Keith Hennessey, director, National Economic Council: In fall of 2007, [our] focus is mostly on a mortgage bubble, and in particular on subprime adjustable-rate mortgages. We’re particularly worried about interest-rate resets. [Say] you have a very low teaser rate from some fly-by-night mortgage broker. What happens when eventually interest rates start to spike, when your interest rate resets upward, and you suddenly find that your monthly mortgage payment goes up to a level where you don’t want to pay it? What we’re seeing as the problem is, a whole bunch of people may find themselves in a position where they start defaulting on mortgages. We’re thinking it’s mostly a homeowner problem.

It’s not really until early 2008 that we start to make the connection that it is not just the homeowners who are going to be hit, but who the heck is holding all of these mortgages. Then, excuse my language: Oh, my God! We didn’t realize that these assets were so tightly concentrated.

The quote I like is from, I think, a German banker, who said we had loaned money to all the good risks and we still had money left, so what were we supposed to do? [laughter] Credit was cheap. [It] was being channeled in ways where people who just never should have gotten mortgages were being offered hundreds of thousands of dollars, with no income. All the big banks made the same bad bet.

It’s not really until early 2008 that we start to make the connection that it is not just the homeowners who are going to be hit, but who the heck is holding all of these mortgages.

Ed Gillespie, counselor: It was just an awful, really draining situation. I remember meeting in the Roosevelt Room with [Henry] Paulson, [Ben] Bernanke, and [Tim] Geithner—that is really where the TARP [Troubled Asset Relief Program] came from. They were briefing on the financial crisis, these banks going under. Paulson said, “We need legislative authority to go in and save the financial system, and we have to act in a big way.” The president said, “What do you mean by big?” Paulson said, “Five hundred billion to a trillion dollars,” or something like that. The president had a long pause. Paulson said, “We’ll be able to get it back, but we’ve got to get the liquidity going.”

Josh Bolten, White House chief of staff: $700 billion, to bail out the banks, was just a horrifying thought. Bush took it fairly calmly. The vice president looked like he’d bit a lemon.

Ed Gillespie: The president said, “What are the other options?” Paulson said, “I really don’t think we have any at this point. I think if we don’t act, and act soon, we’re looking at an economy worse than the Great Depression.” The president again, his head kind of nodded, and he said, “Worse than the Great Depression? Twenty-five percent unemployment?” Paulson said, “I believe that’s right, Mr. President.” The president looked at Bernanke and said, “Ben, do you agree with that?” Bernanke nodded yes. The president said, “OK, let’s figure out what we need to do and let’s get it done.”

$700 billion, to bail out the banks, was just a horrifying thought. Bush took it fairly calmly. The vice president looked like he’d bit a lemon.

We got up from the table. The president walked across the hall to the Oval Office, and Josh walked behind him and I walked behind Josh. The Secret Service agent closed the door behind me from the outside, reached in and closed the door behind us. Bush stood at the end of the sofa and he was looking out the window behind the Resolute desk. We didn’t say anything. Josh and I were just waiting for him to say something. He turned around and he said, “We’re going to act. I’m not going to be Herbert Hoover.”

[But] we had to get it through Congress…. [And] there was a question whether [Senator John] McCain was going to come out for the TARP bill.

Josh Bolten: [His 2008 presidential campaign manager] Rick Davis said to me that Senator McCain is going to be announcing in a few minutes that he’s suspending his campaign in order to go to Washington to help resolve the financial crisis. And we’d like you to host a meeting at the White House, of leadership, with Senators McCain and Obama. I said, “Really?” [laughter] I said something to the effect of, “Is there any chance I can talk you out of that?”

He turned around and he said, “We’re going to act. I’m not going to be Herbert Hoover.”

Ed Gillespie: It threw everything into turmoil. On the morning of the meeting, I went into the Oval Office like I always do, and the president said, “What’s McCain going to say today?” I said, “I have no idea.”

Josh Bolten: We didn’t know what McCain had up his sleeve. We certainly didn’t know what Obama had up his sleeve. It was the most horrifying meeting I’ve ever attended as a government official.

Keith Hennessey: That was the strangest, most surreal meeting I’ve ever been in in 14 years of doing policy work in Washington. It was just fascinating. Not in a good way.

The president kicks off, “Thank you all for coming.” The president recognized Secretary Paulson for him to just give a very brief update. . . . The president then—by protocol—says, “Madam Speaker, do you have anything you want to say?” She says, “Mr. President, House and Senate Democrats have decided that Senator Obama will speak for us.” I remember sitting back, Uh-oh. Right? Because the immediate reaction was OK, they’re coordinated.

It was the most horrifying meeting I’ve ever attended as a government official.

This meeting is both the most important event in the short run in the 2008 presidential campaign and it is the most important short-term juncture point in the potential enactment of the legislation that is needed to prevent a global financial collapse. It’s both of those things intersecting in the West Wing of the White House. This is just a tinder keg.

Senator Obama frankly was phenomenal in what he said. It was the first time I had seen him or heard him in close quarters. He was very good, very constructive, very cooperative. “I’ve been talking with Secretary Paulson. We want to work with people, we want to try and get something done.” It was very well done.

Josh Bolten: And then Bush skipped over [party leaders] Boehner and McConnell and said, “Well,” in parity, “let me invite Senator McCain to speak,” and McCain said, “I’ll wait my turn.”

Senator McCain says, “I’ll pass.” First of all, there was a shock and surprise to me, but in my view what it did was it perfectly encapsulated the tension that existed on the Republican side.

Keith Hennessey: Senator McCain says, “I’ll pass.” First of all, there was a shock and surprise to me, but in my view what it did was it perfectly encapsulated the tension that existed on the Republican side. At this point the Republican Party is starting to have two leaders. . . . If Senator McCain says, “Yes, Mr. President, I want to work with you to enact the TARP, but I have some very important concerns and they need to be addressed,” which would be sort of an obvious thing that he could say, then you think, President Bush wants the TARP, Senator McCain wants the TARP with conditions. If I say I want the TARP with conditions too, I’m in a nice safe space because I’m not caught between the two.

But what if Senator McCain decides that he needs to oppose or to lean very heavily against the TARP? Then you as a Republican leader have a decision to make: Which is more important to you, the legislative [initiative] or the Republican candidate? By saying “I’ll pass,” all those other Republicans in the room are frozen, because they don’t know if they are going to undercut McCain if they agree with Obama and President Bush that we need to enact the TARP.

Josh Bolten: Bush [then] called on Boehner or McConnell or somebody, and Boehner, of course, is the one who is trapped, because the vast majority of his conference has sworn to the death that they will never, ever vote for this thing.

Boehner literally wouldn’t talk to me for weeks after the TARP was done. He thought I put him in a difficult situation. He now says he wasn’t aware then how serious it all was.

Treasury secretary Henry Paulson: Boehner threw out an idea that I thought was a dumb idea, and so I said it was a dumb idea. Then Boehner literally wouldn’t talk to me for weeks after the TARP was done. He thought I put him in a difficult situation. He now says he wasn’t aware then how serious it all was. He didn’t fully understand the extent of the problem at the time. Few people did.

Finally, at the end, when McCain had to speak, he picked a note card out of his pocket and read some innocuous comment and that was it.

Keith Hennessey: [Then] Spencer Bachus (R-AL), who was [ranking member] of the House Financial Services Committee, speaks up and says, “Mr. President, I’ve been the point guy for House Republicans in negotiating with Secretary Paulson and House and Senate Democrats and Senate Republicans on some of the details of this. We’re still working on it. But what I do want you to know”—and I’m roughly paraphrasing here, but I know I’ve got the concept right—“is that if there is a bill we can support, House Republicans will ensure the taxpayers are protected.”

Speaker Pelosi just erupts. I mean literally yelling in the Cabinet Room. “How dare you say that House Republicans are protecting the taxpayers? House Democrats are protecting the taxpayers!”

Speaker Pelosi just erupts. I mean literally yelling in the Cabinet Room. “How dare you say that House Republicans are protecting the taxpayers? House Democrats are protecting the taxpayers!” It appeared to me that she was reacting to the House Republicans claiming that turf. It was just [an] unprovoked outburst, not waiting to be called on, she is literally yelling across a 10-foot-wide table at another member. Then I think Bachus starts barking back at her. Then within, I don’t know, 45 to 60 seconds the whole room just erupts. It is just a complete fracas.

Josh Bolten: The whole meeting just devolved into a shouting match. I remember I was sitting to the vice president’s right, and he and I just exchanged a look of, This just could not be worse. I was often exhausted in government service, but I never felt faint, and I remember feeling faint sitting at the table. I was worried that I was just going to go face down and that my head was going to hit the cabinet table. [laughter] Eventually, the president just said, “Clearly, I’ve lost control of the meeting. It’s over.”

Keith Hennessey: From my standpoint, this was the scariest part: the meeting was breaking up. Several of us ended up huddling in the outer Oval with President Bush. There were four or five or six, like Josh and [congressional liaison] Dan Meyer, Ed Gillespie, Hank Paulson, probably [Press Secretary] Dana Perino, maybe one other. What we’re terrified of—our goal at this point is single-mindedly, We’ve got to get the votes for TARP. So how do we do this?

The whole meeting just devolved into a shouting match. I remember I was sitting to the vice president’s right, and he and I just exchanged a look of, This just could not be worse.

Dan Meyer had agreed earlier that the Democrats who were in this meeting could use the Roosevelt Room as a little private room where none of us would intrude, where they could just have whatever discussion they wanted to. The Democrats had all gone in there. We’re talking to President Bush, and the president says, “OK, Hank, go talk to Nancy.” Paulson walks down. This is the famous image of Hank getting down on one knee: “Please don’t blow this up.”

Henry Paulson: Trying to create a little levity, I thought I’d make a joke. I got down on my knees.

Q: Was anybody saying during this whole process, “Bernanke and Paulson are exaggerating, and we shouldn’t believe—”

Senator Judd Gregg (R-NH): No. They had given us examples that were so startling you could not believe they were exaggerating. Either Bernanke or Paulson said [in a Capitol Hill meeting that evening], “Last night, one of the most successful worldwide companies in America could not move money around its franchises because no bank would trust any other bank to move money around. They won’t be able to open those franchises beginning next week if we don’t do something.”

Example number one is, we didn’t get TARP [on the first vote], even when the financial system was collapsing.

Keith Hennesey: This is one of the few questions, in retrospect, that I’m highly confident of, which is, had Bernanke, Paulson, and Geithner made a joint decision, and then Paulson got the president on board with saying we need to do TARP in May or June—excuse my language—there is not a snowball’s chance in hell we could have gotten Congress to agree to it. No way.

Q: There really needed to be a crisis?

Hennessey: Correct. And example number one is, we didn’t get TARP [on the first vote], even when the financial system was collapsing.

Q: The Dow went down about 800 points. That had to happen for Congress to act?

Hennessey: I think it probably did. Before that first TARP vote, there were lots of angry people calling from back home in the district, saying, “I don’t care what’s going on. Don’t you dare bail out those greedy bastards on Wall Street. Hell, no!” Then after the first TARP vote and after the market plummeted, the same angry people were calling their congressman’s office saying, “I don’t care what you have to do, you fix my 401(k)!” The politics were just as intense, but over the weekend it flipped.

It’s hard to explain that we didn’t do the bailouts for the banks, but to protect the economy for the American people. Also, people do not realize that the bank-recapitalization programs worked.

Henry Paulson: When I left Washington in 2009, if you read polls the way I did, 90 percent of the American people were against the TARP and only 60 percent against torture. What politicians will tell you, they’ll say, “If you give me 15 or 20 minutes, I can convince people that what we did made sense. But in a sound bite, I can’t.” We Americans don’t like bailouts. It’s hard to explain that we didn’t do the bailouts for the banks, but to protect the economy for the American people. Also, people do not realize that the bank-recapitalization programs worked. They not only prevented economic catastrophe, but all the money put in the banks and insurance companies came back, plus almost $50 billion.

Excerpted from Inside the George W. Bush White House: An Oral History published by Oxford University Press ©2026