Andrew Ross Sorkin’s Too Big to Fail is sure to be one of the definitive accounts of the tumultuous days of 2008, when Lehman Brothers went bankrupt, AIG became a ward of the government, and the entire economy was on the brink of collapse. With all of the black limousines zooming around New York and the exasperated conference calls, Sorkin’s book seems destined for the Hollywood treatment. Here are the five scenes we guarantee will be coming to a cinema near you—and perhaps even in Wall Street 2.
Paulson Takes Control
At 4:30 p.m. [Henry] Paulson asked Christal West, his assistant, to get Ken Lewis on the phone. Ken Wilson had just briefed Paulson on his most recent phone call with [Richard] Fuld—his seventh of the day—about Bank of America again. Now, Wilson told [Treasury Secretary] Paulson that all he needed to do was make the case directly to its CEO. Paulson and Lewis did not know each other well, and the only real time they had spent together was a lunch in Charlotte several years back, when Paulson was still at Goldman. Ken Wilson had brought Paulson down to meet Lewis then to demonstrate Goldman’s loyalty to their acquisitive client.
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“I’ve got Lewis on the line,” West finally called out to Paulson, who picked up the receiver.
• Allan Dodds Frank speaks to Sorkin about his new book, how Geithner emerged as the savior of the bank rescue, and the story of the scramble to save Wall Street.“Ken,” he began gravely, “I’m calling about Lehman Brothers,” and after pausing said, “I’d like you to take another look at it.” The receiver was silent for a few seconds. Lewis agreed to consider it, but added: “I don’t know how much it will do for us strategically.” He made it clear, however, that the price would have to be right. “If there’s a good financial deal there, I could see doing it.”
Lewis’s biggest concern about a potential deal, as he told Paulson, was Fuld, who Lewis worried would be unrealistic about his asking price. He recounted to Paulson how badly their meeting had gone back in July.
“This is out of Dick’s hands,” Paulson assured him. It was a powerful statement that could be interpreted only one way: You can negotiate directly with me. [245]
Geithner Works to Sell Lehman
Tim Geithner confirmed to Fuld that Barclays was indeed interested in bidding for the company, even though they had not contacted Fuld directly, and gave him [Robert] Diamond’s phone number in London. “He knows you’ll be calling,” Geithner assured him.
“I understand I’m supposed to call you,” Fuld said when he later reached [Barclays' president]. Diamond, however was clearly flustered, as he thought he had been explicit with Geithner that he didn’t want to talk directly with Fuld about a deal. A deal would have to be brokered by the U.S. government.
“I think we should talk,” Fuld said, trying to engage with him.
“I don’t see an opportunity for us here,” Diamond answered. Fuld couldn’t understand what was going on. He had been told by Geithner to make this contact, and now Diamond was telling him that he wasn’t interested?
Unwilling to force the issue, he ended the conversation and called back Geithner. “I just got off the phone with Bob Diamond,” he told Geithner heatedly. “He says he’s not interested. I thought you said he wanted to talk to us?”
“Yes, he does,” Geithner insisted. “You should call him back.” Five minutes later, he tried Diamond again.
“I just told you that we’re not interested,” Diamond repeated. Fuld, by now feeling as if he were part of some kind of charade, again phoned Geithner. “I don’t know what’s going on here. I’ve called him twice, and both times he says he doesn’t want to talk to me. You tell me he’s interested. He says he’s not.”
Geithner promised he’d reach out to Diamond and urged Fuld to try him on last time. On his final attempt, Diamond was suddenly willing to talk. “We’re going to be flying over tonight,” Diamond said. “I’ll have a team ready to go by Friday morning.”
With that sentence, it was official: Barclays and Bank of America were now in competition. [270]
John Thain and Stan O’Neal Meet
Several weeks after Merrill’s board had named [John] Thain CEO, he was faced with an especially delicate task. Placing a call to his predecessor, Stan O’Neal (who had just negotiated an exit package for himself totaling $161.5 million), Thain asked if they might get together. Hoping to keep their meeting out of the newspapers, the two decided on breakfast in Midtown at the office of O’Neal’s lawyers.
After a few pleasantries, O’Neal stared levelly at Thain and asked, “So, why do you want to talk to me?” Thain knew that if there was one person in the world who could explain what had gone wrong at Merrill Lynch, why it had loaded up on $27.2 billion of subprime and other risky investments—what, in other words, had gone wrong on Wall Street—it was O’Neal.
“Well, as you know, I’m new, and you were the CEO for five years,” Thain said carefully. “I’d like to get your take, any insight on what happened here. Who everybody is, and all that. It would be very helpful to me and to Merrill.”
O’Neal was silent for a moment, picking at his fruit plate, and then looked up at Thain. “I’m sorry,” he said. “I don’t think I’m the right person to answer that question.” [142]
Christopher Cox, Deer in Headlights
Paulson checked his watch and saw that it was past 7 p.m., which meant the Asian markets were opening, and Lehman still hadn’t filed for bankruptcy.
“Has Cox talked to them yet?” he barked at his chief of staff, Jim Wilkinson.
Wilkinson said that he had been trying to get [SEC Chairman Christopher] Cox to call Lehman directly, but that he had been resistant.
“He hasn’t done shit,” Wilkinson said dismissively. “I went in there and repeated what you said, and it’s like he’s frozen. Like a fucking deer in the headlights.”
Cox, for whom Paulson had very little respect to begin with, was proving how over his head he really was. Paulson had assigned him the task of coordinating Lehman’s filing by, well, now. “This guy is useless,” he said, throwing up his hands in the air and heading over to Cox’s temporary office himself.
After barging in and slamming the door, Paulson shouted, “What the hell are you doing? Why haven’t you called them?”
Cox, who was clearly reticent about using his position in government to direct a company to file for bankruptcy, sheepishly offered that he wasn’t certain if it was appropriate for him to make such a call.
“You guys are like the gang that can’t shoot straight!” Paulson bellowed. “This is your fucking job. You have to make the phone call.” [366]
John Mack Stands Firm
“Hi, John. I’m on with Ben Bernanke and Tim Geithner, we want to talk to you,” Paulson said…
“Markets can’t open Monday without a resolution of Morgan Stanley,” he said in the sternest way he knew. “You need to find a solution, we want you to do a deal.”
[Morgan Stanley CEO John] Mack just listened, dumbstruck. Bernanke, who was usually remote and silent in such situations, cleared his throat and added, “You don’t see what we see. We’re trying to keep the system safe. We really need you to do a deal.”
“We’ve spent a lot of time working on this and we think we you need to call Jamie [Dimon],” Geithner insisted.
“Tim, I called Jamie,” Mack replied, clearly exasperated. “He doesn’t want the bank.”
“No, he’ll buy it,” Geithner said.
“Yes. For a dollar!” Mack exclaimed. “That makes no sense.”
“We want you to do this,” Geithner persisted.
“Let me ask you a question: Do you think this is good public policy?” Mack asked, clearly furious. “There are 35,000 jobs that have been lost in this city between AIG, Lehman, Bear Stearns, and just layoffs. And you’re telling me that the right thing to do is to take 45,000 to 50,000 people, put them in play, and have 20,000 jobs disappear? I don’t see how that’s good public policy.”
For a moment, there was silence on the phone.
“It’s about soundness,” Geithner said impassively.
“Well, look, I have the utmost respect for the three of you and what you’re doing,” Mack said. “You are patriots, and no one in our country can thank you enough for that. But I won’t do it. I just won’t do it. I won’t do it to the 45,000 people that work here.”
With that, he hung up the phone. [481]
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