WORLD FINANCIAL CRISIS, 2008
to
New York in the summer
of 2007 to work on a
financial news desk. Our
newsroom was in Lower
Manhattan, just across
from Ground Zero, which
at that point was a giant
excavated pit, lined with
concrete and known as
“The Bathtub.” This was
just a couple months
before the stock market hit
its pre-crisis peak (S&P
500 index at 1,565).
Every morning around
5:30, before the pre-
market news releases
began marching out, I
would roll out of bed, get
dressed and catch the
subway to work, usually
the E train which was
filled with construction workers headed to the morning shift at the World
Trade Center site. The train ended at Chambers Street station, which for
some reason was decorated with wall mosaics featuring nothing but eyes
— frightened eyes, sleepy eyes, angry eyes — staring out at the passing
commuters, and I always found that creepy, as if the ghosts of 9/11 were
watching. When I would walk back to subway in the afternoon, the
sidewalks were crowded with tourists checking out Ground Zero, and
maybe there was something creepy about that too, though who am I to
judge?
Being in New York, I figured I should also be a Giants fan, and I watched
all their games that year. It was well worth it: After a weak start they
surged in the second half of the season, wildcarded their way into the
playoffs, and improbably won the Super Bowl, beating rival Boston,
whose New England Patriots were undefeated heading into the game.
The ticker-tape parade to celebrate the victory was to head down
Broadway, just on the other side of Ground Zero from where I worked, so
me and a colleague decided to go down there and check it out during our
lunch break. We walked over to a large paved plaza that lay between
Church Street and Broadway where a crowd was forming, with everyone
from investment bankers in expensive suits to teens in NY Giants ball caps
all jostling for a position near the route.
Now here’s an example of how stupid I can be. After a little while, some
people in the crowd started chanting, some three-syllable slogan in which
I could only make out the last word, which was “SUCKS!” I listened
closely, trying to figure out what they were saying — at one point it
sounded like “WALL STREET SUCKS!” This seemed a little unusual, and
my guess was based mainly on the fact that we were just a block away
from Wall Street and the New York Stock Exchange.
I asked my colleague, “Are they saying ‘Wall Street sucks’?” and he was
very surprised and said, “What? No, they’re saying ‘Boston Sucks!’ …
Wall Street?! Naw, they LOVE Wall Street. All their money comes from
Wall Street.”
Ironically, that plaza, which I had only known as “that plaza over on
Church Street,” was actually called Zuccotti Park and would later be the
center of the Occupy Wall Street movement, members of which may or
may not have chanted “Wall Street sucks” at some point. But that was all a
couple years in the future, and on that day in February people were
cheering and throwing makeshift confetti down from the buildings as the
Giants rode by in tall open-air buses and waved to us all.
after the Giants parade, Bear Stearns failed and had to be
rescued by J.P. Morgan Chase & Company for a measly $2 a share (later
upped to an only-slightly-less-measly $10, apparently under pressure
from some of the shareholders). It was the topic of conversation for a week
or so, but then things seemed
to go on. Likewise later, near
the end of the summer,
mortgage lenders Fannie Mae
and Freddie Mac were
placed in government
conservatorship. It made big
headlines, but there was still
no clear signal of how close the
collapse now was, at least from
what most people were saying.
The day the meltdown began
— September 15, when
Lehman Brothers declared
bankruptcy and Merrill Lynch
had to be sold to Bank of
America to avoid the same fate — I had just gotten back from a trip to
Montreal with my wife. When we left, there had still been some talk that
Lehman might be near to finding a buyer, but while on vacation I kept
only half an eye on the story. So when I scrambled into work that early
Monday morning, and the assignment editor, who was one of the only
other people in at that early hour, said “Wow, what a crazy morning,” I
had to pretend to know what she was talking about.
Once I turned on my computer though, I learned about the Lehman filing
having happened several hours earlier, with the Merrill news breaking
soon after. Weather-wise, it turned out to be a beautiful day (as, I’m told,
9/11 had been), and our video team sent a camera crew to film the furious
traders streaming out of the Lehman headquarters near Times Square in
Midtown.
I was naïve enough to think that, once the government announced the
TARP plan to save the banks, the storm would begin to clear. Instead, of
course, the House failed to approve TARP, and the market did one of its
biggest nosedives ever (by the end the day, the S&P 500 was at 1,106). The
opponents of the bailout later backtracked and passed it, but the market
kept falling anyway.
For me though, the most stunning development came about a week later,
when the world’s top central banks got together and all cut their interest
rates on the same day. Central banks never did this — it was the financial
equivalent of all the countries joining to shoot down an asteroid headed
toward Earth. And yet still the market kept falling anyway.
.and a half earlier, when we moved to New York from
Singapore, one of the first tasks had been to open a bank account. We had
just signed a lease for a walk-up studio on Ninth Avenue in the gentrified
Hell’s Kitchen neighborhood and found the closest bank to be a
Washington Mutual branch a block away.
My wife had a green card, but she had never lived in the U.S. and didn’t
yet have a Social Security card. When the branch manager discovered this,
she refused to open a joint account for us, turning us away with supreme
indifference. We wandered a couple blocks further and came across a
Chase branch where, in contrast, the manager was very friendly,
welcomed us into his office and opened an account. No worry, we could
report the Social Security number once we got it.
One night a few weeks after the Lehman collapse, we were walking, I
think to see a movie, and we needed to get some cash along the way. Just
to save time, we decided to use the ATM at Washington Mutual (or
“WaMu”) and pay the extra fee rather than take a two-block detour to our
Chase branch. But when my wife inserted her bank card, a message
popped up saying “Welcome Chase customer! This ATM is free to all
Chase customers.”
I had been aware that WaMu had gone bankrupt and all its assets sold off
to J.P. Morgan, just as had happened with Bear Stearns, but I didn’t realize
the ATMs had been changed over so quickly. WaMu had apparently been
a complete mess, and it easily toppled over in the first gust of wind from
the financial crisis. Weirdly though, I felt that by banking at Chase, we
were now some part of a conquering army of Chase depositors, taking the
spoils of waived ATM feeds. But that said, I have no idea what WaMu
customers saw if they tried to use the Chase ATM up the street. And
anyway, I guess the real conquering army was the J.P. Morgan
shareholders, with WaMu shareholders, creditors and employees as the
vanquished. Certainly nothing fun about it for them.
Meanwhile, the market kept plumbing new depths, and now in the wider
economy the job losses were starting to accelerate, but at the end of
October my wife and I found out she was pregnant with our first child,
and just a few weeks later I was given a new job in the same news
organization but in Los Angeles, so I had huge distractions from the
financial crash. I followed the news closely of course — the economic and
market news, the presidential election and all the rest — but a lot of times
my mind was elsewhere. We moved to L.A. that March, and by
coincidence, just as the market had topped when we came to New York, it
bottomed (S&P 500 at 677) as we left.
Wall Street bankers and other assorted New
Yorkers stand on benches at Zuccotti Park in
February 2008, just a month before the collapse of
Bear Stearns and a little over seven months before
Lehman Brothers fell. The bankers are the ones not
wearing jeans.
(Mouse over photos for detailed view)
I moved back
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No WaMu, don’t do it! This Washington
Mutual flier, advertising adjustable-rate home
equity loans, came tucked inside my WaMu
credit card bill sometime in 2003 (even though
I am a lifelong renter). The ad even suggests
using the loan to take a vacation or buy a car.
In large part because of its exposure to real-
estate lending, WaMu became the biggest
financial institution to go bust in U.S. history.