Vanity Fair: US secretly tried to make deal with Goldman Sachs in wake of financial crisis

[babbittd]

http://www.vanityfair.com/online/dai...orkin-too.html

Press Release: Andrew Ross Sorkin, Too Big to Fail
by Vanity Fair
September 30, 2009, 10:00 am



The government secretly tried to orchestrate a deal involving Goldman Sachs in the week following Lehman Brothers’ collapse and considered using the Federal Reserve to help support such a transaction, Andrew Ross Sorkin reports in the new issue of Vanity Fair.

In an excerpt from his forthcoming book, Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, Sorkin reports that the deal, which was nearly consummated, would have merged Goldman Sachs and Wachovia. Henry M. Paulson, the Treasury secretary and former C.E.O. of Goldman, was deeply involved in the process, contacting both Lloyd Blankfein, Goldman's current C.E.O., and a Wachovia board member, and strongly urged both to consider it. Wachovia’s C.E.O., Robert Steel, was a former vice-chairman at Goldman Sachs and Paulson’s former number two at the Treasury Department.

Sorkin reports that Warren Buffett was also contacted about investing in the merged company, but told a banker at Goldman that it would never happen. “By tonight the government will realize they can’t provide capital to a deal that’s being done by the former firm of the Treasury secretary with the company of a former vice-chairman of Goldman Sachs and former deputy Treasury secretary,” Buffett said. “There is no way. They’ll all wake up and realize, even if it was the best deal in the world, they can’t do it.”

Jim Wilkinson, Paulson’s chief of staff, realized that such a deal would be a public-relations nightmare at the worst possible time—just as they were trying to pass TARP. “Hank, if you do this, you’ll get killed,” Wilkinson frantically told his boss. “It would be ******* crazy.” Paulson, he said, would lose credibility; he would be accused of lining the pockets of his friends at Goldman; the “Government Sachs” conspiracy theories would flourish.

[..]

According to Sorkin, Goldman co-president Gary Cohn had agreed to engage in talks with Wachovia only on the presumption that the Fed would help Goldman guarantee some of Wachovia’s most toxic assets. And Warsh, in a bold gesture, made a commitment that the Fed would strongly consider it. Paulson spoke with Blankfein and told him to take the talks seriously. “If you go into this looking for all the problems and how much help you’re going to get, it’s never going to happen,” he said, adding, “You’re in trouble, and I can’t help you.”

Much to their dismay, Cohn and Steel spent 24 hours working on a deal that they thought was near closure—and had the support of the Fed—but which ultimately died after Paulson, Bernanke and Geithner decided against pursuing it, in part, because of the “optics” of Goldman's ties to the government. “I’m sorry. I understand—I’m just as frustrated as you are. We just don’t have the money; we don’t have the authorization,” Warsh explained.

At the same time, Sorkin reports, the Federal Reserve also tried to push Goldman Sachs and Citigroup together, but Vikram Pandit, Citi's C.E.O., rejected the idea. “Well, that was embarrassing,” Blankfein exclaimed after he got off of one phone call with Pandit.

Meanwhile, the government demanded Morgan Stanley merge with J. P. Morgan, an idea that both John Mack, Morgan Stanley’s C.E.O., and Jamie Dimon, J. P. Morgan’s C.E.O., did not want to pursue, but both held brief talks at the government’s urging.

Paulson, Bernanke, and Geithner told Mack that he should be willing to sell his firm to J. P. Morgan for $1 a share. Mack, in an impassioned phone call with the three government leaders, rejected their demand: “There are 35,000 jobs that have been lost in this city between A.I.G., Lehman, Bear Stearns, and just layoffs. And you’re telling me that the right thing to do is to take 45,000 to 50,000 people, and put them in play, and have 20,000 jobs disappear? I don’t see how that’s good public policy.”

[babbittd]

http://www.nypost.com/p/news/busines...fH7GP4zT0vNrEP

The secret to Goldman Sachs' good fortune
Last Updated: 2:04 AM, September 29, 2009
Posted: 2:04 AM, September 29, 2009

John Crudele

Today's column is about Thursday, Sept. 18, 2008.

It's also about the unparalleled access that Goldman Sachs had to Treasury Secretary Hank Paulson, whose mission -- according to his own words -- was to bring Wall Street and market regulators (not to mention decision makers) together, so that they were "seeing the same issues, the same problems and working toward the same solutions." On Wednesday, Sept. 17, 2008 -- the day before the one I am writing about -- the stock market performed horribly.

By the end of the session the Dow Jones industrial average tumbled 449 points as investors worried about the nation's financial system. The next morning, Sept. 18, Paulson placed his first call of the day at 6:55 a.m., to Lloyd Blankfein, who succeeded Paulson as CEO of Goldman. It's unclear whether the two connected because Blankfein called Paulson minutes later.

And then Blankfein placed another call to Paulson at 7:05 a.m. for what looks like a 10-minute conversation.

After that Paulson called Christopher Cox, Securities & Exchange Commission Chairman twice; British Chancellor Alistair Darling and New York Federal Reserve head (and now Treasury Secretary) Tim Geithner two times.

Then Paulson took another call from Goldman's Blankfein.

It wasn't even 9 a.m. yet -- 30 minutes before the stock market was to open -- and Paulson and Blankfein had already exchanged three phone calls.

This wasn't particularly unusual.

On Wednesday, Sept. 17, the day the stock market was in trouble, Paulson spoke with Blankfein five times, including a pair of calls at 7:20 p.m. and 8:45 p.m. One of the earlier calls -- at 12:15 p.m. -- is listed on Paulson's log in the same five minute interval as a call to Geithner, which could indicate that this was a conference call.

If Paulson did set up a conference call, it would have been an extreme instance of putting someone who wielded a lot of power -- Geithner -- together with someone -- Blankfein -- who could profit from that connection.

And all of this doesn't include possible cell phone calls. The Treasury turned over to me Paulson's official schedule and phone records after I made a request under the Freedom of Information Act.

There's no way for me, or anyone else, to know what Blankfein and Paulson talked about during those first three calls on Sept. 18.

cont.

[pangea]

Oligarchs: These aren't the Oligarchs you're looking for.
US Citizens: These aren't the Oligarchs we're looking for.
Oligarchs: He can go about his business.
US Citizens: You can go about your business.

[pangea]

Can someone superimpose all these Oligarchs over the starwars characters? How classic would that video be? Maybe a few more laypeople would start to connect some more dots.

[GRG55]

Press Release: Andrew Ross Sorkin, Too Big to Fail
by Vanity Fair
September 30, 2009, 10:00 am

The government secretly tried to orchestrate a deal involving Goldman Sachs in the week following Lehman Brothers’ collapse and considered using the Federal Reserve to help support such a transaction, Andrew Ross Sorkin reports in the new issue of Vanity Fair.

In an excerpt from his forthcoming book, Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, Sorkin reports that the deal, which was nearly consummated, would have merged Goldman Sachs and Wachovia...

...Paulson, Bernanke, and Geithner told Mack that he should be willing to sell his firm to J. P. Morgan for $1 a share. Mack, in an impassioned phone call with the three government leaders, rejected their demand: “There are 35,000 jobs that have been lost in this city between A.I.G., Lehman, Bear Stearns, and just layoffs. And you’re telling me that the right thing to do is to take 45,000 to 50,000 people, and put them in play, and have 20,000 jobs disappear? I don’t see how that’s good public policy.”

U.S. Jobless Rate May Reach 10.5% by End-2010, Goldman Says

Oct. 8 (Bloomberg) -- The U.S. unemployment rate will probably rise to 10.5 percent by the end of 2010 as the world’s largest economy struggles to recover from the worst recession in over six decades, Goldman Sachs Group Inc. said.

“It will take several years to return to ‘normal,’ mid- single-digit unemployment rates even if the economic and labor market recovery proves to be very strong,” Andrew Tilton, a Goldman economist in New York, said in an e-mailed note today. “The financial crisis and recession have been a disaster for the U.S. labor market,”...

...unless you work at Goldman, or happen to be employed at Morgan Stanley and presumably benefited from all that "good public policy"...:rolleyes:

...“Current levels of unemployment are economically and politically unacceptable,” said Tilton. “The state of the labor market in late 2010 is likely to be a major factor in the midterm Congressional elections.”...

Stimulus II is on the way...;)

[babbittd]

The secret Paulson-Goldman meeting in Russia

http://blogs.reuters.com/felix-salmo...ldman-meeting/

Andrew Ross Sorkin’s new book is out today, and breaks some pretty stunning news, dating from the end of June, 2008. At this point, we’re still months away from the now-famous but then-secret waiver, issued in mid-September, which allowed Hank Paulson to talk to Goldman Sachs; he’d promised not to do that when he moved from Goldman to Treasury.

But it turns out that Paulson just happened to be in Moscow at the same time that Goldman’s board of directors was having dinner there with Mikhail Gorbachev. (You know, as one does.) Take it away, Andrew:

When Paulson learned that Goldman’s board would be in Moscow at the same time as him, he had [Treasury chief of staff] Jim Wilkinson organize a meeting with them. Nothing formal, purely social — for old times’ sake.

For fuck’s sake! Wilkinson thought. He and Treasury had had enough trouble trying to fend off all the Goldman Sachs conspiracy theories constantly being bandied about in Washington and on Wall Street. A private meeting with its board? In Moscow?

For the nearly two years that Paulson had been Treasury secretary he had not met privately with the board of any company, except for briefly dropping by a cocktail party that Larry Fink’s BlackRock was holding for its directors at the Emirates Palace Hotel in Abu Dhabi in June.

Anxious about the prospect of such a meeting, Wilkinson called to get approval from Treasury’s general counsel. Bob Hoyt, who wasn’t enamored of the “optics” of such a meeting, said that as long as it remained a “social event,” it wouldn’t run afoul of the ethics guidelines.

Still, Wilkinson had told [Goldman chief of staff John] Rogers, “Let’s keep this quiet,” as the two coordinated the details. They agreed that Goldman’s directors would join him in his hotel suite following their dinner with Gorbachev. Paulson would not record the “social event” on his official calendar…

“Come on in,” a buoyant Paulson said as he greeted everyone, shaking hands and giving bear hugs to some.

For the next hour, Paulson regaled his old friends with stories about his time in Treasury and his prognostications about the economy. They questioned him about the possibility of another bank blowing up, like Lehman, and he talked about the need for the government to have the power to wind down troubled firms, offering a preview of his upcoming speech.