Author: Economic crisis could have been worse
Even though we’re living in a country with 9 percent unemployment, journalist and author Andrew Ross Sorkin said Thursday that it could have been much, much worse.
“We were looking at 25 percent unemployment in this country,” one year down the road had the nation taken no action in the bank bailouts of 2008, he said.
That figure had been confirmed by Henry Paulson, a former U.S. treasury secretary, as a figure that the government was considering at during the crisis.
Sorkin, who covers mergers and acquisitions for the New York Times, is an anchor on the CNBC television show “Squawk Box” and is the author of the book “Too Big to Fail,” delivered the Kansas University School of Business’ Anderson Chandler Lecture on Thursday.
He took the audience back to 2:30 a.m. on Sept. 18, 2008, 45 minutes after Lehman Bros. failed and after Merrill Lynch agreed to be sold to Bank of America.
When the taxpayers took action to bail out the banks, it was the next dominos that could have fallen that would have been really troublesome, Sorkin said. The people in the room making the decisions for the U.S. government, he said, were really worried that a series of bank bankruptcies would lead to a bigger issue.
“General Electric was going bankrupt next,” he said, taking its 287,000 jobs around the world with it. The effects of that bankruptcy would have been worse than many countries going bankrupt, he said.
The effects could have spread to all kinds of companies, he said.
“All of a sudden, the kid flipping burgers is being affected by the guy in pinstripes,” he said.
Government officials, he said, weren’t extremely forthcoming about the full magnitude of the problem. When he asked stakeholders why, he said the answer was almost always the same.
“If we had actually told the public what we knew, we would have only made it worse,” Sorkin said.
He got the idea to write his book –which was based on interviews with 200 principals involved for more than 500 hours — after waking his wife up at 2:30 a.m. on Sept. 18 and telling her all the things that were going on. It almost was like a movie, he said.
“No, Andrew,” she said. “It’s like a book.”
In the end, they were both right. HBO picked up the book and made a movie that aired earlier this year.
Today, he said, the economy still faces many challenges, and he said if people aren’t paying attention to what’s going on in Europe, they should be.
He said path to recovery would be painful, and whatever the solution is will take a long time. Regardless of people’s political opinions on President Barack Obama’s jobs plan, he said that we don’t need a jobs plan for 12 to 18 months.
“We need a jobs plan for the next decade,” he said.
Everyone in the room, he said, should take some responsibility for how we got here, and he said patience and willingness to withstand an amount of pain will be required to get us out.
“We are the ultimate ADD society, and I would argue we’re getting exactly what we’re paying for,” he said.