Ever since Bob Woodward and Carl Bernstein’s All The President’s Men (1974), American reporters have imitated their novelistic style, turning attention to detail — itself a good thing — into a fetish. Andrew Ross Sorkin of The New York Times has emphatically continued this tradition in his account of the battle to save the Wall Street banks.

He informs us that Dick Fuld, the chief executive of doomed Lehman Brothers, “caught a glimpse of his own haggard reflection in the ­window” of his chauffeur-driven Mercedes, while he “rolled his thumb over the trackball on his BlackBerry as if it were a string of worry beads”; that Tim Geithner, the president of the New York Federal Reserve Bank, “sitting in his office Sunday morning”, was “running his fingers through his thick hair” as he pondered; and that Robert Willumstad, head of the terminally cash-short insurance giant AIG, “could feel the perspiration begin to soak through his undershirt as he strode along Pearl Street at 9.15am… He was anxious about his upcoming appointment with Tim Geithner.”

How does Sorkin know all this? I suppose the AIG boss might have told him that Geithner had been running his hands through his thick hair; and the boss of the New York Fed might have informed him that a rank smell had emanated from under Willumstad’s shirt all the while. Yet it is hard to believe they would have done so, however much each man might have wished to unload his side of the story to the avid voyeur from The New York Times.

On the other hand, I have to admit that Sorkin’s piling up of detail on detail, anecdote upon anecdote, works triumphantly in its objective of turning an immensely complicated series of financial transactions into a high-paced thriller that will captivate even those who shun the business pages. After all, the stakes could not have been higher: in September 2008, when Lehman Brothers (with notional assets of $639 billion) became the biggest bankruptcy in history, the entire financial system came within hours of complete ­meltdown. No wonder the most repeated phrase emitted by the characters in Sorkin’s fly-in-the-boardroom account is, “Are you f***ing kidding me?” — or variations thereof.

One of the most telling examples of this mounting incredulity occurs during a meeting of the board of Merrill Lynch, when it first becomes clear to senior management that they have a problem with their collateralised debt obligations (previously seen as miracle profit earners). The executives responsible for loading the firm with billions of dollars’ worth of these toxic instruments tell the board that “in a ­worst-case scenario…the firm’s loss would amount to only $77m”. Merrill’s chief­executive, the hitherto unchallengeable Stan O’Neal, complacently congratulates them on their presentation. Then Merrill’s chief lawyer, Peter Kelly, grabs the firm’s finance director as he leaves the meeting, and explodes: “Who the f*** are they ­kidding? Are you f***ing kidding me with this?” Within a few months, the lawyer’s rage is amply vindicated. Merrill is forced to announce a quarterly loss of almost $8 billion. O’Neal is forced out — and in short order, mighty Merrill Lynch, whose bull logo was Wall Street’s most famous emblem, ceases to be an independent company.

Yet even those losses were a tiny fraction of the whole. The sheer scale of the financial rescue operation required to restore confidence in Wall Street emerges almost comically in Sorkin’s account of a private meeting between Hank Paulson, the Treasury Secretary, and his egghead advisers Kevin Fromer and Neel Kashkari. Paulson is trying to get them to suggest how much he will have to ask American taxpayers, via Congress, to divvy up: “‘What about $1 trillion?’ Kashkari said. ‘We’ll get killed,’ Paulson said, grimly. ‘No way,’ Fromer said, incredulous at the sum… ‘Okay,’ Kashkari said, ‘how about $700 billion?’ ‘I don’t know,’ Fromer said. ‘That’s better than $1 trillion.’”

That’s real money; and one of the themes of this account is how at the peak of the crisis all the funds of the banks existing in the ether as intangible electrons suddenly appeared worthless. That is what happens when credit, in the literal sense of the word, evaporates. Thus there is something almost poignant in Sorkin’s evocation of the meeting held at the New York Federal Reserve, when the leading figures of Wall Street attempted to find a joint plan to rescue teetering Lehman Brothers: “Deep below its limestone and sandstone building…lies a three-level vault built into the bedrock of Manhattan, 50ft under sea level. It holds more than $60 billion of gold. Real hard assets, with real value.”

As we now know, that attempt to keep Lehman Brothers alive failed — and it was this that triggered the real credit crunch, as fund managers and traders panicked, and began to call in their accounts with firms such as Morgan Stanley, Merrill Lynch and, finally, even the great Goldman Sachs. Sorkin reveals an extraordinary telephone conversation between Stanley Druckenmiller, a George Soros acolyte worth $3.5 billion, and Gary Cohn, Goldman’s president. Cohn attempts to persuade Druckenmiller (whom he had long counted as a friend) not to withdraw all his funds from Goldman: “I’m learning who my friends are and who my enemies are, and I’m making lists.” The hedge fund boss shoots back: “It’s my livelihood. I’ve got to protect myself and I don’t really give a shit what you have to say.” All over Wall Street, the carefully cultivated grandeur and dignity of the big chiefs was brutally stripped away, as even the presidents and chief executives of the oldest-established firms slanged at each other like so many teenage street traders.

Oddly, the villain of Sorkin’s account — which is largely sympathetic to all the individual players — is the British government. On that tumultuous weekend of September 13-14, the federal authorities had managed to persuade the Wall Street honchos to agree to support Lehman’s disastrous property investments, by financing a spun-off vehicle, SpinCo (derisively named “ShitCo” by all concerned) and selling the sounder part of the bank to our very own Barclays. But when on Sunday morning Paulson and Geithner finally thought to call the British financial authorities, they ­discovered that Chancellor Alistair Darling had no intention of agreeing to abandon all normal regulatory checks, just so that Barclays could rush through the deal with Lehman before the markets opened the next morning. [The British] have “grin-f****d us,” Paulson told the assembled — and astonished — Wall Street bosses, when he came off the phone to London. “Isn’t this our closest ally?” wailed one of the bankers holed up at the New York Fed.

From the perspective of this side of the Atlantic, it seems clear that Paulson and co had simply — and wrongly — assumed the British government shared their view that absolutely nothing should stand in the way of saving Lehman Brothers. They should never have left it to one minute before ­midnight to discover otherwise. As it ­happened, Barclays was able to pick up for a song the bits of Lehman it wanted from the liquidators. On the other hand, the Americans were right about one thing: the sky really did fall in afterwards — which is what made this book necessary.

Too Big to Fail by Andrew Ross Sorkin
Allen Lane £14.99 pp624

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