When asked how close the financial services universe came to a complete meltdown one year ago, Mohammed El-Erian said that in the runup to the October 8, 2008, meeting of the G8 nations, he called his wife from the road to recommend she get to an ATM and withdraw plenty of cash, since he feared that the nation’s banks might not open the next day. The candid admission about a potential bank holiday from El-Erian, now PIMCO’s CEO and co-CIO, came during the premiere pre-conference session at Schwab Advisor Services’ Impact 2009 conference on September 13. He was responding to a question from CNBC’s Tyler Mathisen who asked El-Erian and fellow panelist Laurence Fink of BlackRock on whether the financial system is safer now than a year ago, but also how close we came to the brink in those dark days. Fink posited that yes, the system is “very much safer,” but “are we safe?” he continued, “I can’t answer that with much conviction.”
However, the BlackRock chairman and CEO, who was a key advisor to the government during the Lehman Brothers-Merrill Lynch-AIG saga last September, argued that “we do have a stronger system than we had three years ago; we had many structural problems, and our growth was leveraged.” To explain how “we’re safer, but not yet safe,” and to describe how the environment has changed, El-Erian used the analogy of a football game to describe the current state of the economy and markets: “The government used to be the referee; now it’s on the field, and that will have unintended consequences.”