Tags: Sorkin | Wall | Street | Crash

Sorkin: Powerful Few Saw Crash Coming

By Julie Crawshaw   |   Wednesday, 16 Dec 2009 04:35 PM

According to Andrew Ross Sorkin, a New York Times columnist and author of the new Wall Street expose “Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System — and Themselves,” people in power knew last year’s financial crisis was coming yet failed to warn the public.

“I think a lot of people actually saw this train barreling down the tracks, CEOs, people in government, and they weren’t telling us,” Sorkin told Newsmax.

Editor’s Note: Get Sorkin's “Too Big to Fail” at a great price from Amazon – Click Here Now

Another surprise is just how close we came to utter financial collapse. “I don’t think we appreciated how bad it was really about to get,” Sorkin says.

Sorkin says he was shocked to learn that the decisions made to save the financial system were made by a “small fraternity” of mostly men who allowed “little slights and petty jealousies” in their relationships dating years back affect billion-dollar decisions today.

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The decisions about what to do about the big investment banks “were really as much about the system as they were about the people” and their own relationships with Wall Street, he says.

For example, the weekend after Lehman Brothers folded, Sorkin says it was not clear that Morgan Stanley would keep its doors open, nor even the vaunted Wall Street powerhouse Goldman Sachs.

Incredibly, Goldman Sachs CEO Lloyd Blankfein called Morgan Stanley CEO John Mack and said, ”You better hang on because I’m 30 seconds behind you,” Sorkin says.

For a while it looked as if General Electric might go bankrupt as well, meaning Wall Street’s problems would spill over onto Main Street.

The group of decision-makers began calling Treasury Secretary Tim Geithner “eHarmony,” after the Internet dating site, because he was trying to play matchmaker, to create mergers to save the biggest banks.

At one point, Geithner, former Treasury Secretary Hank Paulson, Geithner, and Fed Chairman Ben Bernanke called Mack and told him, “Sell yourself to (JP Morgan Chase CEO and Chairman) Jamie Dimon for $1 a share,” Sorkin relates.

There’s no question that Geithner’s record is “mixed,” Sorkin says, because “he was on the police force and at the scene of the crime.”

Sorkin acknowledged the benefits someone with Geithner’s experience can bring, but he believes it would have been better to pair the former New York Fed chief with someone “with an outside perspective.”

“Part of the problem throughout this entire period was the amount of groupthink,” Sorkin notes.

“You do want to bring in that outside perspective, but at the same time, you want some people with some experience sitting at that table, too.”

Sorkin believes Bernanke deserves more credit than he gets for the job he’s done.

Even though he was one of a group that arguably brought us to the brink of financial collapse, “they also kept us from going off the cliff,” he says.

Sorkin doesn’t believe there will be another crisis of the same magnitude as last year but remains worried that regulations for the financial sector haven’t become tougher.

“I don’t think that Wall Street has actually changed that much, nor will change. . . What worries me the most is what happens two, three, four years out when memories on Wall Street become short and people start leveraging up again,” Sorkin observes.

The seeds of this debacle go back 10 years, he points out, and were planted in an environment of deregulation and intentionally low interest rates.

“There are so many fathers of this crisis that to blame just one would be unfair,” Sorkin says.

Editor’s Note: Get Sorkin's “Too Big to Fail” at a great price from Amazon – Click Here Now

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According to Andrew Ross Sorkin, a New York Times columnist and author of the new Wall Street expose Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves, people in power knew last year s financial crisis...
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