Felix Salmon has been digging some choice nuggets out of Andrew Ross Sorkin’s huge new book “Too Big to Fail.”
Yesterday, Salmon blogged about a secret meeting Sorkin reports between the entire board of directors of Goldman Sachs (one of The Audit’s funders) and then-Treasury Secretary Henry Paulson—in Moscow, of all places, three months before the Lehman Brothers collapse. Remember, Paulson was a Goldman alum (CEO, in fact)—but hey, who isn’t?).
The Treasury intentionally “kept this quiet” as a “social event” and didn’t mark it on Paulson’s calendar, which would be subject to those pesky reporters and their FOIA requests. Here’s what Paulson talked about:
For the next hour, Paulson regaled his old friends with stories about his time in Treasury and his prognostications about the economy. They questioned him about the possibility of another bank blowing up, like Lehman, and he talked about the need for the government to have the power to wind down troubled firms, offering a preview of his upcoming speech.
Today, Salmon finds another big news story in Sorkin’s book, which I’ve yet to read. This one, that Goldman Sachs was effectively advising Paulson in the days leading up to Lehman’s collapse:
If all that weren’t enough to deal with, [Lehman president Bart] McDade had just had a baffling conversation with [CEO Dick] Fuld, who informed him that Paulson had called him directly to suggest that the firm open up its books to Goldman Sachs. The way Fuld described it, Goldman was effectively advising Treasury. Paulson was also demanding a thorough review of Lehman’s confidential numbers, courtesy of Goldman Sachs.
McDade, though never much of a Goldman conspiracy theorist, found Fuld’s report discomfiting, but moments later was on the phone with Harvey Schwartz, Goldman’s head of capital markets. “I’m following up at Hank’s request,” he began.
As Salmon says, “If the Moscow meeting wasn’t enough to precipitate some kind of Congressional investigation of Paulson, this should be.”
It also needs to be widely picked up by the press, which needs to report this even if it can’t advance the ball. This is a big story, folks. It deserves wide play.
And big props to Sorkin for digging this stuff out.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at firstname.lastname@example.org. Follow him on Twitter at @ryanchittum.