Tuesday, September 8, 2009

Would panic prevail?

When Wall Street nearly collapsed

On the Wednesday and Thursday before Lehman filed for Chapter 11, I asked my wife to please go to the ATM and take as much cash as she could. When she asked why, I said it was because I didn't know whether there was a chance that banks might not open. I remember my wife sort of pausing and saying, "Are you serious?" And I said, "Yes, I am."

Posted by mark @ 03:42 PM (621 views)
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5 thoughts on “Would panic prevail?

  • A great find, Mark; a little piece of history.

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  • My favourite quote so far (I’m still reading it)…

    I remember watching the first TARP vote from the gallery over the House floor. When they voted no, I was shocked. Hadn’t we clearly explained the consequences of failure?

    Neel Kashkari
    Former Assistant Secretary of the Treasury and supervisor of TARP

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  • As dissimilar as the events were, there was a similar sense of panic: People talking to each other, and people freaking out. It felt like another 9/11.

    Little did most people on the street that day appreciate how much panic was going on behind the scenes. After all, we hadn’t addressed the fate of Washington Mutual and Wachovia yet.

    I don’t think they should’ve let Lehman fail. The rules didn’t seem uniformly applied. And it’s very hard to get individuals comfortable with investing if different rules are being applied to different people.

    Meredith Whitney

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  • Remember, only a few weeks before, Lehman had raised $6.5 billion in equity. The idea they could get investors to put in $6.5 billion, then a few weeks later go bankrupt, suggested total miscalculation of their real condition.

    Wilbur Ross

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  • Everyone of prominence in the regulatory community — from Paulson to Geithner to Bernanke to Sheila Bair to John Dugan — and all of their key people were huddled in an office across from Hank’s personal office, all in casual clothes on a Sunday.

    At that meeting, we decided that we were going to slap a U.S. full-faith and credit guarantee on basically all liabilities in the banking system. In that moment you’re turning Citigroup debt into U.S. Treasury debt. It was incredibly powerful and scary.

    I worked on the money market mutual fund guarantee and the equity investment to the banks. The second one was really a sea change. We were investing U.S. taxpayers’ dollars into private companies — hundreds of billions of dollars…

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