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Goldman CEO Lloyd Blankfein to Treasury Secretary Hank Paulson: "OK, Now What?"

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It's September 2008. Goldman and AIG are trading in the markets, and Goldman notices that AIG seems to be having very severe liquidity problems. AIG needs to renew repo agreements after investing the trades' cash in plunging mortgage collateral bought from investment banks, and asks around for various other sources of funding.

Recognizing an emergency, Lloyd Blankfein whips out his cell phone and calls Hank Paulson. He gasps to the then Treasury Secretary and former Goldman CEO: "AIG, one of my favorite trading partners is going under! This will cause a market meltdown! What should we do?"

Paulson, in a calm comforting voice says: "Take a deep breath and pull yourself together. I can help. First, let's make sure AIG is really going under."

There is a long pause, during which Blankfein checks the status of his credit default protection and other hedges against an AIG failure, yanks AIG's credit lines, and presses AIG with calls for collateral on credit default swap agreements on plummeting CDOs.

Blankfein's voice finally comes back on the line. He says: "OK, now what?"

Note: This is my takeoff on Spike Milligan's classic joke (not an account of an actual conversation). Illustrated version can be found at Jesse's Café Americain.