One week after the takeover of Bear Stearns, Jamie Dimon told Treasury Secretary Paulson that he had decided to “recut” (36) his deal to purchase Bear Stearns, raising the share price from $2 to $10. Paulson had orchestrated the original low price, which only Dimon knew. Bear’s shareholders could vote against the deal and were threatening to do so. Government insiders were criticizing Paulson for the deal. Presidential candidate Hillary Clinton and Democratic Senator Barney Frank were criticizing President Bush over it, and Republicans also criticized the deal as interventionist. However, Paulson believed “he had just helped save the American economy” (38).

Paulson had been the CEO of Goldman Sachs and had agreed not to participate in any matters involving Goldman Sachs as Treasury Secretary, an agreement “he would later desperately try to find ways around” (42).

Even at the beginning of his tenure at Treasury, in 2006, Paulson “had concerns about the markets” and warned that “the economy was overdue for a crisis” (48). One problem would be “the subprime mortgage mess, which had already begun to have repercussions” (48). The FDIC and the Federal Reserve protected traditional banks, but investment banks had no such protection.

At a regular meeting with his inner circle on March 27, 2008, Paulson expressed concerns about Lehman.