Too Big to Fail

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.

Tearing down these antiquated walls and

granting banks significant new authority.

In a victory for the banking industry,

Congress has approved legislation

which will allow commercial

and investment banks

to merge and form institutions

of unprecedented size and global reach.

I think it's very important for us not to

introduce regulation for regulation's sake.

I do believe in the American dream.

Owning a home is a part of that dream.

We are taking action to bring many thousands

of Americans closer to owning a home.

This project not only is good

for the soul of the country,

it's good for the pocketbook

of the country as well.

The housing market has reached

frantic proportions.

It seems that everybody is building,

buying or selling.

The Dow and the S&P both breaking records.

Profits soared 93%

at Goldman Sachs this year.

Hotshot traders and bankers

can expect to take home 10, 25,

and in some cases, $50 million.

Things that are too good to be true, are.

When you see something coming...

The real estate bubble...

- Housing bubble...

- Bubble...

... don't put it off.

Take action immediately.

Will there be a soft landing,

or will the bubble burst?

A new story, the mortgage meltdown.

This morning in the mortgage meltdown,

new numbers showing

that a record number of Americans

are losing their homes.

More than 70 mortgage companies have failed

in the last few months in America,

and now the biggest of the big companies,

the Bear Stearns, the big banks,

are caught holding the bag.

The fifth largest investment bank

in the country, Bear Stearns,

is being sold

for just $2 a share to JPMorgan.

It's being assisted by the government,

which is stepping in to guarantee

some $30 billion

in Bear's toxic real estate assets.

You've got to imagine that Hank Paulson

didn't think he signed up for this

when President Bush picked him

to become Treasury secretary.

Hank Paulson may now have to undo

some of the deregulation measures

that he and his peers on Wall Street

pushed through when he ran Goldman.

Treasury secretary Hank Paulson

telling Matt Lauer this morning,

"We're all over it.

I've got great confidence in our markets.

"They're resilient. They're flexible."

Ali, the truth is that Bear Stearns is only

a very small fraction of this story.

Our economy could face far worse

than a recession.

In the wake of Bear's collapse,

Lehman Brothers is scrambling

to reassure investors about the impact

of the mortgage crisis on its own assets.

Insurers of the firm under a great deal

of pressure this morning.

Dick Fuld, a 39-year veteran of Lehman

and the longest-running CEO

of a major investment bank on Wall Street,

has pulled the firm back

from the brink during other crises,

but today, for the first time that I'm hearing it,

investors are questioning his leadership.

- Motherf***er.

- One key question

investors have for Lehman Brothers,

"What's the true earnings power

of this investment bank's business?"

- Hey.

- Get up here.

We gotta start stacking sand bags.

What are you talking about?

We're down 21%. On paper, I just

lost $90 million, personally.

With investors pummeling Lehman shares,

the big question this morning is,

"What options does Fuld have?"

So far, he has failed to raise new capital

while virtually all of his rivals

have already done so.

And now, hedge fund manager David Einhorn

is publicly questioning the accuracy of...

Anything good?

It's a red-tailed hawk, first one this year.

Dick Fuld's on one.

... to provide credible answers.

So let's go through a couple of those,

what you call discrepancies, because...

- Tough morning?

- We show top-quality earnings,

- we beat every prediction.

- Yeah.

It's the damn short-sellers.

You know the game, short and distort.

They're rumormongers

and they're making a killing.

What are your plans for a capital raise?

We're way ahead of you.

Now, let me be clear,

we don't need the cash.

It's about perception.

Buffett, Buffett.

We're thinking of reaching out

to Warren Buffett.

Great.

You and Buffett go back, right?

Do me a favor and call him.

Tell him Lehman is rock solid.

As Treasury secretary,

I can't advocate for a specific investment.

Hank, you want me to raise capital or not?

Lehman Brothers is a hell of a lot bigger

than Bear Stearns.

The market is terrified.

When I was running Goldman,

I never even conceived

of asking the Treasury secretary

to cut a deal for me.

Yeah, but the Bear bailout created...

Please don't call it a bailout.

Okay, the very large Bear Stearns

purchase assistance package

created an expectation.

Fuld's counting on

direct intervention from you.

Buffett's a simple solution.

I think you make the call.

As what? Warren's friend? His former banker?

The Treasury secretary?

No. Fuld's calling him.

Hopefully he'll jump

in and we can all relax.

Relax? We just buried one investment bank,

we got another one that's barely breathing.

This is a confidence game.

People lose faith in Lehman,

these banks are gonna drop like dominoes

and I don't have the authority

to do a thing about it.

We're late. We've been late on everything.

Neel's team is working on

some kind of a disaster scenario.

We're calling it the "Break the Glass" plan,

what to ask Congress for

if your back's against the wall.

Money.

Is what you ask them for.

The problem is, Congress won't move

until we've already hit the iceberg,

and at that point, it may be too late.

So you're saying, with the full weight

of the United States Treasury behind me,

all I can do is call Warren Buffett?

Hi, Warren. It's Hank.

I understand you've been talking to Dick Fuld.

You know my misgivings, Hank,

about investment banks.

As soon as they started

trading for themselves,

the risk managers lost control.

I had a very unpleasant time

with Salomon Brothers.

That's fair enough.

But we both know that investment banking

is a profitable business.

I figure it made you a billion or so, huh?

I gotta believe that if the price was right,

you wouldn't just walk away.

You know a good deal when you see one.

What say you?

I gotta leave that to your judgment.

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."

You heard anything from Buffett?

He's asking for preferred shares at 40

with a dividend of 9%.

We were just at 66. What the f***?

Maybe it's just an opening gambit, Dick.

Sounds more like a goddamn insult.

- Let me get that, Dick.

- Thank you.

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.

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