Too Big to Fail [265]
“What they have sent us is not acceptable,” Christopher Dodd declared. “This is not going to work.” Jack Kingston, a Republican congressman from Georgia, went so far as to publicly criticize Paulson as “a terrible communicator,” complaining, “We’re being asked to vote on the major piece of legislation of our lifetimes, and we haven’t seen the bill.”
Beyond the rhetoric, however, lawmakers as well as investors were starting to raise practical questions about how the process of buying troubled assets would actually work. How would the government pay for them? How would the prices be determined? What if certain parties wound up profiting at the expense of the taxpayers?
When Steven Schwarzman, who had encouraged Paulson to announce a plan—any plan—finally saw the details of this one, he called Jim Wilkinson to get a message to Paulson.
“You announced the wrong plan!” Schwarzman told him.
“What do you mean?” Wilkinson asked.
“You won’t practically be able to figure out a way to buy these assets in a short period of time to provide liquidity to the system without either screwing the taxpayers or screwing the banks,” Schwarzman warned him. “And you won’t be able to force people to sell!” He explained that most bank CEOs would prefer to leave their bad assets on their books at depressed prices rather than have to realize a huge loss. “And,” he added, “each package of these assets is so highly complex that it’s not like bidding for a bond; you have to do a lot of in-depth analysis, and that takes weeks to months, and meanwhile, if you do nothing for weeks to months, you’re going to go back into crisis.”
At around 4:00 p.m. on Thursday, September 25, leaders of both parties and of the relevant committees crowded around the large oval mahogany table of the stately Cabinet Room of the White House, joined by the presidential candidates, senators McCain and Obama. Seated at the middle of the throng were the president, Vice President Cheney, and Hank Paulson. The group had been assembled in an attempt to persuade House Republicans, who had been emboldened by McCain, to rejoin the negotiations and agree on a bailout.
“All of us around the table take this issue very seriously, and we know we’ve got to get something done as quickly as possible,” Bush told the group. “If money isn’t loosened up, this sucker could go down,” he warned, referring to the nation’s economy.
But the meeting quickly degenerated from a promising effort to reach a consensus into a partisan fracas after the House Republican leader, John Boehner of Ohio, announced that House Republicans would not support the bailout, but would instead propose an alternative that would involve insuring mortgages with a fund paid for by Wall Street. When Democrats protested that such a plan would do nothing to address the current crisis, arguments erupted throughout the room, followed by finger-pointing and shouting, a spectacle that Cheney sat watching with a smile.
Obama, in an attempt to reach a compromise, asked, “Well, do we need to start from scratch, or are there ways to incorporate some of those concerns?” But by then it was too late for any effort to find a middle ground, and the meeting ended with the various factions leaving the room without speaking to one another.
As the deflated Treasury team made their way to the Oval Office a staffer stopped to inform Paulson that the Democrats were gathering in the Roosevelt Room across the corridor.
“I need to find out what they’re doing,” Paulson mumbled, disappearing before some of the staff even realized he was no longer with them.
He marched into the middle of the scrum of Democrats, who were furious at the House Republicans’ campaign to undermine the rescue plan. Paulson could