Speaking of tick-tocks, and I recently was, American Banker‘s US Banker magazine just published a credible entry on the bank-rescue follies of the fall of 2008 by Jeff Horwitz, who wrote it as a school project upstairs in the Journalism School. Good for him and the school.
The minute-by-minute, inside-the-boardroom business-news subgenre has exploded with the crisis, starting last year with the Kate Kelly’s three-day series in the WSJ on the fall of Bear Stearns, continuing with the New Yorker opus in September on the “Eight Days That Shook The World” by (J-School professor) James B. Stewart, Andrew Ross Sorkin’s recent hit book and (Vanity Fair excerpt) on Goldman and Morgan Stanley’s near-death experiences, and several others, now including Greg Zuckerman’s dissection of John Paulson’s big trade.
The US Banker Wachovia story covers some ground familiar to close readers of Crisis Lit, but fleshes out nice details, including that Wells Fargo first balked at a Wachovia deal because it couldn’t understand its commercial real estate portfolio; that Wachovia actually believed it could save itself; and that Goldman Sachs, a potential suitor, seems to have been everyone’s first choice. It adds to the record on Hank Paulson’s problematic role in trying to broker a takeover by his alma mater, a deal later nixed for reasons of “optics.” The piece also adds to the record of Citigroup’s futility and shows the megabank overplaying its hand in several ways. It provides the fullest account I can recall of Sheila Bair’s role in a particular deal. The FDIC head here first brokers a Citi deal, rejects Wachovia’s bid to rescue itself, then turns on a dime when Wells, which had dropped out earlier, returns.
“Well Sheila, what do you think we should do?” [Wachovia’s general counsel Jane] Sherburne asked. “I don’t know,” Bair replied. “This is a vastly better deal for the American taxpayer, better for the company, certainly better for the shareholders,” Sherburne said. “How can we not consider this?” “I think you have to,” Bair said.
All this can be put in the category of useful information. It’s notable, first, how hamstrung the former Treasury Secretary comes across in this and many accounts because of the overlapping Goldman-government ties. While no technical conflict may have existed to a Goldman-Wachovia deal, the mere appearance of one foreclosed what may have been the best option. The account also further erodes Pandit’s stature; it’s difficult to recall a single detailed journalistic account of the crisis that hasn’t. How he survives is a mystery. Finally, Bair comes across as pragmatically muddling through to a good outcome. Mostly, the piece reinforces the record of how random decision-making was: Citi, Wells, Goldman—it could have gone any old way.
Wachovia sources, apparently, were irked that the bank’s self-rescue plan was rejected when they believe the bank could have saved itself with less government help than Citigroup got later.
Some of Wachovia’s executives were flabbergasted – a bank in a position similar to its own had just received a fundamentally different deal. “I’m not defending Wachovia,” says one source. “But the outcome could very easily have been for the company to stay independent with much less support than the government gave to Citi. This was all so hit or miss.”
It certainly was hit or miss, though the piece doesn’t explain why it wasn’t better in the end from the public’s point of view for Wells to take Wachovia and its dubious assets or what would have been so great about the survival of a state-supported Wachovia.
Indeed, from the public’s standpoint, the entire tick-tock genre has one overriding limitation, and that is, or course, its narrow focus. “I’m not defending Wachovia,” the source says. Defending it against what? Against the unstated but true allegation that it was a leader of a financial system run amok. The tick-tocks as a group treat this one, defining reality of the mortgage crisis as an afterthought. All the bad loans are a given. But they aren’t a given.
if readers are ever really going to understand the financial crisis, they will have to learn what went on in boardrooms and among regulators not in September 2008, but in the years leading up to it.
Dean Starkman Dean Starkman runs The Audit, CJR’s business section, and is the author of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.