a hole, it's not the same story!
- Jim Wilkinson: Nobody is going to care, it's another bailout! With no legislation, the Hill is gonna go crazy, the country is gonna go crazy...
- Henry Paulson: The plane we flew in on this morning, leased from AIG. Construction downtown, AIG. Life insurance, 81 million policies, with a face value of $1.9 *trillion*. Billions of dollars in teachers' pensions! It's everywhere! You want "too big to fail", here it is! You got a better idea, the suggestion box is wide open!
- Lloyd Blankfein's Assistant: I don't think I can take another day of this.
- Lloyd Blankfein: You're getting' out of a Mercedes to go to the New York Federal Reserve. It's not a Higgins boat on Omaha beach.
- Mack's Assistant: Tim Geithner's calling again.
- John Mack: Cover your ears. You tell Tim Geithner to fucking blow me. I'm trying to save my company.
- [on being told that the CEOs of the country's nine biggest banks may refuse to accept bailout money from the federal government if they have to be held accountable for how they spend it]
- Michele Davis: They almost bring down the U.S. economy as we know it, but we can't put restrictions on how they spend the $125 billion we're giving them because... *they might not take it*?
- Ben Bernanke: I don't really understand why there needs to be so much tension about this. The country is facing the worst economy since the Great Depression. If the financial system collapses, it will take every one of you down.
- Richard Fuld: [on the housing crisis] You know, people act like we're crack dealers. Nobody put a gun to anybody's head and said, "Hey, nimrod, buy a house you can't afford, and you know what? While you're at it, put a line of credit on that baby and buy yourself a boat."
- Joe Gregory: [chuckles] You heard anything from Buffett?
- Erin Callan: He's asking for preferred shares at 40, with a dividend of nine percent.
- Richard Fuld: [annoyed] We were just at 66. What the fuck?
- Joe Gregory: Maybe it's just an opening gambit, Dick.
- Richard Fuld: Sounds more like a goddamn insult!
- Erin Callan: Dick, we're at 36 right now. We haven't been anywhere near 66 in months. The markets like Buffett. His name will push the price up overnight.
- Richard Fuld: You know, I don't care who he is. I am not spending $360 million a year for the pleasure of doing business with him. Real estate will come back.
- Joe Gregory: Koreans have been sniffing around.
- Richard Fuld: There you go. And they won't steal us blind. I've seen this before: CEOs panic and they sell out cheap. Right now, the Street's running around with its hair on fire, but the storm always passes. We stand strong, and on the other side, we'll eat Goldman's lunch.
- Erin Callan: So what do we do about Buffett?
- Richard Fuld: Screw Warren Buffett.
- Henry Paulson: There is not a bank in the world that has enough money in its vault to pay its depositors. It's all built on trust.
- Richard Fuld: [on the phone with Neel Kashkari] Last February, we were at 66 a share. Lehman Brothers is *not* Bear Stearns. We have a great business. Real estate will come back. I am not *fucking* giving this company away!
- Ben Bernanke: [Having breakfast with Henry Paulson] Lehman's down another 10%.
- Henry Paulson: You are not gonna let me get down a single bite, are you?
- Ben Bernanke: This is why I have oatmeal.
- Chinese Official: There was an approach last month from Russia. They have considerable holdings in Fannie and Freddie as well. They suggested we coordinate and without warning dump hundreds of billions of Fannie and Freddie's bonds onto the market.
- Henry Paulson: [Flabbergasted] That would be...
- Chinese Official: Chaos. The amount of debt your country carries is a terrible vulnerability.
- Henry Paulson: But you...
- Chinese Official: We declined. Respectfully. Even in the US it seems the relationship between the government and private industry isn't so simple.
- Chris Flowers: Make sure Fuld's not keeping any bad news out of the mix.
- Rodgin Cohen: It's "open kimono", to quote Dick.
- Chris Flowers: There's a revolting image.
- Ronald Reagan: We have no intention of dismantling the regulatory agencies, however we must come to grips with inefficient and burdensome regulations, we will eliminate those that are unproductive and unnecessary.
- Clinton, Bill: ...tearing down these antiquated walls and granting banks significant new authority...
- Ben Bernanke: [about the Chinese] Was it a threat?
- Henry Paulson: No, no. A friendly reminder... that with a single phone call to Moscow they could take down the entire U.S. economy.
- Timothy Geithner: The markets can't open Monday without a resolution of Morgan Stanley. We really need you to do a deal.
- Ben Bernanke: You need to call Jamie.
- John Mack: I called Jamie. He doesn't want us. There's too much overlap.
- Timothy Geithner: We've spoken to him. He'll do it.
- John Mack: For what, a dollar? Why would I do that? I got China Investment and Mitsubishi kicking my tires.
- Timothy Geithner: I know those guys. They're not gonna close a deal in time. We want you to call Jamie.
- John Mack: Let me ask you a question. 35,000 jobs just disappeared in this city between AIG, Lehman and Bear. We make a deal with Jamie, he'll fire 20,000 Morgan Stanley employees. You think that's good public policy?
- Ben Bernanke: John, we are looking at the whole system here.
- Congressman Barney Frank (D-Massachusetts): [reviewing the first draft of TARP] It's all for the banks. You don't want a penny for the average Joe that's about to lose his house?
- [At Dairy Queen, Warren Buffett's cell phone rings. He checks the caller I.D., then declines the call]
- Buffett's Great Grandkid: Grandpa, they keep calling. What if it's important?
- Warren Buffett: They *always* think it's important.
- [silence]
- Warren Buffett: All right, I'll make it fast.
- Lloyd Blankfein: Warren, thanks for calling back. How are you?
- Warren Buffett: Oh, I'm just fine, Lloyd. What can I do for you today?
- Lloyd Blankfein: I'd like to talk to you about taking a stake in Goldman Sachs.
- Warren Buffett: What do you have in mind? Sounds expensive.
- Lloyd Blankfein: Maybe not.
- Dan Jester: In that case, let's talk about cash injections.
- Jim Wilkinson: Here we go again.
- Henry Paulson: We can't nationalise the banks.
- Dan Jester: It's not nationalising...
- Henry Paulson: That's how Japan got itself a decade-long recession. Is that where we wanna go?
- Henry Paulson: [over the phone] You better have good news, because I might be dead before we finish haggling over TARP.
- Timothy Geithner: [tired smile] Buffett's throwing five billion into Goldman. We're off the ledge.
- Henry Paulson: [not consoled] For the moment.
- Timothy Geithner: I'm on the Street, Hank, and people are just going about their business. They have no idea the whole thing is about to fall down.
- Jim Wilkinson: They're blowing it up.
- Neel Kashkari: 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...
- Neel Kashkari, Jim Wilkinson: Clusterfuck.