European Pressure On Hank Paulson: New Details On Why AIG Was Bailed Out After Lehman Had Been Allowed To Fail
Sep 28, 2010 at 5:49 PM
DailyBail in AIG, Henry Paulson, aig bailout, aig cover-up, banks, europe, goldman sachs, goldman sachs, hank paulson, henry paulson, lloyd blankfein, peer steinbruck

lloyd blankfein talks to hank paulson

lloyd blankfein points a gun at henry paulson

New information from German Finance Minister Peer Steinbruck on private AIG crisis discussions with Paulson.  Panic would be an understatement.


The obvious answer is Government Sachs, which we've covered in detail:

However, remember that outside of Goldman Sachs, Deutsche Bank and Societe Generale received more than any other banks in the AIG bailout pulling in $12 billion each versus $14 billion for Goldman.

According to German Central Banking Chairman Peer Steinbruck, it was as a result of direct pressure on Paulson from European leaders.



In a SPIEGEL interview, former German Finance Minister Peer Steinbrück talks about his role in fighting the financial crisis, how he pressured America to stop a second Lehman Brothers and why Greece is not out of the woods yet.


SPIEGEL: It's been almost two years since the financial crisis reached its climax. Has the worst been overcome?

Steinbrück: No one knows. There are still deep-seated structural problems that threaten the economic balance in the world: Between the United States and China, for example, but also within Europe. We have taken a few steps toward taming the financial markets, but we haven't come nearly far enough to rule out a repetition of the crisis. The most important question hasn't been answered yet: Who's in charge, politicians or the financial industry?

SPIEGEL: In your new book "Unterm Strich" ("The Bottom Line"), you clearly have no doubt that the politicians were not in control, at least not in those dramatic fall days in 2008.  How close did the world come to a total crash?

Steinbrück: The investment bank Lehman Brothers collapsed on Sept. 15, 2008, and the world's largest insurance company, AIG, was threatened with the same fate.  I'm convinced that if AIG had gone under, the financial sector would have reached a melting point.  The world was indeed at the brink of disaster.

SPIEGEL: Were you alone in your assessment?

Steinbrück: No, my European counterparts agreed with me: Christine Lagarde from France, Alistair Darling from Great Britain, Wouter Bos from the Netherlands and, not least, the central bank governors from (Bundesbank President) Axel Weber to European Central Bank President Jean-Claude Trichet.  Then, in a coordinated telephone campaign, we implored then-US Treasury Secretary Henry Paulson not to risk a second case like Lehman Brothers under any circumstances.

SPIEGEL: Are you saying that without European intervention there would have been a crash?

Steinbrück:  We had a frank talk with Paulson in any case.  The Lehman decision had triggered an earthquake worldwide. We wanted to know: What on earth are you trying to do?  Does it have something to do with the presidential election campaign, or are you trying to set an example?  We tried to make it clear to our US counterpart, disregarding all diplomatic conventions, that it would be a disaster if AIG failed.

SPIEGEL: Did Paulson know that the Lehman bankruptcy was a huge mistake?

Steinbrück: He never admitted it to me -- or to anyone else, I believe.  But there have been signs from the Americans that make me think they completely underestimated the consequences of the Lehman crash.  They didn't think it possible that its bankruptcy would trigger such an unimaginable shock wave.

SPIEGEL: How often did you speak with Paulson on the phone during that week?

Steinbrück: Twice.

SPIEGEL: For how long?

Steinbrück: Not long. Paulson himself was under enormous stress at the time.  He was constantly going from one meeting to the next, so you don't waste time with chitchat.  The conversations might have lasted five or 10 minutes -- no more.

SPIEGEL: Did you raise your voice?

Steinbrück: Never.




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