"Hold on, hold on," [Ruth] Porat said in disbelief. "You're calling me on a Sunday night saying that we just spent the entire weekend on Lehman and now we have this [AIG]? How the [foul language] did we spend the past forty-eight hours on the wrong thing?"
That is from Andrew Ross Sorkin's Too Big to Fail. Reading the book leads me to ponder the differences between Chauffered America--Hollywood, investment bankers, and high government officials--and Strip Mall America--people who launch businesses like restaurants, hair salons, and other small enterprises.
In spite of Sorkin's low level of economic literacy (at one point, he gives Alan Greenspan's claim to fame as his expertise in fiscal policy), his book is worth reading. He is an outstanding storyteller--I could not put it down until I finished. Moreover, the lack of economic insight is more than made up for by the sociological insight that one obtains from Sorkin's details. He never misses a chance to describe what the financial titans were eating, how their offices were decorated, which brand of car they rode in, how they obtained last-minute air transportation, or the foul language they were using.
The book's crescendo is the weekend of September 14-15, 2008, when Lehman goes bankrupt. Late on Saturday, while Lehman's fate is still uncertain, several CEO's and other executives are ensconced at the New York Fed. Sorkin writes,
In one corner, a number of exeuctives, trying to pass the time, were doing vicious imitations of Paulson, Geithner, and Cox. "Ahhhh, ummm, ahhh, ummm," one banker muttered, adopting Paulson's stammer. "Work harder, get smarter!" another shouted, mocking Geithner's Boy Scoutish exhortations. A third did his best impression of Christopher Cox..."Two plus two? Um--could I have a calculator?" In another corner, Colm Kelleher, Morgan's CFO, had begun playing BrickBreaker on his BlackBerry, and soon an unofficial tournament was under way, with everyone competitively comparing scores.
The obvious sociological point is that the top finance people live in a bubble, with secret entrances, isolated offices, chauffered automobiles, and private jets. Even the top government officials inhabit this world. Sorkin describes Geithner arriving at the airport in DC and losing it over not being met by a driver. Forced to take a taxi, Geithner turns to his colleague and says that he has no cash. Perhaps this would have been a moment to teach the head of the New York Fed how to use an ATM.
Sorkin managed to make me feel some sympathy for Henry Paulson, the earthy control freak. Annoyed that SEC Chairman Cox had not undertaken a task that Paulson had wanted, we hear:
"I don't want to be left here holding Herman," the Treasury secretary said, glancing at his zipper in case the joke wasn't clear.
Ultimately, the hard-charging Gulliver was tied down by the Lilliputians of the British banking regulators, who made it impossible for Barclay's to bid on Lehman prior to its bankruptcy. In that respect, Paulson was actually left holding Herman, as it were.
In Sorkin's telling, Geithner and Paulson are the deal-making heavies. Bernanke makes cameo appearances to utter professorial remarks, but otherwise seems like a non-player.
I do not see how reading this book can help but reinforce a Simon Johnson/James Kwak view of Washington captured by Wall Street. Paulson seems to have no use for anyone who is not a Goldman Sachs alumnus. Geithner seems to have no use for anyone who is not a CEO of a large financial institution. Both of them view the collapse of major Wall Street firms as Armageddon.
The "regulatory overhaul" promised by the Obama Administration is still the same-old, same-old. Chauffered America will be restored to its exalted status, with a few new rules and regulations thrown in.
Instead, somebody should be asking the deeper question about Chauffered America. If Chauffered America were to disappear, would the rest of us miss it? Or could Strip Mall America get along just fine without the big-time bankers and their friends in government?