Andrew Ross Sorkin Sheds Light On Financial Crisis and Too Big To Fail

The Lehman Brothers collapse impacted not only its employees and investors, but it also had ramifications beyond what anyone could have contemplated. It began a domino effect in the market — an effect to which no one was immune.

At the time of the Lehman failure, Andrew Ross Sorkin had already been covering Wall Street for over a decade. He says, “I didn't actually know a lot of the main characters, but I was able to, through some old school traditional reporting, getting in front of the right people and asking questions, getting people to tell me stuff they weren't supposed to.”

Naturally, there were some people who purely wanted to expose the truth — but by no means did that make finding the right people any easier. He says, “I think a third of the people wanted to talk to me for the right reasons…to be helpful. Another third probably talked to me for the wrong reasons, to rewrite their legacy, and rewrite history…I kept them honest. The last third is typically the group who doesn't want to talk to you; the people who had a reason not to talk to you. But once you end up talking to the first two thirds, the other third decides ‘oh my goodness, this guy has actually talked to a lot of people and done a lot of work, maybe I should talk to him.'

The example I always give is the executive who I was trying to get forever. He wouldn't talk to me, his lawyer wouldn't talk to me, it went on and on and on. I finally got him on the phone and I said ‘I know you don't want to talk to me' and he said ‘yes I don't want to talk to you.' So I said, ‘well, at least let me tell you what I have.' He says ‘Sure, but it's not going to change my mind.'…‘It's a Saturday morning and you're sitting on the green couch on the right hand side and you're eating a chicken wrap…' And so he said ‘Okay, well I didn't think I wanted to talk to you but maybe I should.'”

Andrew discusses one of his revelations about that same moment. He says, “I thought it was bad just looking at the tape every day, and the stories I was writing. When you really get into the room, it was worse, and that there was a real sense of panic. We were talking about not 10% unemployment, but 25% unemployment, that Morgan Stanley (NYSE: MS) & Goldman Sachs (NYSE: GS) were on the verge of bankruptcy, that General Electric (NYSE: GE) was going to go bankrupt.”

He added that one of his greatest surprises in writing this book was the revelation that “the TARP plan to buy up $750 billion in toxic assets, which was announced in September 2008 after the fall of Lehman Brothers, was written not in 2008 at all but back in April. The government actually saw this train barreling down the tracks and had written an 11-page memo on what to do, and it was called ‘Break the Glass,' as in, in an emergency break the glass.

Hank Paulson had actually held a meeting with the board of Goldman Sachs in Russia of all things in June 2008…at night in his own hotel suite. I remember being somewhat shocked that something like that could happen. And then the real revelation, more than anything else.”

But above all, as a M&A guy, Andrew says that what really interested him was how the invisible hand of government became a lot more visible during the crisis. Tim Geithner, Hank Paulson and Ben Bernanke, etc. “were trying to orchestrate deals. I didn't know at the time that they were trying to put Goldman Sachs and Citigroup (NYSE: C) together for example, or Morgan Stanley and JP Morgan (NYSE: JPM) together. I wish I was able to report on them at the time.”

“I didn't appreciate what the government was doing behind the scenes,” he added. What particularly fascinated him was the particular approach the government took to the crisis, especially considering Hank Paulson's background on Wall Street. “This was sort of government by deal in a way. It was a different approach. There was so much effort by the government at the time to at least appear as if free markets were working as free markets. That was sort of the shock for me — it wasn't as free as I thought.”

Be sure to check out my entire interview with Andrew Ross Sorkin on Zing Talk.

--Nick Tazar contributed to the reporting of this article.

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