The Books Interview: Andrew Ross Sorkin

Too Big to Fail is based on remarkable access to the main players in the financial crisis.
It's very important that the reader is able to see what these people thought and said to each other during this calamitous period. And I think that when you get in the room with them and you get to hear what they were thinking, there are moments where you'll wince and cringe and, in some cases, get immensely frustrated with them. There are very few heroes in this book.

Those involved seemed to sleepwalk towards catastrophe. Why was that?
It's a story of greed at some level. And it's a story of hubris. It's about a grab for power. I actually think that, in the end, the dollar figure is not necessarily the motivating force. The money is almost a scorecard for everything else. When you see these people in their moments of panic, I'm sure they're thinking about their wallets, but they're also thinking about the power that they have. We talk about institutions that are too big to fail - I think the story is as much about people who think they are too big to fail.

You argue that Dick Fuld, chief executive of Lehman Brothers, was driven much less by greed than some of the other main players.
Dick Fuld has been villainised, but in the context of this book, he's more of a tragic figure. Remember, Fuld had a billion dollars of stock in the company - he had more skin in the game than anyone else in the world. And yet he rides it down to $65,000. What does that say? I don't know. And I wouldn't say I'm sympathetic to him per se, but the reason I suggest he's a tragic figure is that there's a big likelihood that we'd have villainised every other CEO had the government not saved them.

Fuld blamed the collapse of Lehman on short-selling. Was he right to do so?
It's very hard to blame the short-sellers for this debacle. There's no question that they exacerbated the problem, but in many ways there were good reasons to short stocks and I don't think that was what put pressure on these companies. Look at the hedge fund manager David Einhorn: he saw the writing on the wall earlier and better than most other people. It's the people who have an incentive to find the problem who usually find the problem.

You appear to credit the former treasury secretary Hank Paulson, and his successor, Timothy Geithner, with having foreseen the disaster.
You have all these people who see the train barrelling down the track. And yet they still don't completely get out of the way. You can give them credit for having spotted the train - that's great. But do I think they mitigated the disaster? Well, that's a larger question. It's hard to argue that they didn't bring us to the brink. But you could also argue that they took us back from the brink. So, for me, it's a much more mixed record. You can't simply credit these people with having foreseen the disaster. You can give Paulson credit for talking about the need for a resolution authority, which he did in June 2008. Tim Geithner is someone else who seemed to be talking about this a lot. But as for actually doing something - that's another matter.

What about the wider historical context to the crash of 2008?
Many of the seeds of the debacle were sown ten years ago, with some of the issues around monetary policy, sub-prime mortgages, deregulation, the lowering of capital requirements at banks - all of those things contributed to this. So by the time my book begins, many of the problems are already baked in. What you're watching here is people at the moment of emergency. I originally thought the book would just cover September 2008. But once I started doing the reporting, I realised that the Treasury was trying to orchestrate a deal for Lehman with Barclays as the spring. It made me rethink the scope and narrative arc of the book.

And politics matters, doesn't it?The repeal of the Glass-Steagall Act in 1999, for example, was crucial.
The repeal of Glass-Steagall allowed the casino to be attached to the bank. Expanding homeownership also exacerbated the problem. As did the decision to keep interest rates low for long periods of time. So you have the regulators clearly not minding the store and Wall Street taking advantage of rules that aren't properly enforced.

Andrew Ross Sorkin, the author of "Too Big to Fail", is chief mergers and acquisitions reporter for the New York Times

 

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