Schwarzman Not Exactly Helping PE’s “Gun Slinger” Image

It’s been really slow going, but I’ve finally made my way through Andrew Ross Sorkin’s crisis opus, “Too Big Too Fail.” I blame my snail’s reading pace on the fact that, at 2.5 pounds, the book is simply too heavy to carry around.

Private equity’s direct role in the great crisis of September 2008 was minimal, yet somehow Blackstone Group’s Steve Schwarzman proved that once again, the truth is far more amazing than anything I could make up. You may remember his calm, collected public comments on the crisis at a conference days after Lehman collapsed. At the time I wrote that Steve Schwarzman Is Not Freaking Out, noting he seemed “almost too relaxed.”

That was, apparently, not the case.

According to “Too Big To Fail,” Schwarzman was definitely freaking out. The book details a conversation between Schwarzman and Treasury Secretary Hank Paulson, which paints quite a different picture. Not only is Schwarzman spooked by the post-Lehman stock market insanity, but he doesn’t exactly to quell the image of buyout barons as aggressive, gun-slinging, shoot-now-ask-questions-later cowboys. Literally. Yee-haw!

From page 426:

“I have to tell you, the system’s going to collapse in the next few days. I doubt you’re going to be able to open the banks on Monday,” Schwarzman said, deeply spooked by what he was seeing. … “You have to do something.”

“We’re working on some things,” Paulson said. “What do you think we should do?”

“You have to approach what you’re doing from the perspective of being a sheriff in a western town where things are out of control,’ Schwarzman replied, “and you have to do the equivalent of just walking onto Main Street and shooting your gun up in the air a few times to establish that you’re in charge because right now no one is in charge!”

Of course, as history shows Paulson did not take Schwarzman’s advice on his bailout plan, a fact Schwarzman did not let go unnoticed. From page 489:

“When Steve Scwarzman, who had encouraged Paulson to announce a plan–any plan–finally saw the details of this one, he called Jim Wilkinson to get a message to Paulson.

“You announced the wrong plan!” Schwarzman told him.