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How Wall Street Was Really Saved

In the latest issue of The New Yorker, Pulitzer Prize-winning journalist James Stewart offers a 24-page, 19,000-word inside account of the eight days of drama that went down at the White House, Federal Reserve, Treasury, and Congress a year ago over the collapse of Lehman Brothers. “Everybody in some part of their brain thought it was a good thing for Lehman Brothers to go under,” one Treasury official reveals. On September 16, 2008, Bush convened a meeting at the White House. “So what is going on in our financial system, and what are we going to do?” he asked Hank Paulson and Ben Bernanke. Said one Bush loyalist: “This came up in the final months of an eight-year term. He was so ground down by Katrina, the war in Iraq. He was just out of gas.” So Paulson was “unilaterally making economic policy for the administration,” an official says. At the close of the meeting, Bush remarked, “Someday you guys are going to need to tell me how we ended up with a system like this… We’re not doing something right if we’re stuck with these miserable choices.” Later that day, Paulson and Bernanke explained to the House and Senate leadership the need to loan AIG $85 billion. “Do you have $85 billion?” Rep. Barney Frank asked. “I have $800 billion,” the Fed chairman responded, referring to the Fed's balance sheet. Politico’s Mike Allen has excerpts of the story, which goes online Monday.