We pick up the narrative on Monday, March 10, 2008, click here for earlier post.
On Friday prior, JPM Chase came to an agreement on a 28-day loan for Bear Stearns and you will see in the prior post how involved Treasury Secretary Henry Paulson was in the deal.
So back to Monday the 10th, Paulson spends most of the morning on the phone with Keith Hennessey who was Assistant to the President for Economic Policy and Director of the U.S. National Economic Council.
Later that morning the phone log shows four calls to Jerry Corrigan, former President of the NY Fed, but at this time was Managing Director in the office of the Chairman for Goldman Sachs and later in 2008 became chairman of Goldman Sachs holding company GS Bank.
He then has lunch at the White House with presidential staff members.
At 5pm Paulson convenes the first meeting of the Presidents Working Group on Financial Markets, AKA Plunge Protection Team.
On Tuesday the 11th Paulson redacted the first two hours of his day, which were out of the office. He then spoke with Fed chief Ben Bernanke and White House’s Hennessey and SEC chief Chris Cox.
After the call to Cox, Paulson conducts a typical schedule, but is in constant contact with Tim Geithner and White House aides. At the end of the day he meets with an assistant Chinese finance minister.
On March 12th, which is the alleged date of the closed session of the House. This act was a rarity for the people’s house. According to the House of Representatives’ own historic record this was only the fourth time since 1830 that the House closed the floor allowing only its members and select aides to hear the debate.
The secretive discussion was said to be focused on clandestine monitoring efforts to combat terrorism. There’s other chatter that the debate was centered on a financial destruction based on the fall of Bear Stearns, which I believe was considered a fait accompli by Paulson already.
Before the markets opened on the 12th the Plunge Protection Team had already met for 45 minutes. Paulson alerts the White House through Hennessey, who is the equivalent to Larry Summers in the Obama administration, and Joel Kaplan, Deputy Chief of Staff and Josh Bolton his boss.
He then has a White House Lunch with what’s described as attended by “Economic Principals.” Paulson then has a call into Geithner, who could be the conduit to Wall Street on the anticipated House session.
Paulson is the in the Oval Office with the President for an hour, which is an extraordinary amount of time with the President judging from all the other meetings the Treasury Secretary’s schedule has listed as POTUS meetings.
Paulson ends his day with a call to White House Deputy press officer Tony Fratto and calls Sen. Harry Reid from his home.
Thursday, March 13 Paulson starts his day with a 6am call to the EU’s Trichet, which again is odd from the standpoint that Trichet is Bernanke’s peer not Paulson.
The next two hours are redacted so it’s difficult to decipher his moves. After his blackout Paulson continues his dialog with the White House through Kaplan, Bolton.
Paulson then has a 30-minute call with the President.
During the day Paulson had press interviews with CNBC, Washington Post and New York Times. None of these interviews uncovered any of the information cited here. However there is a call late in the day to Bill Keller, editor of the Times. Not sure if this was Paulson doing damage control to squelch any leaks.
Friday, March 14th was the fateful day for Bear Stearns. Paulson begins the day with a 5:30am conference call with Geithner from his home. Although it is labeled as a conference call no other participants are listed.
Paulson then takes a call from the President at his home at 6:30am. Between this call and the market open Paulson speaks with White House aides three times, Geithner four times including a second conference call of the morning with no other participants listed again and SEC chief Cox.
Once the market opens Paulson raises the curtain on his M&A window and begins to call all of Wall St. In order: Ken Lewis, BofA; Bob Rubin, former Treasury Secretary, Citi director; Lehman’s Dick Fuld; Tim Geithner; Merrill’s John Thain; Goldman’s Lloyd Blankfein; Morgan’s John Mack and then after another Geithner call Paulson calls JPM’s Jamie Dimon.
Most likely he told Dimon no one on the Street or at the White House had the appetite to help Bear Stearns and that JPM had to go it alone with no backstop.
But the hits keep on coming that day.
After Dimon, Paulson speaks with Trichet of the EU and someone else who is redacted. He then spends an hour with Geithner before calling Dimon again. When he hangs up with Dimon, he takes a call from President Bush.
After Paulson hangs up with President Bush he then calls Geithner to work on a game plan before the both of them call Bear’s Alan Schwartz to break the news that Dimon and JPM were pulling the rug out from under him and that the administration was not going to bail out the firm.
Then we had the fire sale over the weekend to JPM and the rest is history.
For more on Wall and Washington and the economy see: https://mgray12.wordpress.com