The Bullies of Wall Street - Sheila Bair

[Saluki]

I've read several good books about the great financial crisis.  Too Big to Fail is becoming the default official story, but it's interesting to see someone else's take on it.  Tim Geitner's book was good, but there was something about his version that didn't sit right with me, and I couldn't put my finger on it.  The Bullies of Wall Street is a short, very  readable book by Sheila Bair.  

 

I won't go so far as to say that she comes out swinging, as some in the press have suggested, but she definitely wanted to get her side out given the unflattering portrayal in the most popular accounts of the matter, mentioned above.  Yes, Ken Lewis is referred to as a "country bumpkin", but if you read Too Big to Fail, you probably thought that in your head, even if you never said it aloud.  

 

In other tellings, she is the one who put the turd in the punch bowl by not going along with things that Geitner and Paulson had worked out because she didn't want to put the FDIC's money on the line.  In her telling, she didn't have the authority to use the FDIC's funds for some of those schemes, and would be breaking the law if she did it.  Since Congress quickly changed the Fed's authority to allow them to buy up assets that were not permitted under their original mandate, she wanted Congress to amend the FDIC laws to allow her to do what they were asking, because without that cover she would be breaking the law (committing a crime?). 

 

Geitner and Pandit come off looking particularly bad in her side of the story.  Geitner had some kind of fan boy crush on Pandit and was favoring Citi's bid for a bank, which would require a lot of government money because Citi wasn't in great shape to begin with.  She viewed Pandit as a failed hedge fund manager who fell up and up until he was given the big chair at Citi.  

 

Speed was of the essence in these deals (as we saw recently with SVB, and First Republic), so when Citi stalled and tried to get more concessions, she accepted an offer from Wells for more money (better for the target Banks' shareholders/creditors) with no government assistance,  she jumped on it. Geitner was furious and felt like she had made him look bad in front of Pandit (so what?).  

 

There are three sides to every story, his side , her side, and the truth.  This is obviously not from an unbiased source.  She doesn't like some of the players and takes joy in retelling about a meeting in the White House when Geitner got a dressing down from Obama for trying to undermine her on something.  Still, it's worth seeing things from multiple angles and coming to your own conclusions.  This wasn't a long book because it only involved her and FDIC's role in the saga, which are only a few chapters in Too Big to Fail.  But it's definitely worth a read.