Henry M. Paulson - On the Brink: Inside the Race to Stop the Collapse of the Global Financial System

Copyright 2010 by Henry M. Paulson, Jr.

All rights reserved. Except as permitted under the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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First eBook Edition: February 2010

ISBN: 978-0-446-56567-7

Contents

For Wendy

(in Alphabetical Order)

R EP . S PENCER B ACHUS (R-Alabama), ranking Republican on the House Committee on Financial Services

S EN . M AX B AUCUS (D-Montana), chairman of the Senate Committee on Finance

R EP . R OY B LUNT (R-Missouri), House minority whip

R EP . J OHN B OEHNER (R-Ohio), House minority leader

S EN . J IM B UNNING (R-Kentucky), member of the Senate Committee on Banking, Housing, and Urban Affairs

S EN . H ILLARY R ODHAM C LINTON (DNew York)

S EN . C HRISTOPHER D ODD (D-Connecticut), chairman of the Senate Committee on Banking, Housing, and Urban Affairs

R EP . R AHM E MANUEL (D-Illinois), chairman of the House Democratic Caucus; later chosen as chief of staff by President-elect Barack Obama

R EP . B ARNEY F RANK (D-Massachusetts), chairman of the House Committee on Financial Services

S EN . L INDSEY G RAHAM (RSouth Carolina), national campaign co-chairman for Sen. John McCain

S EN . J UDD G REGG (RNew Hampshire), ranking Republican on the Senate Committee on the Budget

S EN . M ITCH M C C ONNELL (R-Kentucky), Senate minority leader

R EP . N ANCY P ELOSI (D-California), Speaker of the House

S EN . H ARRY R EID (D-Nevada), Senate majority leader

S EN . C HARLES S CHUMER (DNew York), vice chairman of the Senate Democratic Conference

S EN . R ICHARD S HELBY (R-Alabama), ranking Republican on the Senate Committee on Banking, Housing, and Urban Affairs

J OSEF A CKERMANN , chairman of the management board and CEO of Deutsche Bank

H ERBERT A LLISON , J R ., chairman and CEO of TIAA-CREF; later president and CEO of Fannie Mae

L LOYD B LANKFEIN , chairman and CEO of Goldman Sachs

W ARREN B UFFETT , chairman and CEO of Berkshire Hathaway

H. R ODGIN C OHEN , chairman of Sullivan & Cromwell

M ERVYN D AVIES , chairman of Standard Chartered Bank

J AMES D IMON , chairman and CEO of JPMorgan Chase

J. C HRISTOPHER F LOWERS , CEO of J.C. Flowers & Company

R ICHARD F ULD , chairman and CEO of Lehman Brothers

E DWARD H ERLIHY , co-chairman of the executive committee of Wachtell, Lipton, Rosen & Katz

J EFFREY I MMELT , chairman and CEO of General Electric

R OBERT K ELLY , chairman and CEO of Bank of New York Mellon

R ICHARD K OVACEVICH , chairman of Wells Fargo

K ENNETH L EWIS , chairman and CEO of Bank of America

E DWARD L IDDY , chairman and CEO of AIG

J OHN M ACK , chairman and CEO of Morgan Stanley

H ERBERT (B ART ) M C D ADE III, president of Lehman Brothers

D ANIEL M UDD , president and CEO of Fannie Mae

V IKRAM P ANDIT , CEO of Citigroup

R OBERT R UBIN , former secretary of the Treasury; director and senior counselor of Citigroup

A LAN S CHWARTZ , CEO of Bear Stearns

R OBERT S CULLY , vice chairman of Morgan Stanley

L AWRENCE S UMMERS , former secretary of the Treasury; chosen as director of the National Economic Council by President-elect Barack Obama

R ICHARD S YRON , chairman and CEO of Freddie Mac

J OHN T HAIN , chairman and CEO of Merrill Lynch

R OBERT W ILLUMSTAD , CEO of AIG

S HEILA B AIR , chairman of the Federal Deposit Insurance Corporation

B EN B ERNANKE , chairman of the Federal Reserve Board

C HRISTOPHER C OX , chairman of the Securities and Exchange Commission

J OHN D UGAN , comptroller of the currency

T IMOTHY G EITHNER , president of the Federal Reserve Bank of New York; later nominated for secretary of the Treasury by President-elect Barack Obama

D ONALD K OHN , vice chairman of the Federal Reserve Board

J AMES L OCKHART , director of the Federal Housing Finance Agency

C ALLUM M C C ARTHY , chairman of the Financial Services Authority (United Kingdom)

K EVIN W ARSH , governor of the Federal Reserve Board

A LISTAIR D ARLING , chancellor of the Exchequer of the United Kingdom

H U J INTAO , president of the Peoples Republic of China

M ERVYN K ING , governor of the Bank of England

A LEXEI K UDRIN , finance minister of Russia

C HRISTINE L AGARDE , finance minister of France

A NGELA M ERKEL , chancellor of Germany

V LADIMIR P UTIN , prime minister of Russia

N ICOLAS S ARKOZY , president of France

J EAN -C LAUDE T RICHET , president of the European Central Bank

W ANG Q ISHAN , vice premier of the State Council of the Peoples Republic of China

W U Y I , vice premier of the State Council of the Peoples Republic of China

Z HOU X IAOCHUAN , governor of the central bank of the Peoples Republic of China

S EN . J OSEPH B IDEN , J R . (D-Delaware), vice presidential candidate for the Democratic Party; later elected 47th vice president of the United States

S EN . J OHN M C C AIN (R-Arizona), presidential candidate for the Republican Party

S EN . B ARACK O BAMA (D-Illinois), presidential candidate for the Democratic Party; later elected 44th president of the United States

G OV . S ARAH P ALIN (R-Alaska), vice presidential candidate for the Republican Party

M ICHELE D AVIS , assistant secretary for public affairs and director of policy planning

K EVIN F ROMER , assistant secretary for legislative affairs

R OBERT H OYT , general counsel

D AN J ESTER , contractor

N EEL K ASHKARI , assistant secretary for international economics and development and interim assistant secretary for financial stability

J AMES L AMBRIGHT , chief investment officer of TARP

C LAY L OWERY , acting undersecretary for international affairs

J EB M ASON , deputy assistant secretary for business affairs

D AVID M C C ORMICK , undersecretary for international affairs

D AVID N ASON , assistant secretary for financial institutions

J EREMIAH N ORTON , deputy assistant secretary for financial institutions policy

K ARTHIK R AMANATHAN , director of the Office of Debt Management

A NTHONY R YAN , assistant secretary for financial markets

S TEVEN S HAFRAN , senior adviser to the secretary of the Treasury

R OBERT S TEEL , undersecretary for domestic finance; later president and CEO of Wachovia

P HILLIP S WAGEL , assistant secretary for economic policy

J AMES W ILKINSON , chief of staff

K ENDRICK W ILSON , contractor

J OSHUA B OLTEN , chief of staff

G EORGE W. B USH , 43rd president of the United States

R ICHARD C HENEY , 46th vice president of the United States

E DWARD G ILLESPIE , counselor to the president

S TEPHEN H ADLEY , national security adviser

K EITH H ENNESSEY , assistant to the president for economic policy; later director of the National Economic Council

J OEL K APLAN , deputy chief of staff for policy

E DWARD L AZEAR , chairman of the Council of Economic Advisers

D ANIEL M EYER , assistant to the president for legislative affairs

T he pace of events during the financial crisis of 2008 was truly breathtaking. In this book, I have done my best to describe my actions and the thinking behind them during that time, and to convey the breakneck speed at which events were happening all around us.