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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

And New York Fed officials reported that JP Morgan was “thinking” about requesting

. billion on top of a . billion on deposit. According to a Fed examiner at Citi-
group, a banker from that firm had said that “Morgan [Stanley] is the ‘deer in the
headlights’ and having significant stress in Europe. It’s looking like Lehman did a few
weeks ago.” 
Commercial paper markets also seized up for Morgan Stanley. From Friday, Sep-
tember , to the end of September, the amount of the firm’s outstanding commercial
paper had fallen nearly , and it had rolled over only  million. By comparison,
on average Morgan Stanley rolled over about  million every day in the last two
weeks of August. 
On Saturday, Morgan Stanley executives briefed the New York Fed on the situa-
tion. By this time, the firm had a total of . billion in PDCF funding and . bil-

lion in TSLF funding from the Fed. Morgan Stanley’s liquidity pool had dropped
from  billion to  billion in one week. Repo lenders had pulled out  billion
and hedge funds had taken  billion out of Morgan Stanley’s prime brokerage. That
run had vastly exceeded the company’s most severe scenario in stress tests adminis-
tered only one month earlier. 
During the week, Goldman Sachs had encountered a similar run. Its liquidity
pool had fallen from about  billion on the previous Friday to  billion on
Thursday. At the end of the week, its Fed borrowing totaled  billion from the
PDCF and . billion from the TSLF. Lloyd Blankfein, Goldman’s CEO, told the
FCIC,

We had tremendous liquidity through the period. But there were sys-
temic events going on, and we were very nervous. If you are asking me
what would have happened but for the considerable government inter-
vention, I would say we were in—it was a more nervous position than
we would have wanted [to be] in. We never anticipated the government
help. We weren’t relying on those mechanisms. . . . I felt good about it,
but we were going to bed every night with more risk than any responsi-
ble manager should want to have, either for our business or for the sys-
tem as a whole—risk, not certainty. 

Bernanke told the FCIC that the Fed believed the run on Goldman that week could
lead to its failure: “[Like JP Morgan,] Goldman Sachs I would say also protected them-
selves quite well on the whole. They had a lot of capital, a lot of liquidity. But being in
the investment banking category rather than the commercial banking category, when
that huge funding crisis hit all the investment banks, even Goldman Sachs, we thought

there was a real chance that they would go under.” Although it did not keep pace
with Morgan Stanley’s use of the Fed’s facilities, Goldman Sachs would continue to ac-
cess the Fed’s facilities, increasing its PDCF borrowing to a high of  billion in Oc-
tober and its TSLF borrowing to a high of . billion in December.
On Sunday, September , both Morgan Stanley and Goldman Sachs applied to
the Fed to become bank holding companies. “In my -year history, [Goldman and