Too Big to Fail Page #3

waving the Chinese flag.

Paulson the Communist.

The look on your face was priceless.

Hank, I must ask you

about Fannie and Freddie.

We have hundreds of billions invested.

You've assured us the investment is safe.

And it is, absolutely.

We're watching a great deal

of our money disappear.

Share prices have dropped 60%

in the last two months.

Carrying your bazooka around

has not helped matters.

Congress gave you the power.

Perhaps it is time to use it.

The market will stabilize.

We just have to give it some time.

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.

- That would be...

- Chaos.

The amount of debt your country carries

is a terrible vulnerability.

- But you...

- We declined, respectfully.

Even in the US, it seems

the relationship between the government

and private industry isn't so simple.

Was it a threat?

No, no, it was a friendly reminder

that with a single phone call to Moscow,

they can take down the entire US economy.

The book says Fannie

and Freddie are a nightmare.

They are in the hole easily

tens of billions of dollars.

Another few weeks, they're gonna

start defaulting on their debts.

- We're gonna have to step in.

- I don't see how we can avoid it.

Turns out a bazooka's not that useful

unless you fire it.

Lehman's down another 10%.

You are not gonna let me

get down a single bite, are you?

This is why I have oatmeal.

Dick is trotting around the world

with his hat in his hands,

no one will give him any money.

Korea walked out on him.

Mexico told him to shove it.

No one's interested.

All the dumb money's already in.

What about B of A?

Are they still in the mix?

And Barclays is sniffing around again,

now that they think it's a fire sale.

- That's promising.

- I don't know.

The British, they do a lot of talking.

They never close.

- B of A is still our best bet.

- This can't be another Bear.

Absolutely not.

They want Lehman, they buy it outright.

But they may need

a little hand-holding, though.

They just bought Countrywide.

They're spread a little thin.

You may have to give them a break

with the capital requirements.

You want me to allow them

to raise their leverage

so they can buy a bank that's about to fail

because it was overleveraged?

You got a better idea?

Breaking news just coming in.

Sources telling CNBC

that the government has just taken control

of Fannie Mae and Freddie Mac.

Back in July, you remember,

Hank Paulson said

that he wanted the power to step in,

but he probably wouldn't use it.

It certainly sounds like Paulson

just pulled the trigger on that bazooka.

Despite the move to nationalize

Fannie and Freddie,

the market is still

in negative territory across the board.

Investors now focusing their attention

on Lehman Brothers,

amid fresh reports that the nation's

fourth-largest investment bank

may be on the brink of bankruptcy.

Rodge.

Chris.

Bring your money today, huh?

Make sure Fuld's not keeping

any bad news out of the mix.

It's "open kimono," to quote Dick.

There's a revolting image.

Did you get a look at the numbers?

The real estate's the issue.

They got it marked at 30 billion.

It's worth maybe half of that.

Don't look so nervous.

You're about to get a Wall Street bank

for the price of a hot dog.

I know that Paulson told Ken Lewis

that he's not gonna pay for this.

And I don't see how we can do it

unless the government

takes some of the downside.

Paulson is posturing.

He'll write a check just like he did

for Jamie Dimon on the Bear deal.

He has to. He can't lose another major bank

in an election year.

Besides, the guy made

a half a billion bucks at Goldman Sachs.

He lets Lehman die?

Goldman's biggest competitor?

Makes him look like

he's still working for Goldman.

He's just doing it out

of a desk at Treasury.

Where are the donuts?

Exactly. If you're the CEO

of one of these financial firms,

you've already seen

what the government was willing to do.

Why wouldn't you

play chicken with them and say,

"Sure, I'll help you out.

But you gotta throw in a sweetener,

"just like you did for those guys"?

They just assume

I'm gonna bail out Dick Fuld,

like I'm the guy behind the elephant

with the shovel.

They're all drawing a line from Bear

and Fannie and Freddie right to Lehman.

There's no way the taxpayers

are gonna go for another bailout.

- Very large purchase assistance package.

- Large purchase assistance package.

We need to come up

with a private-sector solution,

get the investment banks to bridge the gap.

Okay, but that's never gonna work unless

they believe that you've drawn a line.

I know you don't like leaking,

but let us reach out to the press.

Okay.

Mr. Flowers, there's a call for you.

Bob Willumstad from AIG.

He's very insistent.

Mr. Flowers.

My people tell me you're the man to talk to.

We've got a real problem here.

Yeah? What kind of problem?

It looks very much like

we are about to run out of cash.

AIG?

We've sent over a document.

It's a spreadsheet.

It's confidential, of course,

but it might give you some insight.

I'm in the middle of Lehman.

I'm working with B of A.

Is there any way

you could come over tomorrow?

I'll take a look at the

numbers and we'll talk.

Mr. Flowers.

Somebody put the TV on.

CNBC's talking about Lehman.

A person familiar with Paulson's...

Treasury secretary Hank Paulson's thinking,

and he is saying there will be

no government money

in the resolution of this situation.

They're saying two things

make the Lehman deal different.

The market's been aware

and had time to prepare

for over six months. And the second is...

Is that just TV bullshit?

Or is that Paulson sending us a message?

Chris?

Yeah? Sorry.

What exactly does "a person familiar with

the Treasury secretary" mean?

That could mean a lot of things.

Did one of your staffers do this?

Please tell me

someone got fired 10 minutes ago.

The leak came from me.

Hank, a public statement like that

can have a lot of unintended consequences.

We had to send a message to the other banks.

They need to step up.

I don't have another rabbit

I can pull out of my hat.

Rodgin Cohen just called me.

The B of A team is sitting there

playing Brickbreaker on their phones.

They don't want this deal.

The deal is hanging by a thread

because the closer they get to Lehman,

the more it looks like a toxic waste dump.

Which is why at the end of the day

we may have to help them,

which would be a lot easier

if we didn't publicly state that...

We can't, Tim! Legally, we can't!

Legally, we haven't figured out how yet.

I am concerned

we are limiting our options

at a time when we have very few,

if any, available.

I want all the CEOs in a room.

We've got the weekend.

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