The man behind Bear Stearns deal
Robert Steel advised Bush and played a key role in talks.
Treasury Undersecretary Robert Steel was huddling with regulators at the Federal Reserve Bank of New York on Friday morning when word came that President Bush needed an update on the chaos enveloping financial markets.
Stocks were falling for a third straight week, and the Bear Stearns Cos. Inc. was collapsing and about to be bought by JPMorgan Chase & Co. through an unprecedented Federal Reserve-backed infusion of cash.
Steel, the closest confidant of Treasury Secretary Henry M. Paulson Jr., met Bush at a Lower Manhattan heliport and briefed him during the 10-minute drive past Wall Street on the way to the president's speech to the Economic Club of New York.
The worst credit crisis in at least two decades falls directly into Steel's responsibilities as head of Treasury's domestic-finance division.
In an interview Tuesday, Steel, 56, was unapologetic about the administration's reluctance to back a taxpayer bailout of mortgages.
"The real proof will be in the pudding longer-term, with markets being stable and orderly," he said.
To some analysts, the Bush administration's reliance on markets has prolonged the year-old decline in the housing industry.
"They're going to have to recognize the reality that fiscal and monetary policy aren't going to be enough to get us out of this crisis," said Michael Barr, a former assistant to Treasury Secretary Robert Rubin under President Bill Clinton and now a law professor at the University of Michigan.
Steel, who worked under Paulson as head of equities and later as vice chairman at the Goldman Sachs Group Inc., used his 30 years of experience on Wall Street to help craft two deals culminating in JPMorgan Chase's purchase of Bear Stearns.
Starting at 5 a.m. Friday, Paulson and Steel counseled the Fed and other regulators while participating in talks that culminated in the deal for JPMorgan to buy Bear for about $2 a share, or $240 million, before markets in Asia opened. Just days earlier, on March 7, shares of Bear Stearns closed at $70.08. They closed yesterday at $5.33.
Throughout the credit crisis, Steel has been a surrogate for Paulson on Wall Street.
On Monday, Steel sat on one side of Bush and Paulson on the other as the president sought to reassure Americans that the administration was "on top" of the situation.
Bear Stearns' selling price, at less than 10 percent of its market value, reflects the inevitable fallout from the credit crunch, in which banks and securities companies have lost about $190 billion since the start of 2007, Steel said in the interview.
"I view the resolution as a logical one," Steel said. "Two dollars a share really says that there was pain, and in the current environment, we're focused on the stability of the market."
His experience with markets and focus on stability win him praise from former colleagues.
Sheila Bair, head of the Federal Deposit Insurance Corp., has led calls for lenders and loan-servicing companies to modify mortgages for struggling homeowners, a more aggressive approach than that endorsed by Treasury. Still, she said Steel was "nonideological" in his desire to seek solutions.
"He's calm, he's a steady hand, he doesn't overreact," Bair said in an interview. "He's made his fortune, he doesn't need to think about his next career step. He's just here to do what he thinks is right."