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Almost as soon as they arrived, Philip Howard showed up, carrying a sheaf of papers about Gutfreund’s severance, which he wanted Munger to sign.82 He talked to both of them for a while, until Buffett left them alone and went off to make some phone calls. Munger started getting irritable. They discussed the matter for perhaps an hour or more.

Munger had already made up his mind that he was going to say no to this deal. As he recalled later, “I was deliberately not listening. I was being polite, but I wasn’t paying much attention…. I sort of turned off my mind…. I was just sitting there politely with my head turned off.”

When Howard reached the end of his lengthy list of demands, Munger refused to sign the papers, but stressed that Gutfreund would eventually be treated fairly.83 On the way out the door, Howard hesitated. It bothered him that he still had nothing in writing. “You can’t get paid after the divorce,” he said. Munger reassured him: “Phil, you have to practice law the way my father did, by trusting in a man’s word.”84

While Howard and Munger were talking, Meriwether and his lawyer, Ted Levine, arrived. Meriwether had changed his mind. He said that he was in an impossible position and had to leave Salomon.

He “at least partially understood the seriousness of the company’s situation. He was pacing back and forth, and he was smoking cigarettes as fast as he could light them. He said that the best thing for him to do was to resign.”

Munger would later express feelings of guilt over agreeing to put Meriwether’s name in the press release, which he viewed as a mistake he had made under pressure.85 Both he and Buffett thought Meriwether could stay and fight it out, but they accepted his resignation.

“We talked for a considerable length of time. They stayed until midnight.”

Finally, it was just Buffett and Munger. Buffett went to bed, feeling that matters were, if not under control, at least starting to be straightened out.

The next day, Sunday, August 18, no one would rest.

Early in the morning, Buffett, Gutfreund, and Strauss met in one of the many conference rooms on the forty-fifth floor of Salomon’s office downtown before the meeting at which the board would ratify Buffett’s role as interim chairman. The board gathered outside, and one of the members, Gedale Horowitz, took Marty Lipton aside and told him that he and several others had been talking for two days. He said that Meriwether had failed to keep Mozer under control and they would resign unless Meriwether was fired for the good of the firm. He told Buffett a softer version—that he would not attend the board meeting if Meriwether was still employed. Buffett said the situation had resolved itself, because Meriwether was going to step down on his own.86

Suddenly, a lawyer appeared in the conference room where Buffett was meeting with Gutfreund and Strauss, waving a message from the Treasury Department. It was going to announce in a few minutes that Salomon was barred from bidding at Treasury auctions, both for customers and for its own account. All of them understood that in minutes, Salomon would be shot in the head. “We immediately saw that this would put us out of business—not because of the economic loss, but because the message that would go out to the rest of the world in headlines in the papers on Monday would be ‘Treasury to Salomon: Drop Dead.’ In effect, the response to installation of new management and banishment of the old would be an extraordinary censure delivered at an equally extraordinary time exactly coincident with the first actions of the new management.”

Buffett went off to another conference room to call the Treasury, seeking a stay of execution. The phone was busy. He got the phone company to agree to interrupt the call. They called back and said it was not a working phone. After many minutes of confusion, problems, and delays, Buffett finally spoke to someone in the Treasury Department. It was too late, he was told; the announcement had already gone out. The world now knew that