Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

By comparison with the less encompassing effort in Europe, America’s recapitalization would come to look very impressive. And this judgment was reinforced by hindsight. America’s banks recovered from the crisis more quickly and comprehensively than their European counterparts. The meeting of October 13, 2008, it seems, is when the great transatlantic divergence began.104 Advocates of strong executive branch prerogatives would later celebrate these actions as an essential assertion of sovereign authority. As it had done after 9/11, the American state had declared a state of exception and it had risen to the occasion.105 But comforting as it may be to invoke sovereign power at moments of great uncertainty, this is a mystification of the events in September and October of 2008. The path from Lehman to TARP was less one of a sovereign state rising to a crisis than of a dysfunctional power struggle within the social and political network that tied Washington, DC, to Wall Street and to the European financial system beyond. In September political and commercial considerations had prevented a deal to save Lehman. It took a month of panic, political confusion and unprecedented financial turmoil to reach the point in mid-October when the barons of Wall Street would listen when Paulson thumped the table and declared that everyone must take the Treasury’s money. Even then, the executive branch had the power that it appeared to do in large part because J.P. Morgan swung behind the Trea...

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