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CRISIS AND PANIC

CONTENTS
Money market funds: “Dealers weren’t even picking up their phones” ...............
Morgan Stanley: “Now we’re the next in line”.....................................................
Over-the-counter derivatives: “A grinding halt”.................................................
Washington Mutual: “It’s yours”.........................................................................
Wachovia: “At the front end of the dominoes as other dominoes fell”.................
TARP: “Comprehensive approach” ....................................................................
AIG: “We needed to stop the sucking chest wound in this patient”.....................
Citigroup: “Let the world know we will not pull a Lehman”...............................
Bank of America: “A shotgun wedding” .............................................................

September , —the date of the bankruptcy of Lehman Brothers and the
takeover of Merrill Lynch, followed within  hours by the rescue of AIG—marked
the beginning of the worst market disruption in postwar American history and an
extraordinary rush to the safest possible investments. Creditors and investors sus-
pected that many other large financial institutions were on the edge of failure, and the
Lehman bankruptcy seemed to prove that at least some of them would not have ac-
cess to the federal government’s safety net.
John Mack, CEO of Morgan Stanley during the crisis, told the FCIC, “In the imme-
diate wake of Lehman’s failure on September , Morgan Stanley and similar institu-
tions experienced a classic ‘run on the bank,’ as investors lost confidence in financial
institutions and the entire investment banking business model came under siege.” 
“The markets were very bad, the volatility, the illiquidity, some things couldn’t
trade at all, I mean completely locked, the markets were in terrible shape,” JP Morgan
CEO Jamie Dimon recalled to the FCIC. He thought the country could face  un-
employment. “We could have survived it in my opinion, but it would have been terri-
ble. I would have stopped lending, marketing, investing . . . and probably laid off
, people. And I would have done it in three weeks. You get companies starting
to take actions like that, that’s what a Great Depression is.” 
Treasury Secretary Timothy Geithner told the FCIC, “You had people starting to
take their deposits out of very, very strong banks, long way removed in distance and
