8 Days That Shook the Financial World

James Stewart’s reconstruction of the 8 nail-biting days, a year ago, in which the federal government stepped in to stop the collapse of the world financial system—published in the New Yorker this week, just as Fed chief Ben Bernanke was declaring the recession officially over—makes riveting, tense reading. “I don’t think I can take another day of this,” one banker says getting out of the Goldman Sachs car on Day 4. “You’re getting out of a Mercedes to go to the New York Federal Reserve,” snaps Bernanke. “You’re not getting out of a Higgins Boat on Omaha Beach.” Not quite, at least.

Stewart questions Hank Paulson’s claim that there’s no way Lehman Bros. could have been saved, either by a Bear Stearns-type merger, or by an AIG-style bailout. He rejects the argument that there wasn’t enough collateral to go the AIG route, and that there was no viable buyer for Lehman—proposing that poor handling by Paulson soured the Barclay’s and other possible deals. He also reviews the charge that AIG was bailed out to save Goldman, Paulson’s alma mater. Goldman, he calculates, was sufficiently hedged to survive an AIG collapse. But neither Goldman or any other bank would have survived a global collapse, he notes, and that’s what the series of bold moves, under unimaginable pressure, averted. (More Henry Paulson stories.)